This P+P value equates to $0.79 per common share-News 2016 HIGHLIGHTS AND ACCOMPLISHMENTS
- PetroFrontier acquired interests in 18 highly contiguous sections (16.5 net) of heavy oil properties in the Cold Lake area of northeastern Alberta (the “Properties”) for approximately $17.83 million.
- Total proved (“TP”) reserves of heavy oil were 4.0 million barrels (a 21% increase over the 2015 evaluation of 3.3 million barrels).
- The net present value of future net revenues discounted at 10% ("PV10") before taxes of the Company’s TP reserves was $49.6 million (a 31% increase over the 2015 evaluation of $37.9 million). This TP value equates to $0.33 per common share.
- Total proved plus probable (“P+P”) reserves of heavy oil were 8.82 million barrels (a 23% increase over the 2015 evaluation of 7.16 million barrels).
- The PV10 value before taxes of the Company’s P+P reserves was $117.6 million (a 34% increase over the 2015 evaluation of $87.8 million). This P+P value equates to $0.79 per common share.
- During the second half of 2016, the Company focused on the optimization of the Properties which resulted in significant increases to the Company’s production and reserves base. Those efforts also demonstrated the capacity for future production cost reductions per barrel as costs become spread over a larger production base.
- At year-end, a total of 10 wells were on production, up from 5 wells when the Properties were acquired.
FINANCIAL AND OPERATING RESULTS
Selected financial and operational information is outlined below and should be read in conjunction with the audited financial statements and the related management’s, discussion and analysis (“MD&A”). These filings will be available at www.sedar.com and the Company’s website at www.petrofrontier.com.
| Financial | | |
| | Year ended | Year ended |
| | December 31, | December 31, |
| | 2016 | 2015 |
| Petroleum revenue | $1,261,385 | - |
| Net loss | $707,769 | $819,267 |
| Net comprehensive loss | $709,685 | $628,665 |
| Per common share (basic and diluted) | $0.01 | $0.01 |
| Working capital | $2,131,682 | $9,617,924 |
| Total assets | $22,695,432 | $9,681,433 |
| Total long-term liabilities | $5,832,030 | - |
| Shareholders' equity | $14,826,359 | $9,617,924 |
Production
PetroFrontier’s 2016 petroleum sales volumes averaged 247 boe per producing day (for a 2016 total of 37,791 barrels), compared to nil production during the same period in 2015. The increase in production is attributable to the purchase of the Properties in the third quarter of 2016. The Company’s wellhead price averaged $33.38 per barrel for petroleum sold in 2016.
Operating Netback
The following table details the Corporation’s operating netback for the twelve months ended December 31, 2016.
| | | | Per boe | |
| | Production (boe) | 37,791 | | |
| | Average daily production (boe) | 247 | | |
| | (since acquisition) | | | |
| | Petroleum revenue | $1,261,385 | $33.38 | |
| | Royalties | $111,209 | $2.94 | |
| | Production costs (1) | $945,776 | $25.03 | |
| | Operating netback (2) | $204,400 | $5.41 | |
- Excludes annual lease rentals of $170,799 related to non-producing lands.
- The term “operating netback” is a non-GAAP measure. This term does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures used by other companies in the oil and gas industry.
The 2016 production costs reflect additional expenses incurred by the Company to integrate and optimize the Properties following their acquisition, including putting wells on production. These integration and optimization efforts, along with three new wells drilled in 2017, are now contributing to increased current net production, based on field reports, of approximately 550 bopd (a 122% increase over the 2016 average production rate) and, as set out in the Company’s SEDAR filings, proved plus probable reserves of approximately 8.82 MMbbls as at December 31, 2016 (a 23% increase over proved plus probable reserves for the Properties as at December 31, 2015).
OIL AND GAS RESERVES EVALUATION
DeGolyer and MacNaughton Canada Limited (“DeGolyer”), independent petroleum consultants, of Calgary, Alberta has prepared a report dated April 25, 2017 (the “DeGolyer Report”) in which it has evaluated, as at December 31, 2016, the oil and natural gas reserves attributable to the principal properties of PetroFrontier.
The DeGolyer Report also presents the estimated net value of future revenue of PetroFrontier's properties before and after taxes, at various discount rates. Assumptions and qualifications relating to costs, prices for future production and other matters are summarized in the notes to the following tables.
The following tables summarize certain information contained in the DeGolyer Report. The definitions of the various categories of reserves and expenditures are those set out in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). It should not be assumed that the net present value of reserves estimated by DeGolyer represents the fair market value of these reserves.
Summary of Oil and Gas Reserves
The following table discloses, in the aggregate, PetroFrontier’s gross and net proved reserves, estimated using forecast prices and costs, by product type. “Forecast prices and costs” means future prices and costs used by DeGolyer in the DeGolyer Report that are generally accepted as being a reasonable outlook of the future, or fixed or currently determinable future prices or costs to which the Corporation is bound.
SUMMARY OF OIL AND GAS RESERVES
PETROFRONTIER CORP.
