2P Reserves of 20.2 Million BOE…15 year life
Southern Energy's 2021 2P reserves at 20.17 mmboe
2022-03-02 10:16 ET - News Release
Mr. Ian Atkinson reports
SOUTHERN ENERGY CORP. ANNOUNCES A 73% INCREASE IN 2P RESERVES AT YEAR END 2021, UPDATE ON GWINVILLE DRILLING PROGRAM AND NON-CORE ASSET DISPOSITION
Southern Energy Corp. has released selected highlights of Southern's year-end independent oil and gas reserves evaluation as of Dec. 31, 2021, and has provided an update on the company's three-well drilling program at the Gwinville field and a non-core asset cash disposition.
The report was prepared by Southern's independent qualified reserves evaluator, Netherland Sewell and Associates Inc. (NSAI). All currency amounts are in U.S. dollars (unless otherwise stated) and comparisons refer to Dec. 31, 2020. The company anticipates announcing its fourth quarter and audited year-end 2021 financial results and filing an annual information form (AIF) for the year ended Dec. 31, 2021, in April, 2022.
Highlights:
- Relative to year-end 2020, the NSAI report states:
- An increase in proved developed producing (PDP) reserves by 9 per cent to 5.7 million barrels of oil equivalent;
- Consistent total proved (1P) reserves at 10.5 million barrels of oil equivalent;
- An increase in total proved plus probable (2P) reserves by 73 per cent to 20.2 million barrels of oil equivalent in 2021;
- A PDP reserve life index (RLI) of nine years and a 15-year RLI for 2P reserves;
- Additional drilling locations identified at Gwinville, based on previous Selma Chalk horizontal drilling successes, which could add material levels of production;
- Before-tax net present value (NPV) of reserves, discounted at 10 per cent (NPV10), is $32.4-million on a PDP basis, $53.5-million on a 1P basis and $88.3-million on a 2P basis, evaluated using the average forecast pricing of four independent reserve evaluators as at January, 2022:
- Material progression of before-tax NPV10 per share to 53 Canadian cents per share, 88 Canadian cents per share and $1.45 (Canadian) per share for PDP, 1P and 2P categories;
- The continuing three-well drilling program at Gwinville proceeding on schedule and on budget, with completion operations expected to begin in early April, 2022;
- Disposition of two non-core oil properties for $1.3-million, net of closing adjustments:
- Aggregate production from the two properties was approximately 40 barrels of oil equivalent per day.
In addition to the summary information disclosed in this press release, more detailed information regarding Southern's oil and gas reserves will be included in the company's AIF to be filed on SEDAR.
Ian Atkinson, president and chief executive officer of Southern, commented: "We are delighted to report our 2021 year-end reserves report which highlights the quality of our asset base, our unique operational expertise and the capability for significant reserves growth potential in our assets as we progress our organic growth program.
"We are particularly excited by the additional probable drilling locations identified at Gwinville, which are based on results from previous Selma Chalk horizontal drilling successes and does not incorporate our new well completion design. Identification of these drilling locations demonstrates how our strategy of applying modern completion techniques can bring new life and production to high-quality, midlife assets.
"The NSAI report demonstrates that we have substantially extended the running room and future development potential of our asset, which will complement our strategy to generate long-term sustainable free funds flow and organic growth in development of our existing asset base."
2021 independent qualified reserve evaluation
The attached tables highlight the findings of the NSAI report, which has been prepared in accordance with definitions, standards and procedures contained in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities, and the most recent publication of the Canadian Oil and Gas Evaluation Handbook (COGEH). All evaluations and summaries of future net revenue are stated prior to the provision for interest, debt service charges, or general and administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs, and estimated future capital expenditures. The NSAI report was based on the average forecast pricing of the following four independent external reserves evaluators: GLJ Ltd., Sproule Associates Ltd., McDaniel & Associates Consultants Ltd. and Deloitte. Additional reserves information as required under NI 51-101 will be included in Southern's AIF, which will be filed on SEDAR in April, 2022. The numbers in the attached tables may not add due to rounding.
Summary of reserves volumes as at Dec. 31, 2021
The company's reserve volumes and undiscounted future development capital costs as at Dec. 31, 2021, are summarized in an attached table.
An attached table outlines the changes in Southern's reserves and reserve life index as at Dec. 31, 2021, compared with Dec. 31, 2020.
Southern's total 2P reserves increased by 73 per cent to 20.2 million barrels of oil equivalent per day resulting in a 2P reserve life index of 30.0 years on projected annual PDP production for 2022. Southern's 2021 recompletion program resulted in an 9-per-cent increase in PDP reserves to 5.7 million barrels of oil equivalent.
Net present value of future net revenue as at Dec. 31, 2021
An attached table summarizes the net present value of the company's reserves (before tax) as at Dec. 31, 2021. The reserves value on a dollar-per-barrel-of-oil-equivalent basis, discounted at 10 per cent per year, is also summarized for each category.