CALGARY, February 22, 2024 – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company”) is pleased to report its year-end 2023 oil and gas reserves evaluation.
2023 Reserve Report Highlights:
Proved developed producing reserves decreased 7% to 36.9 MMboe, with a corresponding decrease of 25% in NPV@10% to $361.9 million ($368.4 million including the Countess Power Project (“CPP”)). The PDP reserve life index increased to 8.4 years from 8.3 years.
Proved reserves decreased 2% to 50.0 MMboe, with a corresponding decrease of 17% in NPV@10% to $504.1 million ($581.5 million including the CPP, Gilby Power Project “GPP”) and Mazeppa power project (“MPP”).
Proved plus Probable Developed Producing reserves decreased 5% to 48.6 MMboe, with a corresponding decrease of 22% in NPV@10% to $450.5 million ($457.0 million including the CPP). The Proved plus Probable Developed Producing reserve life index increased to 10.8 years from 10.5 years.
Proved plus Probable reserves decreased 1% to 80.4 MMboe, with a corresponding decrease of 14% in NPV@10% to $772.2 million ($849.6 million including the CPP, GPP and MPP projects).
Proved developed producing and proved plus probable developed producing reserve life index of 8.4 and 10.8 years respectively, are testaments to Journey’s low decline asset base, and the YoY increase in reserve life index demonstrates Journey’s ability to grow our base production base while simultaneously reducing our corporate decline rate.
Realized attractive F&D and FD&A recycle ratios of 2.4 and 2.5 respectively for proven reserves; and 8.9 and 8.5 respectively for proven plus probable reserves.
The $247 million of total proved plus probable undeveloped future development cost (“FDC”) in Journey’s reserve report generates $299 million in future NPV @ 10%. The development wedge generates development cost of approximately $8.25/boe, a cost which is consistent with Journey’s historical averages.
Unaudited Financial Information and 2023 Update Guidance
The preliminary financial information contained in this press release is not a comprehensive statement of our financial results for the fourth quarter and year ended December 31, 2023. Journey’s actual results may differ materially from these estimates due to the currently ongoing finalization of our financial statements. The Company’s audited financial results for the year ended December 31, 2023, are expected to be released on March 12, 2024. Journey will be providing an update on its 2024 guidance and capital program at that time.
COMPANY GROSS WORKING INTEREST OIL AND GAS RESERVES AND NET PRESENT VALUES
The following table provides summary information presented in the GLJ Petroleum Consultants Limited (“GLJ”) independent reserves assessment and evaluation effective December 31, 2023, (the “GLJ Report”). GLJ evaluated 100% of Journey’s crude oil, natural gas liquids and natural gas reserves. The evaluation of all of its oil and gas properties was prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).
The 2023 GLJ reserve report includes the abandonment and reclamation liability associated with all active and inactive wells, facilities, pipelines and gathering systems.
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, 2024.
Company Gross Reserves
Based on Three Consultants Average Price and Costs as at December 31, 2023
| | Light/ Medium Oil | Tight Oil | Heavy Oil | Natural Gas | NGL’s | Total(2) |
| Reserves Category | (Mbbl) | (Mbbl) | (Mbbl) | (MMcf) | (Mbbl) | (Mboe) |
| Proved | | | | | | |
| Producing | 7,822 | 116 | 9,254 | 95,517 | 3,835 | 36,947 |
| Developed non-producing | 263 | – | 521 | 2,914 | 106 | 1,376 |
| Undeveloped | 2,865 | – | 3,098 | 26,590 | 1,257 | 11,652 |
| Total proved | 10,951 | 116 | 12,873 | 125,021 | 5,198 | 49,975 |
| Probable | 7,191 | 34 | 5,535 | 78,695 | 4,525 | 30,402 |
| Total proved plus probable | 18,142 | 151 | 18,408 | 203,716 | 9,724 | 80,377 |
| | | | | | | |
| Included in Above | | | | | | |
| Proved plus probable producing | 10,515 | 151 | 11,502 | 128,858 | 4,999 | 48,643 |
Notes:
- Company Gross Reserves consists of Journey’s working interest (operated and non-operated) share of reserves before deduction of royalties payable and without including royalties receivable by the Company.
- In the case of natural gas volumes, boes are derived by converting natural gas to oil using the ratio of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf:1 bbl).
- Total values may not add due to rounding.
