MENA Hydrocarbons Inc.
TSX VENTURE : MNH

MENA Hydrocarbons Inc.

October 11, 2011 09:32 ET

MENA Hydrocarbons Announces $38 Million in US Subsidiary Proven Plus Probable NPV 10 Before Tax Reserve Values

CALGARY, ALBERTA--(Marketwire - Oct. 11, 2011) - MENA Hydrocarbons Inc. ("MENA" or the "Company") (TSX VENTURE:MNH), on behalf of its 100% owned US subsidiary, Raven Wing Resources Inc., is pleased to release its September 1, 2011 National Instrument 51-101 compliant reserves and resource appraisal for its shallow light and medium oil project in NW Montana, and its Wasatch Plateau Gas Project in East-Central Utah. The report was prepared by the Colorado based independent qualified reserves evaluators Gustavson Associates as of October 7, 2011.

Highlights
  • Net present value (discounted 10% before tax – forecast prices) of $38.1 million ($0.17 per MENA share) attributed to its NW Montana proven + probable (2P) reserves.
  • Net present value (discounted 10% before tax – forecast prices) of $16.7 million ($0.07 per MENA share) attributed to its NW Montana proven (1P) reserves.
  • Net present value (discounted 10% before tax – forecast prices) of $148.4 million ($0.66 per MENA share) attributed to its NW Montana proven + probable + possible (3P) reserves.
  • In addition to the net 1P reserves of 0.4 MMbbl, net 2P reserves of 1.1 MMbbl and net 3P reserves of 5.4 MMbbl assigned to MENA's Northwest Montana lands, Gustavson also assigned those same lands net prospective oil resources of 1.1 MMbbl (low estimate), 7.0 MMbbl (best estimate) and 14.6 MMbbl (high estimate).
  • In addition to MENA's Northwest Montana lands, Gustavson also evaluated MENA's Wasatch Plateau gas project located in East Central Utah and assigned those lands total net prospective gas resources of 50.7 Bcf (low estimate), 107.1 Bcf (best estimate) and 274.8 Bcf (high estimate). Gustavson characterizes this exploration project as low to moderate risk.
  • With the assignment of these US based reserves, the total net present value (discounted 10% after tax-forecast prices) of MENA's company wide 2P reserves (including MENA's Lagia, Egypt onshore heavy oil reserves as at May 18, 2011) is $53.5 million (or $0.24 per MENA share), and the net present value (discounted 10% after tax-forecast prices) of MENA's company wide 3P reserves is $163.2 million (or $0.72 per MENA share).

As a result of increased drilling activity in the areas surrounding MENA's US properties, and in connection with management's ongoing effort to maximize shareholder value, MENA engaged Gustavson to prepare an independent evaluation the Company's reserves and resources, as at September 1, 2011, for the Lewis and Clark Shallow Mississippian Oil Project located on the south dome of the Sweetgrass Arch located in the Pondera and Teton counties, Northwest Montana and the Southern Wasatch Plateau Gas Project located in East-Central Utah.

Commenting on the Gustavson report, Graham Lyon, MENA's President and Chief Executive Officer said "Even though the US is not the primary focus of MENA, our team has been working diligently over the last several months to ascertain the prospectivity and value of our existing US land base. We are very pleased with these results and will soon be evaluating the best way forward to unlock shareholder value from our US holdings."

The information below is derived from Gustavson's report dated October 7, 2011 and effective as of September 1, 2011. Gustavson's report was prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") and utilizes the reserves definitions contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). A copy of Gustavson's report is available at www.sedar.com under MENA's profile. All references to "$" in this news release mean the United States dollar.

The properties

The Lewis and Clark project area

The Lewis and Clark project area is located on the south dome of the Sweetgrass Arch in Pondera and Teton counties, Northwest Montana. The Lewis and Clark project area is located in an active petroleum-producing basin and is surrounded by numerous oil and gas fields with an extensive gathering and transport infrastructure. The prospect is centered on and adjacent to the existing Pondera Field that produces oil from porous carbonates of the Mississippian-age Sun River Dolomite – the same horizon targeted by the project. The Pondera field has produced over 26.7 MMBbl. Raven Wing Resources, a wholly-owned subsidiary of MENA, holds 6,242 gross acres (with an 81.2% average working interest) and has recently renewed all of its leases.

