Cumberland Oil & Gas Ltd.
TSX VENTURE : COG

March 24, 2011 17:10 ET

Cumberland Oil & Gas Ltd. Announces 2010 Reserves Growth

CALGARY, ALBERTA--(Marketwire - March 24, 2011) - Cumberland Oil & Gas Ltd. ("Cumberland" or the "Company") is pleased to announce the results of its independent reserve evaluation for the year ended December 31, 2010, as prepared by McDaniel & Associates Consultants Ltd. (the "McDaniel Report").

2010 Highlights

  • Proved plus probable reserves at December 31, 2010 increased by 256% to 559 mboe from 157 mboe at December 31, 2009.
  • Replaced 2010 production 17.5 times with proved plus probable reserve additions and 7.8 times with proved reserve additions.
  • Achieved all-in finding and development costs ("F&D") of $15.12 per boe on proved plus probable reserves and $22.76 per boe on proved reserves (including future development costs and revisions).
  • Estimated net capital expenditures for the year ended December 31, 2010 were approximately $3.0 million.
  • Increased proved plus probable reserve value by 290% to $10.0 million from $2.6 million at December 31, 2009, using a 10% discount factor.
  • Increased proved plus probable crude oil reserves weighting to 75% from 100% natural gas weighting at December 31, 2009.
  • Cumberland's net asset value per share at December 31, 2010 is estimated at $0.35 per diluted share.

Reserves Summary

The following table provides summary reserve information based upon the McDaniel Report using the published McDaniel (2011-01) price forecast.

    Natural Gas     Light/Medium Oil     Barrels of Oil Equivalent  
    Gross (1 ) Net (2 )   Gross (1 ) Net (2 )   Gross (1 ) Net (2 )
    (Mmcf ) (Mmcf )   (Mbbl ) (Mbbl )   (Mboe ) (Mboe )
Proved                              
  Producing   565.1   489.7     70.8   48.6     165.0   130.2  
  Non-producing   36.6   32.6     63.0   43.0     69.1   48.4  
  Undeveloped   -   -     52.6   38.7     52.6   38.7  
Total proved   601.8   522.3     186.5   130.4     286.7   217.4  
Probable   223.8   194.4     234.8   184.1     272.2   216.5  
Total proved plus probable   825.5   716.7     421.3   314.5     558.9   433.9  

Notes:

  1. "Gross" reserves are working interest reserves before royalty deductions.
  2. "Net" reserves included working interest reserves after royalty deductions plus royalty 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. May not add due to rounding.

Reserves Values

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

      Discounted at:  
($ thousands) 0 % 5 % 10 % 15 % 20 %
Proved                    
  Producing 4,686.1   3,674.0   2,994.8   2,518.8   2,171.7  
  Non-producing 3,657.3   2,786.9   2,228.6   1,849.2   1,577.9  
  Undeveloped 1,493.6   995.3   656.3   419.3   249.0  
Total proved 9,837.0   7,456.3   5,879.7   4,787.3   3,998.6  
Probable 11,497.4   6,568.6   4,164.8   2,843.3   2,038.5  
Total proved plus probable 21,334.4   14,024.9   10,044.5   7,630.5   6,037.1  

Notes:

  1. The estimated future net revenues are stated before deducting future estimated site restoration costs and are reduced for estimated future abandonment costs and estimated capital for future development associated with the reserves.
  2. May not add due to rounding.
  3. Prior to provision of income taxes, interest, debt service charges and general and administrative expenses. It should not be assumed that the undiscounted and discounted future net revenues estimated by McDaniel represent the fair market value of the reserves.
  4. Net present value after income taxes for total proved reserves is $5.83 million and for total proved plus probable reserves is $9.05 million based on a discount factor of 10%.

Reserves Reconciliation

The following summary reconciliation of Cumberland's gross reserves compares changes in the Company's reserves as at December 31, 2010, to the reserves at December 31, 2009, based on the McDaniel (2011-01) price forecast.

    Total           Total Proved  
    Proved     Probable     plus Probable  
    (Mboe )   (Mboe )   (Mboe )
Balance December 31, 2009   119.3     37.6     156.9  
Technical revisions   (0.1 )   (0.3 )   (0.4 )
Discoveries/extensions   191.8     234.9     426.7  
Production   (24.4 )   -     (24.4 )
Balance December 31, 2010   286.7     272.2     558.9  

Notes:

  1. Gross reserves means working interest reserves before royalty deductions.
  2. May not add due to rounding.

Capital Efficiency – 2010

The efficiency of the Company's capital program for the year ended December 31, 2010 is summarized below. National Instrument 51-101 requires that the exploration and development costs incurred in the year, along with the change in estimated future development costs, be aggregated and then divided by the applicable reserve additions.

