Mitra Energy Inc.
TSX VENTURE : MTE

August 23, 2016 17:38 ET

Mitra Updates Contingent Resources Associated With Blocks 05-1b and 05-1c Offshore the Socialist Republic of Vietnam

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 23, 2016) -

NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO US NEWSWIRES

Mitra Energy Inc. (TSX VENTURE:MTE) ("Mitra" or the "Company") is pleased to announce the results of a resource assessment for the Dai Nguyet and Sao Vang fields, Blocks 05-1b and 05-1c Production Sharing Contract, offshore Vietnam ("Block 05-1 PSC") which was completed by an independent qualified reserve evaluator, ERC Equipoise Pte. Ltd. ("ERCE"). ERCE's resource assessment is dated effective as of July 1, 2016 and was prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and complies with National Instrument NI 51-101 - Standards of Disclosure for Oil and Gas Activities. Further to the Company's August 9, 2016 press release, the Company and its wholly-owned Vietnamese subsidiary have signed a definitive sale and purchase agreement ("SPA") with Teikoku Oil (Con Son) Co. Ltd, a wholly-owned subsidiary of Inpex Corp., for the acquisition of a 30% working interest in the Block 05-1 PSC for total cash consideration of US$14.3 million (the "Block 05-1 Acquisition"). Pursuant to the terms of the SPA, Mitra may also be responsible for certain contingent payments which are linked to the project sanction and the delivery of first sales gas from the project, in the amounts of US$9.8 million and US$5.9 million, respectively. Completion of the proposed Block 05-1 Acquisition is conditional on obtaining all required approvals, including the approvals of the Government of Vietnam, the Vietnam Oil and Gas Group ("PetroVietnam") and partners. The proposed Block 05-1 Acquisition is also subject to a contractual pre-emption right held by the existing partners under the Blocks 05-1b and 05-1c Joint Operating Agreement (to be exercised within 30 days of receipt of the signed SPA) and a statutory pre-emption right held by PetroVietnam under the Vietnamese Petroleum law.

All resource data disclosed herein reflects only Mitra's working interest share of 30%, assuming the closing of the Block 05-1 Acquisition, with an effective date of 1 July 2016.

Summary of Resource Assessment

  • Best Estimate Discovered Petroleum Initially in Place ("DPIIP") of 75.7 MMboe, including 343.7 Bcf natural gas (57.3 MMboe) and 18.4 MMbbl natural gas liquids.

  • Contingent Resources (Net Working Interest) are tabulated below

Contingent Resources Best Estimate
(2C)
Low Estimate
(1C)
High Estimate
(3C)
Natural gas (Bcf) 198.0 100.1 268.9
Natural gas liquids (MMbbl) 7.1 3.6 9.8
Barrels of oil equivalent (MMboe) 40.1 20.3 54.6

Notes:

DPIIP is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves, and contingent resources; the remainder is unrecoverable. More specifically, all DPIIP other than the portion further sub-classified as contingent resources in this news release is categorized as unrecoverable at this time. A portion of the unrecoverable DPIIP may in the future be determined to be recoverable or reclassified as contingent resources or reserves as additional technical studies are performed, commercial circumstances change or technological developments occur.

All Contingent Resources reported in this release have been further sub-classified by ERCE as 'Development Pending', the highest project maturity sub-class for contingent resources, based on the level of on-going activities and commitment to the project by the Operator (as defined herein), including:

  • Reserves Assessment Reports ("RARs") for Sao Vang and Dai Nguyet, which have been prepared pursuant to the Vietnamese Petroleum Law and a requirement of the PSC. The approved RARs for both fields is an important milestone in respect of the Vietnamese Government approvals required under the Block 05-1 PSC to progress the development of these Fields. The RARs have been appraised and endorsed by the Hydrocarbon Reserves Appraisal Committee, led by the Vietnamese Ministry of Industry and Trade;
  • A Front End Engineering Design ("FEED") contract has been awarded to Aker Solutions, a world-wide oil and gas services company. FEED and other offshore site surveys have commenced;

ERCE consider the Chance of Commerciality to be 80%.

