Mr. Robert Mercier reports
BOWOOD ENERGY INC. ANNOUNCES 2011 FINANCIAL AND OPERATIONAL RESULTS AND PROVIDES AN OPERATIONAL UPDATE
Bowood Energy Inc. has released its financial and operational results for the year ended Dec. 31, 2011, and is providing an operational update on the Kipp well production in Southern Alberta and on its review process.
2011 Highlights
- Added an additional 25,521 gross (13,081 net) acres to its significant land position in the emerging Alberta Bakken Petroleum System fairway ("Alberta Bakken"), bringing total land holdings in the fairway to approximately 140,000 gross (105,000 net) acres.
- Progressed the Alberta Bakken play with the geological and well test data from the first two wells and booked its first oil reserves on the play.
- With new additions in both the Armada field and in southern Alberta the Company increased oil weighting on production to approximately 20% and on year end reserves to approximately 22%.
- Drilled two (1.25 net) wells in Armada resulting in one (0.9 net) gas well that produced at an average choked back rate in excess of 1 MMCF/d (900 mcf/d net) from late August 2011 to December 31, 2011, and one (0.35 net) standing potential gas well.
2012 Southern Alberta Operational Update
The Company's Kipp well, located at 8- 30-8-23 W4 on the Blood First Nation Reserve came on production late in December 2011. The Company has a 40% working interest in the Kipp well which has now produced over 12,000 bbls of light oil according to field estimates.
Following cleanup, the well has been on production for three full months and has averaged approximately 100 bbls per day of oil during the three months. Water cut has decreased from 60% in January to 25% in March and the well has now recovered over 70% of the injected load water from the fracture stimulation.
The Company is encouraged with the production results from the Kipp well to date and with offsetting industry results which have been publically released in 2012. As more wells are drilled into the Alberta Bakken fairway, initial production rates attained by industry continue to increase. Modifications and improvements in well trajectory and frac design are expected to continue to improve productivity in follow up wells in the play.
Strategic Review Process
On February 27, 2012, Bowood announced a review of strategic alternatives. Strategic alternatives may include, among other alternatives: a sale of the shares of the Company, either in one transaction or in a combination of transactions; a merger, recapitalization, arrangement, amalgamation or any combination thereof; or a sale of a material portion of the assets of the Company.
The process is currently ongoing; however, Bowood does not intend to make any further announcements regarding the review of strategic alternatives unless and until the Board of Directors has approved a specific transaction or otherwise determines that disclosure of developments is required or appropriate.
Financial Highlights
Certain selected financial and operational information for the three months and year ended December 31, 2011 are set out below and should be read in conjunction with Bowood's Financial Statements and Management Discussion and Analysis ("MD & A").
The Company has filed its audited consolidated Financial Statements and related MD & A for the year ended December 31, 2011 with the Canadian securities regulatory authorities on SEDAR. In addition, Bowood has also filed its Annual Information Form, which includes Bowood's statement of reserves data and other oil and gas information for the year ended December 31, 2011 as mandated by NI 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. An electronic copy of these materials are available under Bowood's issuer profile on SEDAR at www.sedar.com and will also be available on the Company's website at www.bowoodenergy.ca.
Three Months Ended Year Ended December 31, 2011 December 31, 2011 (all amounts in Cdn $ except common share data) Petroleum and natural gas revenue 1,855,677 6,349,800 Per share - basic 0.007 0.023 - diluted 0.007 0.023 Funds flow from operations 294,684 1,002,970 Per share - basic 0.001 0.004 - diluted 0.001 0.004 Net loss 12,276,690 13,916,145 Per share - basic (0.045) (0.051) - diluted (0.045) (0.051)Capital expenditures (net of dispositions) 2,430,252 11,036,441 Net debt (surplus) (excluding fixed commodity contracts) 4,280,792 4,280,792 Shareholders' equity 36,803,225 36,803,225 Total assets 45,126,885 45,126,885 Common share data: Weighted average basic 274,933,373 274,829,811 Weighted average diluted 274,933,373 274,829,811 Issued and outstanding 274,933,373 274,933,373 Operating Highlights(6:1 boe Three Months Ended Year Ended conversion) December 31, 2011 December 31, 2010 Average daily production Natural gas (mcf/d) 2,905 2,554 Liquids (Oil & NGLs) (bbls/d) 115 92 Oil equivalent (boe/d) 600 517 Production (boe/d) per million shares 2 2 Average sales price (including fixed commodity contracts): Natural gas ($/mcf) 3.33 3.76 Liquids (Oil & NGLs) ($/bbl) 90.88 85.00 Oil equivalent ($/boe) 33.64 33.63 Operating cost ($/boe) 12.63 13.24 Operating netback ($/boe) (including fixed commodity contracts) 18.06 17.37 Wells drilled - gross (net): Gas -- 1 (1.00) Oil -- 3 (0.71) Suspended -- -- D & A -- -- Total -- 4 (1.71)
For the year ended December 31, 2011, Bowood incurred a net loss of $13,916,145. This was primarily from an impairment write down of $13,798,516 on Bowood's property and equipment. The majority of this write down (approximately 73%) was in Bowood's shallow gas Cash Generating Units (CGUs) and was due to the weakening in natural gas prices. The remaining 23% of the write down was in Bowood's southern Alberta area. The high capital costs associated with drilling the first exploratory wells in the resource play coupled with conservative initial reserves led to the impairment.
