Thunder Energy Trust
TSX : THY.UN

Thunder Energy Trust

March 06, 2007 08:25 ET

Thunder Announces Year-End Reserves

CALGARY, ALBERTA--(CCNMatthews - March 6, 2007) - Thunder Energy Trust (TSX:THY.UN) today released results of its year-end 2006 reserve report prepared by independent engineers, GLJ Petroleum Consultants ("GLJ").

Highlights

- Year-end company interest proved plus probable reserves of 29.4 mmboe. The report includes 3.0 mmboe of proved plus probable additions from drilling, improved recovery and minor acquisitions and dispositions.

- Year-end company interest reserves included upward technical revisions, which includes conversion of nonproducing reserves to producing, of 2.1 mmboe proved producing, and downward technical revisions of 2.4 mmboe proved and total downward revisions of 4.5 mmboe proved plus probable.

- Approximately 82% of proved plus probable downward reserve revisions were from four properties.

- 85% of proved reserves are now proved producing versus 69% at year-end 2005.

- Undeveloped land at year end 2006 of 165,284 net acres was valued at $31.2 million.

- Seismic was independently valued at $22.8 million.

- NAV: $5.13 diluted (including undeveloped land; GLJ December 31 2006 forecast pricing); $5.51/unit (including undeveloped land and seismic)

- Reserve life index of 8.1 years for proved plus probable and 6.0 years for proved based on GLJ's year end reserves evaluation and their 2007 average production estimate.

- The downward revision in the Trust's reserves resulted in a write-down of $102.0 million on its property and plant assets (2005 write-down - $56.2 million). In addition, the year-end reserve revisions resulted in an additional write-down of $58.6 million in goodwill related to the formation of the Trust in July 2005.

2006 Year-end Reserves

GLJ has evaluated the Trust's oil and natural gas reserves as at December 31, 2006 in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Company interest reserves as at December 31, 2006, as evaluated by GLJ based on forecast prices and costs, were 20.4 mmboe proved and 29.4 mmboe proved plus probable. Company interest reserves are the Trust's working interest reserves plus its royalty interest in reserves.

Year-end reserves include upward technical revisions, which includes conversion of nonproducing reserves to producing, of 2.1 mmboe proved producing and downward technical revisions of 2.4 mmboe total proved. Overall there were downward revisions of 4.5 mmboe proved plus probable. Three mmboe of proved plus probable reserves were added from drilling, enhanced recovery and including minor acquisitions and divestitures. Closing balances have been approved by the Reserve Committee of Thunder's Board of Directors and ratified by the full Board.

Downward proved plus probable reserve revisions were principally from four properties, as follows:

- Whiskey Creek (39%): Revisions are primarily related to proved non-producing and probable reserves in the base of the producing geological horizon that were deemed non-recoverable due to the presence of water and to producing wells that stabilized at lower than expected rates. Thunder continues to negotiate with the third party plant operator to install additional compression, now targeted for 2008.

- Rosalind (18%): Increasing water cuts and escalating fixed operating costs have reduced the economically recoverable oil reserves from the existing wells in the two major oil pools. Also, one gas well watered out in 2006 that carried significant reserves.

- Sylvan Lake (14%): Downward reserve revisions were related primarily to the performance of one well and, to a lesser extent, revised GLJ forecasts on some mature properties. Certain end-of-life reserves were truncated due to economic cut-off.

- Fenn-Big Valley (11%): Downward reserve adjustments resulted from producing well performance and revised GLJ forecasts on mature properties.

Valuation

GLJ has estimated the net present value of future net revenue attributable to the Trust's company interest reserves, discounted at 10%, based on forecast prices and costs to be $338.5 million for proved reserves and $436.3 million for proved plus probable reserves.

It should not be assumed that the net present value of future net revenue attributable to reserves estimated by GLJ represents the fair market value of those reserves.

Pursuant to NI 51-101 reporting guidelines, less than 10% of the Trust's drilling location inventory, on a gross basis, has been assigned reserves. In addition to the GLJ report, undeveloped land value is being carried in Net Asset Value ("NAV"), which is currently estimated at $189 per acre for a total value of $31.2 million. This estimate is based on undeveloped lands at December 31, 2006 of 165,284 acres utilizing the average price of Crown land sales within our core areas over a twelve-month period from January 1 to December 31, 2006, and adjusted for tenure.

