- Published: 13 March 2009
- Written by Editor
Open Range Energy Corp. (TSX:ONR) Nearly Doubles Reserves in 2008 to Over 10 Million Boe's
Open Range Energy Corp. (TSX: ONR) ("Open Range" or the "Company") is pleased to announce its 2008 year-end reserves, as independently evaluated by GLJ Petroleum Consultants Ltd. (GLJ) in accordance with National Instrument (N.I.) 51-101. As Open Range plans to provide its audited financial and operating results for the year ended December 31, 2008 on March 19, 2009, certain financial estimates have been made herein with respect to the Company's 2008 capital investment program. In executing its exploration-based strategy for the year ended December 31, 2008, Open Range:
- Increased total proved plus probable reserves to 10,035 mboe and total proved reserves to 6,195 mboe at year-end, representing year-over-year increases of 80 percent and 97 percent, respectively;
- Incurred proved plus probable finding and development costs, excluding the change in future development capital, of $11.63 per boe of reserves added, and including the change in future development capital, of $16.79 per boe of reserves added;
- Achieved a recycle ratio of 2.1 times on a proved plus probable basis, derived from an estimated operating netback of $35.67 per boe for 2008;
- Increased proved plus probable reserves per share by 47 percent year-over-year, to 377 boe per thousand shares at December 31, 2008;
- Organically added 5,206 mboe of proved plus probable reserves and 3,805 mboe of proved reserves, representing production replacement ratios of 6.9 times and 5.0 times, respectively;
- Realized a reserve life index of 11.4 years based on total proved plus probable reserves and an average December 2008 production rate of 2,409 boe per day;
- Achieved a net present value of estimated future net revenue from proved plus probable reserves, based on forecast prices and costs, discounted at 10 percent before tax, of $175 million, an increase of 93 percent over December 31 2007; and
- Increased its net asset value per share to $6.70 based on total proved plus probable reserves discounted at 10 percent, an increase of 60 percent from December 31, 2007.
Refer to the tables below for details on Open Range's oil and natural gas reserves and related capital efficiency metrics.
ANSELL/SUNDANCE
In 2008, Open Range realized its largest recorded reserve additions of 5,309 mboe proved plus probable and 3,319 mboe proved at its core Ansell/Sundance property. At December 31, 2008 Company interest total proved plus probable reserves at Ansell/Sundance were 45.1 billion cubic feet (bcf) of natural gas and 856 mbbls of natural gas liquids.
The significant increase in reserves in 2008 was the combined result of the Company's successful drilling of 16 (7.8 net) wells, continued strong well production performance from existing wells and reserve potential on previously unexplored southern, northern and western land blocks being substantiated. The 2008 drilling program was aimed at further expanding the property's resource potential by stepping out onto undeveloped lands and the result was several significant new pool discoveries.
Open Range has accumulated 54.5 sections of land at Ansell/Sundance through Crown land sales and farm-in deals. The Company is operator of the land and has an average working interest of 56 percent. The Company estimates a drilling inventory of 100 locations based on drilling four gas wells per section. The Company has applied for further reduced spacing to six wells per section over 18 gross sections.
BIG BEND, FERRIER, GARRINGTON
Total proved plus probable reserve additions at Big Bend, Ferrier and Garrington were approximately 28 mboe with total proved plus probable reserves at December 31, 2008 of 968 mboe. Additions were a result of performance-based positive technical revisions on existing producers. These three properties were not the focus of material exploration or development activities in 2008.
ROUGH
As a result of encouraging initial production performance at the Company's 15-35-38-12-W5M (70 percent working interest) dual-zone foothills natural gas discovery well 428 mboe of Company interest proved reserve additions were booked. Due to significant pay zone thickness and the over-pressured reservoirs encountered the Company interest proved plus probable reserve assignment is 3.6 bcf and 95 mbbls of natural gas liquids (689 mboe combined) over an assigned drainage area of only 160 acres.
Open Range is operator of 38 sections of land at Rough and has an average working interest of 90 percent. The Glauconitic and Notikewin zones are being considered as candidates for horizontal drilling utilizing multi-stage fracture technology. Wells in the Rough area qualify for credits under the Natural Gas Deep Drilling Program and the Drilling Royalty Credit Program, which significantly enhances well profitability. Future drilling locations are currently being identified for pursuit when economic conditions improve.
