Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

February 19, 2008 14:15 ET

Ember Resources Inc. Reports 2007 Year-End Reserves and Contingent Resources

CALGARY, ALBERTA--(Marketwire - Feb. 19, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Ember Resources Inc. (TSX:EBR) ("Ember") today released its 2007 year-end reserve report together with its 2007 contingent resource report. Complete reserve and contingent resource disclosure based on National Instrument 51-101-Standards of Disclosure for Oil and Gas Activities ("NI 51-101") will be included in Ember's Annual Information Form ("AIF") which will be filed on SEDAR in March 2008.

Reserve/Resource Highlights

- An 87% increase in proved plus probable reserves resulted from the acquisition of a coal bed methane ("CBM") property at Acme, Alberta together with growth and reserve category reclassification from the drilling of 37.3 net wells. Proved plus probable reserves totaled 51.3 Bcf up from 27.4 Bcf in 2006. Proved developed producing reserves increased 77% to 14.5 Bcf. Proved plus probable reserves per share increased 58% from 2006.

- Unaudited capital expenditures are estimated at $29.6 million for 2007 including the $8.75 million acquisition cost for the Acme property. Ember's total finding development and acquisitions costs, before changes in future capital, are estimated at $9.66/boe for proved reserves and $6.84/boe for proved plus probable reserves. Including changes in future capital, the finding and development and acquisition costs are estimated at $16.54/boe proved and $11.81/boe proved plus probable.

- Operating net backs for 2007 (unaudited) are estimated at $25.89/boe resulting in an estimated recycle ratio, including changes in future capital, of 1.6 for proved reserves and 2.2 for proved plus probable reserves. Ember's low operating costs of $7.96/boe and low royalty rate of 7% contributed to the strong operating and recycle ratio performance despite a relatively weak gas price of $6.27/mcf experienced in 2007.

- Reserve life index is estimated at 5.6 years proved producing, 10.6 years total proved and 15.5 years for proved plus probable reserves. Substantially all of Ember's reserves are derived from Horseshoe Canyon CBM reserves at Fenn Big Valley and Acme Alberta.

- Ember continues to be exposed to significant CBM resource upside in the Mannville coals. The Company's share of technically recoverable natural gas is estimated in a range of 88-423 Bcf.

Reserve Disclosure

Reserve information is based on independent reserves evaluation reports prepared by Sproule Associates Limited ("Sproule") and McDaniel & Associates Consultants Ltd. ("McDaniel") dated February 15, 2008 with an effective date of December 31, 2007. The reports were prepared in accordance with the COGE Handbook and National Instrument 51-101- Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and consolidated using Sproule's forecast for prices and costs. Complete NI 51-101 reserves disclosure will be included in Ember's Annual Information Form ("AIF") which will be filed on SEDAR in March 2008.



Reserve Summary, Forecast Prices as of December 31, 2007

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Company
Gross
Remaining
Reserves Company Share of Net Present Values
BCF Before Income Tax ($ millions)
(Sales) Discounted at
----------------------------------------------------------------------------
0% 10% 15%
----------------------------------------------------------------------------
Proved
----------------------------------------------------------------------------
Developed producing 14.5 66.4 48.2 42.3
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Developed non-producing 0.4 1.6 1.1 0.9
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Undeveloped 16.4 43.3 18.6 11.8
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Total proved reserves 31.3 111.4 67.9 55.0
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Probable reserves 20.0 74.4 29.3 18.9
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Total proved plus probable
reserves 51.3 185.8 97.2 73.9
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Possible reserves 8.1 35.8 12.3 7.8
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Total proved, probable &
possible reserves (1) 59.3 221.6 109.5 81.7
----------------------------------------------------------------------------

1) Includes future capital of $29.5 million for proved reserves, $21.6
million for probable reserves and $4.7 million for possible reserves for
a total of $55.9 million in future development costs.
2) Possible reserves are those additional reserves that are less certain to
be recovered than probable reserves. There is only a 10% probability that
the quantities actually recovered will equal or exceed the sum of the
proved plus probable plus possible reserves.