NAV attributable to the Trust's diluted outstanding units at year was $5.13/unit, based on December 31, 2006 GLJ pricing, proved plus probable reserves and undeveloped land of $31.2 million.

Not included in the NAV is an independent seismic evaluation of the Trust's extensive 2-D and 3-D seismic inventory, conducted by an established geophysical evaluator, which assessed a fair market value of $22.8 million.

Reserves Volumes and Values

The tables below are a summary of the oil, NGL and natural gas reserves of the Trust and the net present value of future net revenue attributable to such reserves as evaluated in the GLJ report, based on forecast price and cost assumptions.

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 GLJ. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to reserves estimated by GLJ represent the fair market value of those reserves. The recovery and reserve estimates of oil, NGL and natural gas reserves provided herein are estimates only and actual reserves may be greater than or less than the estimates provided herein.

Under current tax laws, the Trust will be entitled to deduct from its income all amounts which are paid or payable by it to unitholders in a given financial year. As a result, the Trust does not anticipate being liable for any material amount of income tax on income. Therefore, the net present values of future net revenue after income taxes will be the same as the net present values of future net revenue before income taxes presented in the tables below.

For the purposes of NI 51-101 and the tables below, (i) "gross" means the Trust's "company gross reserves", which are its working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of the Trust and (ii) "net" means the Trust's working interest (operating or non-operating) share after deduction of royalty obligations, plus its royalty interests in reserves.

Additional information concerning the GLJ report and the oil, NGL and natural gas reserves of the Trust will be provided in the Trust's annual information form for the year ended December 31, 2006. The annual information form will be available for review on SEDAR after it is filed by the Trust. The Trust will issue a press release announcing the filing of the annual information form on SEDAR when it occurs.



Summary of Gross and Net Oil and Gas Reserves - Forecast Prices

Gross Reserves Net Reserves
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Gas Oil NGL Gas Oil NGL
Entity Description MMcf Mbbl Mbbl MMcf Mbbl Mbbl
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Proved Producing 68,837 4,746 1,068 55,383 4,237 748
Proved Developed
Nonproducing 8,931 223 73 7,156 187 48
Proved Undeveloped 4,340 463 72 3,284 386 49
Total Proved 82,108 5,433 1,213 65,823 4,810 845
Total Probable 38,613 1,892 654 30,447 1,666 475
Total Proved Plus
Probable 120,721 7,325 1,867 96,270 6,476 1,320
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Note: Numbers may not add due to rounding


Net Present Values of Future Net Revenue
Before Income Taxes Discounted At (%/year)
---------------------------------------------------------------------------
0% 5% 10% 15% 20%
Reserves Category M$ M$ M$ M$ M$
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Proved Producing 468,986 358,827 299,169 260,130 232,008
Proved Developed
Nonproducing 50,290 34,284 26,030 21,071 17,757
Proved Undeveloped 23,806 17,613 13,262 10,096 7,727
Total Proved 543,082 410,724 338,461 291,298 257,492
Total Probable 240,317 143,314 97,880 72,276 56,156
Total Proved Plus
Probable 783,399 554,038 436,342 363,574 313,648
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Summary of Company Interest Oil and Gas Reserves- Forecast Prices
---------------------------------------------------------------------------
Gas Oil NGL
Entity Description MMcf Mbbl Mbbl
---------------------------------------------------------------------------

Proved Producing 69,134 4,752 1,072
Proved Developed Nonproducing 8,938 223 73
Proved Undeveloped 4,340 463 72
Total Proved 82,411 5,440 1,216
Total Probable 38,682 1,894 655
Total Proved Plus Probable 120,093 7,333 1,871
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Pricing Assumptions - Forecast Prices and Costs

GLJ employed the following pricing, exchange rate and inflation rate assumptions as of December 31, 2006 in estimating the above reserves data using forecast prices and costs.



