NuLoch Resources Inc.
OTCQX : NULCF
TSX VENTURE : NLR

NuLoch Resources Inc.

February 16, 2011 08:55 ET

NuLoch Resources Year-End Reserves Information and Operations Update

CALGARY, ALBERTA--(Marketwire - Feb. 16, 2011) -

Monetary amounts are in Canadian dollars unless otherwise indicated.

NuLoch Resources Inc. (TSX VENTURE:NLR) (OTCQX:NULCF) (NuLoch or the Company) retained AJM Petroleum Consultants (AJM) to conduct the evaluation of the Company's petroleum and natural gas reserves effective as at December 31, 2010. AJM's report, dated February 15, 2011 was compiled pursuant to the guidelines of National Instrument 51-101 and The Statement of Reserve Data and Other Oil and Gas Information has been filed on www.sedar.ca.

Reserves Highlights

- Reserve value increased by 3.8 times to $152 million P+P BT PV10 (Proved and probable, before taxes, discounted at 10%);

- Total company working interest reserves exceed 10,000,000 boe;

- Light and medium oil is 81% of total reserves (boe basis); and

- 43% of oil reserves are in Canada and 57% are in North Dakota

Estimates of reserves of petroleum and natural gas and associated future net revenues as at December 31, 2010 are presented below.

  Company Gross   Future  
  Reserves(1)(2)   Net Revenue(1)(3)  
  Light &       Nat-                      
  Medium   Heavy   ural           ($ millions)  
  Oil   Oil   Gas   NGL   Total   Discount Rate  
Reserves Category Mbbl   Mbbl   MMcf   Mbbl   Mboe   0 % 10 % 15 %
CANADA                                
Proved                                
  Developed Producing 775   8   2,575   2   1,214   49   29   25  
  Developed Non-producing 260   -   429   2   334   19   9   7  
  Undeveloped 1,217   -   4,085   -   1,898   68   20   11  
Total Proved 2,252   8   7,089   4   3,446   136   58   43  
Probable 1,258   6   4,033   2   1,938   134   29   18  
Total Proved and Probable 3,510   14   11,122   6   5,384   270   88   61  

 

UNITED STATES                                
Proved                                
  Developed Producing 370   -   35   -   375   18   11   9  
  Developed Non-producing 189   -   -   -   189   10   6   5  
  Undeveloped 2,282   -   -   -   2,282   78   21   11  
Total Proved 2,841   -   35   -   2,847   106   38   25  
Probable 1,767   -   27   -   1,772   122   26   15  
Total Proved and Probable 4,609   -   62   -   4,619   228   64   40  
TOTAL                                
Proved                                
  Developed Producing 1,145   8   2,610   2   1,589   67   40   34  
  Developed Non-producing 449   -   429   2   523   29   15   12  
  Undeveloped 3,499   -   4,085   -   4,181   146   42   22  
Total Proved 5,094   8   7,124   4   6,293   242   97   68  
Probable 3,025   6   4,060   2   3,710   256   55   34  
Total Proved and Probable  8,119   14    11,184   6   10,003   497   152   101  

(1) Columns and rows may not add due to rounding
(2) Six mcf of natural gas is considered equivalent to 1 barrel of oil. (see Advisories)
(3) Future net revenues do not represent fair market value

The following tables summarize the changes in the Company's working interest reserves since December 31, 2009 based on forecast prices and costs.

Summary Analysis of Changes in Reserves (Company Working Interest)(1)                
              ($ millions)  
              Future Net  
  (Mboe) 
  Revenue  
              Before Tax  
  Proved   Probable   Total   10% DCF  
December 31, 2009 2,226   1,229   3,455   $  40  
                   
  Extensions 4,392   2,465   6,857      
  Technical revisions 14   7   21      
  Economic factors (24 ) 4   (20 )    
  Acquisitions 17   9   26      
  Dispositions (7 ) (3 ) (10 )    
  Production (325 ) -   (325 )    
December 31, 2010 6,293   3,710   10,003   $ 152  
(1) Columns and rows may not add due to rounding      

2010 Capital Expenditures

NuLoch invested approximately $58 million in its 2010 capital program with 44% directed to North Dakota activities and 52% to Saskatchewan. The remaining 4% went to Alberta and other capital purposes. Eighty percent of the budget was allocated to drilling, completing and equipping oil wells.