          Proved plus
($ Thousands)     Proved     Probable
Exploration and development expenditures (note 3)     3,022     3,022
Change in future development capital     1,341     3,422
      4,363     6,444
 
Reserve additions - (Mboe)            
  Exploration and development     191.7     426.3
 
Finding & development costs ($/boe) (note 1)   $ 22.76   $ 15.12
 
Reserves replacement ratio (note 4)     7.8     17.5

Notes:

  1. 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.
  2. Calculation includes reserve revision and changes in future development costs.
  3. 2010 amounts include information based on estimated unaudited financial results that may change on the completion of the audited financial statements.
  4. Calculated by dividing the 2010 reserve additions after revisions by the 2010 total production.

Net Asset Value

The following table provides management's calculation of Cumberland's estimated net asset value at December 31, 2010 based on the estimated future net revenues associated with Cumberland's proved plus probable reserves before income tax and discounted at 10%, as presented in the McDaniel Report and an internal estimate of undeveloped land value.

  ($ thousands )
Proved plus probable reserves - discounted at 10%   10,044.5  
Undeveloped land (note 1)   688.3  
Estimated working capital as at December 31, 2010 (notes 2 & 3)   1,626.7  
Net asset value   12,359.5  
   
Diluted common shares outstanding (thousands)   35,684  
   
Net asset value per share ($) $ 0.35  

Notes:

  1. Based on an estimated market value of $75 per hectare.
  2. Includes information based on unaudited financial results that may change.
  3. Working capital includes an estimate of the Company's accounts receivable less accounts payable and accrued liabilities as at December 31, 2010.

CAUTIONARY STATEMENTS

Unaudited Financial Information

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2010, such as finding and development costs, production information and net asset value, are based on estimated unaudited financial results for the quarter and year then ended and are subject to the same limitations as discussed under Reader Advisories set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2010 and changes could be material.

Information Regarding Disclosure on Oil and Gas Reserves

Our oil and gas reserves statement for the year ended December 31, 2010, which will include complete disclosure of our oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be contained within our Annual Information Form which will be available on our SEDAR profile by April 30, 2011 at www.sedar.com. In relation to the disclosure of estimates of reserves relating to less than all of the Company's reserves, such estimates for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

In relation to the disclosure of net asset value ("NAV'), the NAV table shows what is normally referred to a "produce-out" NAV calculation under which the current value of the Company's reserves would be produced at forecast future prices and costs and do not necessarily represent a "going concern" value of the Company. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the future net revenues estimated by McDaniel represent the fair market value of the reserves, nor should it be assumed that Cumberland's estimated value of its undeveloped land represents the fair market value of the lands.

Reader Advisories

Forward-Looking Statements: This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect', "anticipate", "continue", "estimate", "may", "will", "should", "believe", "intends" and similar expressions are intended to identify forward- looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: the recognition of significant additional reserves under the heading "Reserves"; the volumes and estimated value of Cumberland's oil and gas reserves; the life of Cumberland's reserves, the volume and product mix of Cumberland's production; future oil and natural gas prices; future liquidity and financial capacity; the total future capital associated with development of reserves and resources; future operating costs, royalty rates and exchange rates.

The recovery and reserve estimates of Cumberland's reserves and resources provided herein are estimates only and there is no guarantee that the estimated reserves or resources will be recovered. In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Cumberland which have been used to develop such statements and information but which may prove to be incorrect. Although Cumberland believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Cumberland can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations and offsetting wells; continued and timely development of infrastructure in areas of new production; availability of debt and equity financing and cash flow to fund Cumberland's current and future plans and expenditures; the impact of increasing competition; stability of the economic and political environment in which Cumberland operates; timely receipt of any required regulatory approvals; ability of Cumberland to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; ability of the operator of the projects in which Cumberland has an interest in to operate the field in a safe, efficient and effective manner; ability of Cumberland to obtain financing on acceptable terms; field production and decline rates; ability to replace and expand oil and gas reserves through acquisition, development and exploration; timing and cost of pipeline, storage and facility construction and expansion and the ability of Cumberland to secure product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes, and environmental matters in the jurisdictions in which Cumberland operates; and the ability of Cumberland to successfully market its oil and natural gas products.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation; changes in commodity prices; changes in the demand for or supply of Cumberland's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Cumberland or by third party operators of Cumberland's properties, inaccurate estimation of Cumberland's oil and gas reserve and resource volumes; limited or a lack of access to capital markets; increased costs; inadequate insurance coverage; impact of competitors and certain other risks detailed from time-to-time in Cumberland's public disclosure documents (including, without limitation, those risks identified in this news release and Cumberland's Annual Information Form).

The forward-looking information and statements contained in this news release speak only as of the date of this news release and Cumberland does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE Equivalent

Barrel of oil equivalents or 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.

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

Contact Information

  • Cumberland Oil & Gas Ltd.
    Alan MacDonald
    Vice President, Finance and Chief Financial Officer
    (403) 237-0790