Arsenal Energy Inc.
TSX : AEI
PINK SHEETS : AEYIF

Arsenal Energy Inc.

February 09, 2012 17:22 ET

Arsenal Energy Inc. Releases Yearend Reserves

CALGARY, ALBERTA--(Marketwire - Feb. 9, 2012) - Arsenal Energy Inc. (TSX:AEI) (PINKSHEETS:AEYIF)

AJM Deloitte have evaluated Arsenal's reserves as at December 31, 2011 in accordance with National Instrument 51-101. The information that follows has been derived from that evaluation.

More detailed reserve information will be included in Arsenal's Annual Information Form for the year ended December 31, 2011 which will be filed on SEDAR at www.sedar.com on or before March 30, 2012.

Highlights

  • Year/year proved plus probable reserves increase by 50%
  • Year/year proved reserves increase by 38%
  • Year/year net present value of proved plus probable reserves, before income tax and discounted at 10%, increase by 47%
  • Arsenal's net asset value increases to $1.60/share
  • Oil and natural gas liquids at December 31, 2011 constitute 80% of proved plus probable reserves
  • Based on the December 2011 production rate of 3,940 boe/day, Arsenal has a reserve life of 6.9 years on a total proved basis and 10.9 years on a proved plus probable basis.
Summary of Oil and Natural Gas Reserves as at December 31, 2011
Oil and NGL's Natural Gas Oil Equivalent
Gross Net Gross Net Gross Net
Reserve Category (Mbbl ) (Mbbl ) (MMcf ) (MMcf ) (Mboe ) (Mboe )
Proved
Developed producing 3,690.3 3,051.8 11,139.8 9,487.6 5,547.0 4,633.1
Developed nonproducing 114.0 96.5 782.1 702.0 244.4 213.5
Undeveloped 3,978.7 3,182.8 1,101.9 888.6 4,162.4 3,330.9
Total Proved 7,783.0 6,331.1 13,023.8 11,078.1 9,953.6 8177.5
Probable additional 4,752.9 3,825.5 6,088.3 5,239.2 5,767.6 4,698.7
Total Proved + Probable 12,308.8 10,156.6 19,112.1 16,317.3 15,721.3 12,876.2

(1) "Gross" reserves means Arsenal's interest before deduction before deduction of royalties

(2) "Net" reserves means Arsenal's interest after deduction of royalties

Summary of Net Present Values of Future Net Revenue as of December 31, 2011
($ Millions)
Value Before Income Tax
Discounted at (% per year)
Reserve Category 0 % 5 % 10 %
Proved
Developed producing 153.6 126.1 109.0
Developed nonproducing 6.9 4.6 3.5
Undeveloped 132.2 76.7 43.7
Total Proved 292.8 207.4 156.2
Probable additional 309.3 196.4 140.2
Total Proved + Probable 602.1 403.8 296.4

(1) AJM forecast prices at December 31,2011

(2) Includes future development capital of $128.5 MM$

2011 Reserve Reconciliation
December Acquired / Adds / December
31, 2010 Sold Production Revisions 31,2011
TP (Mboe) 7,218 2,640 814 909 9,953
TP value (MM$) 143.3 35.0 30.9 18.7 166.1
P+P (Mboe) 10,466 3,808 849 2,261 15,721
P+P value (MM$) 201.4 41.6 30.9 84.2 296.4
Net Asset Value
as at December 31
$000's 2006 2007 2008 2009 2010 2011
P+P PV10 (10% DNAV) 77.1 87.6 166.4 200.8 201.4 296.4
Land 1.5 1.5 2.0 2.0 6.4 10.0
Seismic 0.3 0.8 0.9 1.0 2.0 2.0
Debt + Working Capital -28.5 -20.7 -41.8 -27.0 -18.8 -56.0
NAV (MM$) 50.4 69.2 127.5 176.8 191.0 252.4
Shares Outstanding (MM) 73.3 83.7 101.6 120.5 140.6 157.3
NAV/Share ($/share) 0.69 0.83 1.25 1.47 1.36 1.60

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Advisory

The information provided above includes references to discovered and undiscovered oil and natural gas resources. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resource.

Certain statements and information contained in this press release, including but not limited to management's assessment of Arsenal's future plans and operations, production, reserves, revenue, commodity prices, operating and administrative expenditures, funds from operations, capital expenditure programs and debt levels contain forward-looking statements. All statements other than statements of historical fact may be forward looking statements. These statements, by their nature, are subject to numerous risks and uncertainties, some of which are beyond Arsenal's control including the effect of general economic conditions, industry conditions, changes in regulatory and taxation regimes, volatility of commodity prices, escalation of operating and capital costs, currency fluctuations, the availability of services, imprecision of reserve estimates, geological, technical, drilling and processing problems, environmental risks, weather, the lack of availability of qualified personnel or management, stock market volatility, the ability to access sufficient capital from internal and external sources and competition from other industry participants for, among other things, capital, services, acquisitions of reserves, undeveloped lands and skilled personnel that may cause actual results or events to differ materially from those anticipated in the forward looking statements. Such forward-looking statements although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made and should not unduly be relied on. These statements speak only as of the date of this press release. Arsenal does not intend and does not assume any obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Arsenal's business is subject to various risks that are discussed in its filings on the System for Electronic Document Analysis and Retrieval (SEDAR).

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.

Contact Information

  • Arsenal Energy Inc.
    Tony van Winkoop
    President and Chief Executive Officer
    (403) 262-4854

    Arsenal Energy Inc.
    J. Paul Lawrence
    Vice President, Finance and CFO
    (403) 262-4854
    (403) 265-6877 (FAX)

    Arsenal Energy Inc.
    1900, 639 - 5th Avenue S.W.,
    Calgary, Alberta, T2P 0M9
    info@arsenalenergy.com
    www.arsenalenergy.com