Online Energy Inc.
TSX VENTURE : ONL

Online Energy Inc.

February 03, 2012 07:30 ET

Online Energy Inc. Announces 2011 Year End Reserves and Provides Operations Update

CALGARY, ALBERTA--(Marketwire - Feb. 3, 2012) - Online Energy Inc. ("Online" or the "Company") (TSX VENTURE:ONL) is pleased to provide information on the Company's 2011 year end reserves. Online's reserves were evaluated by McDaniel & Associates Consultants Ltd. ("McDaniel") effective December 31, 2011, in accordance with National Instrument 51- 101 ("NI 51-101") - Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators (the "McDaniel Report"). All of the Company's reserves were evaluated in the McDaniel Report.

2011 Year End Reserve Highlights

  • Total Company Proved plus Probable ("P+P") reserves of 1,444 Mboe (44% crude oil and natural gas liquids);
  • 87% of P+P reserves are categorized as P+P producing; and
  • Reserve net present value before tax 10% of P+P reserves of $13.6 million.

Reserves

In accordance with NI 51-101, McDaniel prepared the McDaniel Report. The McDaniel Report evaluated the oil, NGL and natural gas reserves attributable to the Company effective December 31, 2011. The McDaniel Report is dated February 2, 2012. The tables below are a summary of the oil, NGL and natural gas reserves attributable to the Company and the net present value of future net revenue attributable to such reserves as evaluated in the McDaniel Report. The tables summarize the data contained in the McDaniel Report and, as a result, may contain slightly different numbers than such report due to rounding. Also due to rounding, certain columns may not add exactly.

The reserve data provided in this news release presents only a portion of the disclosure required under NI 51-101. All of the required information will be contained in the Company's Annual Information Form for the year ended December 31, 2011, which will be filed on SEDAR on or before April 30, 2012.

The net present value of future net revenue attributable to 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 McDaniel. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to reserves estimated by McDaniel represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of oil, NGL and natural gas reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein.

The McDaniel Report is based on certain factual data supplied by the Company and the Company's opinion of reasonable practice in the industry. The extent and character of ownership and all factual data pertaining to petroleum properties and contracts (except for certain information residing in the public domain) were supplied by the Company to McDaniel. McDaniel accepted this data as presented and neither title searches nor field inspections were conducted.

Summary of Oil and Gas Reserves - Forecast Prices and Costs
Gross Reserves Net Reserves
Light and Medium Crude Oil Heavy Oil Natural
Gas
Liquids
Natural
Gas
Light and Medium Crude Oil Heavy Oil Natural Gas Liquids Natural
Gas
Mbbls Mbbls Mbbls MMcf Mbbls Mbbls Mbbls MMcf
Proved
Developed Producing 27.1 43.8 327.0 3,610.2 24.4 39.9 195.2 3,173.6
Developed Non-Producing 88.7 - - - 72.3 - - -
Undeveloped - - - - - - - -
Total Proved 115.8 43.8 327.0 3,610.2 96.7 39.9 195.2 3,173.6
Probable 50.1 7.3 94.5 1,223.1 38.7 6.9 56.2 1,075.8
Total Proved plus Probable 165.9 51.2 421.4 4,833.2 135.5 46.8 251.5 4,249.3
Net Present Value of Future Net Revenue - Forecast Prices and Costs Before Future Income Tax
Before Future Income Tax Expenses and Discounted at
0% 5% 10% 15% 20%
(M$) (M$) (M$) (M$) (M$)
Proved
Developed Producing 14,945.1 10,948.9 8,699.9 7,282.8 6,310.8
Developed Non-Producing 3,110.5 2,670.7 2,348.1 2,104.7 1,915.7
Undeveloped - - - - -
Total Proved 18,055.6 13,619.6 11,048.0 9,387.4 8,226.5
Probable 7,200.2 3,959.8 2,538.6 1,801.7 1,370.3
Total Proved plus Probable 25,255.8 17,579.5 13,586.7 11,189.1 9,596.9
Net Present Value of Future Net Revenue - Forecast Prices and Costs After Future Income Tax
After Future Income Tax Expenses and Discounted at
0% 5% 10% 15% 20%
(M$) (M$) (M$) (M$) (M$)
Proved
Developed Producing 14,945.1 10,948.9 8,699.9 7,282.8 6,310.8
Developed Non-Producing 2,490.4 2,352.4 2,170.4 1,999.0 1,849.7
Undeveloped - - - - -
Total Proved 17,435.5 13,301.3 10,870.2 9,281.7 8,160.5
Probable 5,433.3 2,998.5 1,942.0 1,398.9 1,082.7
Total Proved plus Probable 22,868.8 16,299.9 12,812.3 10,680.6 9,243.2

Pricing Assumptions - Forecast Prices and Costs

McDaniel employed the following pricing, exchange rate and inflation rate assumptions as of December 31, 2011 in the McDaniel Report in estimating reserves data using forecast prices and costs.

