Crocotta Energy Inc.
TSX : CTA

Crocotta Energy Inc.

March 22, 2011 06:00 ET

Crocotta Energy Announces Strong Reserve Growth and Top Quartile Finding and Development Costs

CALGARY, ALBERTA--(Marketwire - March 22, 2011) - Crocotta Energy Inc. ("Crocotta") (TSX:CTA) is pleased to announce its 2010 year-end reserves as independently evaluated by GLJ Petroleum Consultants Ltd., in accordance with National Instrument 51-101 ("NI 51-101").

2010 Highlights

  • Increase in proved plus probable reserves of 22% to 16.2 million barrels of oil equivalent ("boe") despite sale of properties with 3.3 mmboe of proved plus probable reserves booked in opening reserves
  • Increase in proved reserves of 14% to 9.8 million boe
  • Increase in reserves per share by 22% (also 22% after adjusting for debt and future development costs "FDC")
  • All-in finding, development and acquisition costs including FDC on a proved plus probable basis of $8.03 per boe (negative $5.76 per boe excluding FDC as there were net capital dispositions in 2010 due to property dispositions of $50.6 million)
  • Excluding dispositions, finding and development costs including FDC on a proved plus probable basis of $11.09 per boe ($3.68 excluding FDC)
  • Increase in Net Asset Value per share of 7.8% to $2.78 per share
  • Reserve Replacement of 418% on a proved plus probable basis and 230% on a proved basis
  • Recycle ratio of 1.9 times on a proved plus probable basis including FDC but excluding dispositions (1.6 times on a proved basis including FDC but excluding dispositions)
  • Reserve life index of 19.2 years on a proved plus probable basis (11.7 years proved) based on Q410 production of approximately 2,300 boepd

Reserves Summary

Crocotta's December 31, 2010 reserves as prepared by the independent reserve engineering firm GLJ Petroleum Consultants Ltd. ("GLJ") and based on the GLJ (2011-01) future price forecast are as follows:

 
Light/Medium Oil

Heavy Oil

Natural Gas Liquids

Natural Gas
Barrels of Oil Equivalent
  Company   Company   Company   Company   Company  
Interest Net Interest Net Interest Net Interest Net Interest Net
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mmcf) (Mmcf) (Mboe) (Mboe)
Proved                    
  Producing 398 304 4 4 1,148 727 19,575 17,209 4,813 3,903
  Developed Non-producing 10 8 54 48 152 92 3,603 3,086 816 662
  Undeveloped 211 155 59 48 961 738 17,912 15,990 4,216 3,607
Total proved 619 467 117 100 2,261 1,557 41,090 36,286 9,845 8,172
Probable 200 141 57 49 944 619 30,639 27,181 6,308 5,339
Total proved & probable 820 608 174 149 3,205 2,176 71,730 63,467 16,153 13,511

Notes:
 (1) "Company Interest" reserves means Crocotta's working interest (operating and non-operating) share before deduction of royalties and including any royalty interest of Crocotta.
 (2) "Net" reserves means Crocotta's working interest (operated and non-operated) share after deduction of royalties, plus Crocotta'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 may not add due to rounding.

Reserves Values

The estimated future net revenues before taxes associated with Crocotta's reserves effective December 31, 2010 and based on the GLJ (2011-01) future price forecast are summarized in the following table:

($000s) 0% DCF 5% DCF 10% DCF 15% DCF
Proved        
  Producing 121,292 90,704 72,633 60,822
  Developed Non-producing 21,265 12,445 8,625 6,607
  Undeveloped 94,319 67,284 50,146 38,615
Total proved 236,876 170,432 131,404 106,044
Probable 171,645 87,605 51,285 32,509
Total proved & probable 408,521 258,037 182,690 138,554

Price Forecast

The GLJ (2011-01) price forecast for the next 5 years is as follows:



Year

WTI @ Cushing
($US / Bbl)

Edmonton Light
($Cdn / Bbl)
Natural Gas at AECO
($Cdn / Mmbtu)
2011 88.00 86.22 4.16
2012 89.00 89.29 4.74
2013 90.00 90.92 5.31
2014 92.00 92.96 5.77
2015 95.17 96.19 6.22

Net Asset Value

Crocotta's net asset value ("NAV") as at December 31, 2010 and based on the GLJ (2011-01) future price forecast is as follows:

