Zapata Energy Corporation

Zapata Energy Corporation

March 01, 2010 14:39 ET

Zapata Announces 2009 Year-End Reserves

CALGARY, ALBERTA--(Marketwire - March 1, 2010) -

This news release contains forward-looking information within the meaning of applicable securities laws as well as references to "barrels of oil equivalent", or "BOE", and similar terms. This news release also includes references to volumes of oil that are not categorized as reserves under National Instrument 51-101, See "Forward-Looking Information", "Barrels of Oil Equivalent" and "Disclosure of Resources other than Reserves" at the conclusion of this news release.:

Zapata Energy Corporation (TSX VENTURE:ZCO) is pleased to announce that Sproule Associates Limited ("Sproule") has completed their evaluation of Zapata's reserves as at December 31, 2009.


  • Proved Oil Reserves up 53% to 3.8 million barrels ("mmbbl") from 2.5 mmbbl in 2008
  • Total Proved plus Probable Reserves up 12% to 9.9 million barrels of oil equivalent ("mmboe") from 8.8 mmboe in 2008
  • The above increase is after production of 1.0 mmboe in 2009 indicating that actual reserve additions were 2.0 mmboe in 2009.
  • Net present value ("NPV") of proved plus probable reserves up 23% to $217 million from $176 million in 2008 discounted at 10% before tax
  • Zapata's focus on high netback oil, rather than natural gas, was rewarded as oil contributes 77% of Zapata's NPV but only 54% of total reserves.

Zapata's proved plus probable reserves rose 12% sparked by a 54% gain or 1.3 mmbbl increase in proved oil reserves. Zapata's July 2009 decision to focus its drill program on high netback oil and initial response to its prior year's investment in the Silver Lloyd waterflood spearheaded this significant increase.

The company is continuing to develop its oil reserves in its core East Central Alberta oil area and is optimistic that reservoir recoveries from its waterflood at Silver will exceed those assigned in the current reserve report.

A summary of the reserve report follows: 

December 31, 2009    
Gross Reserves Gas from all sources (mmcf) Oil from all sources (mbbl) NGL from all sources (mbbl) Barrels of Oil Equivalent (mboe) Net Present Value of Reserves Discounted at 10% before tax ($000)
Proved 15,967 3,836 347 6,844 $ 161,567 
Probable 8,503 1,479 164 3,060 $ 55,421 
Proved plus Probable 24,470 5,314 511 9,904 $ 216,988 
December 31, 2008    
Gross Reserves * Gas from all sources* (mmcf) Oil from all sources (mbbl) NGL from all sources (mbbl) Barrels of Oil Equivalent* (mboe) Net Present Value of Reserves Discounted at 10% before tax ($000)*
Proved 18,153 2,499 367 5,892 $ 122,945
Probable 8,939 1,299 153 2,941 $ 53,084
Proved plus Probable 27,092 3,798 520 8,833 $ 176,029
 * Includes 31 mboe not reported on by Sproule, sold for $650,000.
Gas from all sources includes solution gas, non-associated gas and associated gas and coal bed methane gas
Oil from all sources includes light and medium oil and heavy oil

Zapata's complete reserves reporting in accordance with National Instrument 51-101 will be released in April along with the company's audited financial statements, management's discussion and analysis and annual information form for the year ended December 31, 2009.

Total Reserves - Proved plus probable reserves grew by 12% to 9.9 mmboe. Proved reserves were up 16% to 6.8 mmboe and represent 69% of total reserves.

Oil - Proved oil reserves increased 53% to 3.8 mmbbl and represent 56% of total proved reserves. Proved plus probable oil reserves were up 40% to 5.3 mmbbl and were 54% of total proved plus probable oil and gas reserves.
The significant increase in oil reserves was achieved primarily through 2009 drilling in East Central Alberta and the Silver Lloyd waterflood which became fully operational in September 2009. The 2009 East Central Alberta oil drilling program included 13 (13 net) wells resulting in 11 (11 net) producing oil wells.

Gas - Zapata's decision to concentrate on oil development predictably resulted in 2009 gas production reducing its natural gas reserves. Proven and probable natural gas reserves were down 10% to 24,470 million cubic feet ("mmcf") after production of 2,603 mmcf of natural gas during 2009. Proven gas reserves were 2,186 mmcf lower resulting in a 12% decline to 15,967 mmcf. Increases in higher netback oil reserves more than replaced the reduction in gas reserves.

As at December 31, 2009, the NPV of proved plus probable reserves before tax discounted at 10% were assigned a value of $217 million by Sproule. This is 23% higher than 2008 and is primarily attributed to Zapata's reserves of higher netback oil. Proved oil reserves (NPV of $126 million discounted at 10%) accounted for 58.4% of the Sproule NPV estimate of proved plus probable reserve value while only accounting for 39% of the total reserve volume.

Zapata's reserve life index (an estimate of years of production remaining) of 9.4 years is based on proved plus probable reserves and average Q4 2009 production. Fourth quarter 2009 production averaged 2,852 boe/d and was 53% oil, 4% ngls and 43% gas.

A reserve report is limited to providing a value for producing properties based on historical production data. Management believes that Zapata has significant reserves that will soon receive greater recognition in Zapata's future reserve reports. Undeveloped land positions are typically not recognized in the reserve report but do provide immediate and ongoing value additions to Zapata.