West Texas Natural Gas
Intermediate Edmonton Light Spot Plant Foreign
Crude Oil Crude Oil Gate Exchange
Year ($US/bbl) ($Cdn/bbl) ($Cdn/mmbtu) ($US/$Cdn)
---------------------------------------------------------------------------

2007 62.00 70.25 7.00 0.870
2008 60.00 68.00 7.25 0.870
2009 58.00 65.75 7.55 0.870
2010 57.00 64.50 7.60 0.870
2011 57.00 64.50 7.65 0.870
2012 57.00 65.00 7.95 0.870
2013 58.50 66.25 8.10 0.870
2014 59.75 67.75 8.30 0.870
2015 61.00 69.00 8.50 0.870
2016 62.25 70.50 8.65 0.870
2017 63.50 71.75 8.85 0.870
Escalate
thereafter at +2.0%/year +2.0%/year +2.0%/year 0.870
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Reconciliation of Company Interest Reserves - December 31, 2005 to
December 31, 2006


The following tables reconcile the Trust's net reserves at December 31, 2006, derived from the evaluation prepared by GLJ using forecast prices and costs, to the net reserves of the Trust at December 31, 2005.



Proved Probable Total Proved
Plus Probable
----------------------------------------------------------
Oil (Mbbl):
Opening Balance: 5,741 1,845 7,586
Technical Revisions: -334 -321 -655
Exploration Discoveries: 12 39 52
Drilling Extensions: 112 -2 110
Infill Drilling: 144 62 207
Improved Recovery: 0 0 0
Acquisition: 40 13 53
Disposition: 0 0 0
Economic factors: 67 30 97
Actual Production: -972 0 -972
Closing Balance: 4,811 1,666 6,477

Natural Gas (MMcf):
Opening Balance: 74,118 36,765 110,883
Technical Revisions: -8,502 -7,827 -16,329
Exploration Discoveries: 324 539 863
Drilling Extensions: 4,529 1,951 6,480
Infill Drilling: 3,814 -1,486 2,328
Improved Recovery: 233 -45 188
Acquisition: 1,072 364 1,435
Disposition: 0 0 0
Economic factors: 381 188 569
Production: -10,145 0 -10,145
Closing Balance: 65,823 30,448 96,270


Proved Probable Total Proved
Plus Probable
----------------------------------------------------------
Natural Gas Liquids (Mbbl):
Opening Balance: 1183 591 1,774
Technical Revisions: -297 -145 -442
Exploration Discoveries: 8 16 24
Drilling Extensions: 38 11 49
Infill Drilling: 9 5 14
Improved Recovery: 9 -4 5
Acquisition: 1 0 1
Disposition: 0 0 0
Economic factors: 2 1 3
Production: -108 0 -108
Closing Balance: 845 475 1,320

Oil Equivalent (Mboe):
Opening Balance: 19,277 8,563 27,840
Technical Revisions: -2,047 -1,771 -3818
Exploration Discoveries: 74 145 219
Drilling Extensions: 904 335 1,239
Infill Drilling: 789 -180 609
Improved Recovery: 48 -12 36
Acquisition: 219 74 293
Disposition: 0 0 0
Economic factors: 133 62 195
Production: -2,771 0 -2,771
Closing Balance: 16,626 7,216 23,842


The following tables reconcile the Trust's company interest reserves at December 31, 2006, derived from the evaluation prepared by GLJ using forecast prices and costs, to the reserves of the Trust at December 31, 2005.



Proved Total Total Proved
Producing Proved Plus Probable
--------------------------------------------------------------
Oil (Mbbl):
Opening Balance: 5,795.9 6,549.4 8,704.1
Technical Revisions (1,2): -246.6 -282.7 -669.3
Exploration Discoveries: 15.5 15.5 69.7
Drilling Extensions: 109.6 126.6 121.9
Infill Drilling: 208.2 159.1 226.7
Improved Recovery: 18.4 0.0 0.0
Acquisition: 40.3 42.4 55.6
Disposition: -2.7 -2.7 -7.2
Actual Production: -1,168.0 -1,168.0 -1,168.0
Closing Balance: 4,752.7 5,439.7 7,333.6