($000s, except per share amounts)                                                                                                Discounted @ 10%
Pre-tax net present value of proved & probable reserves                            182,690
Undeveloped land  (Note 1) 33,331
Net Debt (2) (35,200)
Net asset value 180,821
   
Shares outstanding (basic) 65,142
Net asset value per share $2.78
   

Notes:
 (1) Undeveloped land was estimated at $200 per acre and is considered reasonable by the Company
 (2) Net debt includes debt plus working capital deficiency

Finding and Development Costs

Crocotta's capital program for 2010 was focused on its core properties located at Edson in west-central Alberta and in northeast British Columbia. Capital Expenditures for the year were $26.0 million not taking into account $47.9 million of property dispositions. Crocotta has presented Finding and Development Costs below both including and excluding dispositions. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, Crocotta has included these items because it believes that acquisitions and dispositions can have a significant impact on the Company's ongoing reserve replacement costs and that excluding these amounts could result in an inaccurate portrayal of Crocotta's cost structure.

             
  2010 2009 3 Year Average
    Proved &   Proved &   Proved &
($000's, except were noted) Proved Probable Proved Probable Proved Probable
             
Finding & Development Costs (excluding net acquisitions/dispositions)            
  Exploration and Development Expenditures 26,029 26,029 13,219 13,219 98,212 98,212
  Change in FDC (1) 33,107 52,443 13,814 23,867 46,625 83,500
Finding and Development Costs excluding Net Acquisitions/Dispositions          
  - Including FDC 59,136 78,472 27,033 37,086 144,837 181,712
             
All-in Finding and Development Costs            
  (including net acquisitions/dispositions)            
             
  Exploration and Development Expenditures 26,029 26,029 13,219 13,219 98,212 98,212
  Net Acquisitions (Dispositions) (including related capital) (47,945) (47,945) 76,416 76,416 39,467 39,467
  Exploration and Development Expenditures including net            
  acquisitions (dispositions) (21,916) (21,916) 89,635 89,635 137,679 137,679
  Change in FDC 33,107 52,443 13,814 23,867 46,625 83,500
All-in Finding and Development Costs - Including FDC 11,191 30,527 103,449 113,502 184,304 221,179
             
Reserve Additions (Mboe)            
  Exploration and Development 4,482 7,074 236 265 5,853 9,158
  Net Acquisitions/Dispositions (2,386) (3,271) 4,700 6,700 2,616 4,051
  Total Reserve Additions 2,096 3,803 4,936 6,965 8,470 13,208
             
Finding and Development Costs excluding net acquisitions            
  /dispositions ($/boe)            
  Excluding FDC 5.81 3.68 56.01 49.88 16.78 10.72
  Including FDC 13.19 11.09 114.55 139.95 24.74 19.84
             
All-in Finding and Development Costs ($/boe)            
  Excluding FDC (10.46) (5.76) 18.16 12.87 16.26 10.42
  Including FDC 5.34 8.03 20.96 16.30 21.76 16.75

(1) Future development capital ("FDC") expenditures required to recover reserves estimated by GLJ. The aggregate of the exploration and development costs incurred in the most recent financial period and the change during that period in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that period.

Reserve Life Index

The Company's Reserve Life Index presented below is based on Q410 production of approximately 2,300 boepd.

Reserve Category Reserve Life Index
Proved plus Probable Reserves 19.2
Proved 11.7

Forward-Looking Information

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "should", "believe", "intends", "forecast", "plans", "guidance" and similar expressions are intended to identify forward-looking statements or information.

More particularly and without limitation, this document contains forward looking statements and information relating to the Company's oil, NGLs and natural gas production and reserves and reserves values, capital programs, and oil, NGLs, and natural gas commodity prices. The forward-looking statements and information are based on certain key expectations and assumptions made by the Company, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the availability of capital to undertake planned activities and the availability and cost of labour and services.

Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in tax, royalty and environmental legislation. The forward-looking statements and information contained in this document are made as of the date hereof for the purpose of providing the readers with the Company's expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. The Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

BOE Conversions

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.

Contact Information

  • Crocotta Energy Inc.
    Robert Zakresky
    President and Chief Executive Officer
    (403) 538-3736
    or
    Crocotta Energy Inc.
    Nolan Chicoine
    Vice President, Finance and Chief Financial Officer
    (403) 538-3738
    or
    Crocotta Energy Inc.
    700, 639 - 5th Ave SW
    Calgary, Alberta T2P 0M9
    www.crocotta.ca