Midway Energy Ltd.
TSX : MEL

Midway Energy Ltd.

February 15, 2011 20:02 ET

Midway Releases 2010 Reserve Information

CALGARY, ALBERTA--(Marketwire - Feb. 15, 2011) - Midway Energy Ltd. ("Midway" or the "Company") (TSX:MEL) is pleased to announce the results of its independent reserve evaluation prepared by Sproule Associates Limited ("Sproule") for the year ended December 31, 2010.

In 2010 Midway focused its efforts on proving up and developing its reserves and infrastructure in its Garrington Cardium play. The Company has successfully proven the development potential of its Cardium lands and has identified an inventory of more than 140 Cardium "A" Sand development opportunities as well as additional development drilling prospects in the Cardium "B" Sand.

Throughout 2010, Midway focused its activities in Garrington and maintained its low cost advantage for drilling and completions as well as lowering its unit operating costs. The combination of these efficiencies, as well as very good initial well performance, has resulted in a net present value of proved plus probable reserves (discounted by 10 percent before income tax) of approximately $5.4 million per Cardium well location (100% working interest).

Midway will continue to develop the Cardium at Garrington and expects to drill 21 net wells in 2011. The Company will also focus on proving up and expanding its Beaverhill Lake lands in the Swan Hills area of Alberta.

2010 Reserve Highlights

  • At December 31, 2010 Midway had total proved ("1P") reserves of 11,601 Mboe and total proved plus probable ("2P") reserves of 16,707 Mboe, an increase of 88 percent;
  • Added 6,026 Mboe 1P reserves and 8,726 Mboe 2P reserves in 2010;
  • There are 32 net horizontal Cardium locations in the December 31, 2010 reserve evaluation. Midway expects to drill 21 of these locations in 2011 and estimates it has an additional 110 net Cardium A locations and 13 Cardium B locations;
  • Finding and development costs, including the change in future capital, were $18.49 per barrels of oil equivalent ("boe"), on a 1P basis, and $13.30 per boe on a 2P basis;
  • Reserve life index of 8.4 years proved and 10.6 years proved plus probable, based on 2011 forecast production volumes from our independent engineering report;
  • Net present value of Midway's estimated future net revenue based on forecast prices and costs from its proved plus probable reserves (discounted by 10 percent before income tax) increased in 2010 by 126 percent from $151.1 million to $341.1 million with 92 percent of the value coming from Garrington;
  • Increased net asset value per share (excluding undeveloped land and any upside for undrilled locations) from $2.26 in 2009 to $4.41 per common share (basic) at year end 2010, an increase of 95 percent; and
  • Subsequent to December 31, 2010, Midway announced an agreement to acquire an additional 1,012 Mboe of 1P reserves and 1,456 Mboe of 2P reserves in its current lands at Garrington from a major producer (evaluated by Sproule effective December 31, 2010). These additional reserves are not included in the year end reserve evaluation.

Sproule has prepared an independent evaluation on all of the Company's petroleum and natural gas reserves at December 31, 2010. The gross reserves from the following tables represent Midway's working interest share before deduction of royalties and before including the Company's royalty interests. Forecast prices used in the calculation of net present value of future net revenue are based on Sproule's January 1, 2011 price forecast. Tables may not add due to rounding.

Summary of Gross Oil and Natural Gas Reserves as of December 31, 2010

  Crude   Natural   Natural Gas      
  Oil   Gas   Liquids   Equivalent  
Reserve Category (Mbbl ) (MMcf ) (MMcf ) (Mboe )
                 
PROVED                
  Developed producing 2,967.0   13,008.0   394.4   5,529.6  
  Developed non-producing 309.4   1,790.0   28.9   636.6  
  Undeveloped 3,993.0   6,444.0   367.3   5,434.4  
TOTAL PROVED 7,269.4   21,243.0   790.7   11,600.5  
PROBABLE 3,354.3   8,477.0   339.0   5,106.2  
TOTAL PROVED + PROBABLE 10,623.7   29,720.0   1,129.7   16,706.7  

Reconciliation of Company Gross Reserves by Principal Product Type as of December 31, 2010

    Crude Oil     Natural Gas       Natural Gas Liquids     Equivalent  
   

Proved
(Mbbl
)   Proved
plus
Probable
(Mbbl
)  

Proved
(Mmcf
)   Proved
plus
Probable
(Mmcf
)    

Proved
(Mbbl
)   Proved
plus
Probable
(Mbbl
)  