Sproule December 31, 2007 Price Forecast

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NATURAL GAS
----------------------------------------------------------------------------
Inflation
AECO- Rate Exchange
Henry Hub CSpot %/Yr Rate
----------------------------------------------------------------------------
($Cdn/
YEAR ($US/ MMBtu) MMBtu) %/Yr ($US/$Cdn)
----------------------------------------------------------------------------
Forecast
----------------------------------------------------------------------------
2008 7.56 6.51 2.0 1.00
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2009 8.27 7.22 2.0 1.00
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2010 8.74 7.69 2.0 1.00
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2011 8.75 7.70 2.0 1.00
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2012 8.66 7.61 2.0 1.00
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2013 8.83 7.78 2.0 1.00
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2014 9.01 7.96 2.0 1.00
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2015 9.19 8.14 2.0 1.00
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2016 9.37 8.32 2.0 1.00
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2017 9.56 8.51 2.0 1.00
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Thereafter escalation rate of 2%.
----------------------------------------------------------------------------


The weighted average realized sales price for Ember for the year ended December 31, 2007 is estimated at $6.27/mcf for natural gas.

Reserves Reconciliation

The following table sets forth the changes between the reserve volume estimates made as at December 31, 2007 and the corresponding estimates as at December 31, 2006, based on forecast prices, before royalties:



----------------------------------------------------------------------------
Company Gross Remaining Reserves
----------------------------------------------------------------------------
Gross
Gross Proved Plus
Proved Probable
Gross Plus Plus
Proved Probable Possible
----------------------------------------------------------------------------
BCF BCF BCF
----------------------------------------------------------------------------
December 31, 2006 15.0 27.4 40.6
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Extensions 2.1 3.5 3.7
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Improved Recovery - - -
----------------------------------------------------------------------------
Technical Revisions (1) 2.0 (5.0) (16.6)
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Discoveries - - -
----------------------------------------------------------------------------
Acquisitions 14.2 27.4 33.6
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Dispositions - - -
----------------------------------------------------------------------------
Economic Factors - - -
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Production (Estimate) (2.0) (2.0) (2.0)
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December 31, 2007 31.3 51.3 59.3
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1) Technical revisions include the reclassification and transfer into the
contingent resource category of Mannville CBM reserves in the amount of
0.7 Bcf proved, 5.4 Bcf proved plus probable and 16.6 Bcf of proved,
probable plus possible.


Sensitivity to Changes in Alberta Royalties

On October 25, 2007, the Government of Alberta announced changes to royalties paid to the Province to be effective on January 1, 2009. As part of the review process, the province has identified non-conventional resources, such as CBM and the oil sands, as future industries for Alberta and changes to the royalty structure are designed to encourage further development.

Ember's average well productivity included in its reserve report is estimated at 50 mcf/d. Based on the proposed changes, royalties paid to the Alberta government will decline from a base rate of 9% in 2008 to 5% in 2009 and beyond. The 5% royalty rate would remain in effect at prices up to $9.50/mcf. At $11.50/mcf the royalty rate would increase to the original 9%. As a result, Ember is expected to benefit immediately from the proposed changes and will continue to benefit in a higher gas price environment. A sensitivity case was run on the 2007 year end reserves that resulted in an overall increase in the Company's share of net present value.



Change in Reserves Summary Using Changes to Alberta Royalties

Forecast prices as at December 31, 2007

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Company
Gross
Remaining Change in
Reserves Company Share of Net Present Values
BCF Before Income Tax ($ millions)
(Sales) Discounted at
----------------------------------------------------------------------------
0% 10% 15%
----------------------------------------------------------------------------
Proved
----------------------------------------------------------------------------
Developed producing 14.5 2.0 1.4 1.2
----------------------------------------------------------------------------
Developed non-producing 0.4 0.1 0.1 0.0
----------------------------------------------------------------------------
Undeveloped 16.4 3.0 2.1 1.8
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Total proved reserves 31.3 5.1 3.5 3.0
----------------------------------------------------------------------------
Probable reserves 20.0 3.7 2.1 1.7
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Total proved plus probable
reserves 51.3 8.7 5.6 4.7
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Possible reserves 8.1 1.5 0.9 0.7
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Total proved, probable &
possible reserves 59.3 10.3 6.5 5.4
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Percentage change 5% 6% 7%
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Finding, Development and Acquisition Costs

