Contact Information: Chinook Energy Inc. Matthew Brister President and Chief Executive Officer (403) 261-6883 or Chinook Energy Inc. L. Geoff Barlow Vice-President, Finance and Chief Financial Officer (403) 261-6883 www.chinookenergyinc.com
CALGARY, ALBERTA--(Marketwire - March 1, 2011) - Chinook Energy Inc. ("Chinook" or the "Company") (TSX:CKE) today announced the results of its year-end reserve evaluations effective December 31, 2010 as prepared by its independent evaluators.
The four evaluators, which were largely responsible for the previous evaluations of the same assets, have evaluated all of Chinook's crude oil, NGL and natural gas reserves in accordance with National Instrument 51-101. The price forecast at December 31, 2010 of McDaniel & Associates Consultants Ltd. ("McDaniel") was used to determine all estimates of future net revenue (also referred to as net present value or NPV). Chinook's Reserves Committee and Board of Directors have reviewed and approved the evaluations prepared by the evaluators.
Chinook's audit of its 2010 annual consolidated financial statements is not yet complete and accordingly all financial amounts referred to in this news release are unaudited and represent management's estimates. Readers are advised that these financial estimates are subject to audit and may be subject to change as a result.
2010 Operational Highlights
Chinook's 2010 operated drilling program was dedicated to delineating light oil discoveries and testing the potential of large scale resource opportunities in Canada and Tunisia. The drilling program consisted of 36 (20.5 net) wells of which 24 were operated and 12 were non-operated wells. The results are outlined in the table below:
/T/
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Wells Drilled
Year ended
December 31,
2010 Tunisia Canada Total
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Gross Net Gross Net Gross Net
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Exploration
Oil 1.00 0.65 8 00 4.11 9.00 4.76
Gas - - 4.00 1.75 4.00 1.75
Dry 1.00 0.35 - - 1.00 0.35
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2.00 1.00 12.00 5.86 14.00 6.86
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Development
Oil 2.00 0.91 15.00 9.79 17.00 10.70
Gas - - 4.00 2.19 4.00 2.19
Dry - - 1.00 0.75 1.00 0.75
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2.00 0.91 20.00 12.73 22.00 13.64
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Total 4.00 1.91 32.00 18.59 36.00 20.50
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/T/
Chinook's average daily production for fiscal 2010 was 9,795 barrels of oil equivalent per day. Production for the last half of 2010 was 15,721 barrels of oil equivalent per day and for the fourth quarter was 15,354 barrels of oil equivalent per day. Projected cash flow from operations (before changes in non-cash working capital) for 2010 is estimated at $52.0 million or $0.32 per weighted average basic common share outstanding (unaudited).
2010 Reserves Summary
2010 was an active acquisition year for the Company which saw the composition of its assets change from strictly international to a new domestic base and a revised international focus. In Canada, Chinook completed two material property acquisitions, several minor asset dispositions and completed the acquisition of Iteration Energy Ltd. Internationally, the Company completed an acquisition of additional working interest in the Remada project, a corporate purchase that brought the Company its first significant production and exposure to the prolific Acacus oil play in Southern Tunisia, and divested of its equity interest in the North Sea assets. As a result, 2009 reserves are not comparative.
/T/
-- Proved reserves totaled 37.4 million barrels of oil equivalent. The
proved reserve life index ("RLI") is 6.6 years using fourth quarter 2010
production.
-- Proved plus probable reserves totaled 62.5 million barrels of oil
equivalent. The proved plus probable RLI is 11.1 years using fourth
quarter 2010 production.
-- Proved developed producing reserves represented 71.6 percent of proved
reserves and 42.9 percent of proved plus probable reserves as at
December 31, 2010.
-- Discovered Petroleum Initially in Place ("DPIIP") associated with the
Bir Ben Tartar (TT) discovery on the Remada permit in Tunisia is
estimated to be 297 million barrels of oil. Proven and probable reserves
net to the Company of 3.6 million barrels of oil represents the 39
percent Contractor's share of the 9.25 million barrels of oil
recoverable from the 23 percent of DPIIP to which proven and probable
reserves have been assigned. In addition, possible reserves of 2.07
million barrels of oil and a Best Case Contingent Resource estimate of
8.37 million barrels of oil recoverable are attributable to Chinook's
interest in a scenario with pool recovery of 11 percent of DPIIP. (1, 2)
-- The all-in cost to add proved reserves was $19.63 per barrel of oil
equivalent, and for adding proved plus probable reserves was $14.60 per
barrel of oil equivalent. The all-in calculation reflects the result of
Chinook's $697.5 million capital investment program as it takes into
account the effect of acquisitions, dispositions, revisions plus the
change in future development costs.
