- Published: 23 March 2009
- Written by Editor
Buffalo Resources Year-End Reserves Value Increases 53%
Buffalo Resources Corp. ("Buffalo" or the "Company") (TSX VENTURE:BFR) is pleased to announce the results of its independent reserves evaluation as at December 31, 2008. The evaluation was prepared by Paddock Lindstrom & Associates Ltd. ("PLA") using forecast prices and cost assumptions, in accordance with the reserves definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and the results are presented in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") (the "2008 PLA Report").
HIGHLIGHTS
- Proved plus probable reserves increased 43% from 15,068 Mboe at December 31, 2007 to 21,520 Mboe at December 31, 2008.
- Net present value of future net revenue before tax, discounted at 10% per annum, attributable to proved plus probable reserves, increased 53% over 2007 to $300 million.
- Estimated net asset value increased 40% from 2007 to $3.14 per fully diluted share.
- Proved producing reserves increased 31% from 2007 to 9,602 Mboe.
- Total proved reserves increased 25% from 2007 to 12,894 Mboe.
- Proved plus probable reserves per basic share at December 31, 2008 increased 22% over December 31, 2007.
- Reserves life index of proved plus probable reserves increased 23% to 14.6 years.
- Finding, development and acquisition costs, including the change in future capital expenditures, were $7.52 per boe for 2008 and $12.78 for the three years ended 2008.
- Capital recycle ratio of 4.4 for 2008 and 2.6 for the three years ending December 31, 2008.
OIL AND GAS RESERVES
Buffalo's oil and gas reserves as detailed in the 2008 PLA Report are compared against 2007 as follows:
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Reserves December 31, December 31, % Change
Category 2008 2007
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Oil Gas NGLs Total Total Total
(Mbbls) (MMcf) (Mbbls) (Mboe) (Mboe) (Mboe)
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Proved
Producing 1,047 45,119 1,035 9,602 7,315 31%
Proved
Developed Non
Producing 46 1,066 4 228 321 (29)%
Proved
Undeveloped 2,449 3,379 52 3,064 2,640 16%
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Total Proved 3,542 49,564 1,091 12,894 10,276 25%
Probable
Additional 5,379 18,069 236 8,626 4,792 80%
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Proved plus
Probable 8,921 67,633 1,327 21,520 15,068 43%
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At December 31, 2008, total proved plus probable reserves comprised 52% natural gas, 42% oil and 6% natural gas liquids (NGLs). Using the first year of production as estimated in the 2008 PLA Report, the Company's reserve life index at December 31, 2008 for proved plus probable reserves is 14.6 years and for total proved reserves is 12.0 years compared with 11.9 years and 9.4 years respectively at December 31, 2007.
NET PRESENT VALUE OF FUTURE NET REVENUE
The net present value of future net revenues before tax, undiscounted and discounted at 10% per annum, as detailed in the 2008 PLA Report, are compared against 2007 as follows:
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Reserves Category December 31, 2008 December 31, 2007 % Change
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0% 10% 0% 10% 0% 10%
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Proved Producing $ 326,259 $ 127,826 $ 203,298 $ 100,194 61% 28%
Proved Developed
Non Producing 6,096 3,669 9,692 6,393 (37)% (43)%
Proved Undeveloped 84,399 45,976 52,443 27,526 61% 67%
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Total Proved 416,754 177,471 265,433 134,113 57% 32%
Probable Additional 267,305 122,877 130,779 62,408 104% 97%
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Proved plus
Probable $ 684,059 $ 300,348 $ 396,212 $ 196,521 73% 53%
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In preparing the 2008 PLA Report, PLA used their Forecast Prices and Cost Assumptions effective December 31, 2008. The price forecast for the first three years compared against 2007 is as follows:
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December 31, 2008 December 31, 2007
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AECO-C AECO-C
Hardisty 12 Gas Hardisty 12 Gas
WTI Oil degrees Oil Cdn WTI Oil degrees Oil Cdn
US $/Bbl Cdn $/Bbl $/Mmbtu US $/Bbl Cdn $/Bbl $/Mmbtu
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2009 $ 60.00 $ 42.18 $ 7.24 $ 88.00 $ 55.73 $ 7.28
2010 67.50 48.21 7.90 84.00 54.70 7.43
2011 75.00 55.53 8.26 82.00 52.27 7.58
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% Change
AECO-C
Hardisty 12 Gas
WTI Oil degrees Oil Cdn
US $/Bbl Cdn $/Bbl $/Mmbtu
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2009 (32)% (24)% (1)%
2010 (20)% (12)% 6%
2011 (9)% 6% 9%
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FINDING, DEVELOPMENT AND ACQUISITION COST
Buffalo added 7,646 Mboe of proved plus probable reserves in 2008 (adjusted for production). Buffalo is a full cycle E&P company and its finding, development and acquisition ("FD&A") costs are best examined over a multi-year period to allow time for projects to mature. FD&A costs are presented per boe of reserves additions for the 2008 year and for the three years ended December 31, 2008. FD&A cost is determined using net capital expenditures during the period, including the cost of properties acquired and the proceeds of dispositions, plus the change in future capital expenditures (as per the PLA Report) divided by the increase in reserves. Both the net capital expenditures and the change in required future capital expenditures include an estimate for the cost of future abandonment and site restoration.
