Orion Oil & Gas Corporation
TSX : OIP

January 24, 2011 09:00 ET

Orion Increases Proved + Probable Reserves 34% to 24.8 MMboe

CALGARY, ALBERTA--(Marketwire - Jan. 24, 2011) - Orion Oil & Gas Corporation (TSX:OIP) ("Orion" or the "Company") announced today the results of its 2010 year-end oil and gas reserves evaluation conducted by GLJ Petroleum Consultants ("GLJ") and Sproule Associates Limited ("Sproule") as at December 31, 2010.

Highlights for year-end 2010 compared to year-end 2009 include:

  • Proved reserves of 16.3 million ("MM") boe, an increase of 32%
  • Proved plus Probable ("2P") reserves of 24.8 MMboe, an increase of 34%
  • Oil and liquids account for 48% of 2P reserves
  • Net Present Value of 2P reserves (discounted at 10% before tax) increased 32% ($106 MM), to $439 MM
  • 2P reserve life index of approximately 12.6 years based on estimated fourth quarter 2010 production
  • 2P Reserve Replacement Ratio of approximately 490% (see note 5)

Gary Guidry, President and Chief Executive Officer of Orion, said: "Our strategy to increase production and cash flow with an aggressive capital program during 2010 has been successfully executed. We increased 2P reserves by 34% and added over $100 million in Net Present Value (2P reserves discounted at 10% before tax). Orion is now positioned to generate significant free cash flow over the next 4 to 5 years which we will invest in value growth opportunities."

Oil and Gas Reserves

The tables below summarize certain information contained in the independent reserves reports prepared by GLJ and Sproule as of December 31, 2010 (collectively, the "Reports"). The information relating to reserves and the associated Net Present Value of Orion's Beaverhill Lake (Kaybob), Bigstone and Redwater properties was prepared by GLJ. The information relating to reserves and associated Net Present Value of Orion's Redwater North property was prepared by Sproule. Orion retained Sproule to continue its evaluation of the Redwater North acquisition which the Company announced in December 2010.

The Reports were prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). The Net Present Values included in the table below were based on price forecasts, effective January 1, 2011, provided by GLJ and Sproule, as applicable.

Upon approval of the Board of Directors, additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form that is to be filed on SEDAR on or before March 31, 2011.

Summary of Oil and Gas Reserves – Forecast Prices and Costs

    Light and Medium
Crude Oil
  Natural Gas   Natural Gas
Liquids
  Total Oil
Equivalent
 