Ember's finding development and acquisition costs (FD&A) are comprised of two distinct CBM investments. Horseshoe Canyon coals that are commercial and are in the development stage and Mannville coals that have been in the pilot and demonstration phase and are not considered commercial at this time. During 2007, Ember made a strategic decision to defer significant Mannville expenditures until such time as technology, industry and economic conditions warranted further investment. As a result of that deferral combined with the performance of the existing Mannville CBM wells, all Mannville reserves previously booked have been reclassified and included in the Company's contingent resource report. The following table summarizes FD&A costs by project for the past three years:



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Horseshoe Canyon Mannville Total
Coals (3) Coals (4) Company
----------------------------------------------------------------------------
(1) (2) (1) (2) (1) (2)
12/31/05
Proved $ 16.84 $ 14.69 $456.70 $456.70 $ 57.25 $ 55.31
----------------------------------------------------------------------------
Proved + Probable $ 9.77 $ 7.48 $ 86.00 $ 98.90 $ 27.89 $ 29.24
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12/31/06
Proved $ 14.90 $ 14.72 $144.90 $147.30 $ 26.40 $ 26.44
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Proved + Probable $ 11.66 $ 12.49 $ 24.40 $ 42.60 $ 15.63 $ 21.84
----------------------------------------------------------------------------
12/31/07
Proved $ 7.59 $ 14.30 n/m n/m $ 9.66 $ 16.54
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Proved + Probable $ 4.62 $ 11.79 n/m n/m $ 6.84 $ 11.81
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3 Year Average
Proved $ 10.33 $ 14.44 n/m n/m $ 19.41 $ 23.48
----------------------------------------------------------------------------
Proved + Probable $ 6.62 $ 11.45 n/m n/m $ 12.47 $ 17.27
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1) Finding development and acquisition costs ($/boe) before changes in
future capital
2) Finding development and acquisition costs ($/boe) including changes in
future capital
3) Capital expenditures for Horseshoe Canyon coals ($ millions) 2007 - 24.2,
2006 - 18.0, 2005 - 8.4
4) Capital expenditures for Mannville coals($ millions) 2007- 5.4, 2006 -
16.9, 2005 - 22.9
5) n/m - not meaningful


Contingent Resource Report - Mannville Coals

The Company has retained Sproule, an independent engineering firm, to provide an estimate of Mannville CBM resource potential of Ember's undeveloped lands located in Alberta as at December 31, 2007. Due to technical and economic uncertainty these resources are categorized as contingent at this time. Ember's strategy is to move these contingent resources into the reserve category by demonstration of economic returns when technology, and industry and economic conditions warrant further investment. Ember is currently seeking joint venture proposals to assist in the advancement of its contingent resources.

In the Mannville coals original gas-in-place (OGIP) for each section was estimated volumetrically based on net pay from existing logs. Gas contents specific to each area were then applied to provide OGIP estimates. Variations in the assignment of OGIP in the low, best and high cases were based on the inclusion of individual coal seams as follows:

- The low case OGIP calculation includes the net pay in the major seam of an area of potential development. The recovery factor is then estimated based on engineering judgment for each area. The recovery factors assigned in the low case range from 5 - 25%

- The best case OGIP calculation considers the net pay from the major and secondary coal seams where the secondary coal seam was greater than 0.9 meters in thickness. The recovery factors assigned in the best case range from 20 - 35%

- The high case OGIP calculation includes all coals seams greater than 0.9 meters in thickness. The recovery factors assigned in the high case range from 40 - 50%

The report then estimates Company interest technically recoverable raw gas resources and technically recoverable sales gas based on calculated OGIP and assigned recovery factors. Economics have not been included in the report, due to the uncertainty of the parameters required to make economic estimates. These parameters include, but are not limited to, production rates, capital costs, operating costs, future gas prices and project timing.



The following table summarizes Sproule's contingent resource estimates as at
December 31, 2007.