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Proved plus Probable Reserves 2008 Three years ended
December 31, 2008
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Net reserves additions (Mboe) 7,646 16,584
Capital expenditures, net $ 29,738 $ 170,374
Change in future capital
expenditures 27,778 41,515
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$ 57,516 $ 211,889
FD&A Cost ($/boe) $ 7.52 $ 12.78
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The Company's average operating netback for 2008 was approximately $32.78 per boe resulting in a capital recycle ratio of 4.4 for 2008 and 2.6 for the three years ended December 31, 2008. The recycle ratio is determined as the average operating netback per boe of production divided by the FD&A cost.
NET ASSET VALUE PER SHARE
Buffalo has estimated its before tax net asset value per fully diluted share at December 31, 2008 using the before tax values for total proved reserves and for proved plus probable reserves, discounted at 10% per annum, as specified in the PLA Report, as well as the balance sheet values of undeveloped land, seismic data, working capital deficit (including bank debt) and the value of asset retirement obligations in excess of amounts recorded in the PLA Report.
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Reserves Category Total Proved Proved plus Probable
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Net present value of reserves
(NPV at 10%) $ 177,471 $ 300,348
Book value of undeveloped
land & seismic 28,619 28,619
Net working capital deficit (51,843) (51,843)
Additional asset retirement
obligations (7,073) (7,073)
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147,174 270,051
Proceeds from dilutive instruments 23,724 23,724
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170,898 293,775
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Common shares outstanding (000s) 76,702 76,702
Fully diluted shares outstanding
(000s) 93,649 93,649
Net asset value per share
- basic $ 1.92 $ 3.52
Net asset value per share
- fully diluted $ 1.82 $ 3.14
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Bill Trickett, the President and CEO of Buffalo commented, "We are pleased, in today's difficult environment, to have once again delivered strong results for our shareholders. It speaks to the high quality of Buffalo's underlying assets and the ability of our management team to consistently deliver value."
Additional reserves disclosure as required under NI 51-101, will be contained in Buffalo's Annual Information Form, which is expected to be filed on SEDAR on or about April 17, 2009.
Reader Advisory
Certain statements contained in this press release constitute forward looking statements or forward-looking information under applicable securities legislation. Such forward-looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", "seek", "continue", "forecast", "may", "will", "potential", "could", "should" or similar words suggesting future outcomes or statements regarding an outlook. All forward looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. Forward-looking statements or information are based on a number of factors and assumptions that have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition, forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties may cause actual results to differ materially from the forward-looking statements or information.
In particular, in connection with such forward-looking statements and information, the Company has made assumptions regarding, and there are risks and uncertainties relating to, among other things: the ability of management to execute its business plan; general economic and business conditions; the nature of the oil and natural gas industry, including exploring for, developing and producing crude oil and natural gas; competition; market demand; government policies or laws and approvals; reserves estimates and reserves life; the ability of the Company to add production and reserves; timing and amount of exploration or development projects and capital expenditures; estimates and projections relating to production (including decline rates), costs and expenses; fluctuations in oil and natural gas prices, currency, exchange and interest rates; marketing operations; credit exposure; royalty payments; health, safety and environmental matters; legal and regulatory proceedings; and the availability and cost of financing. Additional assumptions upon which such forward-looking statements are based and risk factors affecting the Company and its business are contained in the Company's annual information form and management's discussion and analysis filed on SEDAR at www.sedar.com. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties facing the Company or of the assumptions and other factors that may have been considered by the Company in connection with such forward-looking statements.
The forward-looking statements contained in this press release are made as of the date hereof and Buffalo 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.
The evaluations of future net revenue are stated prior to any provisions for general and administrative costs or interest costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables above represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The amounts and recovery of oil, natural gas and NGLs reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual oil, natural gas and NGL reserves may be greater than or less than the estimates provided.
Certain financial and operating information included in this press release such as finding, development and acquisition costs, recycle ratios, operating netbacks and net asset value are based on management's estimates of financial results for the year ended December 31, 2008 which are unaudited and are subject to the same limitations as discussed above in this Reader Advisory. These estimated amounts may change upon completion of the audited financial statements for the year ended December 31, 2008 and the changes could be material.
In this news release reserves and production data is commonly stated in barrels of oil equivalent (Boe's) using a conversion ratio of 6 Mcf of gas = 1 Bbl of oil based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Such conversion may be misleading, particularly if used in isolation.
SOURCE: Buffalo Resources Corp.
Buffalo Resources Corp. Trevor Penford Snr. VP and C.F.O. (403) 252-2462 (403) 252-1399 (FAX) Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Buffalo Resources Corp. William (Bill) Trickett President and C.E.O. (403) 252-2462 (403) 252-1399 (FAX) Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Website: www.buffaloresources.com
