VERO INCREASES YEAR END 2010 RESERVES BY 28% TO 32VERO INCREASES YEAR END 2010 RESERVES BY 28% TO 32.9 MMBOE
CALGARY, Mar 3, 2011 (Canada NewsWire via COMTEX News Network) --
Vero Energy Inc. ("Vero" or the "Company") (TSX: VRO) today announces results of its independent reserves evaluation effective December 31, 2010 as prepared by Sproule Associates Limited in accordance with the requirements prescribed by National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities.
2010 HIGHLIGHTS
-- Increase in proved plus probable reserves of 28% to 32,941
mboe, including a 210% increase in light oil reserves to 4,292
mbbl, resulting from success in the Cardium.
-- Increases in proved reserves of 11% to 20,052 mboe, including a
174% increase in light oil reserves to 2,444 mbbl.
-- Increase in proportion of light oil and natural gas liquids
reserves from 20% in 2009 to 27% at year end 2010.
-- Reserves replacement of 332% proved plus probable and 163%
total proved.
-- The Company's reserve life index is approximately 10.6 years on
a proved plus probable basis.
-- Increase in proved plus probable reserves per share of 15%,
resulting in a compound annual growth rate in proved plus
probable reserves per share of 30% since inception.
-- Finding, development and acquisition costs on a proved plus
probable basis were $12.47 per boe and $21.82 per boe including
future development capital.
-- The company added more than 21,000 net acres of land in 2010 at
crown landsales, promoted farmins, and acquisitions, increasing
the capture and extension of the Company's organically
generated prospects.
-- Drilled 31 (24.5 net) wells with a 100% success rate with 30
(24.2 net) horizontal wells. 61% of the wells targeted light
oil.
The year 2010 was a transition year for Vero as the Company made a concerted effort to increase the proportion of light oil and natural gas liquids in its production and reserves. By concentrating on the Cardium light oil resource play both under company lands and expanding the land base via landsale, land acquisitions and farmin, the company increased its Cardium proved plus probable resources to over 5,500 mboe (67% light oil, 72% oil and NGLs). As a result, the Company successfully increased the light oil and liquids ratio of its reserve base from 20% to 27%, adding over 3,700 mbbl of oil and liquids to its year-end balance versus 2009. During this transition, Vero developed and evolved its plans for the Cardium to ensure that development costs, especially with respect to drilling and well completion costs, are significantly improved going forward. As well, certain solution gas gathering costs were incurred in 2010, assets that are part of the infrastructure for future drilling. The Company has maintained its ongoing focus on reducing lifting costs, contributing to field netbacks in excess of $50/boe on its Cardium production in November and December 2010. It is anticipated that Cardium netbacks will improve through 2011 with strengthening crude oil prices and continued optimization. Importantly, certain 2010 capital expenditures on infrastructure, including batteries and pipelines, related to the Cardium will be used for future development, thereby reducing per barrel future development costs.
The 2010 capital program put considerably less emphasis on natural gas than in years past in light of the low prevailing natural gas prices. Despite low natural gas prices, Vero continued moderate development of its liquids rich gas portfolio. Wells targeting the Wilrich and Bluesky discovered new accumulations and extended existing pool boundaries. Looking forward into 2011, activities that began in late 2010 and continuing into early 2011 have been extending Notikewin trends, testing the Viking and will target the Wilrich. Gas and gas liquids reserves have increased by 17% and 22% respectively on a proved plus probable basis.
First quarter 2011 activities are comprised of drilling both undeveloped reserves, as recognized by Vero's independent reserves evaluator in the 2010 reserve report, as well as new extensions. Thus Vero remains on its mission to expand the resource base, balanced with the focus on cash flow by maintaining low lifting costs and improving the gas-to-liquids mix.
Despite low forecast natural gas prices and the shift in emphasis in the 2010 capital program, total downwards revisions due to performance and economic factors amounted to less than 4% of the proved and 1% of the proved plus probable 2009 opening balances respectively.
Vero previously announced its acquisition of shale gas lands in the Cordova Embayment. While there has been modest preparatory work to license the first wells, the Company has no imminent commitments to fulfill and retain tenure on these lands. Development of this tremendous resource potential will be paced according to natural gas price signals and leverage gained from competitor developments in the region.
COMPANY GROSS WORKING INTEREST OIL AND GAS RESERVES AND NET PRESENT VALUES
The following table provides summary information presented in the Sproule Associates Limited independent reserves assessment and evaluation effective December 31, 2010. Sproule has evaluated 100% of Vero's crude oil, NGL and natural gas reserves. Detailed reserve information will be presented in the Company's upcoming Statement of Reserves Data and Other Oil and Gas Information section of the Company's Annual Information Form scheduled to be filed on SEDAR on or before March 31, 2011.
