Connacher Reports Year-End 2017 Reserves

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CALGARY, April 24, 2018 /CNW/ – Connacher Oil and Gas Limited (“Connacher” or the “Company”) announces its year-end reserves as of December 31, 2017, as evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”), independent qualified reserves evaluators.

Proved producing reserves decreased by 1.4 million barrels (gross) to 13.3 million barrels (gross). The net present value of future net revenue before income taxes (discounted at ten per cent) (“10% PV”) of the proved producing reserves decreased to $30 million from $57 million last year. Proved plus probable producing reserves are 20.3 million barrels (gross) compared to 21.3 million barrels (gross) in 2016. The 10% PV of the proved plus probable reserves decreased by $425 million to $1,081 million.

Estimated proved (“1P”) bitumen reserves totaled approximately 243 million barrels (gross), an increase of 12% per cent over year-end 2016 volumes. The 10% PV of the 1P bitumen reserves decreased by $233 million to $668 million in 2017 due to a decrease in the long term GLJ price forecast and changes to carbon tax regulation.

Proved plus probable (“2P”) reserve volumes were approximately 465 million barrels of bitumen, up 4 per cent from a year earlier. The 10% PV of these 2P bitumen reserves decreased by $425 million to approximately $1.1 billion due to a decrease in the long term GLJ price forecast and changes to carbon tax regulation.

Connacher’s first SAGD project at Great Divide, Pod One, has been producing bitumen since late 2007, with commercial production commencing March 1, 2008. Algar commenced producing bitumen in August 2010 and commerciality was achieved October 1, 2010. Production from Great Divide since startup through December 31, 2017 has totaled approximately 39.5 million barrels of bitumen. Such amounts have been deducted from earlier estimates of proved reserves prior to the calculation of reserves as at December 31, 2017.

Unless otherwise stated, reserves refer to reserves of bitumen. Future net revenue is calculated after the deduction of forecast royalties, operating expenses, estimated future capital expenditures and well abandonment costs, but before corporate overhead or other indirect costs, including interest and income taxes, from forecast revenue. Certain amounts cited herein have been rounded for presentation purposes. The GLJ December 31, 2017 report (“Year-End 2017 Report”) was prepared utilizing the GLJ January 1, 2018 price forecast, effective December 31, 2017. Readers are referred to the notes to the Summary Tables included in this press release for details regarding the price forecast used by GLJ. Earlier reports were prepared using the price forecasts then being applied by GLJ. Future net revenues disclosed herein do not represent fair market value. Also, estimations of reserves and future net revenue discussed in this press release constitute forward looking information. See “Forward Looking Information and Reserves Advisory” below.

The Year-End 2017 Report was prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and in accordance with National Instrument 51-101– Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Comparisons provided herein with respect to Connacher’s bitumen reserves and for 10% PV for December 31, 2016 are to estimates contained in the report, prepared by GLJ, with an effective date of December 31, 2016 (“Year-End 2016 Report”).

Furthermore, additional information regarding Connacher’s reserves and resources, including the Company’s interest in the resources and the risks and the level of uncertainty associated with the recovery of the resources, can be found in the Company’s annual information form (“AIF”) dated March 29, 2016 and Statement of Reserves Data and Other Oil and Gas Information dated April 24, 2018, which can be accessed at www.sedar.com.

Detailed information included in the Year-End 2017 Report regarding Connacher’s bitumen reserves and associated present values are set forth in the tables below, including a comparison of year-end 2017 results to year-end 2016 results.

Summary Tables

Set out below is a summary of the bitumen reserves and the value of future net revenue of the Corporation as at December 31, 2017 as evaluated by GLJ in the Year-End 2017 Report. The pricing used in the forecast price evaluations is set forth in the notes to the tables.

