Iona Energy Announces Production Operational Update and Reserves Information

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CALGARY, ALBERTA--(Marketwired - June 12, 2013) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN UNITED STATES

Iona Energy Inc. (TSX VENTURE:INA) ("Iona" or the "Company") is pleased to provide an operational update regarding production and reserves and that gas compression has commenced at the Huntington Field.

Huntington and Corporate Production

On June 5th, 2013, first gas was exported from the Huntington Field, of which Iona owns a 15% working interest and a 2.55% royalty interest. Production from Huntington on June 7th was approximately 10,500 boepd gross (1,842 boepd net to Iona including the royalty interest).

Production has been steady since gas compression commenced and is expected to continue to increase until it reaches the predetermined Floating Production Storage and Offloading unit capacity of 30,000 bbls/d of oil and 27 MMcf/d by the end of June 2013. As a result of the aforementioned, Iona has reached a new production record of approximately 3,464 boepd, which is expected to increase to over 7,500 boepd as Huntington reaches production capacity.

The working interests in the Huntington field are E.ON Ruhrgas UK E&P (25% Operator), Premier Oil plc (40%), Norwegian Energy Company ASA (20%), and Iona (15%). In addition to the working interest, Iona holds a gross overriding royalty of 2.55% of the total Huntington production, payable from the Huntington Joint Venture Partners.

Corporate Reserves

The Company is also pleased to announce that independent reserves evaluator Gaffney, Cline & Associates Ltd. ("GCA") has completed its evaluation of Iona's interest in the Huntington property. GCA evaluated, effective as of December 31, 2012, the reserves and net present values of future revenue associates therewith, and using forecast prices and costs. The proved and probable reserves from Huntington net to Iona based on a 15.75% interest (15% working interest and 0.75% differential lifting entitlement) are 4.58 MMboe (4.14 MMbbls of oil and 2.64 Bcf of gas), not including the additional royalty interest of 1.8%., the results of which are integrated into Iona's full portfolio as set forth below.

Readers should note that these figures are based on the approved field development plan for Huntington and do not take full account for the recent development drilling results on the property. Iona expects to provide a further update on the reserves associated with Huntington later in 2013 once production results associated with Huntington's expected maximum production capacity have been analyzed. Also, the updated reserves and net present values listed below accurately reflect Iona's current working interests in its Orlando and Kells properties. The previously disclosed reserve report (released April 30th, 2013) included Orlando and Kells reserves and net present values at 100% working interest, while the figures below reflect a 75% working interest.

Specifically, the changes from Iona's reserve report released on April 30, 2013 and the figures below are as follows (gas converted to barrels of oil equivalent by Iona at 6,000 cubic feet per 1 barrel of oil):

  • Proved pre-tax net present value 10% increased from US$483.38 million to US$620.59 million, up 28%.
  • Proved plus probable pre-tax net present value 10% increased from US$1,184.64 million to US$1,255.94 million, up 6%.
  • Proved post-tax net present value 10% increased from US$293.03 million to US$408.15 million, up 39%.
  • Proved plus probable post-tax net present value 10% increased from US$643.91 million to US$755.31 million, up 17%.
  • Adjusting for Orlando and Kells working interest adjustment proved reserves increased from 15.2 MMboe to 18.8 MMboe, up 24%.
  • Adjusting for Orlando and Kells working interest adjustment proved plus probable reserves increased from 29.7 MMboe to 34.3 MMboe, up 15%.

SUMMARY OF IONA INTEREST RESERVES (CUMULATIVE) GCA FORECAST PRICES AND ESCALATED COSTS AS AT 31ST DECEMBER, 2012

Field Company Interest Oil & Condensate
Reserves
MMbbls
Proved Proved plus
Probable
Proved plus Probable
Plus
Possible
Orlando 5.87 11.53 16.17
West Wick 5.10 9.71 12.18
Kells 1.42 3.15 3.86
Trent & Tyne - 0.01 0.01
Huntington 3.31 4.14 4.85
Total 15.70 28.54 43.08
Field Company Interest Gas Reserves
Bcf
Proved Proved plus
Probable
Proved plus Probable
Plus
Possible
Kells 14.75 20.65 24.83
Trent & Tyne 1.94 11.43 14.90
Huntington 2.08 2.64 3.15
Total 18.77 34.72 42.88

NET PRESENT VALUES AGGREGATED NORTH SEA ASSETS AS AT 31ST DECEMBER, 2012 (US$ MM)

Pre-Tax

  0% 5% 10% 15% 20%
Proved Developed Producing 7.90 8.23 8.48 8.66 8.79
Proved Developed Non-Producing 278.90 265.70 253.19 241.48 230.60
Proved Undeveloped 724.19 507.56 358.92 254.70 180.21
Total Proved 1,010.99 781.49 620.59 504.84 419.60
Probable 1,179.00 848.07 635.35 491.79 390.78
Proved + Probable 2,189.99 1,629.56 1,255.94 996.62 810.38
Possible 909.42 579.81 398.60 289.95 220.15
Proved + Probable + Possible 3,099.41 2,209.37 1,654.54 1,286.57 1,030.53

Post-Tax

  0% 5% 10% 15% 20%
Proved Developed Producing 7.90 8.23 8.48 8.66 8.79
Proved Developed Non-Producing 176.15 171.00 165.63 160.27 155.05
Proved Undeveloped 498.26 341.47 234.04 158.92 105.47
Total Proved 682.31 520.70 408.15 327.85 269.31
Probable 637.03 460.69 347.16 270.38 216.20
Proved + Probable 1,319.34 981.39 755.31 598.23 485.52
Possible 356.09 234.20 164.78 121.84 93.56
Proved + Probable + Possible 1,675.43 1,215.59 920.09 720.06 579.08