Company Gross and Net Oil and Gas Reserves Based on Forecast Price and Costs
Light/medium Natural gas Barrels of oil
oil liquids Natural gas equivalent
Gross Net Gross Net Gross Net Gross Net
Mbbl Mbbl Mbbl Mbbl MMcf MMcf Mboe Mboe
Proved
Producing 1,250 1,081 1,696 1,084 55,500 48,735 12,196 10,287
Non-producing 42 34 52 32 1,323 1,186 314 263
Undeveloped 1,152 981 1,131 880 31,551 29,411 7,542 6,763
Total Proved 2,444 2,096 2,879 1,996 88,373 79,331 20,052 17,313
Probable 1,849 1,475 1,822 1,263 55,312 50,033 12,890 11,076
Total Proved &
Probable 4,292 3,571 4,701 3,258 143,685 129,365 32,941 28,390
Notes:
(1) In the case of BOEs, using BOEs derived by converting gas to
oil equivalent in the ratio of six thousand cubic feet of gas
to one barrel of oil (6 Mcf:1 bbl)
(2) Total values may not add due to rounding
(3) Company Gross reserves consists of Vero's working interest
(operated and non-operated) share before deduction of
royalties payable and without including royalties receivable
by the Company
(4) Net reserves means Vero's working interest (operated and
non-operated) share after the deduction of royalty
obligations, plus Vero's royalty interest reserves
(5) Forecast pricing used is based on an average of the published
price forecasts of four engineering firms effective December
31, 2010 (AJM, Sproule, McDaniel and GLJ)
Net Present Values of Future Net Revenue (Before Tax) Based on Forecast Prices and Costs
0% 5% 8% 10%
(MM$) (MM$) (MM$) (MM$)
Proved
Producing 342,589 252,564 220,092 203,393
Non-producing 10,511 7,453 6,343 5,775
Undeveloped 182,853 108,970 82,639 69,356
Total proved 535,953 368,987 309,074 278,523
Probable 437,156 237,050 180,651 154,601
Total proved and
probable 973,109 606,036 489,725 433,125
Notes:
(1) Total values may not add due to rounding
(2) Forecast pricing used is based on an average of the published
price forecasts of four engineering firms effective December
31, 2010 (AJM, Sproule, McDaniel and GLJ)
(3) Cash flows include the effects of the current Alberta Royalty
Framework. The estimated future net reserves are stated before
deducting future estimated site restoration costs and are
reduced for future abandonment costs and estimated capital
for future development associated with the reserves
(4) It should not be assumed that the net present values of future
net revenues estimated by Sproule represent fair market value
of the reserves. There is no assurance that the forecast price
and cost assumptions will be attained and variances could be
material
FINDING, DEVELOPMENT AND ACQUISITION COSTS ("FD&A")
Vero's F&D and FD&A costs for 2010, 2009 and the three year average are presented in the tables below. The costs used in the F&D and FD&A calculation are the capital costs related to: land acquisition and retention; drilling; completions; tangible well site; tie-ins; and facilities, plus the change in estimated future development costs as per the independent reserve report, inclusive of the effects of the Alberta Drilling Royalty Credit program. Acquisition costs are net of any proceeds from dispositions of properties. Due to the timing of capital costs and the subjectivity in the estimation of future costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year. The reserves used in this calculation are company gross reserve additions, including revisions. The 2010 costs are unaudited as the financial results are in the process of being finalized; and, are subject to change upon completion of the audited financial statements.
Proved Finding, Development 3 Year
& Acquisition Costs 2010 2009 Average
Capital expenditures
(including acquisitions; net
of dispositions) 128,723 37,522 341,009
Change in future capital 62,449 (19,642) 85,902
Total capital for F&D 191,172 17,880 426,911
Reserve additions, including
acquisitions (mboe) 5,081 2,898 18,420
Proved F&D costs - including
future capital ($/boe) 37.63 6.17 23.18
Proved F&D costs - excluding
future capital ($/boe) 25.34 12.95 18.51
Recycle ratio
Including future capital 0.6 2.6 0.9
Excluding future capital 0.9 1.2 1.2
Proved plus
Probable Finding,
Development & Acquisition 3 Year
Costs 2010 2009 Average
Capital expenditures
(including acquisitions; net
of dispositions) 128,723 37,522 341,009
Change in future capital 96,467 (17,831) 131,528
Total capital for F&D 225,190 19,691 472,537
Reserve additions, including
acquisitions (mboe) 10,319 2,823 27,544
Proved plus Probable F&D
costs - including future
capital ($/boe) 21.82 6.98 17.16
Proved plus Probable F&D
costs - excluding future
capital ($/boe) 12.47 13.29 12.38
Recycle ratio
Including future capital 1.0 2.3 1.3
Excluding future capital 1.7 1.2 1.8
Proved Finding & Development 3 Year
Costs 2010 2009 Average
Capital expenditures
(excluding acquisitions) 123,445 53,507 283,260
Change in future capital 63,782 (18,167) 88,710
Total capital for F&D 187,227 35,340 371,970
Reserve additions, excluding
acquisitions (mboe) 4,917 3,801 15,546
Proved F&D costs - including
future capital ($/boe) 38.08 9.30 23.93
Proved F&D costs - excluding
future capital ($/boe) 25.11 14.08 18.22
Recycle ratio
Including future capital 0.6 1.7 1.0
Excluding future capital 0.9 1.1 1.3
Proved plus Probable Finding 3 Year
& Development Costs 2010 2009 Average
Capital expenditures
(excluding acquisitions) 123,445 53,507 283,260
Change in future capital 98,505 (16,080) 135,315
Total capital for F&D 221,948 37,427 418,575
Reserve additions, excluding
acquisitions (mboe) 10,130 4,082 24,123
Proved plus Probable F&D
costs - including future
capital ($/boe) 21.91 9.17 17.35
Proved plus Probable F&D
costs - excluding future
capital ($/boe) 12.19 13.11 11.74
Recycle ratio
Including future capital 1.0 1.7 1.4
Excluding future capital 1.8 1.2 2.0
Note:
(1) Future Development and Changes to Future Development Capital
include the net effects of the Alberta Royalty Drilling
Credits Program, for the Proved cases forecast credits amount
to approximately $1.6 MM, for the Proved plus Probable cases
forecast credits amount to approximately $1.7 MM
(2) Vero calculates finding, development and acquisition ("FD&A")
costs which incorporate both the costs and associated reserve
additions related to acquisitions net of any dispositions
during the year. Since acquisitions and divestitures have a
significant impact on Vero's annual reserve replacement costs,
the Company believes that FD&A costs provide a meaningful
portrayal of Vero's cost structure.