SOURCE: Canamax Energy Ltd.

Canamax Energy Ltd.

March 17, 2015 08:00 ET

Canamax Announces 111% Increase in Proven Plus Probable Reserves During Period Ended December 31, 2014, and Provides Update on Significant New Wapiti Well and Bank Loan Facility

CALGARY, AB--(Marketwired - March 17, 2015) -

NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Canamax Energy Ltd. ("Canamax" or the "Company") (TSX VENTURE: CAC) is pleased to announce the results of its December 31, 2014 oil and gas reserves evaluation and provide updates on the Company's recently completed horizontal well at Wapiti and bank loan facility. 

Canamax's reserves were evaluated at December 31, 2014 to reflect the year-end change from the Company's previous February 28, 2014 year-end to December 31, 2014. The significant additions to reserves from February 28, 2014 to December 31, 2014 primarily reflect reserve extensions at the Company's core areas of Flood and Wapiti as a result of successful drilling and well re-completion programs in those areas, combined with the acquisition of Ki Exploration Inc. during April 2014. 

During the 10-month period to December 31, 2014, Canamax drilled and completed 8 (net 8) successful vertical, Montney oil wells at Flood and one (net 0.7) successful horizontal, Cardium well at Wapiti. In addition, Canamax re-completed a number of existing wells (such wells obtained through acquisitions), including 3 (net 3) at Flood in the Montney and one (net 1) at Retlaw in the Glauconite. At Flood, the Company completed the construction of a new gathering system and expanded its battery and water disposal infrastructure during the fourth quarter of 2014. During January 2015, all of the wells in the Flood field were tied in to the gathering system, which provides for the transport of produced emulsion through a central pipeline to the battery and water disposal facilities. With this infrastructure in place, the Company will see reductions in emulsion hauling and other operating costs going forward. 

2014 Reserve Highlights (10-month period ended December 31, 2014)

  • Increased Proven plus Probable ("2P") reserves by 111% to 5.4 million boe (68% oil & NGL)
  • Increased the value of 2P reserves by 73% to $67.0 million (NPV 10% before tax ("NPV10")), despite a reduction in forecasted commodity prices.
  • Increased Proven ("1P") reserves by 105% to 3.2 million boe (65% oil & NGL)
  • Increased the value of 1P reserves by 49% to $38.3 million NPV10
  • Increased 2P reserve volumes by 37% and 1P reserve volumes by 32% on a per share basis (based on the shares outstanding at the respective period ends).
  • Achieved finding, development and acquisition ("FD&A") costs, including the change in future development capital ("FDC"), of $15.47 per boe on a 2P reserve basis and $18.85 per boe on a 1P reserve basis during the period.
  • Replaced 2014 production of 266 mboe by 11.6 times with 2P reserve additions and 7.1 times with 1P reserve additions
  • Proved Developed Producing reserves represent 50% of total Proved reserves on a volume basis and 69% on a value basis (NPV10) at December 31, 2014
  • The reserve life index at December 31, 2014 is 13.6 years for 2P reserves and 8.8 years for 1P reserves
  • The Company's net asset value ("NAV") based on the 2P NPV10 reserve value is $1.43 per share(1) and is $0.75 per share based on the 1P reserve value.

Notes:

  1. The NAV calculation is based on the Company's 2P and 1P NPV10 reserve values of $67.0 million and $38.3 million, net of December 31, 2014 working capital deficit of $6.8 million, and 42.0 million common shares outstanding. No value has been attributed to undeveloped land. As at December 31, 2014, the Company had nil drawn on its operating loan facility. This financial information is based on the Company's preliminary 2014 unaudited financial statements which is subject to audit and could be revised.

Canamax's December 31, 2014 year end reserves were evaluated by independent reserve evaluators GLJ Petroleum Consultants Ltd. ("GLJ"). The evaluation of all of the Company's oil and gas properties was completed in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR on or before April 30, 2015.

Summary of Reserves (1)

           
   Light & Medium Oil  Heavy Oil  Natural Gas  NGL  Total
Reserves Category  (Mbbl)  (Mbbl)  (MMcf)  (Mbbl)  (Mboe)
                
Proved               
 Developed Producing  685  102  4,145  119  1,597
 Developed Non-producing  67  -  714  56  242
 Undeveloped  835  89  1,886  117  1,355
Total Proved  1,587  191  6,745  292  3,194
Probable  1,294  61  3,631  190  2,150
Total Proved Plus Probable  2,881  252  10,376  482  5,344
                

Note:
 1. Above gross reserves are working interest reserves before production royalty deductions and excluding royalty income reserves

Summary of Reserve Values

The estimated before tax net revenues associated with Canamax's reserves at December 31, 2014 are based on the published GLJ future price forecasts at that date and are as follows:

   
Reserves Category Net Present Value, Before Tax ($000)(1)
  0% 5% 10% 15%
Proved        
 Developed Producing 40,992 31,902 26,383 22,574
 Developed Non-Producing 6,702 4,718 3,507 2,730
 Undeveloped 25,860 15,031 8,407 4,136
Total Proved 73,554 51,651 38,297 29,440
Probable 70,970 43,177 28,729 20,303
Total Proved Plus Probable 144,524 94,828 67,026 49,743
         

Note:

  1. It should not be assumed that the net present values of future net revenues estimated by GLJ represent fair market values for these reserves. There is no assurance that the forecasted price and cost assumptions will be attained and variances could be material. 

