Arsenal Energy Inc.

Arsenal Energy Inc.

January 28, 2010 17:11 ET

Arsenal Energy Announces Operational Update on Reserves

CALGARY, ALBERTA--(Marketwire - Jan. 28, 2010) - Arsenal Energy Inc. ("Arsenal") (TSX:AEI) is pleased to provide an operational update on reserves as at December 31, 2009, as independently evaluated by AJM Petroleum Consultants ("AJM"), in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Reserves ("NI 51-101"). Arsenal's full NI 51-101F1 – Statement of Reserves Data and Other Oil and Gas Information will be filed in Arsenal's Annual Information Form on SEDAR – by no later than March 31, 2010.


  • Replaced 137% of P+P reserves sold and produced
  • Increased oil weighting from 70% to 85% of P+P reserves.
  • Increased proved portion of P+P reserves from 61% to 65%
  • Increased P+P NAV from $1.25/share to $1.47/share

Reserves Summary

The following tables summarize certain information related to Arsenal's oil and gas reserves as of December 31, 2009 based on forecast price and cost assumptions:

  Light/Medium Oil Heavy Oil Natural Gas Liquids Natural Gas Barrels of Oil Equivalent 3
  Company Company Net Company Company Company Company Company Company Company Company Net
  Gross (Mbbl)1 (Mbbl)2 Gross (Mbbl)1 Net (Mbbl)2 Gross(Mbbl)1 Net (Mbbl)2 Gross(MMcf)1 Net (MMcf)2 Gross (Mbbl)1 (Mbbl)2
Proved Producing 1,889 1,558 274 249 132 100 3,956 3,208 2,955 2,443
Proved Non-producing 98 78 19 18 9 6 874 701 271 219
Proved Undeveloped 2,367 1,909 19 17 3 3 21 21 2,392 1,932
Total proved 4,354 3,545 312 284 144 110 4,850 3,930 5,618 4,593
Probable 2,057 1,667 491 424 55 42 2,613 2,059 3,039 2,476
Total proved & probable 6,411 5,212 803 708 198 152 7,464 5,989 8,657 7,069

Reserves Values

The estimated future net revenues before taxes associated with Arsenal's reserves effective December 31, 2009 and based on the AJM's future price forecast are summarized in the following table:

  0%DCF 5% DCF 10% DCF 15% DCF
  ($000s Cdn) ($000s Cdn) ($000s Cdn) ($000s Cdn)
Proved Producing 96,921 77,299 65,681 57,705
Proved Non-producing 8,755 7,643 6,809 6,151
Proved Undeveloped 125,871 82,462 59,355 45,025
Total proved 231,546 167,404 131,845 108,881
Probable 184,832 103,021 68,987 50,628
Total proved & probable 416,379 270,425 200,832 159,509

Price Forecast

AJM employed the following pricing, exchange rate and inflation rate assumptions in estimating Arsenal's reserves data using forecast prices and costs as of December 31, 2009:

  WTI Cushing Edmonton Par Natural Gas NGLs Edmonton NGLs Edmonton    
  Oklahoma Price 40o API AECO-C Price Butanes Plant Pentanes Plant Inflation Exchange Rate
Year ($US/bbl) ($Cdn/bbl) ($Cdn/Mmbtu) Gate ($Cdn/bbl) Gate ($Cdn/bbl) Rate (%) ($US/$Cdn)
2010 75.00 77.55 5.80 62.05 81.45 2.00 0.95
2011 81.60 84.45 6.70 67.55 88.65 2.00 0.95
2012 85.85 88.90 7.05 71.10 93.35 2.00 0.95
2013 90.20 93.45 7.45 74.75 98.15 2.00 0.95
2014 97.40 101.05 7.55 80.85 106.10 2.00 0.95
Thereafter       Escalation rate of 2%    

Arsenal Yearend 2009 Reserve Reconciliation AJM Forecasted prices before tax

  31/12/08 Acquired/ Production 4 Adds/Revisions 31/12/09
    Sold   Accretion  
TP (Mboe) 5,109 -603 -785 1,897 5,618
TP value (10%DNAV/MM$) Cdn 103.3 -5.4 -15.8 49.7 131.8
P+P (boe) 8,267 -1,014 -785 2,189 8,657
P+P value (10% DNAV/MM$)Cdn 166.4 -5.4 -15.8 55.6 200.8

Based on the Q4 estimated production rate of 2,060 Boe/d, Arsenal has a reserve life of 7.5 years based on total proved and 11.5 years based on proved plus probable.