SUMMARY OF RESERVES BY CATEGORY (FORECAST PRICES AND COSTS)
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December 31, 2008 2007
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Year-over-
% of year%
Reserve category (mboe) Total change (mboe) % of Total
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Proved
Developed producing 3,639 36% 42% 2,567 46%
Developed non-producing 376 4% 81% 208 4%
Proved undeveloped 2,156 22% 514% 351 6%
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Total proved 6,171 62% 97% 3,125 56%
Probable 3,834 38% 58% 2,432 44%
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Total Company gross 10,006 100% 80% 5,557 100%
working interest reserves -
proved plus probable
reserves
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Proved plus probable 29 -3% 30
Company interests in
royalties
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Total Company interest 10,035 80% 5,587
reserves - proved plus
probable reserves
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NOTE: Table may not add due to rounding.
"Company interest" reserves and values refer to the sum of royalty interest and working interest reserves before deduction of royalty burdens payable. "Working interest" reserves equate to those reserves that are referred to as "company gross" reserves by the Canadian Securities Administrators in N.I. 51-101.
SUMMARY OF OIL, NATURAL GAS AND NATURAL GAS LIQUIDS (NGL) RESERVES (FORECAST
PRICES AND COSTS)
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Light & medium oil Natural gas NGL Total
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At December Gross Net Gross Net Gross Net Gross Net
31, 2008 (mbbls) (mbbls) (mmcf) (mmcf) (mbbls) (mbbls) (mboe) (mboe)
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Proved
Developed
producing 13 12 19,151 16,105 434 270 3,639 2,966
Developed non-
producing - - 2,027 1,790 38 25 376 323
Proved
undeveloped - - 11,615 10,377 220 157 2,156 1,887
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Total proved 13 12 32,792 28,271 693 452 6,171 5,176
Probable 7 6 20,495 16,299 411 249 3,834 2,972
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Total proved
plus probable 20 18 53,287 44,571 1,104 701 10,006 8,148
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NOTE: Table may not add due to rounding.
NET PRESENT VALUE OF FUTURE NET REVENUE AT DECEMBER 31, 2008 (FORECAST
PRICES AND COSTS)
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Net Present Value (NPV) of Future Net Revenue (FNR)
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($ millions) Before Income Taxes - After Income Taxes -
Discounted at (%/yr) Discounted at (%/yr)
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Reserves
category 0 5 10 15 20 0 5 10 15 20
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Proved
Developed
producing 138.9 108.1 89.2 76.4 67.2 129.1 101.8 84.9 73.4 65.0
Developed
non-producing 11.8 8.4 6.4 5.1 4.2 8.6 6.2 4.8 3.9 3.2
Proved
undeveloped 61.1 39.2 25.9 17.3 11.6 44.6 27.8 17.6 11.0 6.6
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Total proved 211.8 155.7 121.5 98.8 82.9 182.2 135.8 107.3 88.3 74.8
Probable 171.5 87.2 53.6 37.3 28.0 125.2 63.5 39.0 27.1 20.4
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Total proved
plus probable 383.3 242.8 175.1 136.1 110.9 307.5 199.2 146.3 115.4 95.2
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NOTE: Table may not add due to rounding.
PRICING AND INFLATION RATE ASSUMPTIONS AT DECEMBER 31, 2008 (FORECAST PRICES
AND COSTS)
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Oil Natural gas
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Edmonton
WTI Edmonton Pentanes
Cushing, Par Price Plus FOB
Oklahoma 40 degrees API AECO Price Field Gate
Year (US$/bbl) (Cdn$/bbl) (Cdn$/mmbtu) (Cdn$/bbl)
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2009 57.50 68.61 7.58 69.98
2010 68.00 78.94 7.94 80.52
2011 74.00 83.54 8.34 85.21
2012 85.00 90.92 8.70 92.74
2013 92.01 95.91 8.95 97.82
2014 93.85 97.84 9.14 99.80
2015 95.73 99.82 9.34 101.81
2016 97.64 101.83 9.54 103.87
2017 99.59 103.89 9.75 105.97
2018 101.59 105.99 9.95 108.10
2019 +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr
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NGL Inflation
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Edmonton
Butanes Edmonton
FOB Propane Inflation Exchange
FOB
Field Gate Field Gate Rate Rate
Year (Cdn$/bbl) (Cdn$/bbl) (%/Yr) (US$/Cdn$)
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2009 52.14 43.22 2.0 0.8250
2010 61.57 49.73 2.0 0.8500
2011 65.16 52.63 2.0 0.8750
2012 70.92 57.28 2.0 0.9250
2013 74.81 60.42 2.0 0.9500
2014 76.32 61.64 2.0 0.9500
2015 77.86 62.89 2.0 0.9500
2016 79.43 64.15 2.0 0.9500
2017 81.03 65.45 2.0 0.9500
2018 82.67 66.77 2.0 0.9500
2019 +2.0%/yr +2.0%/yr 2.0 0.9500
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RECONCILIATION OF COMPANY NET RESERVES BY PRINCIPAL PRODUCT TYPE (FORECAST
PRICES AND COSTS)
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Associated and
non-associated natural
