Arsenal Energy Inc. Releases Yearend Reserves and Declares Dividend
CALGARY, ALBERTA--(Marketwired - Feb 9, 2015) - Arsenal Energy Inc. (AEI.TO)(AEYIF) --
Dividend
The Board of Directors ("BOD") of Arsenal Energy Inc. ("Arsenal" or the "Company") has declared a dividend $0.03 per common share. The dividend is payable in cash, or if a shareholder has enrolled in Arsenal's Dividend Reinvestment Plan, in shares on February 27, 2015 to shareholders of record at the close of business on February 17, 2015. The ex-dividend date is February 12, 2015.
With the severe drop in oil prices, the Board of Directors is of the view that prudent management of the Company's balance sheet is the current overriding priority. To that end, in addition to the reduction of the dividend, Arsenal has implemented other cost reduction initiatives, including freezing salaries, cutting 2014 bonuses, and reducing director's fees. Arsenal's 2015 capital program is estimated at $31.5 million but is backend loaded to take advantage of higher prices anticipated at that time. Cash flow for 2015 (including the hedges that were monetized in early January, 2015) is now estimated at $31.1 million using the current 2015 forward strip prices. Volumes for the year are now expected to average 4,100 boe/d, with exit volumes estimated at 4,600 boe/d. Total debt at yearend 2015 is estimated at approximately $68.0 million.
Reserves
Deloitte LLP has evaluated Arsenal's reserves as at December 31, 2014 in accordance with National Instrument 51-101. Deloitte LLP is using a price forecast of US $67.00 WTI, US $70.00 WTI and US $72.00 WTI for light oil for 2015, 2016 and 2017 respectively, Cdn. $3.85 per mcf, Cdn. $4.05 per mcf and Cdn. 4.30 per mcf for AECO natural gas in 2015, 2016 and 2017 respectively. Detailed reserve information will be included in Arsenal's Annual Information Form for the year ended December 31, 2014 which will be filed on SEDAR at www.sedar.com on or before March 31, 2015. The summary information that follows has been derived from that evaluation.
Highlights
Production in 2014 was a record of approximately 4,500 boe/d.
Reserve replacement totaled 149% of 2014 production.
Year/year proved developed producing reserves increased by 5.8%
Year/year proved plus probable reserves increased by 5.3%.
Oil and natural gas liquids at December 31, 2014 constitute 78% of proved plus probable reserves.
Arsenal's P+P PV10 net asset value is estimated at $8.85/share.
Based on the 2014 production rate, Arsenal has a reserve life of approximately 9.2 years on a proved plus probable basis.
Arsenal's P+P FD&A was approximately $21.49 per boe in 2014.
Summary of Oil and Natural Gas Reserves as at December 31, 2014 | ||||||
Oil and NGLs | Natural Gas | Oil Equivalent | ||||
| Gross (1) | Net (2) | Gross (1) | Net (2) | Gross (1) | Net (2) |
Proved | ||||||
Developed producing | 4,579.5 | 3,754.4 | 7,210.5 | 6,340.6 | 5,781.3 | 4,811.2 |
Developed non-producing | 227.2 | 199.8 | 1,389.3 | 1,177.4 | 458.8 | 396.0 |
Undeveloped | 2,164.9 | 1,798.2 | 863.7 | 705.1 | 2,308.9 | 1,915.7 |
Total Proved | 6,971.6 | 5,752.3 | 9,463.5 | 8,223.0 | 8,548.9 | 7,122.9 |
Probable | 5,081.4 | 3,423.7 | 8,626.8 | 7,668.2 | 6,519.2 | 4,701.7 |
Total Proved plus Probable | 11,896.7 | 9,740.0 | 19,713.4 | 17,466.8 | 15,182.3 | 12,651.2 |
Possible | 2,851.2 | 2,395.0 | 651.7 | 522.9 | 2,959.8 | 2,482.2 |
Total Proved plus Probable plus Possible | 14,763.1 | 12,071.7 | 20,412.2 | 18,025.3 | 18,165.2 | 15,075.9 |
(1) "Gross" reserves means Arsenal's interest before deduction of royalties |
(2) "Net" reserves means Arsenal's interest after deduction of royalties |
Summary of Net Present Value of Future Net Revenue as of December 31, 2014 ($ Millions) | |||
Before income taxes discounted at (% / year) | |||
Reserves Category | 0% | 5% | 10% |
Proved | |||
Developed producing | 131,104.2 | 111,313.4 | 97,438.9 |
Developed non-producing | 8,284.3 | 6,445.6 | 5,222.9 |
Undeveloped | 32,761.9 | 13,018.1 | 813.8 |
Total Proved | 172,150.4 | 130,777.1 | 103,475.6 |
Probable additional | 214,180.4 | 138,671.8 | 98,184.2 |
Total Proved plus Probable | 386,330.8 | 269,448.9 | 201,659.8 |
Possible | 169,752.5 | 99,587.4 | 68,061.8 |
Total Proved + Probable + Possible | 556,083.3 | 369,036.3 | 269,721.6 |
2014 Reserve Reconciliation | ||||||||||||
December 31, 2013 | Acquired / Sold | Production | Adds / Revisions | December 31, 2014 | ||||||||
Total Proved (Mboe) | 8,812 | 13 | (1,642 | ) | 1,366 | 8,549 | ||||||
Total Proved Value (MM$) | 152.9 | 0.3 | (60.8 | ) | 11.1 | 103.5 | ||||||
Total Proved Plus Probable (Mboe) | 14,415 | 21 | (1,642 | ) | 2,388 | 15,182 | ||||||
Total Proved Plus Probable Value (MM$) | 265.2 | 0.3 | (60.8 | ) | (3.0 | ) | 201.7 | |||||
Reserves Committee
Arsenal has a reserves committee, comprised of independent Board members that review 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.
Information Regarding Disclosure on Oil and Gas Reserves and Operational Information
Arsenal's oil and gas reserves statement for the year ended December 31, 2014, which will include complete disclosure of our oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be contained within our Annual Information Form which will be available on our SEDAR profile at www.sedar.com on or before March 31, 2015. The recovery and reserve estimates contained herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In relation to the disclosure of estimates for individual properties, such estimates may not reflect the same confidence level as estimated reserves and future net revenue for all properties, due to the effects of aggregation. 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".
The disclosure of the estimated net asset value ("NAV"), assumes what is normally referred to as "produced-out" NAV calculation under which the current value of the Company's reserves would be produced at forecast future prices and costs and do not necessarily represent a "going concern" value of the Company. The value is a snapshot in time and is based on various assumptions including commodity price forecasts and foreign exchange rates that very over time. It should not be assumed that the future net revenues estimated by Deloitte LLP represent the fair market value of the reserves, nor should it be assumed that Arsenal's internally estimated value of its undeveloped land holdings and seismic represent the fair market value of the lands and seismic.
Advisory
The information provided above includes references to discovered and undiscovered oil and natural gas resources. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resource.
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, 2013 which has been filed on SEDAR and can be accessed at www.sedar.com. The forward‐looking statements contained in this presentation 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.
This press release may contain financial terms that are not considered measures under International Financial Reporting Standards ("IFRS"), which are considered to be generally accepted accounting principles ("GAAP"), such as cash flow from operations and net debt. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Specifically, cash flow from operations reflects cash generated from operating activities before changes in non-cash working capital. Management considers cash flow from operations important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities and repay debt. Net debt includes bank debt outstanding plus accounts payable less accounts receivable and prepaid expense and is used to evaluate the Company's financial leverage.
Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("mcf") of natural gas is equal to one barrel based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.
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