Reserves
Bowood's reserves were evaluated at December 31, 2011 by GLJ Petroleum Consultants ("GLJ"), an independent engineering firm. GLJ's evaluation was conducted in accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook and is compliant with NI 51-101. All reserve numbers are Company gross(i) before royalties.
Bowood Energy 2011 Reserves (before Light and Heavy royalties) (forecast Gas Medium Oil Oil NGLs Total prices) mmcf mbbls mbbls mbbls mboe----------------------------------------------------------------------------December 31, 2011 Proved producing 4,328 108 4.5 21 855Proved developed non- producing 551 44 0 2 138Proved undeveloped 640 62 0 2 171----------------------------------------------------------------------------Total Proved 5,519 214 4.5 25 1,164Probable 2,667 125 1.5 14 585----------------------------------------------------------------------------Total Proved plus Probable 8,187 339 6 39 1,749Columns may not add due to rounding(i)"Gross" reserves means the Company's working interest (operating and non-operating) share before deduction of royalties payable to others and without including any royalty interest of the Company
Reserve Reconciliation
The following tables provides a reconciliation of the Company's gross reserves of oil, natural gas, and natural gas liquids for the year ended December 31, 2011 versus the year ended December 31 2010.
Light and Natural Medium Natural Gas Crude Oil Heavy Oil Gas Liquids BOE ------------------------------------------------------- (Mbbl) Mbbl (MMcf) (Mbbl) (Mboe) Proved --------------------- Balance at Dec. 31, 2010 182 4 5,694 24 1,159 Extensions and Improved Recovery 46 - 876 2 194 Technical Revisions 9 1 50 3 21 Discoveries 4 - 0 6 4 Acquisitions 1 - 2 - 2 Dispositions - - - - - Economic Factors - - (171) - (28) Production (28) (1) (932) (4) (189) Balance at Dec. 31, 2011 214 5 5,519 25 1,164 Proved plus Probable Balance at Dec. 31, 2010 269 6 8,391 39 1,711 Extensions and Improved Recovery 74 - 1,056 2 252 Technical Revisions 19 1 (37) 2 (16) Discoveries 5 - - 0 5 Acquisitions 1 - 3 - 2 Dispositions - - - - - Economic Factors - - (294) - (49) Production (28) (1) (932) (4) (189)Balance at Dec. 31, 2011 339 6 8,187 39 1,749Columns and rows may not add due to rounding
NET PRESENT VALUES OF FUTURE NET REVENUE AS OF DECEMBER 31, 2011
(Forecast Prices and Costs)
Before Income Tax (
00s) -------------------------------------------------- Discounted at --------------------------------------------------Reserve Category 0% 5% 10% 15% 20%---------------------------------------------------------------------------- Proved Developed Producing 14,564 12,076 10,348 9,084 8,124 Developed Non-Producing 2,401 2,130 1,903 1,713 1,551 Proved Undeveloped 3,967 3,332 2,839 2,451 2,139Total Proved 20,932 17,537 15,090 13,247 11,814 Probable 13,512 9,508 7,211 5,738 4,724Total Proved & Probable 34,443 27,045 22,302 18,986 16,537 After Income Tax (
00s) -------------------------------------------------- Discounted at --------------------------------------------------Reserve Category 0% 5% 10% 15% 20%---------------------------------------------------------------------------- Proved Developed Producing 14,564 12,076 10,348 9,084 8,124 Developed Non-Producing 2,401 2,130 1,903 1,713 1,551 Proved Undeveloped 3,967 3,332 2,839 2,451 2,139Total Proved 20,932 17,537 15,090 13,247 11,814 Probable 13,512 9,508 7,211 5,738 4,724Total Proved & Probable 34,443 27,045 22,302 18,986 16,537Note: Columns may not add due to rounding
It should not be assumed that the undiscounted and discounted future net revenues estimated by GLJ which are set forth above represent fair market value.
GLJ's reserves evaluation is based upon the following price forecast (effective January 1, 2012)
Medium and Light Crude Oil Natural Gas NGL ---------------------------------------------------------------------- WTI Cushing Edmonton Cromer Oklahoma Par Medium Alberta Gas 40 Price 40 29 Reference degrees degrees degrees Price AECO - C Pentanes Exchange API API API Plantgate Spot Plus RateYear (US$/bbl) ($/bbl) ($/bbl) ($/MMBtu) ($/MMBtu) ($/bbl)($US/$Cdn)----------------------------------------------------------------------------2012 97.00 97.96 90.12 3.23 3.29 107.76 0.982013 100.00 101.02 92.94 3.85 3.93 108.09 0.982014 100.00 101.02 91.93 4.30 4.39 105.06 0.982015 100.00 101.02 91.93 4.74 4.84 105.06 0.982016 100.00 101.02 91.93 5.19 5.30 105.06 0.982017 100.00 101.02 91.93 5.64 5.75 105.06 0.982018 101.35 102.40 93.18 5.87 5.99 106.49 0.982019 103.38 104.47 95.07 5.98 6.11 108.65 0.982020 105.45 106.58 96.99 6.11 6.23 110.84 0.982021 107.56 108.73 98.85 6.23 6.36 113.08 0.98Escalated at 2.0% per year thereafter. Credit Facility Update
Bowood renewed its bank facility with Canadian Western Bank in March 2012. Oil reserve additions at Armada and Kipp helped to offset low natural gas prices, resulting in a lending facility of $5.7 million.
We seek Safe Harbor.
© 2012 Canjex Publishing Ltd.