Light & medium oil gas
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Proved Proved
Plus Plus
Proved Probable Probable Proved Probable Probable
Factors (mbbls) (mbbls) (mbbls) (mmcf) (mmcf) (mmcf)
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Dec. 31, 2007 19 10 28 16,511 13,316 29,827
Discoveries - - - - - -
Extensions - - - 13,004 9,834 22,839
Infill drilling - - - 3,062 1,786 4,848
Technical revisions 3 (3) - 4,246 (4,441) (196)
Economic factors - - - - - -
Production (8) - (8) (4,031) - (4,031)
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Dec. 31, 2008 13 7 20 32,792 20,495 53,287
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NGL Total
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Proved Proved
Plus Plus
Proved Probable Probable Proved Probable Probable
Factors (mbbls) (mbbls) (mbbls) (mboe) (mboe) (mboe)
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Dec. 31, 2007 355 203 558 3,125 2,432 5,557
Discoveries - - - - - -
Extensions 247 187 433 2,414 1,825 4,239
Infill drilling 58 34 92 569 331 900
Technical revisions 108 (12) 96 818 (753) 65
Economic factors - - - - - -
Production (74) - (74) (755) - (755)
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Dec. 31, 2008 693 412 1,104 6,171 3,835 10,006
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NOTE: Table may not add due to rounding.
RESERVE-LIFE-INDEX
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Production (December 2008 average) 2,409 boe/d
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Proved reserves (mboe) 6,195
Proved reserve-life-index (years) 7.0
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Proved plus probable reserves (mboe) 10,035
Proved plus probable reserve-life-index (years) 11.4
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FINDING AND DEVELOPMENT COSTS (UNAUDITED)
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Change in
future Total Finding &
Capital development capital Reserve development
($000s) costs costs costs additions costs ($/boe)
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Excluding future
development costs
Proved 60,567 - 60,567 3,805 15.92
Proved plus probable 60,567 - 60,567 5,206 11.63
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Including future
development costs
Proved 60,567 26,772 87,339 3,805 22.95
Proved plus probable 60,567 26,862 87,429 5,206 16.79
RESERVE REPLACEMENT
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Proved plus
Proved Probable
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Reserve replacement of 2008 production
(757,793 boe) 5.0 times 6.9 times
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NET ASSET VALUE PER SHARE (UNAUDITED)
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As at December 31, 2008
Discounted Discounted
($000s except NAV per share) at 10% at 15%
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Present value of reserves (P+P) 175,096 136,081
Undeveloped acreage(1) 31,108 31,108
Working capital deficiency (27,886) (27,886)
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Estimated value 178,318 139,303
Basic and fully diluted shares
outstanding(2)(3) 26,601 26,601
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Estimated NAV per share $ 6.70 $ 5.24
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(1) Based on independent land evaluation at December 31, 2008
(2) Includes 26,600,841 common shares outstanding at December 31, 2008
(3) Does not include stock options outstanding as they were all out-of-the-
money at December 31, 2008
OPEN RANGE ENERGY CORP. IS A PUBLICLY TRADED CANADIAN ENERGY COMPANY WITH FOCUSED OPERATIONS IN THE DEEP BASIN REGION OF ALBERTA.
OPEN RANGE HAS APPROXIMATELY 26.5 MILLION COMMON SHARES ISSUED AND OUTSTANDING, WHICH TRADE ON THE TSX UNDER THE SYMBOL ONR.
Reader Advisory
This news release contains certain forward-looking statements, which include assumptions with respect to (i) production; (ii) future capital expenditures; (iii) funds from operations; (iv) cash flow; and (v) debt levels. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Open Range's control. Such risks and uncertainties include, without limitation, risks associated with oil and natural gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Open Range's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits, including the amount of proceeds, Open Range will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Open Range or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Open Range 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 may be required by applicable securities laws.
Disclosure provided herein in respect of barrel(s) of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 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 Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.
Contacts
A. Scott Dawson, P.Eng.
Open Range Energy Corp.
President and Chief Executive Officer
(403) 205-3704
Lyle D. Michaluk, CA
Open Range Energy Corp.
Vice President, Finance and Chief Financial Officer
(403) 262-9280
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