Summary of FD&A Costs (1)

   
    

2014 (10 months)
Proved
Reserves
Proved Plus
Probable Reserves
FD&A Costs, Including FDC (M$)    
 Exploration and Development capital expenditures 20,833 20,833
 Acquisitions (2) 9,184 9,184
 Dispositions (3) (2,456) (2,456)
 Total change in FDC (4) 8,201 20,056
Total FD&A Costs, including change in FDC (M$) 35,762 47,617
   
Total net reserve additions (Mboe) (5) 1,897 3,078
Total FD&A costs, including FDC (per boe) $18.85 $15.47
     

Notes:

  1. The 10-month December 31, 2014 exploration and development capital expenditures, and acquisitions and dispositions figures are based on unaudited financial results which may change on the completion of the audited financial statements.
  2. Acquisitions primarily reflect the acquisition of 100% of Ki Exploration Inc. during April 2014 for total consideration (shares + warrants + assumption of net debt) of $7.3 million. The amounts reflected in "Acquisitions" represent the net purchase price paid rather than the amounts allocated to property, plant and equipment for accounting purposes.
  3. Dispositions primarily reflects the disposal of the Delta West property during September 2014 for net proceeds of $2.4 million.
  4. Future Development Capital increased from February 28, 2014 to December 31, 2014 as follows: Proven Reserves -- increased from $19.6 million to $27.8 million; Proven plus Probable Reserves -- increased from $25.7 million to $45.7 million.
  5. Total net reserve additions during the period include reserve extensions, technical revisions and acquisitions net of dispositions.
  6. The aggregate exploration and development costs incurred in the most recent financial period and the change during the period in future development capital, generally will not reflect total finding and development costs related to reserve additions for that period due to the timing of capital costs and the subjectivity in the estimation of future costs

Update on new Wapiti well 

During February 2015, Canamax completed the tie-in of the new horizontal Wapiti well at 04-15-67-08 W6, which had been completed and production tested in December. This well, in which the Company has a 70% working interest, was placed on production on March 2, 2015. Based on field estimates, the following average gross production rates for the initial 224 hours (9.3 days) of operations were recorded: 678 bbl/d of light oil, 285 mcf/d of natural gas and 23 bbl/d of NGL's (total gross production of 749 boe/d and net 524 boe/d). Since this well was put on production after December 31, 2014, the related reserves were not included as part of the Company's proved producing reserves category in the year end reserve report. Canamax has identified an additional 7 (net 5.5) horizontal well locations on its Wapiti acreage.

Canamax management anticipates that the initial 30‐day average production ("IP30") rate for the 04-15 well will be better than the IP30 rate of the initial well drilled on the Wapiti lands in February 2014 (which recorded a rate of 405 boe/d (net 284 boe/d)). The initial production rates noted are not indicative of long-term performance or ultimate recovery. 

Update on Bank Loan Facilities

After a review of the Company's lending facilities by Canamax's bankers during January 2015, its $10.0 million operating loan limit will remain in place. Another review of the lending facilities is scheduled for May 1, 2015 in conjunction with completion of the reserve report discussed above and completion of the year end audited financial statements.

About Canamax

Canamax is a junior oil and gas company in the business of consolidating micro-cap oil and gas companies and exploiting low risk development opportunities in the Western Canadian Sedimentary Basin.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Reader Advisories

Certain information in this press release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects", "seeks", "potential", "plans", "estimates", "targets", "objectives" and similar expressions. Specific forward-looking statements included in this press release include comments related to cost reductions to be achieved as a result of the infrastructure improvements to the Company's Flood property, the drilling inventory at the Company's Wapiti property and the IP30 rate for the recently completed 04-15 well in Wapiti.

Forward-looking statements necessarily involve known and unknown risks and uncertainties, including, without limitation, the impact of general economic conditions, the risks and liabilities inherent in oil and natural gas operations; marketing and transportation; loss of markets; volatility of commodity prices; currency and interest rate fluctuations; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions or dispositions; inability to access sufficient capital from internal and external sources; changes in legislation, including but not limited to income tax, environmental laws and regulatory matters, including changes in how they are interpreted and enforced; changes in incentive programs related to the oil and natural gas industry generally; and geological, technical, drilling and processing problems and other difficulties in producing petroleum and natural gas reserves; and obtaining required approvals of regulatory authorities. Readers are cautioned that the foregoing list of factors is not exhaustive.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits the Company will derive from them.  Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

The forward looking statements contained in this news release are made as of the date of this news release, and Canamax does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.

Conversion

BOE's may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Contact Information

  • For further information contact:

    Brad Gabel 
    President & CEO 
    (587) 349-5186 

    Chris Martin, CA
    Vice President, Finance & CFO
    (587) 349-5186

    Website - www.canamaxenergy.ca