Natural Gas (MMcf):
Opening Balance: 55,488.9 92,719.8 138,854.1
Technical Revisions (1,2): 11,309.3 -10,199.8 -19,492.7
Exploration Discoveries: 853.4 395.7 1,064.5
Drilling Extensions: 6,906.0 6,393.4 8,978.5
Infill Drilling: 5,136.6 4,342.7 2,550.7
Improved Recovery: 1,411.6 279.7 224.5
Acquisition: 832.8 1,284.5 1,718.2
Production: -12,804.6 -12,804.6 -12,804.6
Closing Balance: 69,133.9 82,411.4 121,093.3



Proved Total Total Proved
Producing Proved Plus Probable
-----------------------------------------------------------------------
Natural Gas Liquids (Mbbl):
Opening Balance: 630.7 1,673.8 2,488.6
Technical Revisions (1,2): 475.9 -425.5 -629.7
Exploration Discoveries: 16.6 10.4 44.7
Drilling Extensions: 64.5 68.6 88.8
Infill Drilling: 14.6 11.6 19.6
Improved Recovery: 16.5 10.7 5.8
Acquisition: 0.8 0.8 1.0
Production: -147.8 -147.8 -147.8
Closing Balance: 1,071.8 1,216.4 1,871.0

Oil Equivalent (Mboe):
Opening Balance: 15,674.8 23,676.5 34,335.0
Technical Revisions (1,2): 2,096.2 -2,394.3 -4,533.9
Exploration Discoveries: 174.4 91.9 278.0
Drilling Extensions: 1,325.1 1,260.8 1,707.1
Infill Drilling: 1,078.9 894.5 671.5
Improved Recovery: 270.2 57.3 43.3
Acquisition: 179.9 257.3 343.0
Disposition: -2.7 -2.7 -7.2
Production: -3,450.0 -3,450.0 -3,450.0
Closing Balance: 17,346.7 20,391.3 29,386.8

(1) Includes the conversion of nonproducing reserves to producing.
(2) Figures include technical revisions and economic factors.


Net Asset Value

The following table sets forth the Trust's calculation of its net asset
value as at December 31, 2006.


($Millions, except per unit data)
Discount Rate 5% 8% 10%
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Reserves (Company Interest)
Proven $ 410.7 $ 363.3 $ 338.4
Probable 143.3 112.7 97.9
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Total 554.0 476.0 436.3

Undeveloped Land(1) 31.2 31.2 31.2
Net Debt (204.2) (204.2) (204.2)
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NAV - Basic and diluted $ 381.0 $ 303.0 $ 263.3
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Per unit(2)
Basic $ 7.51 $ 5.97 $ 5.19
Diluted 7.43 5.91 5.13

(1) Undeveloped land valued at $189 per acre.
(2) Based on 50.3 million outstanding trust units, 0.4 million
outstanding exchangeable shares and 0.5 units related to
restricted and performance trust units as at December 31, 2006.


Forward-looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning the Trust's reserve life index and net asset value that may be considered to be forward looking.

The forward-looking statements are based on certain key expectations and assumptions made by the Trust, including expectations and assumptions concerning the Trust's reserves and production, the performance of existing wells, the value of the Trust's undeveloped land and the value of the Trust's seismic.

Although the Trust believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Trust can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks). These risks are set out in more detail in the Trust's annual information form for the year ended December 31, 2005, which can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and the Trust undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boepd means barrel oil equivalent per day.

In this press release: (i) mmboe means million boe; (ii) boe/d or boepd means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic feet; (v) mmcf means million cubic feet; (vi) mcf/d or mcfd means thousand cubic feet per day; and (vii) mmcf/d or mmcfd means million cubic feet per day.

Contact Information

  • Thunder Energy Trust and Thunder Energy Inc.
    Stuart Keck
    President & C.E.O.
    (403) 294-1635
    (403) 232-1317 (FAX)
    or
    Thunder Energy Trust and Thunder Energy Inc.
    Brent Kirkby
    Vice President, Finance & C.F.O.
    (403) 294-1635
    (403) 232-1317 (FAX)
    Email: thunder@thunderenergy.com
    Website: www.thunderenergy.com