CALGARY, Alberta, Feb. 12, 2018 (GLOBE NEWSWIRE) — Pine Cliff Energy Ltd. (“Pine Cliff” or the “Company”) (TSX:PNE) is pleased to announce 2018 guidance, an update on its commodity risk management and 2017 year-end reserves.
2018 Guidance
Pine Cliff’s Board of Directors has approved a 2018 capital budget of $10.4 million that will be funded from cash flow at an AECO reference price of $1.50 per Mcf for 2018. Pine Cliff intends to spend approximately $4.0 million drilling six gross (1.2 net) wells in the liquids rich Edson area of Alberta, $0.2 million drilling two gross (0.3 net) oil wells in the Central area, $2.8 million on major maintenance capital, $1.3 million on abandonments and reclamation and $2.1 million on facility upgrades. Pine Cliff will monitor its capital spending throughout the year and may modify expenditures depending on commodity prices and marketing initiatives to target spending within cash flow.
Based on the $4.2 million drilling capital budget, Pine Cliff is budgeting 2018 annual production volumes to range from 20,000 – 20,500 BOE per day, weighted 95% to natural gas. Pine Cliff’s fourth quarter 2017 production was 21,489 BOE per day, weighted 95% to natural gas. Pine Cliff exited 2017 with production of approximately 21,340 BOE per day.
Pine Cliff will continue to consider additional opportunities to enhance its shareholders’ long term value which may include further asset acquisitions, although maintaining a strong balance sheet will remain a prime focus.
Commodity Risk Management
Pine Cliff mitigates the near-term commodity price weakness in western Canadian natural gas pricing through a combination of fixed-price delivery agreements and diversifying production exposure to non-AECO markets, including Dawn, Empress and the TransGas Energy Pool (“TEP”) in Saskatchewan.
Assuming the success of these market diversification initiatives, current 2018 forecasted revenue and production volumes are: 36% and 55% to AECO; 21% and 21% to TEP; 20% and 5% to oil and liquids; 13% and 9% to Dawn; and 10% and 10% to Empress. By diversifying to non-AECO markets, Pine Cliff is expecting to reduce the break-even on its funds flow from operations, before capital expenditures, to an AECO reference price of $1.31 per Mcf.
Reserve Report Highlights
Pine Cliff’s independent reserve report was prepared by McDaniel & Associates Limited (“McDaniel”) in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) with the effective date of December 31, 2017.
As a result of the low natural gas prices experienced during the second half of 2017, Pine Cliff conducted a limited capital program, spending $13.5 million (excluding acquisitions and dispositions but including $3.5 million of major maintenance and other capital expenses) participating in 11 gross (1.8 net) non-operated drills and 29 gross recompletions. As a result of a significantly lower natural gas price forecast, and after adjusting for 2017 production, Pine Cliff’s remaining reserves decreased from the previous year.
Highlights of the McDaniel reserve report include:
- Positive technical revisions of 6.7 MMBOE on a total proved plus probable basis in Pine Cliff properties due to a combination of decreased operating costs and strong performance;
- Prior to adjusting for 2017 production, total positive net changes to proved reserves were 5.1 MMBOE (9%), largely a result of improved well performance and a successful well recompletion program;
- Remaining proved reserves of 51.1 MMBOE (95% natural gas) at December 31, 2017, decreased by 2.7 MMBOE (5%) from 53.8 MMBOE (94% natural gas) at December 31, 2016;
- Prior to adjusting for 2017 production, total positive net changes to proved plus probable reserves were 4.1 MMBOE, largely a result of improved well performance;
- Remaining proved plus probable reserves of 67.2 MMBOE (94% natural gas) at December 31, 2017 decreased by 3.7 MMBOE (5%) from 70.9 MMBOE (94% natural gas) at December 31, 2016;
- Approximately 76% of total reserves are classified as proved reserves and 24% are classified as probable reserves;
- Approximately 98% of proved reserves are classified as proved developed producing;
- Net present value for proved plus probable reserves of $240.1 million, discounted at 10%, a decrease of $106.8 million, or 31%, from December 31, 2016, mainly as a result of decreases in the future natural gas price deck; and
- In line with Pine Cliff’s historical accretive focus rather than drilling existing reserves, the McDaniel reserve report reflects a conservative future development capital program of $69.3 million over the next five years.
