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CALGARY, ALBERTA--(Marketwired - Feb 1, 2016) - Arsenal Energy Inc. ("Arsenal" or the "Corporation") (TSX:AEI)(OTCQX:AEYIF) is pleased to provide the highlights of its year end reserves report and to provide a corporate update. Arsenal's proved plus probable finding development and acquisition costs for 2015 were $12.22 per boe and based, on the current production rate, Arsenal has a reserve life of approximately 13.3 years on a proved plus probable basis.
In preparing the Company's reserves, Deloitte LLP (Deloitte") has evaluated Arsenal's reserves as at December 31, 2015 in accordance with National Instrument 51-101. For light oil, Deloitte is using a price forecast of US $42.00 WTI, US $47.50 WTI and US $55.00 WTI for 2016, 2017 and 2018 respectively and for AECO natural gas, Deloitte is using Cdn. $2.45 per mcf, Cdn. $2.80 per mcf and Cdn. 3.00 per mcf in 2016, 2017 and 2018, respectively. Additionally, Deloitte assumed a Canadian/ US dollar exchange rate of $0.74, 0.77 and 0.80 in 2016, 2017 and 2018 respectively.
Detailed reserve information will be included in Arsenal's Annual Information Form for the year ended December 31, 2015 which will be filed on SEDAR at www.sedar.com on or before March 31, 2016. The summary information that follows has been derived from Deloitte's evaluation.
Despite using lower price forecasts than were used in the December 31, 2014 reserves report, which resulted in some earlier booked reserves being eliminated as being uneconomic in the current price environment, Arsenal nonetheless replaced its proved developed reserves by 124% and despite the lower price deck, marginally increased the dollar value of its P+P reserves.
|Summary of Oil and Natural Gas Reserves as at December 31, 2015|
|Oil and NGL's||Natural Gas||Oil Equivalent|
|Gross (1)||Net (2)||Gross (1)||Net (2)||Gross (1)||Net (2)|
|Total Proved Plus Probable||12,734.6||10,537.9||18,521.3||16,172.8||15,821.5||13,233.4|
|(1)||"Gross" reserves means Arsenal's interest before deduction of royalties|
|(2)||"Net" reserves means Arsenal's interest after deduction of royalties|
|Summary of Net Present Value of Future Net Revenue as of December 31, 2015 ($ Thousands based on Deloitte December 31, 2015 price forecast)|
|Total Proved Plus Probable||473,965.5||282,456.0||188,081.5|
|2015 Reserve Reconciliation|
|December 31||Acquired||Technical||Economic||December 31|
|Total Proved (Mboe)||8,549||(44||)||(1,353||)||929||2,590||(728||)||9,943|
|Total Proved Value (MM$)||103.5||(1.9||)||(21.7||)||26.5||31.4||(31.4||)||106.4|
|Total Proved Plus Probable (Mboe)||15,182||(111||)||(1,353||)||842||1,820||(558||)||15,822|
|Total Proved Plus Probable Value (MM$)||201.7||(1.9||)||(21.7||)||10.0||24.2||(24.2||)||188.1|
Arsenal has a reserves committee, comprised of independent Board members, that reviews the qualifications and appointment of the independent reserves evaluators. The committee also reviews the procedures for providing information to the evaluators. All booked reserves are based upon the annual evaluations by the independent qualified reserves evaluators conducted in accordance with the COGE (Canadian Oil and Gas Evaluation) Handbook and NI 51-101. The evaluations are conducted using all available geological and engineering data. The reserves committee has reviewed the reserves information and approved the reserve report.
The Company is entering into processes to market some or all of its US properties as well as various non-core properties in Canada. The goal is to reposition the Company's balance sheet and pursue growth opportunities at the Company's Princess property by substantially reducing or eliminating the Company's indebtedness.
Premium assets like Arsenal's North Dakota properties often attract valuations substantially in excess of asset transactions in Canada. As demonstrated by Arsenal's 2015 finding and development costs, the capital efficiencies of Arsenal's Princess property offer very attractive economics relative to most plays in the Western Canadian Sedimentary Basin. A sale of the US properties, if achieved, will reposition the Company's balance sheet and allow the Company to pursue growth in the opportunity base at Princess at a time when costs are generally expected to be very low.
In light of the current crude oil commodity price environment, Capex in 2016 is expected to be limited to tie-ins and exploration to grow the Princess opportunity base. The Company will continue its efforts at reductions to operating and overhead costs with any repositioning of the asset base.
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Information Regarding Disclosure on Oil and Gas Reserves and Operational Information
The reserves estimates contained in this press release represent gross reserves as at December 31, 2015 as defined under NI 51-101. It should not be assumed that the present worth of estimated future net revenues presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. The Company's belief that it will establish additional reserves over time with conversion of probable undeveloped reserves into proved reserves is a forward-looking statement and is based on certain assumptions and is subject to certain risks, as discussed below under the heading "Advisory".
All future net revenues are estimated using forecast prices, arising from the anticipated development and production of our reserves, net of the associated royalties, operating costs, development costs, and abandonment and reclamation costs and are stated prior to provision for interest and general and administrative expenses. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein do not represent fair market value.
To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (boe). The Company uses the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 mcf = 1 bbl.). The 6:1 boe ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the boe ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.
This press release contains metrics commonly used in the oil and natural gas industry, such as "finding and development costs" and "reserve life index". These terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons.
Finding and development costs take into account reserves revisions during the year on a per boe basis, the aggregate of the exploration and development costs incurred in the financial year and changes during that year in estimated future development costs.
Management uses these oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare the Company's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this press release, should not be relied upon for investment or other purposes.
Certain information regarding Arsenal Energy Inc. (the "Company") contained in this press release, may constitute forward-looking statements under applicable securities laws. The forward‐looking statements are based on certain key expectations and assumptions made by the Company, including expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, prevailing commodity prices, the availability of labor and services, the geological nature of the formations targeted by the Company and the success of completion and recompletion activities. Although the Company 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 Company 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, 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), commodity price and exchange rate fluctuations, changes in the regulatory regime applicable to the Company and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in the Company's Annual Information Form for December 31, 2014 which has been filed on SEDAR and 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 Company 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.
Arsenal Energy Inc.
Tony van Winkoop
President and Chief Executive Officer
Arsenal Energy Inc.
J. Paul Lawrence
Vice President, Finance and CFO
Arsenal Energy Inc.
1900, 639 - 5th Avenue S.W.