2009 Reserve addition costs

  Reserve Adds    2009 Capex      Change in FD&A costs
  Mboe MM$ 4,5 Future Capex $/BOE
    Cdn      MM $ Cdn  
Total Proved 1,294    4.7 21.0 19.86
Proved + Probable 1,175    4.7 19.5 20.60

On a total proved basis, reserves increased by 1.897 MBoe and reserves/share increased by 0.16 Boe (34%). Additions replaced production by 242%.

On a proved plus probable basis, reserves increased by 2.189 MBoe and reserves/share increased by 0.018 Boe/share (25%).

Arsenal Year/Year Net Asset Value              
    31-Dec-06 31-Dec-07 31-Dec-08 31-Dec-09  
P+P PV 10 (10% DNAV/MM$) 77.1        87.6        166.4 200.8  
Land 7 1.5        1.5        2.0 2.0  
Seismic 8 0.3        0.8        0.9 1.0  
Debt + Working Capital (MM$) 9 -28.5        -20.7        -41.8 -27.0  
NAV (MM$) 50.4        69.2        127.5 176.8  
Shares Outstanding (MM) 6 73.3        83.7        101.6 120.5  
NAV/Share ($/share) 0.69        0.83        1.25 1.47  


  1. "Company Gross" reserves means Arsenal's working interest (operating & non-operating) share before deduction of royalties and excluding any royalty interest.
  2. "Net" reserves means Arsenal's working interest (operated & non-operated) share after deduction of royalties, plus Arsenal's royalty interest in reserves.
  3. Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil.
  4. Numbers are unaudited management estimates.
  5. Capital includes costs and proceeds of property sales and acquisitions.
  6. Undiluted
  7. 50,000 acres of undeveloped land at $40/acre
  8. 180 km2 of proprietary seismic at $5,500/km2
  9. unaudited

Arsenal is a junior oil and gas company engaged in the exploration for, and development and production of natural gas and oil reserves primarily in Alberta and Saskatchewan and North Dakota, U.S.A. Arsenal's common shares trade on the Toronto Stock Exchange under the symbol "AEI".

For further information on Arsenal, please visit our website at, e-mail

Cautionary Statement

This press release contains certain forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable Canadian securities laws. These statements relate to future events and future performance and are based upon expectations, estimates, projections, assumptions and beliefs. Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Although Arsenal believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Arsenal cannot guarantee future results, levels of activity, performance or achievements. Consequently, there is no representation by Arsenal that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. In particular, this press release contains forward-looking statements pertaining to the following: expectations of future oil and natural gas production, reserves and commodity prices and the filing of certain oil and gas information in Arsenal's Annual Information Form. With respect to forward-looking statements contained in this press release, certain assumptions have been made regarding, among other things, future prices for crude oil and natural gas (as set out in AJM's price forecast and future), currency and interest rates. Some of the risks which could cause results to differ materially from those expressed in the forward-looking statements contained in this press release include: general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in the price of oil and natural gas; governmental regulation of the oil and gas industry, including environmental regulation; fluctuations in foreign exchange or interest rates; changes in hydrocarbon or investment policies; geological, technical, drilling and processing problems and other difficulties in producing reserves; failure to realize anticipated benefits of acquisitions; or unanticipated operating events which can reduce production or cause production to be shut in or delayed.

Statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Arsenal is not under any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in Arsenal's expectations, except as otherwise required by applicable securities laws.

In this press release where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel. The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Estimates of future net revenue do not represent fair market values.

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