Near term value additions include but are not limited to:

  • The 100% owned Silver (Lloyd) waterflood, which was only fully implemented in September 2009, did not have sufficient post implementation production history to be recognized as a waterflood in the reserve report. Once adequate production history with the waterflood is established, Zapata expects to have increases in recovery rates recognized above the current 10% level. Twenty seven million barrels of original oil in place ("OOIP") have been estimated by the Corporation based on recent drilling and mapping. Currently approximately 10% of this amount has been recognized as recoverable. However, similar Lloyd pools in the area have achieved 50% to 60% recovery rates to date. Based on 27 million barrels of OOIP each 10% increase in recovery would add 2.7 million barrels to Zapata's reserves and should be recognized in future reports.
  • The Silver battery will soon be pipeline connection will be completed in July 2010. Management expects this to reduce transportation costs by $1/bbl which will result in increases in the NPV of the property.
  • Zapata's Cardium rights in the Pembina area have been given no value in the reserve report. Zapata is well positioned in the East Pembina area with 10.5 net sections (2719 ha) of Cardium rights where offsetting horizontal wells with multi stage fracs are being drilled and Cardium rights at recent land sales have sold for up to $14,000 per ha and averaged $7,000 per ha. Currently the land alone provides substantial value to Zapata. In order to optimize this value Zapata is proceeding with licensing a 100% horizontal multi frac well. Within the greater Cardium fairway Zapata has a total of 58 (47 net) sections of Cardium rights.
  • Additional waterfloods now being implemented for oil in East Central Alberta have been given no value in the current reserve report.

In addition to the above near term reserve additions, Zapata has the following assets which will continue to provide value to Zapata.

  • In addition to the Cardium rights above, Zapata has 258,440 net acres (403.8 sections) of undeveloped land in inventory for future drilling.
  • Of its undeveloped land inventory, 74,413 acres (116 sections) are in Zapata's East Alberta core area where Zapata has been focusing its seismic and drilling programs for oil. Zapata's strong strategic position in both land and facilities gives it an advantage in developing many opportunities through exploring for new pools, developing and extending existing oil reservoirs and implementing enhanced oil technology.
  • Zapata has significant natural gas producing assets and exploration opportunities. At current natural gas prices, netbacks from and present value of natural gas projects are much lower than on oil projects. When natural gas prices recover, natural gas assets will increase in value and natural gas exploration and development projects will be re-emphasized.

Current Operations

  • Zapata drilled a horizontal Bluesky (.5 net) well in Q1 which is now being tied in.
  • The first 10 (10 net) well drill program for oil in 2010 in East Central Alberta is to commence in two weeks.
  • Seismic programs (100% owned) are underway in the Silver and Sounding Lake areas to confirm locations for Q2 and Q3 oil drilling programs.

Zapata is a junior oil and gas production company operating in western Canada and trades on the TSX Venture Exchange under the symbol "ZCO."

Forward-Looking Information
This news release contains certain forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "guidance", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "budget", "strategy" and similar expressions are intended to identify forward-looking information. In particular, but without limiting the foregoing, this news release contains forward-looking information pertaining to the following: the volume and value of the company's oil, natural gas and natural gas liquids reserves and potential future additions to its reserves; drilling and development plans; seismic activities; and the company's potential strategic alternatives including potential business combinations.

The forward-looking information contained in this news release reflect several material factors and expectations and assumptions of the company including, without limitation: that the company will continue to conduct its operations in a manner consistent with past operations; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the accuracy of the estimates of the company's reserve and resource volumes; certain commodity price and other cost assumptions; and the continued availability of adequate debt and/or equity financing and cash flow to fund its capital and operating requirements as needed. The company believes the material factors, expectations and assumptions reflected in the forward-looking information are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.

The forward-looking information included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information including, without limitation: changes in commodity prices; changes in the demand for or supply of the company's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans by the company or by third party operators of the company's properties; increased debt levels or debt service requirements; inaccurate estimation of the company's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; reliance on industry partners; the failure to find an acceptable strategic alternative or transaction; and certain other risks detailed from time to time in the company's public disclosure documents (including, without limitation, those risks identified in the company's Annual Information Form).

The forward-looking information contained in this news release speak only as of the date of this news release, and the company assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

Barrels of Oil Equivalent

This news release also contains references to "boe" (barrels of oil equivalent and "mboe" (thousand barrels of oil equivalent). Zapata has adopted the standard of six thousand cubic feet of gas to one barrel of oil (6 Mcf: 1 bbl) when converting natural gas to boes and mboes. Boes and Mboes may be misleading, particularly if used in isolation. The foregoing conversion ratios are based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead.

Disclosure of Resources other than Reserves

This news release contains estimate of "oil in place" ,which means the quantity of oil that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated accumulations yet to be discovered. Oil in place is not, and should not be confused with, reserves under National Instrument 51-101, and there is no assurance that the volumes represented will be discovered, and if discovered, there is no certainty that it will be commercially viable to produce any portion of these resources. The term "reserves" means those quantities of oil and gas anticipated to be economically recoverable from discovered resources as defined in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook"). In this presentation the term recoverable reserves is used as it is in common usage. This term has the same meaning a reserves defined in accordance with the COGE Handbook.
"Original resources" are those quantities of oil and gas estimated to exist originally in naturally occurring accumulations. Also defined as per the COGE Handbook. In this presentation we have provided estimates of the oil portion of original resources which is referred to by us as "Original Oil in Place".

The TSX Venture Exchange has neither approved nor disapproved of the information contained herein.

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