Cardinal Energy Ltd.
TSX : CJ

Cardinal Energy Ltd.

March 27, 2014 21:30 ET

Cardinal Energy Ltd. 2013 Year End Reserves Results and Drilling Update

CALGARY, ALBERTA--(Marketwired - March 27, 2014) - Cardinal Energy Ltd. ("Cardinal" or the "Company") (TSX:CJ) is pleased to report its year end 2013 reserves results and to provide an update of the production results from its first two horizontal wells in Bantry.

Reserve Highlights

  • Year over year, proved developed producing reserves increased to 12,500 Mboe (86% oil) an increase of 67% per fully diluted share.
  • Total proved reserves increased to 13,748 Mboe (86% oil) or 79% per fully diluted share as compared to December 31, 2012.
  • Total proved plus probable reserves increased to 21,163 Mboe (86% oil) an increase of 111% per fully diluted share.
  • Total proved plus probable producing reserves now make up 86% of Cardinal's reserve base.
  • Finding, development and acquisition ("FD&A") costs (including change in future development capital of $32.4 MM) were $14.99 per boe on a total proved and probable reserve basis (2012 $18.00 per boe.) Finding and development costs ("F&D") (including future development capital) were $15.77 in 2013 as compared to $16.56 in 2012, based on actual amounts the Company spent in 2012 and 2013.
  • Cardinal's reserve life index is 6.4 years on its total proved reserves and 9.9 years on its total proved plus probable reserves, based on 5,850 boe/d of production.

Drilling Update

Cardinal drilled two Glauconitic horizontal wells in the first quarter of 2014. Both wells were fracture stimulated and brought on production as flowing oil wells.

The 2-15-17-12W4 well has produced an average of 222 boe/day to date in the month of March. However, management believes the well is still cleaning up and anticipates that production rates from the well will improve over time.

The 2-35-16-12W4 well commenced production and flowed without pumping equipment at an average rate of 335 boe/day. Cardinal made a decision to shut down the well and equip it with pumping equipment to fully understand the capabilities of the well. The well has been on production with pumping equipment for 13 days (312 hours) and has produced at an average rate of 740 boe/day, 732 barrels of oil per day and 134 mcf/day of solution gas. While we are pleased with the initial drilling results, readers are cautioned that the Sproule type curve for the area anticipates an initial production rate of 300 boe/day with 70% production decline in the first year of production.

Cardinal is currently drilling its third horizontal well at Bantry and management is continuing to evaluate the number of additional Glauconitic horizontal wells to be drilled in 2014 to manage the Company's overall decline rate.

The following tables summarize information from the independent reserve evaluation (the "Sproule Report") completed by Sproule Associates Ltd. ("Sproule") as of December 31, 2013 in accordance with the definition, standard and procedures contained in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" of the Canadian Securities Administrators ("NI 51-101"). Additional reserve information will be included the Company's Annual Information Form which will be filed on SEDAR on or before March 31, 2014. See "Advisory Regarding Oil and Gas Information" for additional cautionary language.

SUMMARY OF OIL AND NATURAL GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2013
FORECAST PRICES AND COSTS
RESERVES
LIGHT AND
MEDIUM OIL
HEAVY OIL NATURAL GAS NATURAL GAS
LIQUIDS
RESERVES CATEGORY Gross
(Mbbls)
Net
(Mbbls)
Gross
(Mbbls)
Net
(Mbbls)
Gross
(MMcf)
Net
(MMcf)
Gross
(Mbbls)
Net
(Mbbls)
PROVED:
Developed Producing 4,561 4,166 6,171 5,555 10,298 8,605 51 41
Developed Non-Producing 73 71 68 59 100 120 0 1
Undeveloped 731 560 208 197 831 660 13 10
TOTAL PROVED 5,365 4,797 6,447 5,811 11,229 9,386 65 53
PROBABLE 3,536 3,030 2,657 2,388 7,058 5,892 47 38
TOTAL PROVED PLUS PROBABLE 8,901 7,827 9,103 8,199 18,287 15,278 112 90
Notes:
(1) "Gross" reserves means the total working and royalty interest share of remaining recoverable reserves owned by Cardinal before deductions of royalties payable to others.
(2) "Net" reserves means Cardinal's gross reserves less all royalties payable to others.
(3) Approximately 80% of Cardinal's gross oil reserves have an API of 20 degrees or greater.
NET PRESENT VALUES OF FUTURE NET REVENUE
BEFORE INCOME TAXES DISCOUNTED AT (%/year)
RESERVES CATEGORY 0%
($000s)
5%
($000s)
10%
($000s)
15%
($000s)
20%
($000s)
Unit Value
Before Income Tax
Discounted at
10% per Year
$/Boe
PROVED:
Developed Producing 344,616 306,713 264,931 232,027 206,682 23.66
Developed Non-Producing 5,171 4,325 3,691 3,204 2,821 24.57
Undeveloped 26,006 20,387 16,254 13,133 10,720 18.51
TOTAL PROVED 375,794 331,424 284,876 248,365 220,224 23.30
PROBABLE 256,547 159,137 110,403 82,063 63,891 17.15
TOTAL PROVED PLUS PROBABLE 632,341 490,561 395,278 330,428 284,115 21.18
Notes:
(1) All evaluations and summaries of future net revenue are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned.
(2) Unit values are based on net reserve volumes.
(3) Pricing inflation and exchange rates are based on the published Sproule December 31, 2013 price deck.