BITUMEN RESERVE VOLUMES BASED ON FORECAST PRICES AND COSTS⁽⁷⁾
		Bitumen
		Gross⁽¹⁾(Mbbl)	Net⁽¹⁾(Mbbl)
Proved Reserves
	Producing⁽²⁾⁽⁴⁾	13,294	12,834
	Developed Non-Producing⁽²⁾⁽⁵⁾	0	0
	Undeveloped⁽²⁾⁽⁶⁾	229,314	199,549
Total Proved⁽²⁾		242,608	212,382
Total Probable⁽³⁾		222,731	188,796
Total Proved Plus Probable⁽²⁾⁽³⁾		465,339	401,178

NET PRESENT VALUE SUMMARY BASED ON FORECAST PRICES AND COSTS⁽⁷⁾

		Net Present Value of Future Net Revenue Before Income Taxes Discounted at (%/Year)					Net Present Value of Future Net Revenues After Income Taxes Discounted at (%/Year)
		0% ($MM)	5% ($MM)	10% ($MM)	15% ($MM)	20% ($MM)	0% ($MM)	5% ($MM)	10% ($MM)	15% ($MM)	20% ($MM)
Proved Reserves
	Producing⁽²⁾⁽⁴⁾	-12	16	30	37	42	-12	16	30	37	42
	Developed Non-Producing⁽²⁾⁽⁵⁾	0	0	0	0	0	0	0	0	0	0
	Undeveloped ⁽²⁾⁽⁶⁾	3,749	1,478	638	278	104	2,991	1,226	543	239	86
Total Proved⁽²⁾		3,737	1,494	668	316	146	2,978	1,242	573	276	128
Total Probable⁽³⁾		4,213	1,195	413	152	47	2,974	812	263	83	11
Total Proved Plus Probable⁽²⁾⁽³⁾		7,950	2,690	1,081	467	192	5,952	2,053	836	359	139

Figures in tables may not add due to rounding.

Notes:
(1)	“Gross Reserves” are the Corporation’s working interest (operating or non-operating) share before deducting royalties and without including any royalty interests of the Corporation. “Net Reserves” are the Corporation’s working interest (operating or non-operating) share after deduction of royalty obligations, plus the Corporation’s royalty interests in reserves.
(2)	“Proved” reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
(3)	“Probable” reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(4)	“Producing” reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(5)	“Undeveloped” reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g., when compared to the cost of drilling a well) is required to render them capable of production.
(6)	The net present value of estimated future net revenues referred to herein should not be construed as the fair market value of estimated bitumen reserves attributable to Connacher’s properties.
(7)	Pricing assumptions in the Year-End 2017 Report were as follows: US$/CDN$ exchange rate was 1.30 for 2017. The following is the price forecast for the Year-End 2017 Report:

Year	Inflation (%/Year)	Exchange Rate ($US/$)	West Texas Intermediate Crude Oil at Cushing Oklahoma Current ($US/bbl)	AECO/NIT Spot Current ($/MMBtu)	WCS Crude Oil Stream Quality at Hardisty Current ($/bbl)	Alberta Natural Gas Liquids Edmonton C5+ Stream Quality Current ($/bbl)
2018	2	0.790	59.00	2.20	48.89	76.42
2019	2	0.790	59.00	2.54	53.16	74.68
2020	2	0.800	60.00	2.88	56.25	74.38
2021	2	0.810	63.00	3.24	59.26	77.16
2022	2	0.820	66.00	3.47	62.20	79.88
2023	2	0.830	69.00	3.58	65.06	82.53
2024	2	0.830	72.00	3.66	68.67	86.14
2025	2	0.830	75.00	3.73	72.29	89.76
2026	2	0.830	77.33	3.80	75.10	92.57
2027	2	0.830	78.88	3.88	76.96	94.43
2028	2	0.830	+2.0%/yr	+2.0%/yr	+2.0%/yr	+2.0%/yr

Comparison of Reserves 2016/2017

BITUMEN GROSS RESERVES (Mbbl)
	31-Dec-16	31-Dec-17
Proved Producing	14,717	13,294
Proved Plus Probable Producing	21,388	20,366
Total Proved Reserves (1P)	216,555	242,608
Probable	230,682	222,731
Proved Plus Probable Reserves (2P)	447,237	465,339

Note: The definitions of the respective types of reserves set forth in the notes to the Summary Tables above also apply to the above table.

10% PRESENT VALUE OF FUTURE NET REVENUE OF BITUMEN RESERVES – BEFORE TAX ($MM)
	31-Dec-16	31-Dec-17
Proved Producing	57	30
Proved Plus Probable Producing	147	74
Total Proved Reserves (1P)	901	668
Probable	605	413
Proved Plus Probable Reserves (2P)	1,506	1,081

Note: The definitions of the respective types of reserves set forth in the notes to the Summary Tables above also apply to the above table.

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