Medium and Light Crude Oil Natural Gas NGL
Year WTI
Cushing
Oklahoma
40° API
(US$/bbl)
Edmonton
Par Price
40° API
($/bbl)
Cromer
Medium
29.3º API
($/bbl)
Alberta Gas Average
Plantgate
($/MMBtu)
AECO - C Spot
($/MMBtu)
Edmonton
NGL mix
($/bbl)
Exchange
Rate
($US/$Cdn)
(1) (2) (3) (4)
2012 97.50 99.00 91.00 3.30 3.50 72.40 0.9750
2013 97.50 99.00 91.00 4.00 4.20 74.10 0.9750
2014 100.00 101.50 93.30 4.50 4.70 76.10 0.9750
2015 100.80 102.30 94.10 4.90 5.10 77.10 0.9750
2016 101.70 103.20 94.90 5.35 5.55 78.30 0.9750
2017 102.70 104.20 95.80 5.70 5.90 79.40 0.9750
2018 103.60 105.10 96.60 6.00 6.25 80.40 0.9750
2019 104.50 106.00 97.50 6.20 6.45 81.30 0.9750
2020 105.40 106.90 98.30 6.45 6.70 82.20 0.9750
2021 107.60 109.20 100.30 6.60 6.85 84.00 0.9750
(1) West Texas Intermediate at Cushing Oklahoma 40 degrees API/0.5% sulphur
(2) Edmonton Light Sweet 40 degrees API, 0.3% sulphur
(3) Midale Cromer crude oil 29 degrees API, 2.0% sulphur
(4) NGL Mix based on 45 percent propane, 35 percent butane and 20 percent natural gasolines.
(5) Escalated at 2%/yr. thereafter

Outlook

As previously reported on December 15, 2011, the Online Hz Paddle River 8-31-55-7W5M Ostracod Oil well was shut-in in mid-December after extensive testing. Prior to being shut-in, the well flowed over a three day period at an average rate of 129 bopd (27.6 degree API) and 81 mcf/d of gas (total of 142 boe/d) with water cuts averaging 50%. Over the final eight hours the well flowed at an average rate of 149 bopd and 94 mcf/d of gas (total of 164 boe/d) with water cuts averaging 33%. The well appears to have continued to clean-up while flowing and performance may improve further, particularly when the benefit of pumping equipment is realized.

The Company expects the 8-31 well to commence production by mid-February at an initial rate of 100 - 150 bopd.

Online is planning to spud its second horizontal well (100% WI) targeting Ostracod oil in the Paddle River area prior to the end of February. The Company has 37.5 net sections of prospective lands on the Ostracod oil trend in this area.

Current corporate production is estimated to be approximately 450 boe/d and is expected to increase significantly when the 8-31 horizontal Ostracod oil well comes on-stream.

Online anticipates filing its audited financial statements and related MD&A for the year ended December 31, 2011 on SEDAR prior to April 30, 2012.

Online Energy Inc. is a domestic junior oil and gas exploration and production company with assets in Alberta. Online trades on the TSX Venture Exchange under the symbol ONL. Basic corporate information and periodically updated presentations are available on the Company's website at www.onln.ca.

Cautionary Statements:

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgments with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Online. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.

In the interest of providing Online shareholders and potential investors with information regarding the Company, including management's assessment of Online's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves 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. Online believes 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 contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements.

In particular, this press release may contain forward looking statements pertaining to the following:

  • the performance characteristics of the Company's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Company's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

The material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company's most recent management's discussion and analysis included in the material available on this press release.

The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • volatility in market prices for oil and natural gas;
  • liabilities inherent in oil and natural gas operations;
  • uncertainties associated with estimating oil and natural gas reserves;
  • competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, Online does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

Estimated values contained in this press release do not represent fair market value.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Online Energy Inc.
    Steve Dabner
    President & Chief Executive Officer
    (403) 262-1901 ext. 228
    sdabner@onln.ca

    Online Energy Inc.
    Thomas Love
    Chief Financial Officer
    (403) 262-1901 ext. 227
    tlove@onln.ca
    www.onln.ca