Reserves Category Gross   Net   Gross   Net   Gross   Net   Gross   Net  
    (Mbbls ) (Mbbls ) (MMcf ) (MMcf ) (Mbbls ) (Mbbls ) (Mboe ) (Mboe )
Proved Developed Producing                         -   -  
  Beaverhill Lake (Kaybob)         26,705   23,375   3,359   2,272   7,810   6,168  
  Bigstone         2,093   1,749   1       350   292  
  Redwater 1,240   1,042   2,340   1,913           1,630   1,361  
  Redwater North 245   214   220   183           282   245  
Total Proved Developed Producing 1,485   1,256   31,358   27,220   3,360   2,272   10,072   8,065  
Proved Developed Non-Producing                         -   -  
  Beaverhill Lake (Kaybob)         1,204   1,068   151   97   352   275  
  Bigstone                         -   -  
  Redwater                         -   -  
  Redwater North 57   48   43   36           64   54  
Total Proved Developed Non-Producing 57   48   1,247   1,104   151   97   416   329  
Proved Undeveloped                         -   -  
  Beaverhill Lake (Kaybob)         17,619   16,256   2,216   1,631   5,153   4,340  
  Bigstone                         -   -  
  Redwater 382   322   768   616           510   425  
  Redwater North 132   106   92   74           147   118  
Total Proved Undeveloped 514   428   18,479   16,946   2,216   1,631   5,810   4,883  
Total Proved                         -   -  
  Beaverhill Lake (Kaybob)         45,529   40,699   5,727   3,999   13,315   10,782  
  Bigstone         2,093   1,749   1       350   292  
  Redwater 1,622   1,365   3,108   2,529           2,140   1,787  
  Redwater North 435   368   355   293           494   417  
Total Proved 2,057   1,733   51,085   45,270   5,728   3,999   16,299   13,277  
Total Probable                         -   -  
  Beaverhill Lake (Kaybob)         22,608   19,444   2,844   1,906   6,612   5,146  
  Bigstone         886   741           148   124  
  Redwater 1,249   1,050   2,252   1,894           1,624   1,366  
  Redwater North 121   102   109   90           139   117  
Total Probable 1,370   1,152   25,855   22,169   2,844   1,906   8,523   6,753  
Total Proved plus Probable                         -   -  
  Beaverhill Lake (Kaybob)         68,137   60,144   8,571   5,905   19,927   15,929  
  Bigstone         2,980   2,491   1   1   498   416  
  Redwater 2,871   2,415   5,360   4,423           3,764   3,152  
  Redwater North 555   470   464   383           632   534  
Total Proved plus Probable 3,426   2,885   76,941   67,441   8,572   5,906   24,822   20,031  
Total Possible                                
  Beaverhill Lake (Kaybob)         23,431   19,891   2,948   1,943   6,853   5,258  
  Bigstone                         -      
  Redwater                         -   -  
  Redwater North                         -   -  
Total Possible -   -   23,431   19,891   2,948   1,943   6,853   5,258  
Total Proved plus Probable plus Possible                                
  Beaverhill Lake (Kaybob)         91,568   80,034   11,519   7,848   26,780   21,187  
  Bigstone         2,980   2,491   1   1   498   416  
  Redwater 2,871   2,415   5,360   4,423           3,764   3,152  
  Redwater North 555   470   464   383           632   534  
Total Proved plus Probable plus Possible 3,426   2,885   100,372   87,331   11,520   7,849   31,675   25,289  
                                   

Notes:

  1. Gross equals Company working interest reserves.
  2. Net equals volumes after Royalty equivalent volumes are deducted.
  3. Columns for all tables may not add due to rounding.
  4. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is at least a 10% probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable plus possible reserves. 
  5. The reserves replacement ratio was calculated by subtracting the reserves balance at December 31, 2009 from the reserves balance at December 31, 2010; adding the estimated production for 2010; and dividing the result by the estimated 2010 production.
  6. All dollar amounts are in Canadian dollars unless otherwise noted.

The following table sets forth the Net Present Value of estimated cash flows attributed to the Company's reserves as set forth in the Reports, both before and after deducting income taxes, and prior to general and administrative expenses.

Net Present Value of Reserves – Forecast Prices and Costs

    Before Deducting Income Taxes Discounted at each percent  
Reserves Category 0 % 5 % 10 % 15 % 20 %
    ($MM ) ($MM ) ($MM ) ($MM ) ($MM )
Proved Reserves                    
  Developed Producing 322.0   263.5   223.8   195.3   174.0  
  Developed Non-Producing 10.6   8.6   7.2   6.1   5.3  
  Undeveloped 150.2   96.8   64.6   43.9   29.9  
Total Proved 482.8   368.9   295.5   245.3   209.1  
Probable Reserves 305.4   200.8   143.7   109.4   87.0  
Total Proved plus Probable 788.2   569.7   439.3   354.7   296.2  
Possible reserves 253.7   135.6   87.3   62.9   48.7  
Total Proved plus Probable plus Possible 1041.9   705.3   526.6   417.6   344.9  
                       
    After Income Taxes Discounted at each percent  
Reserves Category 0 % 5 % 10 % 15 % 20 %
    ($MM ) ($MM ) ($MM ) ($MM ) ($MM )
Proved Reserves                    
  Developed Producing 300.8   248.0   212.1   186.2   166.7  
  Developed Non-Producing 7.9   6.5   5.4   4.6   4.0  
  Undeveloped 113.5   71.0   45.5   29.1   18.1  
Total Proved 422.2   325.5   263.0   220.0   188.8  
Probable Reserves 230.4   150.5   107.2   81.2   64.3  
Total Proved plus Probable 652.6   476.1   370.2   301.1   253.2  
Possible reserves 191.0   101.6   65.0   46.7   36.0  
Total Proved plus Probable plus Possible 843.6   577.6   435.2   347.8   289.2  
                       