The Southern Wasatch Plateau Gas project area

The Southern Wasatch Plateau Gas project area is located in East-Central Utah. The primary target zones are Cretaceous (Turonian) sands and coals of the Ferron Sandstone Member. The Clear Creek Field is an established analog for the Ferron sandstone production and has produced approximately 138 Bcf as of August 2011. The Drunkard's Wash coalbed methane field is an analog for CBM targets and has produced 833 Bcf as of August 2011. Raven Wing Resources, a wholly-owned subsidiary of MENA, holds approximately 36,201 gross acres (with a 99.5% average working interest) prospective for both commercial gas sand and coal bed methane.

Reserves estimates for the Lewis and Clark project area

The following tables set forth certain information relating to MENA's light and medium oil reserves attributed to the Lewis and Clark prospect, and the net present values of future net revenue associated with such reserves, as at September 1, 2011, before and after income taxes and using forecast prices and costs. It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of MENA's oil reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual oil reserves may be greater than or less than the estimates provided herein.

Reserves data (forecast prices and costs)

Light and Medium Oil Before Income Taxes Discounted at (%/year) ($000's)
Reserves Category Net (Mbbl ) 0 5 10 15 20
Proved Undeveloped 410 24,704 19,976 16,666 14,240 12,391
Total Proved 410 24,704 19,976 16,666 14,240 12,391
Probable 676 35,086 27,033 21,393 17,289 14,211
Total Proved Plus Probable 1,086 59,789 47,009 38,059 31,529 26,602
Possible 4,346 227,899 156,166 110,344 80,011 59,311
Total Proved + Probable + Possible 5,432 287,689 203,175 148,401 111,540 85,913
Light and Medium Oil After Income Taxes Discounted at (%/year) ($000's)
Reserves Category Net (Mbbl ) 0 5 10 15 20
Proved Undeveloped 410 16,058 12,888 10,674 9,052 7,819
Total Proved 410 16,058 12,888 10,674 9,052 7,819
Probable 676 22,806 17,360 13,568 10,825 8,780
Total Proved Plus Probable 1,086 38,863 30,249 24,241 19,877 16,599
Possible 4,346 148,134 100,298 69,990 50,095 36,633
Total Proved + Probable + Possible 5,432 186,998 130,546 94,232 69,972 53,232

The following table sets forth a summation of (i) MENA's light and medium oil reserves attributed to the Lewis and Clark prospect, and the net present values of future net revenue associated with such reserves, as at September 1, 2011, and (ii) MENA's crude oil reserves contained in one main fault block covered by the Lagia Development Lease and the net present values of future net revenue associated with such reserves, as at May 18, 2011, as evaluated by DeGolyer & MacNaughton Canada Limited ("D&M") in the report of D&M dated May 19, 2011 evaluating the crude oil reserves of MENA, in each case after income taxes and using forecast prices and costs.

Net Oil Total MENA Reserves After Income Taxes
Discounted at (%/year) ($000's)
Reserves Category (Mbbl ) 0 5 10 15 20
Proved Undeveloped 1,559 26,445 18,569 13,099 9,202 6,366
Total Proved 1,559 26,445 18,569 13,099 9,202 6,366
Probable 3,574 77,622 55,056 40,408 30,471 23,459
Total Proved Plus Probable 5,133 104,066 73,626 53,506 39,673 29,825
Possible 10,756 255,317 164,057 109,678 75,747 53,672
Total Proved + Probable + Possible 15,889 359,384 237,682 163,185 115,420 83,497

For additional information relating to the reserves estimates respecting our Lagia Development Lease, please see the material change report of the Company dated and filed on June 9, 2011 on www.sedar.com, and the joint management information circular and proxy statement of the Company dated April 15, 2011 and filed on www.sedar.com on April 27, 2011.

Notes to reserves tables:

1. Columns may not add due to rounding.

2. No heavy oil, natural gas or natural gas liquids reserves have been attributed to Raven Wing's properties.

3. "Reserves" are the estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on: analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates.

"Proved reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. At least a 90% probability that the quantities actually recovered will equal or exceed the estimated proved reserves is the targeted level of certainty.

"Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. At least a 50% probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves is the targeted level of certainty.

"Possible reserves" are those additional reserves that are less certain to be recovered than probable reserves. At least a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves is the targeted level of certainty.

