Crocotta Energy Inc.
TSX : CTA

Crocotta Energy Inc.

March 26, 2009 06:00 ET

Crocotta Energy Announces Year-End Reserves

CALGARY, ALBERTA--(Marketwire - March 26, 2009) - Crocotta Energy Inc. ("Crocotta") (TSX:CTA) is pleased to announce its 2008 year-end reserves as independently evaluated by GLJ Petroleum Consultants Ltd., in accordance with National Instrument 51-101.

Reserve evaluation highlights:

- An 18% increase in Proved Reserves to 4.5 million barrels of oil equivalent

- A 31% increase in Proved plus Probable Reserves to 7.1 million barrels of oil equivalent

- A 30% increase in reserve life index to 9.6 years

- A reserve replacement ratio of 3.1 times

Finding and onstream costs:

- Proved plus probable finding and development costs of $19.43 per boe excluding future development capital and Montney specific land costs

- Proved plus probable finding and development costs of $28.67 per boe excluding future development capital but including Montney land purchases

- Proved plus probable finding and development costs of $31.62 per boe including all period and future costs

Discussion of 2008 capital spending and reserve:

A large portion of Crocotta's 2008 capital was spent on acquiring land to Crocotta in Montney resource plays at Dawson and Tupper in northeast British Columbia and also at Kaybob in west central Alberta. A total of $22.5 million was spent during 2008 in these areas which has increased Crocotta's Montney exposure in these areas to over 31 net sections of land.

In late 2008, Crocotta drilled a successful Montney horizontal well at Dawson that was completed in Q1 2009 (see Operations Update and 2009 Outlook). As the Dawson well was not completed until 2009, GLJ was able to assign only probable reserves to the one drilled location. No reserves were assigned for additional wells on the section nor to any of the remaining Montney prospective undeveloped lands.

The Smoky and Niton areas added significant reserves with successful plays in the Cardium and Mannville formations, while dry holes at Chime and 2 unsuccessful horizontal wells at Niton added materially to period costs while adding only marginal reserves.

Reserves Summary

Crocotta's December 31, 2008 reserves as prepared by the independent reserve engineering firm GLJ Petroleum Consultants Ltd. ("GLJ") and based on the GLJ (2009-01) future price forecast are as follows:



----------------------------------------------------------------------------
Natural Gas Barrels of Oil
Light/Medium Oil Heavy Oil Liquids Natural Gas Equivalent
----------------------------------------------------------------------------
Company Company Company Company Company
Gross Net Gross Net Gross Net Gross Net Gross Net
(Mbbl)(Mbbl) (Mbbl)(Mbbl) (Mbbl)(Mbbl) (Mmcf) (Mmcf) (Mboe)(Mboe)
----------------------------------------------------------------------------
Proved
----------------------------------------------------------------------------
Producing 895 611 14 14 380 243 10,737 9,041 3,078 2,374
----------------------------------------------------------------------------
Non-
producing 90 75 50 45 134 83 5,447 4,264 1,181 913
----------------------------------------------------------------------------
Undeveloped 0 0 0 0 33 21 1,123 917 220 174
----------------------------------------------------------------------------
Total
proved 985 685 63 58 547 347 17,307 14,222 4,479 3,460
----------------------------------------------------------------------------
Probable 388 259 47 41 315 198 10,854 8,462 2,558 1,909
----------------------------------------------------------------------------
Total
proved &
probable 1,373 944 110 100 861 545 28,161 22,685 7,038 5,369
----------------------------------------------------------------------------

Notes:
(1) "Company Gross" reserves means Crocotta's working interest (operating
and non-operating) share before deduction of royalties and excluding 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, 2008 and based on the GLJ (2009-01) future price forecast are summarized in the following table:




----------------------------------------------------------------------------
($000s) 0% DCF 5% DCF 10% DCF 15% DCF
----------------------------------------------------------------------------
Proved
----------------------------------------------------------------------------
Producing 106,649 86,264 72,618 62,914
----------------------------------------------------------------------------
Non-producing 33,936 25,042 19,825 16,361
----------------------------------------------------------------------------
Undeveloped 4,958 3,087 2,051 1,413
----------------------------------------------------------------------------
Total proved 145,543 114,393 94,494 80,687
----------------------------------------------------------------------------
Probable 81,849 51,017 35,053 25,589
----------------------------------------------------------------------------
Total proved & probable 227,032 165,409 129,547 106,277
----------------------------------------------------------------------------

Price Forecast

The GLJ (2009-01) price forecast for the next 5 years is as follows:

----------------------------------------------------------------------------
WTI @ Cushing Edmonton Light Natural Gas at AECO
Year ($US / Bbl) ($Cdn / Bbl) ($Cdn / Mmbtu)
----------------------------------------------------------------------------
2009 57.50 68.61 7.58
----------------------------------------------------------------------------
2010 68.00 78.94 7.94
----------------------------------------------------------------------------
2011 74.00 83.54 8.34
----------------------------------------------------------------------------
2012 85.00 90.92 8.70
----------------------------------------------------------------------------
2013 92.01 95.91 8.95
----------------------------------------------------------------------------


Net Asset Value

Crocotta's net asset value ("NAV") as at December 31, 2008 and based on the
GLJ (2009-01) future price forecast is as follows:

($000s, except per share amounts) Discounted @ 10% Discounted @ 15%
----------------------------------------------------------------------------
Pre-tax present value of proved &
probable reserves 129,547 106,277
Undeveloped land (168,000 net acres) (1) 38,000 38,000
Working capital deficiency (20,944) (20,944)
----------------------------------------------------------------------------
Net asset value 146,603 123,333

Shares outstanding (basic) 43,985 43,985
Net asset value per share $ 3.33 $ 2.80
----------------------------------------------------------------------------

Notes:
(1) Crocotta internally valued its undeveloped land holdings based on
19,000 net acres of Montney land @ $1,600/acre; 78,000 net acres of
Saskatchewan land @ $20/acre; and 71,000 net acres of other lands
predominantly in west central Alberta and the Peace River Arch @
$100/acre.


