TRAFINA Energy Ltd.
TSX VENTURE : TFA.A

TRAFINA Energy Ltd.

March 22, 2011 09:36 ET

Trafina Energy Increases Total Proved Plus Probable Reserves by 61 Percent and Oil Weighted Reserves by 483 Percent in 2010

CALGARY, ALBERTA--(Marketwire - March 22, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Trafina Energy Ltd. ("Trafina" or the "Company") (TSX VENTURE:TFA.A) is pleased to report continued success in the transformation from a gas weighted to oil weighted exploration company. An independent reserves evaluation by McDaniel & Associates Consultants Ltd. ("McDaniel") in a report dated March 21, 2011 and effective December 31, 2010 (the "McDaniel Report") indicates that year over year Trafina increased its oil reserves by 483 percent. Oil reserves now represent 50 percent of the Company's total reserve base. Over the same period, Trafina increased its total proved plus probable reserves by 61 percent despite the disposition of several non-core assets.

Highlights

In conjunction with increasing its oil weighting, during 2010 the Company accomplished the following:

  • Maintained average production at 400 barrels of oil equivalent ("boe") per day ("boepd") despite disposing of 40 boepd of non-core producing assets.

  • Increased year over year oil and natural gas liquids production by 104 percent.

  • Completed the acquisition of oil focused assets in southwest Saskatchewan where area production is currently 135 boepd (108 net) and is 90 percent oil weighted.

  • Drilled the first non-operated Cardium oil well at Pembina (part of an anticipated four well drilling program), which has produced an average of 180 boepd (45 net) to date.

  • Raised net proceeds of approximately $3.9 million through various non-brokered private placements.

  • Disposed of non-core assets for net proceeds of $2.6 million.

  • Increased total proved plus probable reserves by 61 percent to 1.6 million boe and increased proved reserves by 31 percent to 838 thousand boe ("Mboe").

From a strategic perspective, the most significant event of 2010 was the purchase in November of a large land position in the McMullen area of north eastern Alberta. The acquired lands have the potential to significantly increase Trafina's oil weighting in terms of production and reserves. Subsequent to year-end 2010, Trafina engaged McDaniel to provide an interim report of discovered oil initially-in-place ("OIIP") on 15 sections at McMullen. The report, dated and effective January 31, 2011, provided a low estimate of 167 million barrels of oil. The best estimate was 198 million barrels of OIIP with a high estimate of 235 million OIIP. See Trafina's press release dated February 2, 2011 for further information. Since the date of the report, Trafina purchased 18 adjacent sections on March 9, 2011. None of this potential is reflected in Trafina's 2010 reserves estimated in the McDaniel Report.

Additional information relating to Trafina's operations in 2010 and its statement of reserves data (and related report of qualified reserve evaluators and management and board of Trafina) will be included in the Company's audited financial statements and accompanying management's discussion and analysis for the year ended December 31, 2010, and in its annual information form for the year ended December 31, 2010, respectively, which the Company expects will be filed on SEDAR on or about April 25, 2010.

Summary of Year-End 2010 Reserves

Trafina recorded 2010 proved plus probable reserves additions of 600 Mboe resulting from acquisitions, drilling, and technical revisions net of production. The Company's December 31, 2010 reserves were evaluated in accordance with the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities by McDaniel in the McDaniel Report.

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Summary of Net Present Values of Future Net Revenue
(based on forecast prices and costs) (before income tax) (M$)


Discount
Factor


Total
Proved


Total
Probable
Total
Proved
Plus
Probable
0% 12,776 19,110 31,885
5% 10,554 13,225 23,780
10% 8,914 9,645 18,559
15% 7,670 7,288 14,958
20% 6,705 5,654 12,359
       
       
Summary of Reserves - Barrels of Oil Equivalent
 (based on forecast prices and costs)
 

Total
Proved


Total
Probable
Total
Proved
Plus
Probable
Oil & Liquids (Mbbls) 455.1 344.6 799.7
Gas (Mmcf) 2,296.2 2,494.6 4,790.8
Barrels of oil equivalent (Mboe) 838 760 1,598
       
McDaniel Commodity Price Assumptions
  Light Sweet Oil Edmonton Par ($CDN/bbl) AECO/NIT-Spot ($CDN/MMBTU)
2010 84.20 4.25
2011 88.40 4.90
2012 91.80 5.40
2013 94.80 5.90
2014 97.70 6.35

Trafina's proved plus probable reserve life index, based on fourth quarter 2010 average production, is 11.2 years.

2011 Capital Spending Forecast

The company is also pleased to announce that its Board of Directors has approved a capital spending forecast for 2011 of $6.4 million. The capital program will focus on an initial four well development and exploration program on Trafina's newly acquired McMullen lands and the drilling of up to three additional horizontal Cardium wells in the Pembina area of Alberta. As well, Trafina intends to drill two wells targeting the Upper Shaunavon zone on its Rangeview/Divide lands in south west Saskatchewan.

About Trafina

Trafina is a junior oil and gas company based in Calgary, Alberta. The Company's main areas of interest are in the McMullen/Twin Lakes and Pembina areas of Alberta and in the Rangeview and Divide areas of southwest Saskatchewan with other operated production in Wetaskiwin, Retlaw and Ronalane in Alberta. Trafina also has non-operated production in Viking/Kinsella, Alberta and minor interests in Carson Creek/Judy Creek, Alberta. Trafina's shares trade on the TSX Venture Exchange under the stock symbol TFA.A.

Basis of Presentation and Cautionary Statement: Information in this press release expressed in boes is derived by converting natural gas to oil in the ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Discovered Oil Initially-in-Place is the quantity of oil that is estimated, as of a given date, to be contained in known accumulations prior to production. OIIP is the most specific category of resources that can be assigned at this stage because there is insufficient data available at this time to sub classify. The data required to sub classify is data such as viscosity and flow test data that will be obtained when the vertical wells are drilled. There is no certainty that it will be commercially viable to produce any portion of the resources.

Low Estimate of OIIP: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.

Best Estimate of OIIP: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

High Estimate of OIIP: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

Estimated values of future net revenue do not represent fair market value.

Forward Looking Statements: This news release contains forward looking statements and forward looking information regarding, among other things, estimated reserves and future net revenue, management's focus on growing its oil reserves and production and the anticipated number of wells to be drilled. Forward looking information is based on management's expectations regarding future growth, results of operations, production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for an results of drilling, environmental matters, business prospects and opportunities and future economic conditions. Statements relating to reserves involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated, and can be profitably produced in the future. Readers are cautioned that assumptions used in the preparation of such statements may prove to be incorrect. Forward looking statements involves significant known and unknown risks and uncertainties. Reference is made to Trafina's annual information form for the year ended December 31, 2009 and thereafter Trafina's annual information form for the year ended December 31, 2010 (once filed) for a description of some of the risks that could affect the Company's future results and could cause results to differ materially from those expressed in the Company's forward looking statements. The forward looking statements contained in this news release are made as at the date hereof and, except as required by applicable securities laws, Trafina does not undertake any obligation to update publicly or otherwise any such statements.

Neither the 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

  • Trafina Energy Ltd.
    Kelly J. Ogle
    President and Chief Executive Officer
    (403) 263-0800
    (403) 263-0811 (FAX)
    info@trafinaenergy.com
    or
    Trafina Energy Ltd.
    Robert W. Lamond
    Chairman
    (403) 269-9889
    (403) 269-9890 (FAX)