Reserve Report Highlights
Pine Cliff's independent reserve report was prepared by McDaniel & Associates Limited ("McDaniel") in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") with the effective date of December 31, 2021.
Highlights of the McDaniel reserve report include:
- Net present value for proved plus probable ("P+P") reserves of $277.9 million, discounted at 10%, an increase of $179.7 million, or 283% higher than December 31, 2020, primarily as a result of an increase in forecast commodity prices;
- Pine Cliff replaced its 2021 production by 218% on a P+P basis, or by 14.7 MMBoe (27%) largely as a result of 7.7 MMBoe from acquisitions (14%), 7.9 MMBoe (14%) due to economic factors, 0.5 MMBoe (1%) of extensions and a decrease of 1.4 MMBoe (2%) from negative technical revisions;
- Seven gross (5.8 net) Pekisko well locations were added to Pine Cliff's booked locations, bringing the total booked locations in its P+P reserves to 31 gross (20.3 net) wells;
- Remaining P+P reserves of 62.8 MMBoe (84% conventional natural gas and coal bed methane) at December 31, 2021 increased by 8.0 MMBoe (15%) from 54.8 MMBOE (87% conventional natural gas and coal bed methane) at December 31, 2020, mainly as a result of acquisitions and economic factors; and
- Approximately 78% of total reserve volumes are classified as total proved reserves and approximately 22% are classified as probable reserves.
Pine Cliff's Reserves
McDaniel has used a three consultant average price (McDaniel, GLJ & Sproule) forecast, resulting in a price forecast of $3.56 and $3.21 per MMbtu for AECO natural gas and US$72.83 and US$68.78 per Bbl for WTI oil in 2022 and 2023 respectively.
Summary of Remaining Working Interest Reserves, as of December 31, 2021
| | Light, | | | |
| | Medium | Natural Gas | Natural Gas and Coal | Oil |
| | and Heavy | Liquids | Bed Methane | Equivalent |
| | Oil | | | |
| Reserve Category | MBbl | MBbl | MMcf | MBOE |
| Proved | | | | |
| Developed Producing | 1,856.8 | 3,558.2 | 243,769.0 | 46,043.2 |
| Developed Non-Producing | 223.9 | 65.4 | 3,532.7 | 878.1 |
| Undeveloped | 963.3 | 229.7 | 5,990.7 | 2,191.5 |
| Total Proved | 3,044.0 | 3,853.3 | 253,292.4 | 49,112.7 |
| Probable | 1,629.1 | 1,468.1 | 63,620.6 | 13,700.7 |
| Total Proved plus Probable | 4,673.1 | 5,321.4 | 316,913.0 | 62,813.4 |
Summary of Net Present Values of Future Net Revenue, Before Income Taxes, as of December 31, 2021
| | Discounted at (% per year) |
| ($millions) | 0% | 5% | 10% | 15% |
| Reserve Category | | | | |
| Proved | | | | |
| Developed Producing | (17.4) | 136.4 | 167.9 | 167.3 |
| Developed Non-Producing | 15.9 | 12.6 | 10.1 | 8.4 |
| Undeveloped | 44.6 | 27.7 | 18.0 | 12.1 |
| Total Proved | 43.1 | 176.8 | 196.0 | 187.8 |
| Probable | 194.3 | 121.4 | 81.9 | 59.0 |
| Total Proved plus Probable | 237.4 | 298.1 | 277.9 | 246.8 |
Reconciliation of Working Interest Gross Reserves by Principal Product Type, as of December 31, 2021
| | Light, Medium, and Heavy | Natural Gas Liquids | Natural Gas and Coal Bed | Oil Equivalent |
| | Oil | Methane |
| | Proved | Proved plus | Proved | Proved plus | Proved | Proved plus | Proved | Proved plus |
| | Probable | Probable | Probable | Probable |
| | (MBbl) | (MBbl) | (MBbl) | (MBbl) | (MMcf) | (MMcf) | (MBOE) | (MBOE) |
| December 31, 2020 | 1,702.7 | 2,832.5 | 3,054.3 | 4,476.9 | 228,852.3 | 285,183.6 | 42,899.1 | 54,840.0 |
| Extension | 116.4 | 5.2 | 132.1 | 94.6 | 2,754.5 | 2,579.0 | 707.6 | 529.6 |
| Technical Revisions | 199.3 | 406.7 | (215.7) | (365.7) | (4,119.5) | (8,482.0) | (703.0) | (1,372.7) |
| Acquisitions | 1,077.3 | 1,482.9 | 306.4 | 420.8 | 25,979.2 | 34,650.0 | 5,713.6 | 7,678.7 |
| Dispositions | - | - | (1.7) | (2.0) | (23.2) | (27.1) | (5.6) | (6.5) |
| Economic Factors | 101.3 | 98.8 | 1,034.2 | 1,153.2 | 36,588.1 | 39,748.5 | 7,233.5 | 7,876.8 |
| Total Changes | 1,494.3 | 1,993.6 | 1,255.3 | 1,300.9 | 61,179.1 | 68,468.4 | 12,946.0 | 14,705.9 |
| Production | (153.0) | (153.0) | (456.3) | (456.3) | (36,739.0) | (36,739.0) | (6,732.5) | (6,732.5) |
| December 31, 2021 | 3,044.0 | 4,673.1 | 3,853.3 | 5,321.5 | 253,292.4 | 316,913.0 | 49,112.6 | 62,813.4 |
Operations Update
Pine Cliff's fourth quarter 2021 production averaged 19,056 Boe per day, weighted 90% to natural gas. This resulted in the average production for the year being 18,445 Boe per day, at the high end of the Company's 18,000 to 18,500 annual 2021 guidance range.
Pine Cliff conducted a $23.1 million capital program in 2021 (excluding acquisitions and dispositions but including $6.8 million of major maintenance and other optimization capital expenses, $14.7 million in development capital and $1.6 million in abandonment expenditures). Development capital included four gross (3.4 net) Pekisko oil wells (including two gross (1.4 net) that were completed in January 2022), two gross (0.4 net) Ellerslie liquids rich gas wells, one gross (0.2 net) Notikewin gas well and one gross (0.9 net) Basal Quartz natural gas well and various natural gas well recompletions that were conducted during 2021.
In addition, the Company closed the acquisition of a private company (the "Acquisition") for a cash purchase price of $22.2 million. The Acquisition consolidates Pine Cliff's position in its core Ghost Pine area and the Acquisition is included in the Company's independent reserve report.
2022 Guidance
Pine Cliff's Board of Directors has approved a 2022 capital budget of $25.5 million to be fully funded from adjusted funds flow. Pine Cliff intends to spend approximately $9.6 million drilling four (3.4 net) Pekisko oil wells in Central Alberta, $4.4 million drilling four (1.0 net) Ellerslie natural gas well in the Edson area, $4.0 million for the completion of two (1.4 net) Pekisko oil wells drilled in the fourth quarter of 2021 along with various recompletion projects, $3.6 million on major maintenance and optimization capital and $3.9 million on abandonments and reclamation (exclusive of abandonments conducted pursuant to government funded grants). The Company expects to spend approximately $6.9 million in government funded grants for site abandonment and reclamation activities in 2022.
Based on $18.0 million of development capital to be spent in 2022, and assuming that Pine Cliff makes no acquisitions or does not add to its 2022 capital program, Pine Cliff expects 2022 annual production volumes to range between 20,000 and 21,000 Boe per day, weighted 87% to natural gas.
Pine Cliff will continue to consider opportunities to enhance shareholders' long term value which may include asset acquisitions, the early retirement of term debt and shareholder returns.