Net Contingent Resources in the table above are Mitra's Working Interest fraction of the Gross Field Contingent Resources as of July 1, 2016 and assume completion of the Block 05-1 Acquisition; they do not represent Mitra's Working Interest following PetroVietnam's rights under the Block 05-1 PSC to back-in. The back-in right is the right of PetroVietnam, arising under the Block 05-1 PSC and exercisable at PetroVietnam's sole discretion to acquire a 20% working interest following the declaration of commerciality, which would result in Mitra's net working interest under the Block 05-1 PSC being reduced to 24%.

Natural gas is converted to a barrel of oil equivalent ("Boe") using six thousand cubic feet ("Mcf") of natural gas equal to one barrel of oil. Boe may be misleading, particularly if used in isolation. A Boe conversion ratio of six Mcf to one barrel ("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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

Contingent resources are those quantities of petroleum estimated to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies.

  • "Low Estimate (1C)" 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 recovered will equal or exceed the low estimate.
  • "Best Estimate (2C)" is considered to be the best estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be a 50 percent probability (P50) that the quantities recovered will equal or exceed the best estimate.
  • "High Estimate (3C)" 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 recovered will equal or exceed the high estimate.

There is uncertainty that it will be commercially viable to produce any portion of the resources classified as DPIIP including those further sub-classified as contingent resources.

  • The field development is anticipated to be a Central Processing Platform (CPP) with production well slots supporting dry trees situated at Sao Vang. Gas export is currently expected to be via the Nam Con Son 2 pipeline with condensate exported via the Dai Hung Floating Production Unit (FPU). The Dai Nguyet field is expected to be developed as a later phase utilising a Well Head Platform (WHP) supporting dry trees and subsea tie-back pipeline to Sao Vang.

  • The key contingency associated with the development of Block 05-1 PSC is that the approval of the project's Outline Development Plan (ODP) has not yet been achieved. Upon its approval by the Prime Minister of Vietnam, negotiations for the Gas Sales Agreement (GSA) and other agreements will commence. The timeline of these negotiations is not fixed, but submission of the final Field Development Plan (FDP) to the Vietnamese regulatory authorities is expected in H1 2017.

  • Idemitsu Oil and Gas Co. Ltd, the operator of the Block 05-1 PSC, estimates that the project Final Investment Decision shall occur in 2Q 2017. Following the receipt of Final Investment Decision and regulatory approval of the final Field Development Plan, Mitra anticipates that the resources reported in this press release will be assessed as reserves. First gas production is anticipated, under the current development plan and project timeline, for the second half of 2019.

Summary of Net Present Value (NPV)

D6

Economic Limit (year) 0% 6% 8% 10% 12%
Best Estimate (2C) 2039 1,020 556 458 379 314
Low Estimate (1C) 2033 382 202 161 127 98
High Estimate (3C) 2039 1,561 785 635 516 422

Notes:

NPVs in this table comprise the NPVs attributable to Mitra's Working Interest fraction of the Gross Field Contingent Resources in accordance with the terms of the Block 05-1 PSC at discount rates ranging from zero to 12%. The resource NPV estimates are based upon cash flow modeling of the proposed development project using the ERCE price forecast. ERCE's cash flows assumed first production in late 2019 and were discounted back to July 1, 2016. All price and cost are Real 2016 and escalated at 2% on an annualized basis. Associated pricing metrics are:

  • a natural gas price of $8/MMbtu (Real, 2016) and 2% inflation per annum going forward
  • a price for natural gas liquids of $65, $68 and $70 (Real, 2016) for 2019, 2020 and 2021+

The estimated net present value of the future net revenues of the resource estimates set forth above do not represent fair market value.

