Razor Energy Corp. Announces Significant Increases in 2017 Year-End Reserves and Net Asset Value

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CALGARY, Alberta, Feb. 15, 2018 (GLOBE NEWSWIRE) — Razor Energy Corp. (“Razor” or the “Company”) (TSXV:RZE) is pleased to provide a summary of its 2017 year-end reserves evaluation.

The highlights and reserves summary below sets forth Razor’s gross reserves as at December 31, 2017, as evaluated by Sproule Associates Limited (“Sproule”) in an independent report (the “Sproule Report”). The figures in the following tables have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and the reserve definitions contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in the Company’s annual information form which will be filed on SEDAR on or before March 31, 2018.

Razor’s 2017 annual audited consolidated financial statements have not been completed. Financial representations in this news release are management’s estimates and are subject to audit and may be subject to change.

HIGHLIGHTS

  • Total reserve values on a proved developed producing basis (“PDP”) discounted at 10% (“NPV10”) before tax were $178.3 million, which represents an increase of 112% over year end 2016.
  • Total PDP reserve volumes were 11,910 Mboe (90% oil and liquids), which represents an increase of 55% over year end 2016.
  • Total proved (“1P”) reserves were 15,072 Mboe and total proved plus probable (“2P”) reserves were 20,326 Mboe, which represent increases of 49% and 62%, respectively, over year end 2016.
  • The Company’s reserve life index(3) is 6.8 years for PDP, 8.6 years for 1P and 11.6 years for 2P reserves based on December 2017 average field-estimated production of 4,782 boepd.
  • Razor’s reserve replacement (1) was 360% of PDP, 420% of 1P, and 660% of 2P.

Notes:

(1)
“Reserve replacement”, “reserve life index”, or “RLI” do not have standardized meanings. See “Reader Advisories – Oil and Gas Metrics” contained in this news release.

2017 INDEPENDENT RESERVES EVALUATION

Sproule conducted an independent reserves evaluation effective December 31, 2017, which was prepared in accordance with definitions, standards and procedures contained in the COGE Handbook and in NI 51-101. The reserves evaluation was based on Sproule forecast pricing and foreign exchange rates at December 31, 2017 as outlined herein.

Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without the inclusion of any royalty interest) unless otherwise noted.

RESERVES SUMMARY

Summary of Gross Oil and Gas Reserves as of December 31, 2017(1), (2), (3), (4)

Light and Medium
Crude Oil
Conventional
Natural Gas
Natural Gas Liquids
Barrels of Oil
Equivalent
Gross
Gross
Gross
Gross
(Mbbl)
(MMcf)
(Mbbl)
(Mboe)
Proved
Developed Producing
8,141
7,412
2,533
11,910
Developed Non-Producing
1,628
1,555
728
2,615
Undeveloped
419
376
66
547
Total Proved
10,188
9,343
3,327
15,072
Probable
3,836
2,656
976
5,255
Total Proved plus Probable
14,024
12,000
4,303
20,326

Net Present Value of Future Net Revenues Before Income Taxes Discounted at (% per Year) (M$)

 
0%
5%
10%
15%
20%
Proved
Developed Producing
291,401
221,759
178,344
149,263
128,645
Developed Non-Producing
48,821
37,338
29,412
23,813
19,732
Undeveloped
12,146
10,545
9,160
7,986
6,996
Total Proved
352,368
269,642
216,916
181,061
155,374
Probable
131,287
76,082
48,133
32,160
22,177
Total Proved plus Probable
483,655
345,724
265,049
213,221
177,551

Notes:

(1)
The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding.
(2)
Gross reserves means the total working interest (operating or non-operating) share of remaining recoverable reserves owned by Razor before deductions of royalties payable to others and without including any royalty interests owned by Razor.
(3)
Based on Sproule’s December 31, 2017 escalated price forecast. See “Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs”.
(4)
The net present value of future net revenue attributable to the Company’s reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment and reclamation costs for only those wells assigned reserves by Sproule.  It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Company’s reserves estimated by Sproule represent the fair market value of those reserves.  Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Company’s oil, NGL and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.

NET ASSET VALUE(1)

Net asset value, including estimated January 31, 2018 cash and working capital was:

  • $9.60 /share on a PDP basis discounted at 10%, before tax and;
  • $15.10 /share on a 2P basis discounted at 10%, before tax.(2)
  NPV10 (M$) $/share(2)
Proved    
Developed Producing 178,344 11.31
Developed Non-Producing 29,412 1.87
Undeveloped 9,160 0.58
Total Proved 216,916 13.76
Probable 48,133 3.05
Total Proved plus Probable 265,049 16.81
Net Debt(1,3) (26,953 ) (1.71 )
Net Asset Value 238,096 15.10

Notes:

(1)
The estimated Net Asset Values are based on the estimated net present value of all future net revenue from Razor’s reserves, before tax, as estimated by Sproule at year-end. All Net Asset Values cited in this press release are the resulting NPV per reserves category per basic share plus cash and working capital of $18.0 million or $1.14 /share less $45 million term debt facility or $2.85 /share.  See “Reader Advisories – Oil and Gas Metrics” contained in this news release.
(2)
Basic shares outstanding of approximately 15.8 million.  There are no dilutive instruments currently outstanding.
(3)
Financial information is based on the Company’s preliminary estimate as at January 31, 2018 and is therefore subject to change.

Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs

The forecast cost and price assumptions assume increases in wellhead selling prices and include inflation with respect to future operating and capital costs.  Crude oil and natural gas benchmark reference pricing, inflation and exchange rates utilized by Sproule as at December 31, 2017 were as follows:

Year
Exchange Rate
(CAD/USD)
WTI Cushing
Oklahoma 40 API
(USD/bbl)
Canadian Light
Sweet 40 API
(CAD/bbl)
Hardisty Bow River
25 API
(CAD/bbl)
Natural Gas
AECO

(CAD/mmbtu)
2018
0.79
55.00
65.44
51.70
2.85
2019
0.82
65.00
74.51
61.10
3.11
2020
0.85
70.00
78.24
65.72
3.65
2021
0.85
73.00
82.45
69.26
3.80
2022
0.85
74.46
84.10
70.64
3.95
2023
0.85
75.95
85.78
72.05
4.05
2024
0.85
77.47
87.49
73.49
4.15
2025
0.85
79.02
89.24
74.96
4.25
2026
0.85
80.60
91.03
76.46
4.36
2027+
0.85
+2.0%/yr
+2.0%/yr
+2.0%/yr
+2.0%/yr

Reconciliation of Company Gross Reserves By Principal Product Type(1), (2)

The following table sets forth the reconciliation of the Company’s reserves at Forecast Prices and Costs:

  Light and Medium Crude Oil Natural Gas Liquids
Factors Gross Proved
(Mbbl)
Gross
Probable
(Mbbl)
Gross Proved
+ Probable
(Mbbl)
Gross
Proved

(Mbbl)
Gross
Probable

(Mbbl)
Gross Proved
+ Probable

(Mbbl)
December 31, 2016 6,210 1,521 7,731 2,852 720 3,572
Acquisitions 2,524 673 3,197 340 82 422
Category Change 327 71 398 54 (2 ) 52
Disposition (17 ) (1 ) (18 )
Extensions/Infill Drilling 129 1,262 1,391 37 150 187
Economic Factors 53 25 78 17 7 24
Technical Revision 1,863 287 2,150 302 18 320
Production (901 ) (901 ) (274 ) (274 )
December 31, 2017 10,188 3,836 14,024 3,327 976 4,303
  Conventional Natural Gas Barrels of Oil Equivalent
Factors Gross Proved
(Mmcf)
Gross
Probable

(Mmcf)
Gross Proved
+ Probable

(Mmcf)
Gross
Proved

(MBOE)
Gross
Probable

(MBOE)
Gross Proved
+ Probable

(MBOE)
December 31, 2016 6,371 1,716 8,087 10,124 2,527 12,651
Acquisitions 3,555 868 4,423 3,456 901 4,357
Category Change 286 36 322 429 74 503
Disposition (17 ) (1 ) (18 )
Extensions/Infill Drilling 71 292 363 177 1,461 1,638
Economic Factors 37 34 71 76 36 112
Technical Revision (19 ) (278 ) (297 ) 2,162 258 2,420
Production (959 ) (959 ) (1,335 ) (1,335 )
December 31, 2017 9,343 2,657 12,000 15,072 5,254 20,326

Notes:

(1)
The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding.
(2)
Conventional Natural Gas includes associated and non-associated gas.

Future Development Costs

The following table sets forth development costs deducted in the estimation of Razor’s future net revenue attributable to the reserve categories noted below:

Forecast Prices and Costs (M$)
Year Proved Reserves Proved plus Probable
2018 6,705 9,408
2019 5,039 41,222
2020 272 4,444
2021
Thereafter
Total Undiscounted 12,016 55,074
Total Discounted at 10% 11,108 48,688

The future development costs are estimates of capital expenditures required in the future for Razor to convert proved developed non-producing reserves and probable reserves to proved developed producing reserves.  The undiscounted future development costs are $12.0 million for proved reserves and $55.1 million for proved plus probable reserves (in each case based on forecast prices and costs).

ABOUT RAZOR

Razor is a publicly-traded junior oil and gas development and production company headquartered in Calgary, Alberta, concentrated on acquiring, and subsequently enhancing, producing oil and gas properties primarily in Alberta. The Company is led by experienced management and a strong, committed Board of Directors, with a long term vision of growth focused on efficiency and cost control in all areas of the business.

Razor started operations in the first quarter of 2017, through an acquisition of producing assets in the Swan Hills area. In the second quarter of 2017, Razor added to its asset base with the acquisition of complementary assets in the Kaybob area. In the fourth quarter of 2017 and first quarter of 2018, Razor consolidated working interest in certain units in the Kaybob area.

This portfolio of predominantly light oil assets provides a foundation for strong shareholder return through abundant low risk operations. Razor plans to concurrently grow Swan Hills and Kaybob, and execute on similar acquisitions, using its experience to extract upside value.

Razor is a pivotal leading-edge enterprise, balancing creativity and discipline, focused on growing an enduring energy company.

Razor currently trades on TSX Venture Exchange under the ticker “RZE”.

For additional information please contact:

Doug Bailey
President and Chief Executive Officer
OR Kevin Braun
Chief Financial Officer
Razor Energy Corp.
800, 500 5th Avenue S.W.
Calgary, Alberta T2P 3L4G8

Telephone: (403) 262-0242

www.razor-energy.com

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