Net Present Values of Future Net Revenue (Based on Three Consultants Average Forecast Prices and Costs)
| | Before Tax Net Present Value(1)
($000’s) |
| Reserves category | 0% | 5% | 10% | 15% | 20% |
| Proved | | | | | |
| Producing | 295,958 | 403,659 | 361,865 | 313,670 | 274,349 |
| Developed non-producing | 29,316 | 22,091 | 17,405 | 14,190 | 11,881 |
| Undeveloped | 279,788 | 182,574 | 124,838 | 88,668 | 64,765 |
| Total proved | 605,061 | 608,325 | 504,108 | 416,528 | 350,995 |
| Probable | 698,808 | 409,299 | 268,051 | 189,444 | 141,187 |
| Total proved plus probable | 1,303,869 | 1,017,623 | 772,160 | 605,973 | 492,182 |
| | | | | | |
| Included in Above | | | | | |
| Proved plus probable producing | 562,812 | 546,891 | 450,543 | 374,276 | 318,755 |
| | | | | | |
Notes:
- The net present values presented in the above table do not include any value associated with the Power Projects.
- Forecast pricing used is the average of the published price forecasts for GLJ Petroleum Consultants Ltd., Sproule Associates Ltd. and McDaniel & Associates Ltd. as at December 31, 2023.
- It should not be assumed that the net present values of future net revenues estimated by GLJ represent fair market value of the reserves. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material.
- Total values may not add due to rounding.
The forecast prices and foreign exchange rates used in the GLJ Report are as follows:
| | WTI Cushing Oklahoma ($US/bbl) | Edmonton 40 API
($CDN/bbl) | WCS Crude Oil Stream
($CDN/bbl) | Alberta AECO-spot ($CDN/Mmbtu) | NYMEX Henry Hub
($US/Mmbtu) | Foreign Exchange ($US/$CDN) |
| 2024 | 73.67 | 92.91 | 76.74 | 2.20 | 2.75 | 0.752 |
| 2025 | 74.98 | 95.04 | 79.77 | 3.37 | 3.64 | 0.752 |
| 2026 | 76.14 | 96.07 | 81.12 | 4.05 | 4.02 | 0.755 |
| 2027 | 77.66 | 97.99 | 82.88 | 4.13 | 4.10 | 0.755 |
| 2028 | 79.22 | 99.95 | 85.04 | 4.21 | 4.18 | 0.755 |
| 2029 | 80.80 | 101.95 | 86.74 | 4.30 | 4.27 | 0.755 |
| 2030 | 82.42 | 103.98 | 88.48 | 4.38 | 4.35 | 0.755 |
| 2031 | 84.06 | 106.07 | 90.24 | 4.47 | 4.44 | 0.755 |
| 2032 | 85.75 | 108.18 | 92.04 | 4.56 | 4.53 | 0.755 |
| 2033 | 87.46 | 110.35 | 93.89 | 4.65 | 4.62 | 0.755 |
| 2034 | 89.21 | 112.56 | 95.77 | 4.74 | 4.71 | 0.755 |
| 2035 | 90.99 | 114.81 | 97.68 | 4.84 | 4.80 | 0.755 |
| 2036 | 92.82 | 117.10 | 99.63 | 4.94 | 4.90 | 0.755 |
| 2037 | 94.67 | 119.44 | 101.63 | 5.03 | 5.00 | 0.755 |
| 2038 | 96.56 | 121.83 | 103.66 | 5.13 | 5.10 | 0.755 |
| Thereafter | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | |
Reserves Reconciliation
The following table sets out the reconciliation of Journey’s total gross reserves based on forecast prices and costs by principal product type as at December 31, 2023 relative to December 31, 2022.