AS OF DECEMBER 31, 2016 (FORECAST PRICES & COSTS)
| | | | | | | RESERVES | | | |
| | Light Crude Oil & | | | | Conventional Natural | | |
| | Medium Crude Oil | | Heavy Crude Oil | Gas (1) | Natural Gas Liquids |
| | Gross (2) | | Net (3) | | Gross (2) | Net (3) | Gross (2) | Net (3) | Gross (2) | Net (3) |
| RESERVES CATEGORY | (Mbbls) | | (Mbbls) | | (Mbbls) | (Mbbls) | (MMcf) | (MMcf) | (Mbbls) | (Mbbls) |
| PROVED | | | | | | | | | | |
| Developed Producing | | - | | - | 329 | 296 | - | - | - | - |
| Developed Non-Producing | | - | | - | 671 | 568 | - | - | - | - |
| Undeveloped | | - | | - | 2,970 | 2,593 | - | - | - | - |
| TOTAL PROVED | | - | | - | 3,970 | 3,457 | - | - | - | - |
| Probable | | - | | - | 4,852 | 4,125 | - | - | - | - |
| TOTAL PROVED + PROBABLE | | - | | - | 8,822 | 7,582 | - | - | - | - |
| Possible | | - | | - | 9,487 | 7,917 | - | - | - | - |
| TOTAL PROVED + PROB + POSS | | - | | - | 18,309 | 15,499 | - | - | - | - |
- Estimates of reserves of natural gas include associated and non-associated gas.
- "Gross Reserves" are Company's working interest reserves before the deduction of royalties.
- Net Reserves" are Company's working interest reserves after deductions of royalty obligations plus the Company's royalty interests. Note: The numbers in this table may not add exactly due to rounding.
Net Present Value of Reserves
The following table discloses, in the aggregate, the net present value of the Corporation’s future net revenue attributable to the reserves categories in the previous table, estimated using forecast prices and costs, before and after deducting future income tax expenses, and calculated without discount and using discount rates of 5%, 10%, 15% and 20%.
SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE
PETROFRONTIER CORP.
AS OF DECEMBER 31, 2016 (FORECAST PRICES & COSTS)
| | | | Net Present Value (NPV) of Future Net Revenue (FNR) | | | Unit Value |
| | Before Income Taxes - Discounted at (%/yr) | After Income Taxes - Discounted at (%/yr) | BFIT Disc. |
| | 0 | 5 | 10 | 15 | 20 | 0 | 5 | 10 | 15 | 20 | @ 10%/Yr |
| RESERVES CATEGORY | (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | ($/BOE) |
| PROVED | | | | | | | | | | | |
| Developed Producing | 5.3 | 4.4 | 3.7 | 3.3 | 2.9 | 5.3 | 4.4 | 3.7 | 3.3 | 2.9 | 12.50 |
| Developed Non-Producing | 13.7 | 11.0 | 9.1 | 7.6 | 6.6 | 13.7 | 11.0 | 9.1 | 7.6 | 6.6 | 16.02 |
| Undeveloped | 62.7 | 47.3 | 36.8 | 29.4 | 23.8 | 46.5 | 34.9 | 27.0 | 21.5 | 17.4 | 14.19 |
| TOTAL PROVED | 81.7 | 62.7 | 49.6 | 40.3 | 33.3 | 65.5 | 50.3 | 39.8 | 32.4 | 26.9 | 14.35 |
| Probable | 121.9 | 89.1 | 68.0 | 53.5 | 43.3 | 89.2 | 64.6 | 48.9 | 38.2 | 30.6 | 16.48 |
| TOTAL PROVED + PROBABLE | 203.6 | 151.8 | 117.6 | 93.8 | 76.6 | 154.7 | 114.9 | 88.7 | 70.6 | 57.5 | 15.51 |
| Possible | 268.3 | 180.3 | 127.5 | 93.9 | 71.4 | 195.9 | 130.9 | 92.0 | 67.2 | 50.7 | 16.10 |
| TOTAL PROVED + PROB + POSS | 471.9 | 332.1 | 245.1 | 187.7 | 148.0 | 350.6 | 245.8 | 180.7 | 137.8 | 108.2 | 15.81 |
NPV of FNR includes all resource income: Sale of oil, gas, by -product reserves; Processing of third party reserves; Other income.
Income Taxes includes all resource income, appropriate income tax calculations and prior tax pools.
The unit values are based on net reserve volumes before income tax (BFIT).
Note: The numbers in this table may not add exactly due to rounding.
Management expects continued volatility in the price of crude oil and tight capital markets for junior oil and gas companies throughout 2017. Consequently, management remains committed to cost control and limiting capital spending to opportunities that will meaningfully add to the Corporation’s proven and probable reserves base and current production.
Read more at https://www.stockhouse.com/news/press-releases/2017/04/27/petrofrontier-announces-2016-annual-financial-and-operating-results-and-year#PX2649tSxeg6wFbm.99