Finding, Development and Acquisition Costs ("FD&A")

FD&A costs reflect the efficiency and value added by Crocotta's capital spending. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, Crocotta has included these items because it believes that acquisitions can have a significant impact on its ongoing reserve replacement costs and that excluding these amounts could result in an inaccurate portrayal of its cost structure. Crocotta's FD&A costs for the period ended December 31, 2008 along with comparatives for the two prior years and a three year average are as follows:



2008 2007
Proved & Proved &
($000's, except were noted) Proved Probable Proved Probable
----------------------------------------------------------------------------

Reserve additions (mboe) (1) 1,438 2,440 3,720 4,952

Capital expenditures 58,964 58,964 22,387 22,387
Property acquisitions (5,579) (5,579) - -
Corporate acquisitions 16,575 16,575 110,632 110,632
----------------------------------------------------------------------------
Total, excluding future capital costs 69,960 69,960 133,019 133,019

Less: Undeveloped Montney land(2) (22,547) (22,547) (12,105) (12,105)
----------------------------------------------------------------------------
Total, excluding undeveloped Montney
land and future capital costs 47,413 47,413 120,914 120,914

Add: Change in future capital costs(3) (296) 7,190 5,123 8,847
----------------------------------------------------------------------------
Total, including undeveloped Montney
land and future capital costs 69,664 77,150 138,142 141,866

FD&A costs, excluding undeveloped
Montney land and future capital
costs ($/boe) 32.97 19.43 32.50 24.42
FD&A costs, excluding future capital
costs, including undeveloped Montney
land ($/boe) 48.65 28.67 35.76 26.86
FD&A costs, including undeveloped
Montney land and future capital
costs ($/boe) 48.45 31.62 37.13 28.65
----------------------------------------------------------------------------
----------------------------------------------------------------------------


2006 3 Years
Proved & Proved &
($000's, except were noted) Proved Probable Proved Probable
----------------------------------------------------------------------------

Reserve additions (mboe) (1) 394 728 5,552 8,120

Capital expenditures 2,420 2,420 83,771 83,771
Property acquisitions 6,556 6,556 977 977
Corporate acquisitions 504 504 127,711 127,711
----------------------------------------------------------------------------
Total, excluding future capital costs 9,480 9,480 212,459 212,459

Less: Undeveloped Montney land(2) - - (34,652) (34,652)
----------------------------------------------------------------------------
Total, excluding undeveloped Montney
land and future capital costs 9,480 9,480 177,807 177,807

Add: Change in future capital costs(3) 1,983 3,051 6,810 19,088
----------------------------------------------------------------------------
Total, including undeveloped Montney
land and future capital costs 11,463 12,531 219,269 231,547

FD&A costs, excluding undeveloped
Montney land and future capital
costs ($/boe) 24.06 13.02 32.03 21.90
FD&A costs, excluding future capital
costs, including undeveloped Montney
land ($/boe) 24.06 13.02 38.27 26.16
FD&A costs, including undeveloped
Montney land and future capital
costs ($/boe) 29.10 17.21 39.49 28.52
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Based on total company interest reserves before deduction of royalties
to others and including any royalty interest of Crocotta. Based on the
evaluation by GLJ.
(2) Undeveloped Montney land is displayed as a line item due to its
materiality and effect on 2008 finding costs. As the Montney lands will
be evaluated in future years, it is informative to show finding costs
with and without these costs.
(3) Future capital costs 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.
(4) See BOE Conversions


Operations update and 2009 Outlook

In the first quarter of 2009, Crocotta completed a 100% working interest Montney horizontal well in the Dawson area of northeast British Columbia. The well initially flowed at over 5.0 mmcf/d with a final test rate on an extended flow at approximately 2.5 mmcf/d. GLJ assigned probable reserves of 1.8 bcf for the well based on the test data. Crocotta is very encouraged by the results of its first horizontal Montney well and will look to improve on the performance of subsequent wells by evaluating alternative drilling and completion techniques as well as reducing capital costs. Crocotta has a 100% working interest in a 6 section contiguous block where the well was drilled, an additional 3 section block (100% working interest) in close proximity and 22 additional net sections in established Montney areas including Kaybob, Dawson (east), and Tupper. Once commercial production is established, Montney is typically developed at 4 wells per section.

Crocotta is also drilling its first Montney horizontal well (50% working interest) in the Kaybob area with test results expected in Q2 2009.

For the remainder of 2009, Crocotta will look to further its resource plays in the Montney formation while also completing technical work on its lands for potential resource plays in the Cardium and Bluesky formations on its current land holdings in west central Alberta.

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
    (403) 538-3737
    (403) 538-3735 (FAX)
    Website: www.crocotta.ca