| | Proved (Mboe) | Probable (Mboe) | TPP (Mboe) |
| December 31, 2022 | 50,813 | 30,159 | 80,972 |
| Discoveries | – | – | – |
| Extensions | 1,608 | 99 | 1,707 |
| Infill drilling | – | – | – |
| Improved recovery | 1,634 | 959 | 2,594 |
| Technical revisions | 254 | (882) | (628) |
| Acquisitions | 197 | 79 | 276 |
| Dispositions | (22) | (5) | (27) |
| Economic factors | (46) | (9) | (55) |
| Production | (4,463) | – | (4,463) |
| December 31, 2023 | 49,975 | 30,402 | 80,377 |
FINDING, DEVELOPMENT AND ACQUISITION COSTS
Journey’s finding and development (“F&D”) and finding, development and acquisition (“FD&A”) costs for 2023, 2022 and the three-year average are presented in the tables below. The capital costs used in the calculations are those costs related to: land acquisition and retention, seismic, drilling, completions, tangible well site, tie-ins, and facilities, plus the change in estimated future development costs (“FDC”) as per the independent evaluator’s reserve report. Net acquisition costs are the cash outlays in respect of acquisitions; minus the proceeds from the disposition of properties during the year. 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 FDC’s generally will not necessarily reflect total FDC’s related to reserve additions for that year. The reserves used in this calculation are working interest reserve additions, including technical revisions and changes due to economic factors. The 2023 and the three-year average capital expenditures are currently unaudited as the 2023 financial results are in the process of being finalized. For the unaudited information see the reconciliation of the capital expenditures below which are as of the date of this press release.
| Proved Finding, Development & Acquisition Costs | 2023 | 2022 | 3 Year |
| Capital expenditures (including A&D) ($000’s) | 26,400 | 178,030 | 215,142 |
| Change in future capital ($000’s) | 15 | 44,714 | 52,194 |
| Total capital for FD&A (000’s) | 26,415 | 222,744 | 267,336 |
| Reserve additions, including A&D (Mboe) | 3,625 | 21,178 | 31,726 |
| Proved FD&A costs – including changes in future capital ($/boe) | 7.29 | 10.52 | 8.43 |
| Proved FD&A costs – excluding changes in future capital ($/boe) | 7.28 | 8.41 | 6.78 |
| Recycle ratio(1) | | | |
| Including changes in future capital | 2.5 | 3.0 | 2.7 |
| Proved plus Probable Finding, Development & Acquisition Costs | 2023 | 2022 | 3 Year |
| Capital expenditures (including A&D) ($000’s) | 26,400 | 178,030 | 215,142 |
| Change in future capital ($000’s) | (18,203) | 90,257 | 86,860 |
| Total capital for FD&A ($000’s) | 8,197 | 268,287 | 302,002 |
| Reserve additions, including A&D (Mboe) | 3,867 | 29,753 | 41,318 |
| Proved FD&A costs – including changes in future capital ($/boe) | 2.12 | 9.02 | 7.31 |
| Proved FD&A costs – excluding changes in future capital ($/boe) | 6.83 | 5.98 | 5.21 |
| Recycle ratio(1) | | | |
| Including changes in future capital | 8.5 | 3.5 | 3.1 |
| Proved Finding & Development Costs | 2023 | 2022 | 3 Year |
| Capital expenditures (excluding A&D) ($000’s) | 25,469 | 41,577 | 70,036 |
| Change in future capital ($000’s) | (23) | 11,433 | 18,379 |
| Total capital for F&D (000’s) | 25,446 | 53,010 | 88,415 |
| Reserve additions, excluding A&D (Mboe) | 3,428 | 3,636 | 11,800 |
| Proved F&D costs – including changes in future capital ($/boe) | 7.42 | 14.58 | 7.49 |
| Proved F&D costs – excluding changes in future capital ($/boe) | 7.43 | 11.43 | 5.94 |
| Recycle ratio(1) | | | |
| Including changes in future capital | 2.4 | 2.2 | 3.0 |
| Proved plus Probable Finding & Development Costs | 2023 | 2022 | 3 Year |
| Capital expenditures (excluding A&D) ($000’s) | 25,469 | 41,577 | 70,036 |
| Change in future capital ($000’s) | (18,241) | 31,654 | 27,623 |
| Total capital for F&D (000’s) | 7,228 | 73,231 | 97,659 |
| Reserve additions, excluding A&D (Mboe) | 3,591 | 5,951 | 14,596 |
| Proved F&D costs – including changes in future capital ($/boe) | 2.01 | 12.31 | 6.69 |
| Proved F&D costs – excluding changes in future capital ($/boe) | 7.09 | 6.99 | 4.80 |
| Recycle ratio(1) | | | |
| Including changes in future capital | 8.9 | 2.6 | 3.4 |
Notes:
- Recycle ratio is calculated as the operating netback per boe divided by F&D or FD&A costs per boe as applicable. The operating netbacks used in the respective years are as follows: 2023 (unaudited) – $17.98/boe; 2022 – $31.88/boe and the three-year average is $22.72/boe (see full reconciliation in the “Advisories” section).