Proved
(Mboe
)   Proved
plus
Probable
(Mboe
)
Dec 31,                                                  
2009   3,603.0     5,050.5     15,440.0     21,307.0       206.7     289.9     6,383.0     8,891.6  
Extensions   4,048.0     5,970.1     7,310.0     10,424.0       413.0     592.8     5,679.3     8,300.2  
Technical                                                  
  Revisions   (152.0 )   (210.2 )   78.0     (564.0 )     172.7     238.0     33.7     (66.2 )
Acquisitions   153.6     192.2     866.0     1,045.0       49.1     59.3     347.0     425.7  
Economic                                                  
  Factors   0.8     5.1     (380.0 )   (421.0 )     (0.7 )   (0.2 )   (63.2 )   (65.3 )
Production   (384.0 )   (384.0 )   (2071.0 )   (2071.0 )     (50.1 )   (50.1 )   (779.3 )   (779.3 )
Dec 31,                                                  
2010   7,269.4     10,623.7     21,243.0     29,720.0       790.7     1,129.7     11,600.5     16,706.7  

Summary of Net Present Values of Future Net Revenue as of December 31, 2010

    Before Income Tax
Discounted at (% per Year)
($ Millions)   0%   5%   10%
Reserve Category            
PROVED            
  Developed producing   239.7   168.4   132.4
  Developed non-producing   24.5   18.2   14.5
  Undeveloped   239.0   152.4   105.6
TOTAL PROVED   503.2   339.0   252.5
PROBABLE   297.3   139.7   88.6
TOTAL PROVED + PROBABLE   800.5   478.7   341.1
  1. Net present value does not represent fair market value. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material.

Midway's Finding & Development costs including change in Future Development Costs

                        3 year
(per boe)     2010     2009     2008     average
                         
TOTAL PROVED   $ 18.49   $ 19.97   $ 24.23   $ 19.55
TOTAL PROVED + PROBABLE   $ 13.30   $ 15.32   $ 22.76   $ 14.69
  1. Finding and development costs for 2010 and the three year average are based on Midway's unaudited capital expenditures for the year ended December 31, 2010.
  2. Current management in place at Midway on August 1, 2009.
  3. 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 reserves additions for that year.

Midway is also pleased to announce the appointment of Mr. Shane Peet to the position of Chief Operating Officer. Mr. Peet is a Professional Engineer with over 15 years of industry experience and brings a strong operational background to Midway. In his most recent position he was Senior Vice President of Engineering with Equal Energy Ltd. Prior thereto he was Vice President Engineering and C.O.O. of Wild River Resources and Vice President of Engineering of Prairie Schooner Energy. Mr. Peet has a Bachelor of Science degree in Petroleum Engineering from the University of Alberta.

Midway also announces that Mr. Ken Frankiw has resigned as President and a Director of the Company to pursue other opportunities.

Forward-looking Statements

This news release contains forward-looking statements relating to the Company's plans and other aspects of the Company's anticipated future operations, management focus, strategies, financial and operating results and business opportunities. Forward-looking statements typically use words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. In particular, this press release contains forward-looking statements relating, but not limited to:

  • drilling and development plans including the timing of drilling, completion and tie-in of wells;
  • Midway's business strategy, plans and management focus;
  • Midway's asset base and future prospects for development and growth.

In addition, statements relating to reserves are deemed to be forward-looking as they involve an implied assessment, based on certain assumptions and estimates, that the reserves described can be properly produced in the future.

These forward-looking statements are based on various assumptions including: the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; the timing, location and extent of future drilling operations; anticipated timing and results of capital expenditures; estimates of future production and operating costs; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; future exchange and interest rates, Midway's ability to obtain equipment in a timely manner to carry out development activities, impact of increasing competition, ability to market oil and natural gas successfully and the ability of Midway to access capital. While Midway considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with 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; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the U.S. and globally; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Midway believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not unduly rely on forward-looking statements. The forward-looking statements contained in this news release are made as the date of this new release and the company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

51-101 Advisory

In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The estimate of future net revenue presented in this press release does not represent fair market value.  Readers are cautioned that the term "boe" may be misleading, particularly if used in isolation.

The estimates of reserves and reserve values for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

Net asset value per share is defined as total 2P reserve net present value (discounted by 10% before income tax) less estimated debt, net of working capital, at year end; divided by 61,445,472 common shares outstanding at December 31, 2009 and 68,044,315 common shares outstanding at December 31, 2010.

Information Regarding Midway

Midway Energy Ltd. is a public oil and gas exploration and development company, located in Calgary, Alberta with operations pursued in Alberta. Midway currently trades on the Toronto Stock Exchange (TSX) under the Symbol "MEL".

Contact Information

  • Midway Energy Ltd.
    Scott Ratushny
    Chairman and Chief Executive Officer
    (403) 216-2705
    or
    Midway Energy Ltd.
    Doug Smith
    Chief Financial Officer
    (403) 216-2705
    info@midwayenergy.com