-- The proved finding and development cost, as per NI 51-101 requirements,
was $29.18 per barrel of oil equivalent and the proved plus probable
finding and development cost, as per NI 51-101 requirements, was $21.57
per barrel of oil equivalent. The change in future development costs
("FDC") was included in the calculation and the effect of acquisitions,
divestitures and revisions was excluded.
-- The net asset value amounted to $1.08 billion which results in the
estimated net asset value per diluted share (being 217.5 million shares)
at December 31, 2010, being $4.94 per share based on the net present
value of proved and probable reserves, discounted at 10 percent before
tax and after deducting year end total net debt and adding an estimated
value for undeveloped land in Canada. On an after tax basis, with a
similar 10 percent discount rate, the net asset value is $777.5 million
or $3.57 per diluted share.
-- Future development costs were $168.6 million on a proved basis and
$337.8 million on a proved plus probable basis.
-- The Company established a recycle ratio on a proven plus probable
reserve basis, before commodity price contracts, of 1.1 times in Canada
and 3.9 times in Tunisia.
Notes:
1. "Discovered Petroleum Initially-In-Place" (equivalent to discovered
resources) is defined in the Canadian Oil and Gas Evaluation Handbook as
that quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations prior to production. The recoverable
portion of discovered petroleum initially-in-place includes production,
reserves, and contingent resources; the remainder is unrecoverable.
"Contingent Resources" are defined in the COGE Handbook as those
quantities of petroleum estimated to be potentially recoverable from
known accumulations using established technology or technology under
development, but which are not currently considered to be commercially
recoverable due to one or more contingencies. Contingencies include
factors such as economic, legal, environmental, political, and
regulatory matters, or a lack of markets. It is also appropriate to
classify as contingent resources the estimated discovered recoverable
quantities associated with a project in the early evaluation stage. The
Contingent Resources estimates and the DPIIP estimates are estimates
only and the actual results may be greater than or less than the
estimates provided herein. There is no certainty that it will be
commercially viable to produce any portion of the resources except to
the extent identified as proved or probable reserves. Best Case
Estimate: This is considered to be the best estimate of the quantity
that will actually be recovered. It is equally likely that the actual
remaining quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be at least a
50 percent probability (P50) that the quantities actually recovered will
equal or exceed the best estimate.
2. Possible reserves are those additional reserves that are less certain to
be recovered than probable reserves. There is a 10 percent probability
that the quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible reserves.
The independent evaluators of the Company's year-end reserves are as
follows:
-- McDaniel & Associates Consultants Ltd. ("McDaniel") evaluated all of the
Canadian properties except Grande Prairie and the Northeast gas assets
in Alberta, representing 52 percent of the Company's assets;
-- GLJ Petroleum Consultants Ltd. ("GLJ") evaluated certain Canadian
properties including the Grande Prairie and Northeast gas assets in
Alberta, representing 21 percent of the Company's assets;
-- InSite Petroleum Consultants Ltd. ("InSite") evaluated all of the
Tunisia interests except Cosmos, representing 19 percent of the
Company's assets; and
-- Sproule International Limited ("Sproule") evaluated Comos in Tunisia,
representing eight percent of the Company's assets.
Reserves Breakdown (Company interest before royalties) (1)
(December 31, 2010, escalated price forecast)
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(mboe) 2010 2009
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Proved Producing
Canada 26,224 -
Tunisia 555 92
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Total proved producing 26,780 92
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Proved
Canada 31,283 -
Tunisia 6,133 3,819
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Total proved 37,416 3,819
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Proved Plus Probable Additional
Canada 45,803 -
Tunisia 16,655 12,438
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Total proved plus probable additional 62,459 12,438
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Note:
(1) Columns may not add due to rounding.
Gross Company Interest Reserves as at December 31, 2010 (1)
(Before deduction of royalties payable, not including royalties receivable)
(December 31, 2010, escalated price forecast)
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Light Heavy 6:1 Oil
Crude Oil Crude Oil Sales Gas NGL Equivalent
(mbbls) (mbbls) (mmcf) (mbbls) (mboe)
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Proved producing 6,168 336 107,669 2,332 26,780
Proved non-producing 1,095 60 12,767 183 3,465
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Total proved developed 7,263 396 120,436 2,515 30,245
Proved undeveloped 5,225 - 10,566 184 7,170
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Total proved 12,487 396 131,002 2,698 37,416
Probable additional 13,479 162 61,174 1,207 25,043
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Total proved plus probable 25,967 558 192,176 3,905 62,459
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Note:
(1) Columns may not add due to rounding.