The Block 05-1 PSC provides a facility for the back-in by PetroVietnam of up to 20% following the Declaration of Commerciality. On completion of a full back-in Mitra's actual Net Entitlement would be lower by reducing Mitra's net working interest to 24%. Mitra's SPA is also subject to possible pre-emption by PetroVietnam and the existing partners. PetroVietnam is currently considering whether to exercise its contractual and statutory option and therefore values presented in this news release should be considered preliminary and contingent on the back-in rights and rights of pre-emption. Mitra will provide a further update upon conclusion of these aspects of the proposed Block 05-1 Acquisition.

Block 05-1 Acquisition Metrics

Following ERCE's resources assessment, the Acquisition metrics for the Block 05-1 Acquisition are as follows:

Initial Acquisition Contingent Acquisition Development Cost Acquisition & Development
Best Estimate (2C) $0.36/boe $0.39/boe $8.79/boe $9.54/boe
Low Estimate (1C) $0.70/boe $0.77/boe $17.36/boe $18.84/boe
High Estimate (3C) $0.26/boe $0.29/boe $6.45/boe $7.00/boe

Notes:

Resource and capital cost estimates are based on the independent evaluation carried out by ERCE.

Net Development Cost to first gas is $270.0MM, with a further $82.4MM incurred after 1st gas - relating to the phased development of Dai Nguyet.

Look forward development cost has been used in the above metrics with combined Acquisition & Development metric including both Initial and Contingent Acquisition portions of $382.4 million net. ERCE has not included the contingent payments relating to project sanction and delivery of first sales gas as stipulated in the SPA in the economic modeling.

A. Paul Blakeley, Executive Chairman of Mitra said "The independent assessment undertaken by ERCE Equipoise closely matches the results of our internal evaluation and underpins our positive view of the Block 05-1b and 05-1c asset. At $0.36/boe of 2C resources, we believe that this acquisition represents excellent value to Mitra shareholders and puts us on the path to development of significant hydrocarbon resources in Vietnam in the short to medium term."

About Mitra Energy Inc.

Mitra Energy Inc. is TSX-V listed oil and gas company headquartered in Kuala Lumpur, Malaysia. The company is currently engaged in exploration, appraisal and pre-development activities in the Philippines, Vietnam and Indonesia. Following a recent strategic review, the company is focusing on acquiring production in the near term and further enhancing value through follow-on development activity.

Cautionary Statements

This press release may contain "forward-looking information" within the meaning of applicable securities laws. Readers are cautioned to not place undue reliance on forward-looking information. Such statements and information (together, "forward looking statements") relate to future events or the Company's future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities, ultimate recovery of resources and dates by which certain areas will be explored, developed or reach expected operating capacity, the completion of the Block 05-1 Acquisition, contingent payments, receipt of the project's ODP and the receipt of Final Investment Decision, the timeline for the production of first gas, the potential for the reclassification of resources into reserves, each of which are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

All statements other than statements of historical fact may be forward-looking statements. Statements concerning resource estimates may also be deemed to constitute forward-looking statements and reflect conclusions that are based on certain assumptions that the resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "seek", "anticipate", "plan", "continue", "estimate", "expect, "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions) are not statements of historical fact and may be "forward- looking statements". Forward-looking statements 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 statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, changes in oil prices, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government or other regulatory approvals, actual performance of facilities, availability of financing on reasonable terms, availability of third party service providers, equipment and processes relative to specifications and expectations, unanticipated environmental impacts on operations and completion of the Acquisition. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Completion of the Block 05-1 Acquisition is subject to a number of conditions. Failure to satisfy any of these conditions may result in the termination of the SPA.

This press release contains certain oil and gas metrics which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included in this document to provide readers with additional measures to evaluate Mitra's performance; however, such measures are not reliable indicators of Mitra's future performance and future performance may not compare to its performance in previous periods and therefore such metrics should not be unduly relied upon.

All currency values included in this press release are in $USD unless otherwise indicated.

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.

Not for distribution to U.S. Newswire Services of for dissemination in the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws.

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