Pine Cliff’s Reserves
McDaniel is using a price forecast of $2.25 and $2.65 per Mcf for AECO natural gas and US$58.50 and US$58.70 per Bbl for WTI oil in 2018 and 2019 respectively.
Summary of Remaining Working Interest Reserves, as of December 31, 2017
| Light, Medium and Heavy Oil |
Natural Gas and CBM |
Natural Gas Liquids |
BOE | ||||
| Reserve Category | MBbl | MMcf | MBbl | MBOE | |||
| Proved | |||||||
| Developed Producing | 432.5 | 282,598.1 | 2,418.5 | 49,950.7 | |||
| Developed Non-Producing | – | 456.1 | 19.5 | 95.5 | |||
| Undeveloped | 31.6 | 5,054.3 | 152.7 | 1,026.7 | |||
| Total Proved | 464.1 | 288,108.5 | 2,590.7 | 51,072.9 | |||
| Probable | 207.2 | 89,323.0 | 1,050.9 | 16,145.3 | |||
| Total Proved plus Probable | 671.3 | 377,431.5 | 3,641.6 | 67,218.2 | |||
Summary of Net Present Values of Future Net Revenue, Before Income Taxes, as of December 31, 2017
| Discounted at (% per year) | ||||||||||
| ($millions) | 0% | 5% | 10% | 15% | ||||||
| Reserve Category | ||||||||||
| Proved | ||||||||||
| Developed Producing | 170.2 | 181.4 | 171.6 | 157.1 | ||||||
| Developed Non-Producing | 0.7 | 0.7 | 0.6 | 0.6 | ||||||
| Undeveloped | 10.8 | 7.0 | 4.7 | 3.2 | ||||||
| Total Proved | 181.7 | 189.1 | 176.9 | 160.9 | ||||||
| Probable | 149.9 | 96.7 | 63.2 | 42.2 | ||||||
| Total Proved plus Probable | 331.6 | 285.8 | 240.1 | 203.1 | ||||||
Reconciliation of Gross Reserves by Principal Product Type, as of December 31, 2017
| Light, Medium, and Heavy Oil and Natural Gas Liquids |
Natural Gas and Coal Bed Methane |
BOE | ||||||||||
| Proved | Proved plus Probable |
Proved | Proved plus Probable |
Proved | Proved plus Probable |
|||||||
| (MBbl) | (MBbl) | (MMcf) | (MMcf) | (MBOE) | (MBOE) | |||||||
| December 31, 2016 | 3,337.6 | 4,496.3 | 302,540.7 | 398,635.4 | 53,801.1 | 70,935.5 | ||||||
| Extension | 272.1 | 382.7 | 3,889.1 | 5,391.7 | 920.3 | 1,281.3 | ||||||
| Technical Revisions | (103.5) | (104.2) | 45,432.3 | 40,806.5 | 7,434.1 | 6,697.1 | ||||||
| Acquisitions | 30.7 | 31.2 | 1,692.9 | 2,067.0 | 307.4 | 375.7 | ||||||
| Change in Working Interest | 33.3 | 29.0 | 2,664.8 | 2,651.1 | 477.4 | 470.9 | ||||||
| Economic Factors | (104.5) | (111.2) | (23,683.9) | (27,692.8) | (4,051.8) | (4,726.7) | ||||||
| Total Changes | 128.1 | 227.5 | 29,995.2 | 23,223.5 | 5,087.4 | 4,098.3 | ||||||
| Production | (410.9) | (410.9) | (44,427.4) | (44,427.4) | (7,815.6) | (7,815.6) | ||||||
| December 31, 2017 | 3,054.8 | 4,312.9 | 288,108.5 | 377,431.5 | 51,072.9 | 67,218.2 | ||||||
About Pine Cliff
Pine Cliff is a natural gas company with a long-term view of creating shareholder value. Pine Cliff’s current focus is on acquiring, developing and operating long life assets that are cash flow positive in a low commodity price environment. Further information relating to Pine Cliff may be found on www.sedar.com as well as on Pine Cliff’s website at www.pinecliffenergy.com.
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