- Future Development Costs have been adjusted for the effects of reserves categorized as acquisitions and dispositions.
FUTURE DEVELOPMENT COSTS
The following table provides the breakdown of future development costs deducted in the estimation of the future net revenue attributable to the proved and proved plus probable reserve categories noted below:
| ($000’s) | Proved | Proved plus Probable |
| 2024 | 13,920 | 16,058 |
| 2025 | 48,068 | 75,879 |
| 2026 | 36,399 | 88,272 |
| 2027 | 20,727 | 41,551 |
| 2028 | 14,143 | 29,987 |
| Remaining | 9,089 | 23,065 |
| Total (Undiscounted) | 142,346 | 274,812 |
RESERVE LIFE INDEX
The Company’s reserve life index (“RLI”) is calculated by taking the Company Gross Reserves from the GLJ Report and dividing them by the projected 2024 production as estimated in the GLJ Report.
| | Company Gross Reserves | 2024 Company Gross Production | RLI |
| Reserves Category | (Mboe) | (Mboe) | (Years) |
| Proved, developed, producing | 36,947 | 4,395 | 8.4 |
| Total proved | 49,975 | 4,544 | 11.0 |
| Proved plus probable producing | 48,643 | 4,514 | 10.8 |
| Proved plus probable | 80,377 | 4,707 | 17.1 |
NET ASSET VALUE
The following table provides a calculation of Journey’s estimated net asset value (“NAV”) and net asset value per share (“NAVPS”) as at December 31, 2023 based on the estimated future net revenues associated with Journey’s reserves as presented in the GLJ Report. NAV does not include any provision for Journey’s undeveloped land or seismic database. However, NAV in the table below includes the future discounted cash flows of Journey’s Countess Power Project, Gilby Power Project, and Mazeppa Power Projects based upon an economic run completed by GLJ and using their pricing assumptions.
| | Net Asset Value ($000’s) | Net Asset Value ($/share) |
| Category | 2023 | 2022 | % | 2023 | 2022 | % |
| PDP plus CPP (developed) | 306,698 | 392,085 | (22) | 5.00 | 6.77 | (26) |
| TP plus CPP, GPP & MPP (developed + undeveloped) | 519,819 | 540,829 | (4) | 8.47 | 9.34 | (9) |
| P+P DP plus CPP (developed) | 395,298 | 488,596 | (19) | 6.44 | 8.44 | (24) |
| TPP plus CPP, GPP & MPP (developed + undeveloped) | 787,919 | 830,867 | (5) | 12.84 | 14.35 | (11) |
Notes:
- Aggregate NAV is calculated by taking the future net revenues per the GLJ report, on a before tax basis, discounted at 10% and subtracting net debt at December 31, 2023 of approximately $61,676 thousand (unaudited); (December 31, 2022 – $98,767 thousand). The 2023 NAV has been adjusted to include the value of power generation at Countess, Gilby and Mazeppa. Countess was commissioned on September 29, 2020 (10% NPV: $6,474 thousand). Gilby power generation is expected to start power generation in late 2024 (10% NPV: $30,555 thousand), Mazeppa power generation is expected to start power generation in late 2024 (10% NPV: $40,366 thousands), as evaluated by GLJ effective January 1, 2024.
- Year-end NAVPS is calculated by taking the NAV and dividing it by the basic shares outstanding as at December 31, 2023 of 61,350 thousand shares (December 31, 2022 – 57,882 thousand). All share counts have been rounded to the nearest 1,000 shares.
OPERATIONS UPDATE
Journey is happy to report that it has now completed expenditures and obligations in association with the March 2023 flow through share issuance. Journey’s exploration and development program costs were well under the originally forecast amount, thereby allowing the Company to expand its drilling program. During the fourth quarter of 2023 and to date in 2024, Journey has drilled 16.0 wells (13.1 net) in 4 of its core areas. 12.0 wells (10.3 net) are now on-production. 4.0 wells (2.9 net) were drilled in 2024 to date in Medicine Hat and are currently forecast to be producing by mid-March. The net capital expenditures for this drilling program were approximately $25 million. Current sales volumes (net to Journey) from the new wells that are currently producing is approximately 1,100 boe/d (79% crude oil and NGL’s).
About the Company
Journey is a Canadian exploration and production company focused on oil-weighted operations in western Canada. Journey’s strategy is to grow its production base by drilling on its existing core lands, implementing waterflood projects, and by executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.