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Company Interest
Company Interest Technically Recoverable
Original Gas in Place Sales Gas
BCF BCF
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Mannville coals
----------------------------------------------------------------------------
Low 445.5 88.3
----------------------------------------------------------------------------
Best 710.2 209.2
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High 923.9 423.3
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In management's opinion it is too early to estimate the chance of success for the appraisal programs of the Mannville coal contingent resources. By NI 51-101 definitions, these resources do not have the certainty of recovery at this time to be classified as reserves. For this reason, the evaluation conducted by Sproule presents a range of technically recoverable resources. While it appears that production is technically possible from these formations and the gas in place can be reasonably estimated, the production rates and recoveries are still undetermined and have, therefore, been estimated as low, best and high contingent resources as presented in the Sproule evaluation.

There can be no assurance that contingencies relating to the contingent resources will be satisfied such that these resources may be classified as reserves. There can be no certainty that it will be economically viable or technically feasible to produce any portion of the resources.

Estimated Net Asset Value - December 31, 2007

The following table summarizes the Company's estimated net asset value and is based on various assumptions. Reference should be made to the forward-looking statements advisory included below. Net asset value represents a calculation at a point in time and should not be assumed to represent fair market value of the Company or its shares.



($ millions except per share amounts)

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Proved plus probable reserves (1) $97.2 $97.2
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Possible reserves (1) 12.3 12.3
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Impact of proposed royalty change (1) 6.5 6.5
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Mannville contingent resources (2) 32.9 (3) 209.2
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Other land 8.7 8.7
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Net debt and working capital (unaudited) 19.7 19.7
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Estimated net asset value 137.9 314.2
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Shares outstanding-basic 36.1 36.1
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Estimated net asset value per share $3.82 $8.70
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(1) Based on Company's share of net present value before income taxes
discounted at 10% as evaluated in the Sproule and McDaniel reports.
(2) Mannville contingent resource value based on internal Mannville land
evaluation.
(3) Mannville contingent resource value based on an internally assigned
value of $1/mcf to the best case technically recoverable sales gas
included in the contingent resource report.


Reader Advisory

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements including expectations of estimated reserves and resources and future net revenue, estimated net asset value, future production, funds from operations, earnings, operating expenses and capital expenditures. These statements are based on current expectations that involve a number of assumptions, risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., 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 reserve and resource estimates; the uncertainty of estimates and projections relating to production, costs and expenses, health, safety and environmental risks and changes to legislation related to royalties, taxation and environmental matters), commodity price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors that could affect the Company's operations or financial results are included in the Company's reports on file with Canadian securities regulatory authorities.

The reserves and future net revenue and resources in this press release represent estimates only. The reserves and future net revenue and resources from the Company's properties have been independently evaluated by Sproule and McDaniel with effective dates of December 31, 2007. These evaluations include a number of assumptions relating to factors such as initial production rates, production decline rates, ultimate recovery of reserves, timing and amount of capital salvage values, royalties and other government levies that may be imposed during the producing life of the reserves. These assumptions were based on Sproule price forecasts in use at December 31, 2007 and many of these assumptions are subject to change and are beyond the control of the Company. Actual production, sales and cash flows derived there from will vary from the evaluation and such variations could be material. The present value of estimated future net cash flows referred to herein should not be construed as the current market value of estimated crude oil and natural gas reserves attributable to the Company's properties. Estimates of future net revenue do not represent fair market value. There can be no assurance that contingencies relating to the contingent resources will be satisfied such that these resources may be classified as reserves. There can be no certainty that it will be economically viable or technically feasible to produce any portion of the resources.

BOE Disclosure: Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.

Ember Resources Inc. is a resource company specializing in coalbed methane (CBM) with extensive land and resource holdings in Alberta, Canada. Ember's shares are traded on the Toronto Stock Exchange under the trading symbol "EBR"

Contact Information

  • Ember Resources Inc.
    Mr. Douglas A. Dafoe
    Chairman & CEO
    (403) 270-0803
    (403) 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Terry S. Meek
    President & COO
    (403) 270-0803
    (403) 270-2850 (FAX)