Surmont Energy Ltd.

Surmont Energy Ltd.

May 29, 2012 09:00 ET

Surmont Energy Announces Results of Independent Resources Evaluation of Its Oil Sands Leases Near Ft. McMurray, Alberta

CALGARY, ALBERTA--(Marketwire - May 29, 2012) - Calgary-based private company Surmont Energy Ltd. ("Surmont", or the "Company") is pleased to announce that independent qualified reserves evaluation firm GLJ Petroleum Consultants Ltd. ("GLJ") has completed its evaluation of Surmont's Wildwood Project oil sands leases located near Ft. McMurray, Alberta (the "GLJ Report").

The GLJ Report was prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook"), with an effective date of March 31, 2012, and using GLJ's forecast prices and costs as at that date.

HIGHLIGHTS

  • Total Company interest Contingent Resources for the Wildwood Project of approximately 104.8 million barrels (Best Estimate). This represents an increase to approximately 800% of the corresponding Contingent Resources volumes booked prior to the Company's $9 million 2011-2012 winter seismic and core hole drilling program.
  • Total Company-interest Prospective Resources for the Wildwood Project of approximately 16.3 million barrels (Best Estimate).
SUMMARY OF CONTINGENT RESOURCES 1,2,3,4,5,7,8,9,10,11
Heavy Oil (Bitumen) (Millions of Barrels)
Low Estimate Best Estimate High Estimate
Gross Lease 61.0 131.0 234.4
Total Company Interest 48.8 104.8 187.5
Net After Royalties 40.7 85.2 146.4
SUMMARY OF PROSPECTIVE RESOURCES 1,2,3,4,6,7,8,9,10,11
Heavy Oil (Bitumen) (Millions of Barrels)
Low Estimate Best Estimate High Estimate
Gross Lease 0 20.4 37.8
Total Company Interest 0 16.3 30.2
Net After Royalties 0 13.7 23.4
Note: "Gross Lease" represents 100% interest values; "Total Company Interest" represents Surmont's 80%.

OPERATIONS

Surmont and its 20% partner Bounty Developments Ltd. ("Bounty") are preparing applications for an approximately 10,000 - 12,000 barrel per day SAGD oil sands project on these leases, and planning for submission of such applications to regulatory authorities later this year. Surmont and Bounty are also developing plans for further exploration of the rest of the leases in upcoming seasons.

NOTES

1. Economic Contingencies

GLJ's evaluation of the Contingent Resources is based upon the same fiscal conditions as applicable in the assessment of reserves and, as such, the estimated recoverable resource volumes are economically recoverable resources; there is no economic contingency.

2. Technical Contingencies

Surmont's Wildwood development is based on the application of Steam-Assisted Gravity Drainage (SAGD) technology, which is an established technology in this oil sands formation in this geographic area. There is no technical contingency with respect to the application of SAGD technology to the Wildwood development. Given the maturity of this project, additional drilling will, however, be required to fully characterize the oil sands reservoir and for development to proceed.

3. Non-Technical Contingencies

Non-technical contingencies include SAGD facility design, preparation of more-detailed cost estimates and schedules to confirm project economics, Company and partner sanctioning of firm plans to proceed with the project, receipt of required regulatory approvals on the schedule contemplated, the availability of required capital investment funds on suitable terms, and the availability of required equipment and services on the schedule contemplated.

4. Future Reclassifications of Resources

For reclassification of portions of the estimated Contingent Resources to Reserves, Surmont expects that it will, at a minimum, need to make regulatory application for Phase 1 of the Wildwood Project development (with no foreseen impediments to approval) with first major capital forecast to occur within five years, and develop higher-accuracy cost estimates and schedules to confirm project economics. Surmont is currently in the process of preparing its Phase 1 Wildwood Project regulatory applications, with submission planned for later in 2012. More-detailed cost estimates and schedules are to be prepared as part of the work leading to submission of these regulatory applications. Additional delineation drilling and future regulatory applications will be necessary to develop the entire resource base on these leases and correspondingly assign reserves.

Successful future drilling will be necessary to allow reclassification of any portion of estimated Prospective Resources to Contingent Resources.