Gross Company Reserve Reconciliation for 2010 (1)
(Gross company interest reserves before deduction of royalties payable)
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6:1 Oil Equivalent (mboe)
Proved Plus
Total Proved Probable Probable
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December 31, 2009 - opening balance 3,819 8,619 12,438
Additions and extensions 1,730 1,189 2,920
Improved performance 126 6 132
Discoveries 496 106 602
Acquisitions 34,784 14,738 49,522
Dispositions - - -
Technical revisions 35 386 421
Production (3,575) - (3,575)
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December 31, 2010 - closing balance 37,416 25,043 62,459
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Note:
(1) Columns may not add due to rounding.
Consolidated
Net Present Value Summary (before tax) as at December 31, 2010
(December 31, 2010, escalated price forecast)
Benchmark oil and NGL prices used are adjusted for quality of oil or NGL
produced and for transportation costs. The calculated NPVs include a
deduction for estimated future well abandonment costs and drilling royalty
credits earned and expected to be claimed in Canada in the first quarter of
2011 have been deducted against royalties.
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Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
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Proved producing 709,965 550,698 455,489 391,345 344,932
Proved non-
producing 109,368 83,672 66,739 54,997 46,463
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Total proved
developed 819,332 634,371 522,227 446,341 391,396
Proved undeveloped 207,347 161,933 129,166 104,435 85,187
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Total proved 1,026,678 796,304 651,393 550,776 476,582
Probable
additional 996,771 702,175 534,223 423,274 344,235
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Total proved plus
probable 2,021,450 1,498,479 1,185,615 974,049 820,816
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Canada
Net Present Value Summary (before tax) as at December 31, 2010
(December 31, 2010, escalated price forecast)
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Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
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Proved producing 680,140 523,636 430,707 368,456 323,633
Proved non-
producing 78,615 59,144 46,582 38,027 31,892
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Total proved
developed 758,755 582,780 477,289 406,483 355,525
Proved undeveloped 60,440 44,589 34,088 26,750 21,415
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Total proved 819,194 627,369 511,377 433,233 376,939
Probable
additional 466,310 280,051 191,441 141,202 109,529
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Total proved plus
probable 1,285,505 907,420 702,818 574,434 486,468
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Tunisia
Net Present Value Summary (before tax) as at December 31, 2010
(December 31, 2010, escalated price forecast)
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Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
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Proved producing 29,825 27,062 24,782 22,888 21,299
Proved non-
producing 30,753 24,528 20,156 16,970 14,571
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Total proved
developed 60,577 51,590 44,938 39,858 35,871
Proved undeveloped 146,907 117,345 95,078 77,685 63,772
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Total proved 207,484 168,935 140,017 117,543 99,642
Probable
additional 530,461 422,124 342,782 282,072 234,706
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Total proved plus
probable 735,945 591,059 482,798 399,615 334,348
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Consolidated
Net Present Value Summary (after tax) as at December 31, 2010
(December 31, 2010, escalated price forecast)
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Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
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Proved producing 654,562 509,870 422,997 364,213 321,507
Proved non-
producing 77,340 60,602 49,421 41,594 35,836
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Total proved
developed 731,901 570,472 472,419 405,807 357,343
Proved undeveloped 150,442 116,092 91,026 71,966 57,055
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Total proved 882,344 686,564 563,445 477,773 414,398
Probable
additional 639,137 437,202 324,563 251,969 201,341
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Total proved plus
probable 1,521,480 1,123,766 888,008 729,742 615,739
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Canada
Net Present Value Summary (after tax) as at December 31, 2010
(December 31, 2010, escalated price forecast)
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Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
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Proved producing 642,122 498,447 412,454 354,417 312,346
Proved non-
producing 58,289 44,833 36,035 29,997 25,626
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Total proved
developed 700,411 543,280 448,488 384,414 337,972
Proved undeveloped 42,380 30,046 21,894 16,220 12,112
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Total proved 742,791 573,326 470,382 400,633 350,083
Probable
additional 347,175 208,583 142,562 105,129 81,549
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Total proved plus
probable 1,089,965 781,909 612,944 505,762 431,632
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Tunisia
Net Present Value Summary (after tax) as at December 31, 2010
(December 31, 2010, escalated price forecast)
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Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
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Proved producing 12,440 11,424 10,544 9,796 9,161
Proved non-