Wells Drilled in 2010                    
      Natural              
  Oil   gas   Pending   Dry   Total  
Gross 26   -   18   3   47  
Net 6.2   -   4.4   1.3   11.9  

The following table summarizes well drilling operations in 2010.

    Spud   Completed   Standing   Drilling  
    in 2010   in 2010   12/31/10   12/31/10  
North Dakota Gross 36   22   11   4  
  Net 3.5   2.0   1.3   0.4  
Saskatchewan Gross 11   9   2   1  
  Net 8.4   6.4   2.0   0.7  
Total Gross 47   31   13   5  
  Net 11.9   8.4   3.3   1.1  

Future Development Costs

The following table sets forth the future development costs which have been deducted in determining future net revenue attributable to the reserves categories noted below.

  Forecast Prices and Costs  
  ($ millions)  
  Canada   United States  
      Proved       Proved  
      and       and  
Year Proved   Probable   Proved   Probable  
2011 31   33   29   34  
2012 7   9   21   26  
2013 -   -   1   3  
2014 8   8   -   -  
Remaining -   -   -   -  
Total (undiscounted) 46   51   51   63  

Virtually all of the 2011 and 2012 expenditures are forecast to be undertaken in the Williston Basin of Saskatchewan and North Dakota.

Future prices used in the forecast of net revenue are based on those estimated by AJM as at December 31, 2010. The first five years of forecast prices for certain benchmarks are summarized below:

Five-Year Forecast of Future Prices            
  Oil   Oil   Natural gas  
  WTI   Edmonton   AECO average  
Year ($US/bbl ) ($CDN/bbl ) ($CDN/Mcf )
             
2011 85.00   82.80   4.10  
2012 89.25   88.80   4.60  
2013 91.55   94.05   5.20  
2014 95.50   98.15   5.50  
2015 102.85   105.80   5.75  

Operations Update

Recent notable results in North Dakota have been obtained from the Three Forks Sanish formation in the following 2-mile (1280 acre) wells:

Well Name WI % Comments
Almos 1-12-162-99 10.0 % Average 536 bopd over first 15 days
Hansen 6-7-162-99 10.0 % Average 356 bopd over first 18 days
Hansen 18-19-162-99 10.0 % Average 367 bopd over first 15 days

In particular, the Almos Farms well achieved a one-day rate in excess of 1,000 boe/d during its initial flowback period.

During 2010, NuLoch participated in the drilling of 47 wells (11.9 net) in the Williston Basin of Saskatchewan and North Dakota. The pace of well completions was slowed during the fourth quarter as harsh weather and service shortages affected operations. At year end, 13 of those wells (3.3 net) were awaiting completion. The Company was working through the completion inventory during January and five of the wells (2.3 net) were fracture stimulated. Six rigs are currently operational drilling 1.5 net wells.

NuLoch's horizontal long-lateral wells are fracture stimulated in up to 30 stages with up to 75 tons of sand per stage. Wells typically flow for a few weeks or months and are then shut-in, cleaned out with coiled tubing or a service rig and ultimately equipped for production. Corporate daily production rates fluctuate with these completion activities. Current productive capability is 1,550 boe/d (87% crude oil) from producing and completed wells. Additionally, 630 bopd (IP30 basis, net to NuLoch's working interest) is behind pipe in wells standing cased or currently drilling.

At Tableland, Saskatchewan, we are constructing a centralized processing and water disposal facility with first oil shipments planned for early March. Initially five oil wells will be gathered to this facility. Inlet capacity will be approximately 3,000 barrels of fluid per day that will allow for expansion of the gathering system to accommodate the 2011 drilling program. It is anticipated that, once completed, this facility will improve well up-time, reduce operating costs through elimination of trucking and third party water disposal, and lower capital costs my minimizing the use of single-well batteries.