5. "Contingent Resources" are defined in the COGE Handbook as those quantities of resources estimated on a given date to be potentially recoverable from known accumulations using established technology or technology under development, but which do not currently qualify as reserves or commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters, or a lack of markets. Contingent Resources are subject to the chance of development. There is no certainty that it will be commercially viable to produce any portion of the Contingent Resources or that Surmont will produce any portion of the volumes currently classified as Contingent Resources.

6. "Prospective Resources" are "undiscovered resources" as defined in the COGE Handbook. Undiscovered resources are defined as those quantities estimated on a given date to be contained in accumulations yet to be discovered. The estimates of the potentially recoverable portions of undiscovered resources are classified as Prospective Resources. Prospective Resources are defined as those quantities of resources estimated on a given date to be potentially recoverable from undiscovered accumulations. They are technically viable and economic to recover. Pursuant to s.5.9(d)(v) of NI 51-101, Surmont cautions that that there is no certainty that any portion of the Prospective Resources will be discovered, and that if discovered, there is no certainty that it will be commercially viable to produce any portion of the volumes currently classified as Prospective Resources or that Surmont will produce any portion of the volumes currently classified as Prospective Resources.

7. "Low Estimate" values are considered to be a conservative estimate of the quantity of resources that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the Low Estimate. Those resources at the low end of the estimate range have the highest degree of certainty - a 90% confidence level - that the actual quantities recovered will be equal or exceed the estimate.

8. "Best Estimate" values are considered to be the best estimate of the quantity of resources that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the Best Estimate. Those resources that fall within the Best Estimate have a 50% confidence level that the actual quantities recovered will be equal or exceed the estimate.

9. "High Estimate" values are considered to be an optimistic estimate of the quantity of resources that will actually be recovered. It is unlikely that the actual remaining quantities of resources recovered will meet or exceed the High Estimate. Those resources at the high end of the estimate range have a lower degree of certainty - a 10% confidence level - that the actual quantities recovered will equal or exceed the estimate.

10. "Bitumen" is defined under NI 51-101 as naturally occurring hydrocarbons with a viscosity greater than 10,000 centipoise. The resources at the Surmont Wildwood Project have a viscosity greater than this value and are classified as bitumen.

11. The Wildwood Project resource estimates provided herein are estimates, and actual resources and future production from such resources may be greater than or less than the estimates. The size of the resource estimates could be positively or negatively impacted, potentially materially, if delineation wells or seismic data indicate that the aerial extent, reservoir quality and/or the thickness of the reservoir is different than estimated by GLJ.

ABOUT SURMONT ENERGY LTD.

Surmont Energy Ltd. is a privately held oil sands company founded in October 2011, and headquartered in Calgary, Alberta. The Company focuses on utilizing environmentally responsible technologies to carry out profitable development of oil sands and heavy oil projects in western Canada. Surmont's initial project is located on a 12,000 acre block of oil sands leases in the heart of Alberta's steam-assisted-gravity-drainage (SAGD) project region, where the Company has been conducting an accelerated exploration and delineation program intended to lead to an oil sands project application during the latter part of 2012 and first production in 2015.

FURTHER INFORMATION

For further information, please visit Surmont's website at www.surmontenergy.com

This information release contains certain "forward-looking statements" within the meaning of such statements under applicable securities law including but not limited to final regulatory approval from the Alberta Energy Resources Conservation Board and Alberta Environment. Forward-looking statements are frequently characterized by words such as "plan", "expect", "estimate", "intend", "believe", "anticipate", "proposed", "prospective" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on Surmont's experience and current beliefs as well as assumptions made by, and information currently available to, Surmont, and are subject to a variety of risks and uncertainties including, but not limited to, those associated with resource definition, unanticipated costs and expenses, regulatory approvals, fluctuating oil and gas prices, and the ability to access sufficient capital under suitable conditions to finance future acquisitions and development. Although the Company believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this information release are not exhaustive and readers are not to place undue reliance on forward-looking statements. Surmont expressly disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this message, except as required under applicable securities legislation. The forward-looking statements are expressly qualified by these cautionary statements.

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