producing 19,051 15,769 13,387 11,597 10,210
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Total proved
developed 31,491 27,192 23,931 21,393 19,372
Proved undeveloped 108,062 86,046 69,132 55,746 44,943
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Total proved 139,553 113,238 93,063 77,139 64,315
Probable
additional 291,962 228,619 182,001 146,840 119,792
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Total proved plus
probable 431,515 341,857 275,064 223,979 184,107
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McDaniel & Associates Consultants Ltd. Escalating Price Forecast as at
December 31, 2010 (1)
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Edmonton
WTI Light Henry Hub AECO
Crude Oil Brent Crude Oil Natural Gas Natural Gas
(US$/bbl) (US$/bbl) (Cdn$/bbl) (US$/mmbtu) (Cdn$/mmbtu)
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2011 85.00 85.00 84.20 4.55 4.25
2012 87.70 87.20 88.40 5.30 4.90
2013 90.50 89.50 91.80 5.75 5.40
2014 93.40 92.30 94.80 6.30 5.90
2015 96.30 95.20 97.70 6.80 6.35
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90.58 89.84 91.38 5.74 5.36
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Edmonton
Condensate
and Natural US/Cdn
Gasoline Propane Butane Exchange
(Cdn$/bbl) (Cdn$/bbl) (Cdn$/bbl) (US$/Cdn)
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2011 88.20 44.40 67.90 0.975
2012 90.40 47.70 71.20 0.975
2013 93.90 50.30 74.00 0.975
2014 96.90 52.70 76.40 0.975
2015 99.90 55.00 78.70 0.975
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93.86 50.02 73.64 0.975
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Note:
(1) Prices escalate at two percent per year after 2015.
Future Development Costs
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($ millions)
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2010 2009
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Proved
Canada 37.4 -
Tunisia 131.1 135.9
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Total proved 168.6 135.9
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Proved Plus Probable
Canada 59.3 -
Tunisia 278.5 252.3
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Total proved plus probable 337.8 252.3
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Chinook's approved budget includes the drilling of 46.0 wells (27.3 net) in
Canada and 7.0 wells (3.7 net) in Tunisia in 2011.
NI 51-101 Finding and Development Costs
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Total Proved Finding and Development Cost
($ thousands, except per unit amounts) 2010
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Capital expenditures excluding acquisitions and dispositions
(unaudited) 50,018
Net change from previously allocated future development
capital 19,107
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Total capital including the net change in future capital 69,125
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Reserve additions excluding acquisitions, dispositions and
revisions (mboe) 2,369
Total proved finding and development costs (per boe) 29.18
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Total Proved Plus Probable Finding and Development Cost
($ thousands, except per unit amounts) 2010
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Capital expenditures excluding acquisitions and dispositions
(unaudited) 49,151
Net change from previously allocated future development
capital 30,026
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Total capital including the net change in future capital 79,177
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Reserve additions excluding acquisitions, dispositions and
revisions (mboe) 3,670
Total proved plus probable finding and development costs (per
boe) 21.57
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All-In Finding, Development and Acquisition Costs
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Total Proved All-In Finding, Development and Acquisition Cost
Including
FDC, Acquisitions, Dispositions and Revisions
($ thousands, except per unit amounts) 2010
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Capital expenditures including acquisitions and dispositions
(unaudited) (1) 697,482
Net change from previously allocated future development
capital 32,645
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Total capital including the net change in future capital 730,127
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Reserve additions including acquisitions, dispositions and
revisions (mboe) 37,188
All-in total proved finding and development costs (per boe) 19.63
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Note: (1) Excludes non-cash costs, including Asset Retirement Obligations.
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Total Proved Plus Probable All-in Finding, Development and
Acquisition Cost
Including FDC, Acquisitions, Dispositions and Revisions
($ thousands, except per unit amounts) 2010
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Capital expenditures including acquisitions and
dispositions (unaudited) (1) 697,482
Net change from previously allocated future development
capital 85,489
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Total capital including the net change in future capital 782,972
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Reserve additions including acquisitions, dispositions and
revisions (mboe) 53,612
All-in total proved plus probable finding and development
costs (per boe) 14.60
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Note: (1) Excludes non-cash costs, including Asset Retirement Obligations.
/T/
Total 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 the total cost of reserve additions in that year.
Recycle Ratio
The recycle ratio is calculated as the netback per barrel divided by the finding and development costs (including acquisitions and dispositions). It is a measure of the profitability and efficiency of the Company.