Recent NuLoch North Dakota Completions - Gross Well Production and Rates (bopd)(1)(2)  
                  Cumulative  
  Zone         IP30 IP60 Current bbls oil  
Well Name (3) DSU WI%   IP Date bopd bopd bopd (4 )
Goldal 16-10-161-98 TFS 640 10.0 % 2009-08 334 282 65 53,174  
Moe 9-162-98 TFS 640 10.0 % 2009-09 188 152 40 30,190  
Vassen 27-163-99 TFS 640 10.0 % 2009-11 453 396 165 78,935  
Fuhrman 36-162-99 TFS 640 10.0 % 2009-12 106 108 31 16,518  
Torgeson 3-30-163-99 TFS 1280 0.6 % 2010-01 312 304 176 76,889  
Torgeson 14-19-163-99 TFS 1280 1.2 % 2010-01 394 459 214 84,343  
Sparks 8-162-98-2 TFS 640 10.0 % 2010-02 447 348 104 41,022  
Jacobsen 15-161-98 TFS 640 10.0 % 2010-04 168 148 40 23,049  
Ness 29-32-163-98 TFS 1280 10.0 % 2010-05 413 399 169 62,781  
Enerson 4-29-163-99 TFS 1280 4.5 % 2010-05 175 177 111 38,204  
Meyers 2-162-99 TFS 640 10.0 % 2010-04 306 247 135 34,657  
Radenic 14-20-163-99 TFS 1280 0.6 % 2010-06 416 478 211 65,050  
Hansen 13-162-99 TFS 640 10.0 % 2010-06 228 167 116 25,882  
Hall 3-161-98 TFS 640 10.0 % 2010-06 246 261 116 32,435  
Antonson 1-12-163-95 BK 1280 10.0 % 2010-08 120 121 130 18,528  
Sorenson 14-162-99 TFS 640 10.0 % 2010-08 144 129 101 14,141  
Lindsey 4-161-98 TFS 640 10.0 % 2010-09 92 94 61 8,436  
Grundstad 5-162-99H TFS 640 10.0 % 2010-10 190 - 212 6,075  
Gustafson 29-32-161-99 BK 1280 18.8 % 2010-10 471 - 327 23,270  
Larson 3-162-99H TFS 640 10.0 % 2010-11 287 - 200 14,115  
Hansen 17-20-163-98 TFS 1280 10.0 % 2010-11 188 - 160 8,625  
Hauganoe 15-162-99H TFS 640 10.0 % 2010-11     145 3,413  
Haugland 4-162-99 TFS 640 10.0 % 2010-12     240 3,705  
Aarestad 4-34-160-97 BK 1280 1.0 % On Flowback          
Impala 23-14-163-98 TFS 1280 16.0 % Rig Released          
Almos 1-12-162-99 TFS 1280 10.0 % 2010-12     Shut in 13,885  
Hansen 18-19-162-99 TFS 1280 10.0 % 2011-01     350 2,645  
Eagle 22-15-163-95 BK 1280 21.6 % Rig Released          
Aarestad 4-27-160-97 BK 1280 2.7 % On Flowback          
Haugland 9-162-99 TFS 640 10.0 % 2010-12     Shut in 3,345  
Nova 4-9-163-98H TFS 1280 10.0 % 2011-01          
Malibu 26-35-163-98H TFS 1280 16.0 % Rig Released          
Woodpeckr 27-34-163-95 TFS 1280 16.0 % Rig Released          
Hansen 6-7-162-99 TFS 1280 10.0 % 2011-01     320 2,891  
Larson 8-162-99H TFS 640 7.0 % Rig Released          
Peters 11-1-160-93 BK 1280 9.3 % Rig Released          
Dahl 13-24-162-100 TFS 1280 9.4 % Rig Released          
Barracuda 27-34-163-98 TFS 1280 10.0 % Rig Released          
Denali 13-24-163-98 TFS 1280 10.0 % Rig Released          
Grundstad 10-162-99 TFS 640 10.0 % Rig Released          
Recent Saskatchewan Completions - Gross Well Production and Rates (bopd) (1)(2)  
                  Cumulative  
  Zone         IP30 IP60 Current bbls oil  
Well Name (3) DSU WI % IP Date bopd bopd bopd (4 )
91/05-02-001-10W2 TFS 320 100 % 2009-12 205 147 19 20,713  
91/12-12-001-10W2 TFS 640 70 % 2010-04 186 148 14 17,531  
91/16-06-001-09W2 TFS 640 70 % 2010-05 72 67 15 8,950  
91/01-22-001-10W2 TFS 640 70 % 2010-05 204 166 40 19,067  
91/08-04-001-09W2 TFS 640 70 % 2010-08 69 61 11 5,316  
91/04-10-001-10W2 TFS 640 70 % 2010-10 123 88 40 6,492  
91/01-04-002-10W2 TFS 640 50 % 2012-01 - - - -  
91/01-06-001-10W2 TFS 640 100 % 2010-12     125 629  
92/05-16-001-10W2 TFS 640 100 % 2011-01     188 1,257  
91/16-02-001-10W2 TFS 320 100 % 2011-02     101 -  
91/01-11-001-10W2 TFS 320 70 % Rig Released          