"Undeveloped reserves" are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable) to which they are assigned.

4. The extent and character of all factual data supplied to Gustavson were accepted by Gustavson as represented. No field inspections were conducted.

Pricing assumptions

The September 1, 2011 Gustavson price forecast is summarized in the following table:

Year $/bbl
2012 82.88
2013 84.70
2014 85.05
2015 85.42
2016 85.84
2017 86.68
2018 87.50
2019 to 2027 88.43

Resource estimates for the Lewis and Clark and Southern Wasatch Plateau project areas

This news release contains estimates of prospective resources described above. Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be subclassified based on project maturity. There is no certainty that these prospective resources will be commercially viable to produce any portion of the resources. These estimates of resources are generally quoted as a range according to the level of confidence associated with the estimates. See below for further details.

About MENA Hydrocarbons

MENA Hydrocarbons is an international oil and gas company focused on growing an asset base of production, development and high impact exploration in the Middle East and North Africa region. In Egypt, MENA owns and operates the development lease for the Lagia oil field, a 32 square kilometre onshore block located on the Sinai Peninsula, directly adjacent to the Gulf of Suez. In Syria, MENA owns a 30% participating interest in Block 9 in Syria, a 10,032 square kilometre onshore block prospective for crude oil, natural gas and condensate. In the United States, MENA owns 6,242 gross acres (with an 81.2% average working interest) in Northwestern Montana with light/medium oil reserves, and 36,201 gross acres (with a 99.5% average working interest) in East-Central Utah prospective for both commercial gas sand and coal bed methane. MENA's shares currently trade on the TSX Venture Exchange under the symbol "MNH".

Further information

For more information, please see an updated version of MENA's corporate presentation on www.menahydrocarbons.com.

Forward looking information

This news release contains forward-looking information relating to reserves and resource estimates in respect of the Company's properties, the values of such reserves estimates, MENA's plans for its US properties and other statements that are not historical facts. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, development plans of the Company in respect of its Egyptian and US properties, the impact of increasing competition; the general stability of the economic and political environments in which the Company operates or owns interests; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include risks associated with instability of the economic and political environments in which the Company operates or owns interests, oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, the inability to settle the definitive terms of the farmout arrangements, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, reliance on key personnel, regulatory risks and delays, including risks relating to the acquisition of necessary licenses and permits, environmental risks and insurance risks.

The estimates of reserves and resources in this news release constitute forward-looking information which are subject to certain risks and uncertainties, including those associated with the Company's future development plans, the drilling and completion of future wells, limited available geological data and uncertainties regarding the actual production characteristics of, and recovery efficiencies associated with, the reservoirs, all of which are being assumed. As estimates, there is no guarantee that the estimated reserves or resources will be recovered or produced. Actual reserves and resources may be greater than or less than the estimates provided in this news release.

For additional information relating to the reserves and resource estimates respecting our Lagia property, please see the material change report of the Company dated and filed on June 9, 2011 on www.sedar.com, and the joint management information circular and proxy statement of the Company dated April 15, 2011 and filed on www.sedar.com on April 27, 2011. For additional information relating to the reserves and resource estimates respecting our US properties, please see the material change report of the Company dated and filed October 11, 2011 on www.sedar.com.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

Resources; uncertainty categories

Estimates of resources always involve uncertainty, and the degree of uncertainty can vary widely between accumulations/projects and over the life of a project. Consequently, estimates of resources are generally quoted as a range according to the level of confidence associated with the estimates. The range of uncertainty of estimated recoverable volumes may be represented by either deterministic scenarios or by a probability distribution. Resources are generally provided as low, best, and high estimates as follows:

  • "Low Estimate" – This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
  • "Best 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.
  • "High Estimate" – This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

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 release.

Contact Information

  • MENA Hydrocarbons Inc.
    Graham Lyon
    President & Chief Executive Officer
    +1.403.930.7500
    +1.403.930.7599 (FAX)

    MENA Hydrocarbons Inc.
    Jason Bednar
    Vice President, Finance & Chief Financial Officer
    +1.403.930.7500
    +1.403.930.7599 (FAX)

    MENA Hydrocarbons Inc.
    1000, 205 - 5th Avenue S.W.
    Calgary, AB
    T2P 2V7
    general_inquiries@menahydrocarbons.com
    www.menahydrocarbons.com