Notes:

  1. Iona's Interest reserves are based upon a 75% working interest in Orlando.
  2. Iona's Interest reserves are based upon a 58.73% working interest in West Wick.
  3. Iona's Interest reserves are based upon a 75% working interest in Kells.
  4. Iona's Interest reserves are based upon a 20% working interest in Trent & Tyne.
  5. Iona's Interest reserves are based upon a 15% working interest plus a 0.75% royalty in Huntington.
  6. In addition to the above working interest in Huntington, Iona receives an additional 1.8% revenue interest payable less certain cost deductions which is included in the above NPV estimates.
  7. The post-tax net present value of Iona's oil and gas properties here reflects the tax burden on the properties on a stand-alone basis. It does not consider the business-entity-level tax situation, or tax planning. It does not provide an estimate of the value at the level of the business entity, which may be significantly different. The financial statements and management's discussion & analysis (MD&A) of Iona should be consulted for information at the business entity level.
  8. In addition to the items set forth in the table below, key assumptions for post-tax net present value of Iona's oil and gas properties include the utilization of existing tax pools, the application of the recently-enacted U.K. small field allowance to Iona's interest in the Kells field, and use of GCA's forecast prices and costs. No other adjustments have been made for cash balances, inventories, indebtedness or other balance sheet effects.

FUTURE NET REVENUE PERTAINING TO IONA'S NORTH SEA INTERESTS UNDISCOUNTED AS AT 31ST DECEMBER, 2012 (US$ MM)

  Revenue Royalty OPEX CAPEX ABEX Before
Tax Net Revenue
Income
Taxes
After
Tax Net
Revenue
Proved 1,792.31 5.84 303.59 393.88 78.02 1,010.99 328.67 682.31
Proved + Probable 3,325.31 18.20 523.07 470.68 123.36 2,189.99 870.65 1,319.34
Proved + Probable + Possible 4,355.13 21.46 635.58 470.68 128.00 3,099.41 1,423.97 1,675.44

Notes:

  1. OPEX = Operating Costs, CAPEX = Development Capital Costs, ABEX = Abandonment Costs.
  2. Royalty is payable to Fairfield Energy on production from the Kells Field.
  3. The table shows minor rounding errors.
  4. Iona's Interest Reserves are based upon a 15% Working interest plus a 0.75% royalty in Huntington.
  5. In addition to the above Reserves Interest, Iona receives an additional 1.8% revenue interest payable less certain cost deductions in Huntington, which is included in the above NPV estimates.
  6. The post-tax net present value of Iona's oil and gas properties here reflects the tax burden on the properties on a stand-alone basis. It does not consider the business-entity-level tax situation, or tax planning. It does not provide an estimate of the value at the level of the business entity, which may be significantly different. The financial statements and management's discussion & analysis (MD&A) of Iona should be consulted for information at the business entity level.
  7. In addition to the items set forth in the table above, key assumptions for post-tax net present value of Iona's oil and gas properties include the utilization of existing tax pools, the application of the recently-enacted U.K. small field allowance to Iona's interest in the Kells field, and use of GCA's forecast prices and costs. No other adjustments have been made for cash balances, inventories, indebtedness or other balance sheet effects.

Additional information relating to the Company is available on SEDAR at www.sedar.com.

About Iona Energy:

Iona is an oil and gas exploration, development and production company focused on oil and gas development and exploration in the United Kingdom's North Sea.

Forward-looking statements

Some of the statements in this announcement are forward-looking, including statements regarding estimates of the quantities of reserves, associated net present values of future revenue therefrom, and contingent resources in the Huntington field. Forward-looking statements include statements regarding the intent, belief and current expectations of Iona Energy Inc. or its officers with respect to various matters, including production, drilling activity or otherwise. When used in this announcement, the words "expects", "believes", "anticipate", "plans", "may", "will", "should", "scheduled", "targeted", "estimated" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, are based on various assumptions by Iona's management, including the assumption with respect to the timing and effects of commissioning gas compression systems for Huntington which are beyond Iona's control, and are subject to risks and uncertainties that could cause actual outcome to differ materially from those suggested by any such statements, including without limitation, the risk of unanticipated delays impacting production rates at Huntington. These forward-looking statements speak only as of the date of this announcement. Iona Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.

Notes Regarding Oil and Gas Disclosure

As used in this press release, "boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

It should not be assumed that the present worth of estimated future net revenue represents the fair market value of the reserves disclosed in this press release. The reserve and related revenue estimates set forth in this press release are estimates only and the actual reserves and realized revenue may be greater or less than those calculated. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties due to the effects of aggregation. As used in this press release, "possible reserves" are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Additionally, this press release uses certain abbreviations as follows:

Oil and Natural Gas Liquids Natural Gas
   
bbls barrels mcf thousand cubic feet
       
MMbbls millions of barrels MMcf million cubic feet
       
MMboe million barrels of oil equivalent Bcf billion cubic feet
       
boepd barrels of oil equivalent per day    
       
bopd barrels of oil per day    
Contact:
Iona Energy Inc.
Neill A. Carson
Chief Executive Officer
+44 1224 228400

Iona Energy Inc.
Graham A. Heath
Interim Chief Financial Officer
+44 7508 936982

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