(1) See Advisories – Initial Production (IP) Rates
(2) All rates are barrels of oil per day and do not include solution natural gas
(3) TFS is the Three Forks Sanish formation and BK is the Bakken formation
(4) Cumulative to January 31, 2011

Financial Position

Production during the fourth quarter of 2010 averaged 917 boe/d (75% oil). Approximately $5 million of NuLoch's 2010 capital expenditure budget was deferred into 2011 due to delays in the field and the total that was invested in 2010 is now estimated at $58 million. The working capital deficiency at December 31, 2010 totalled $2.1 million net of $9.7 million in cash and cash equivalents. NuLoch has a $25 million line of credit with a Canadian chartered bank that is currently undrawn.

Corporate Transaction

On January 19, 2010 NuLoch announced that it entered into a definitive agreement to be acquired by Magnum Hunter Resources Corporation (NYSE:MHR), a Houston, Texas based oil and gas company focused on unconventional shale plays. Under the terms of the agreement, each holder of common shares of NuLoch will receive either: (i) 0.3304 of a share of common stock of Magnum Hunter or (ii) in certain circumstances, 0.3304 of an exchangeable share of a Canadian subsidiary of Magnum Hunter for each NuLoch share held. The transaction will be completed pursuant to a statutory plan of arrangement pursuant to the Business Corporations Act (Alberta). Complete details regarding the transaction are set out in the arrangement agreement, which can be found on SEDAR (www.sedar.com).

ADVISORIES

Use of Barrels of Oil Equivalent (boe)

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf of natural gas to 1 bbl of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and may not represent a value equivalency at the wellhead.

Reserves Disclosure and Use of Estimates

Reserves information presented relates to NuLoch's working interest share of reserves and present values as at December 31, 2010. The net present value of future net revenue attributable to the Company's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves by AJM. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to effects of aggregation. Actual recoveries may be greater than or less than the estimates provided herein and there is no guarantee that the estimated reserves will be recovered. It should not be assumed that the values of future net revenue attributable to the Company's reserves represent the fair market value of those reserves.

Forward-Looking Statements

Certain statements in this document or incorporated herein by reference constitute "forward-looking statements". These forward-looking statements can generally be identified as such because of the context of the statements, including words indicating that the Company "believes", "anticipates", "expects", "plans" or words of a similar nature. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions which will, among other things, impact demand for and market prices of the Company's products; industry capacity; the ability of the Company to implement its business strategy, including exploration and development activities; the ability of the Company to complete its capital programs; successful negotiations with bankers and other third parties; the success of exploration and development activities; production levels; government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations); asset retirement obligations; and other circumstances affecting revenues and expenses.

Class A common shares outstanding: 122,332,907

Neither 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

  • NuLoch Resources Inc.
    R. Glenn Dawson
    President and CEO
    (403) 920-0455
    (403) 920-0457 (FAX)
    nuloch@nuloch.ca
    or
    NuLoch Resources Inc.
    2200, 444 - 5th Avenue SW
    Calgary, Alberta T2P 2T8