/T/
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Total Proved Consolidated Canada Tunisia
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Operating netback before
commodity price contracts
($/boe) (unaudited) (1) 19.29 16.69 59.90
FD&A costs ($/boe) (unaudited) 19.63 19.99 14.89
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Recycle ratio 1.0x 0.8x 4.0x
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Total Proved Plus Probable Consolidated Canada Tunisia
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Operating netback before
commodity price contracts
($/boe) (unaudited) (1) 19.29 16.69 59.90
FD&A costs ($/boe) (unaudited) 14.60 14.53 15.47
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Recycle ratio 1.3x 1.1x 3.9x
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Note: (1) Operating netback is calculated by deducting royalties and
production expenses from revenue.
/T/
Corporate Net Asset Value
The Company's net asset value as of December 31, 2010, is detailed in the following table. This net asset value determination is a "point-in-time" measurement and does not take into account the possibility of Chinook being able to recognize additional reserves through successful future capital investment in its existing properties beyond those included in the 2010 year-end reserve reports.
/T/
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Before Tax Before Tax
December 31, 2010 NPV 10% NPV 15%
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($ thousands) $/share ($ thousands) $/share
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Proved plus probable
reserves NPV (1,2) 1,185,615 5.54 974,049 4.55
Undeveloped acreage (3) 53,096 0.25 53,096 0.25
Net debt (4) (169,966) (0.79) (169,966) (0.79)
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Net asset value (basic) (5) 1,068,745 4.99 857,179 4.00
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Net asset value (diluted) (6) 1,075,080 4.94 863,514 3.97
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After Tax After Tax
December 31, 2010 NPV 10% NPV 15%
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($ thousands) $/share ($ thousands) $/share
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Proved plus probable
reserves NPV (1,2) 888,008 4.15 729,742 3.41
Undeveloped acreage (3) 53,096 0.25 53,096 0.25
Net debt (4) (169,966) (0.79) (169,966) (0.79)
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Net asset value (basic) (5) 771,138 3.60 612,872 2.86
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Net asset value (diluted) (6) 777,473 3.57 619,207 2.85
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Notes:
1. Evaluated by independent reserve evaluators as at December 31, 2010. Net
present value of future net revenue does not represent the fair market
value of the reserves.
2. Net present values for before and after tax are based on McDaniel's
December 31, 2010 escalated price forecast.
3. Undeveloped land value has been calculated based on internal estimates
of $100/acre for all Canadian lands.
4. Net debt as at December 31, 2010, including working capital deficit
(estimated and unaudited).
5. Basic shares at December 31, 2010 total 214,187,681 common shares.
6. Diluted shares at December 31, 2010, total 217,475,731 common shares
which include in-the-money options of 3,288,050 shares with proceeds of
$6,335,363.
/T/
Chinook's audited consolidated financial statements and its annual information form, which will include more detailed reserves information, will be filed on SEDAR (www.sedar.com) on or about March 30, 2011.
About Chinook Energy Inc.
Chinook is a Calgary-based public oil and gas exploration and development company that combines high quality gas-weighted assets in Western Canada with an exciting high growth oil business onshore and offshore Tunisia in North Africa.
Reader Advisory
Forward-Looking Statements
In the interest of providing shareholders and potential investors with information regarding Chinook, including management's assessment of the future plans and operations of Chinook, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, 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 exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this news release contains, without limitation, forward-looking statements pertaining to Chinook's recoverability of reserves and the values assigned thereof.
With respect to forward-looking statements contained in this news release, Chinook has made assumptions regarding, among other things: future capital expenditure levels; future oil and natural gas prices and differentials between light, medium and heavy oil prices; future exchange rates and interest rates; Chinook's ability to obtain equipment in a timely manner to carry out development activities; Chinook's ability to market oil and natural gas successfully to current and new customers; the impact of increasing competition; the ability of Chinook to obtain financing on acceptable terms; and the ability of Chinook to add production and reserves through development and exploitation activities. Although Chinook believes that the expectations reflected in the forward-looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Chinook's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: failure to realize the anticipated benefits and synergies of the acquisitions; volatility in market prices for oil and natural gas; failure to complete planned operational activities; general economic conditions in Canada, the U.S. and globally; and the other factors described under "Risk Factors" in Appendix "F" to Iteration's management information circular and proxy statement dated May 29, 2010, available in Canada at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this news release speak only as of the date hereof. Except as expressly required by applicable securities laws, Chinook does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl (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.
Reserve Life Index
The reader is also cautioned that this news release contains the term reserve life index ("RLI"), which is not a recognized measure under GAAP. Management believes that this measure is a useful supplemental measure of the length of time the reserves would be produced over at the rate used in the calculation. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with GAAP as a measure of performance. Chinook's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.