About Cardinal Energy Ltd.

Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal's operations are focused in all season access areas in Alberta.

Advisory Regarding Forward-Looking Statements

In the interest of providing Cardinal's shareholders and potential investors with information regarding Cardinal, including management's assessment of Cardinal's future plans and operations, certain statements in this press release are "forward-looking statements" within the meaning of applicable Canadian securities legislation. In some cases, forward-looking statements can be identified by terminology such as "anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "intend", "may", "objective", "ongoing", "outlook", "potential", "project", "plan", "should", "target", "would", "will" or similar words suggesting future outcomes, events or performance. The forward-looking statements contained in this press release speak only as of the date thereof and are expressly qualified by this cautionary statement.

Specifically, this press release contains forward-looking statements relating to: our business strategies, plans and objectives; expected production rates and decline rates and our reserve life index. In addition, information and statements relating to reserves are deemed to be forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, that the reserves described exist in quantities predicted or estimated, and that the reserves can be profitably produced in the future.

These forward-looking statements are based on certain key assumptions regarding, among other things: petroleum and natural gas prices and pricing differentials; well production rates and reserve volumes; estimated operating costs; our ability to market our oil and natural gas successfully; our ability to add production and reserves through our exploration and development activities; capital expenditure levels; the receipt, in a timely manner, of regulatory and other required approvals for our operating activities; the availability and cost of labour and other industry services; the availability and cost of financing and our ability to access capital; the amount of future cash dividends that we intend to pay; interest and foreign exchange rates; the continuance of existing and, in certain circumstances, proposed tax and royalty regimes; our ability to develop our crude oil and natural gas properties in the manner currently contemplated; and current industry conditions, laws and regulations continuing in effect (or, where changes are proposed, such changes being adopted as anticipated). The reader is cautioned that such assumptions, although considered reasonable by Cardinal at the time of preparation, may prove to be incorrect.

Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: declines in oil and natural gas prices; risks related to the accessibility, availability, proximity and capacity of gathering, processing and pipeline systems; variations in interest rates and foreign exchange rates; access to external sources of capital; risks associated with the exploitation of our properties and our ability to acquire reserves; increases in operating costs; changes in government regulations that affect the oil and gas industry; changes to royalty or mineral/severance tax regimes; risks relating to hydraulic fracturing; changes in income tax or other laws or government incentive programs; uncertainties associated with estimating petroleum and natural gas reserves; changes in environmental, health and safety regulations; competition in the oil and gas industry for, among other things, acquisitions of reserves, undeveloped lands, skilled personnel and drilling and related equipment; or key personnel and information systems; risks associated with the ownership of our securities, including the discretionary nature of dividend payments and changes in market-based factors; and other factors, many of which are beyond the control of Cardinal.

The above summary of assumptions and risks related to forward-looking statements in this press release has been provided in order to provide shareholders and potential investors with a more complete perspective on Cardinal's current and future operations and such information may not be appropriate for other purposes. There is no representation by Cardinal that actual results achieved during the forecast period will be the same in whole or in part as those forecast and Cardinal 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 may be required by applicable securities law.

Advisory Regarding Oil and Gas Information

Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given 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 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.

With respect to finding and development costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year. Expenditures do not include capitalized general and administrative costs and related share based compensation or non-cash expenditures for the decommissioning obligation or fair value adjustments on acquisitions.

This press release contains estimates of the net present value of our future net revenue from our reserves. Such amounts do not represent the fair market value of our reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise.

References herein to short-term production rates are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating aggregate production for us. A pressure transient analysis or well-test interpretation has not been carried out in respect of all wells. Accordingly, we caution that the test results should be considered to be preliminary.

Contact Information

  • Cardinal Energy Ltd.
    M. Scott Ratushny
    Chief Executive Officer and Chairman
    (403) 216-2706

    Cardinal Energy Ltd.
    Douglas Smith
    Chief Financial Officer
    (403) 216-2709

    Cardinal Energy Ltd.
    (403) 234-8681
    (403) 234-0603 (FAX)
    info@cardinalenergy.ca