Price Forecast

The GLJ and Sproule price forecasts used in the Reports are summarized below:

Year WTI Crude Oil   Light Crude Oil   Light Crude Oil   Natural Gas   Alberta   Natural Gas
  at Cushing (GLJ)   at Edmonton (GLJ)   at Edmonton (Sproule)   AECO (GLJ)   Sulphur (GLJ)   AECO (Sproule)
  $US/bbl   $Cdn/bbl   $Cdn/bbl   $Cdn/mmbtu   $Cdn/LT   $Cdn/Mcf
2011 88.00   86.22   93.08   4.16   99.86   4.04
2012 89.00   89.29   93.85   4.74   84.55   4.66
2013 90.00   90.92   93.43   5.31   84.55   4.99
2014 92.00   92.96   93.54   5.77   59.04   6.58
2015 95.17   96.19   94.95   6.22   59.04   6.69
2016 97.55   98.62   96.38   6.53   59.04   6.80
2017 100.26   101.39   97.84   6.76   61.08   6.91
2018 102.74   103.92   99.32   6.90   63.16   7.02
2019 105.45   106.68   100.81   7.06   65.29   7.14
2020 107.56   108.84   102.34   7.21   67.45   7.26
2021+ +2.0%/yr   +2.0%/yr   +1.5%/yr   +2.0%/yr   +2.0%/yr    + 1.5%/yr

GLJ - $US/$CDN exchange rate assumed to be $0.98. Inflation rate assumed to be 2.0% per year.
Sproule - $US/CDN exchange rate assumed to be $0.932. Inflation rate assumed to be 1.5% per year.

Alberta Natural Gas Liquids (GLJ)
        Edmonton
  Spec Edmonton Edmonton Pentanes
Year   Ethane Propane   Butane Plus
  $Cdn/bbl $Cdn/bbl $Cdn/bbl $Cdn/bbl
         
2011 13.66 54.32 67.26 90.54
2012 15.68 56.25 68.75 91.96
2013 17.62 57.28 70.01 92.74
2014 19.21 58.56 71.58 94.82
2015 20.79 60.60 74.07 98.12
2016 21.85 62.13 75.94 100.59
2017 22.62 63.87 78.07 103.42
2018 23.14 65.47 80.02 106.00
2019 23.67 67.21 82.15 108.82
2020 24.20 68.57 83.80 111.01
2021+ +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr

On a Net Present Value basis (10% discount rate, before tax), approximately 79% of the value of reserves is attributable to the Kaybob area (including Bigstone) and 21% is attributable to the Redwater area (including Redwater North).

Summary Information Relating to Orion

Orion is engaged in the exploration for and development of oil and natural gas interests located primarily in the Kaybob, Redwater and Bigstone areas of Alberta. Orion is operator at its Kaybob, Redwater and Bigstone properties.

Cautionary Statements

Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: anticipated cash flow, future investment objectives, anticipated oil and gas pricing, expected inflation and future foreign exchange rates. Statements relating to "reserves" and "resources" are forward-looking information as they involve the implied assessment, based on certain estimates and assumptions that, among others, the reserves and resources described exist in the quantities predicted or estimated. Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs; capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Risk Factors" and "Industry Conditions" in the Company's most recent Annual Information Form available under the Company's profile on SEDAR (www.sedar.com). Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Statements" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions. The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document 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 required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.

For the purposes of this press release, boe has been calculated on the basis of six thousand cubic feet of gas to one barrel of oil. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel 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 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 the effects of aggregation.

Contact Information

  • Orion Oil & Gas Corporation
    Gary Guidry
    President and Chief Executive Officer
    (403) 297-1430
    (403) 237-9791 (FAX)
    or
    Orion Oil & Gas Corporation
    Douglas Allen
    Chief Financial Officer
    (403) 297-1430
    (403) 237-9791 (FAX)
    or
    Orion Oil & Gas Corporation
    Trevor Peters
    Vice President, Business Development and Corporate Planning
    (403) 297-1430
    (403) 237-9791 (FAX)
    www.orionoilandgas.ca