CALGARY, ALBERTA--(Marketwired - April 2, 2014) - Hyperion Exploration Corp. ("Hyperion" or the "Company") (TSX VENTURE:HYX) announces its 2013 year end reserves and a development update for its Niton/McLeod Cardium light oil play. Certain financial estimates have been made herein to facilitate the disclosure of the Company's 2013 capital program and reserves. Readers are advised that these financial estimates are subject to the disclosure to be contained in the audited financial statements of Hyperion for the year ended December 31, 2013 and management's discussion and analysis related thereto and Hyperion's Annual Information Form for the year ended December 31, 2013.
Hyperion's reserves were evaluated by McDaniel & Associates Consultants Ltd. ("McDaniel") effective December 31, 2013, in accordance with National Instrument 51- 101 ("NI 51-101") - Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators (the "McDaniel Report"). All of the Company reserves were evaluated in the McDaniel Report.
2013 Year End Reserve Highlights:
- Increased P+P Net Asset Value ("NAV") by 4% to $1.53 per basic and fully diluted share - see table below for full calculation;
- On the basis of Proved plus Probable Developed Producing reserves ("P+PDP") achieved a NAV of $0.95 per basic and fully diluted share - see table below for full calculation;
- Invested $8.2 million to complete and tie-in one 1 gross (1 net) short reach horizontal ("SRH") well with a lateral length up to 1.0 mile (convert from undeveloped to producing reserve status) and drill, complete and tie-in 2 gross (2 net) SRH wells, not previously booked in the reserve report;
- Actual well cost was less than the capital estimated in the McDaniel year end 2012 reserve report. This resulted in a $10.965 million reduction of Company wide future development capital ("FDC"). This represents a reduction in FDC for future wells at Niton/McLeod of approximately 20%;
- Increased Total Proved plus Probable ("P+P") reserves Before Tax Net Present Value, discounted at 10% ("BT NPV10%") by 4% to $101.9 million;
- Modest drilling activity in 2013 was offset by a shallowing base decline (mainly from maturing SRH wells drilled in 2012) resulting in relatively minor changes in overall corporate reserves: P+P reserves decreased by 5.3% to 7,734.1 Mboe (54% liquids) and Total Proved ("TP") reserves decreased by 4.7% to 4,688.8 Mboe (53% liquids);
- Achieved TP finding, development and acquisition cost ("FD&A") of $8.71/boe and TP finding and development cost ("F&D") of $11.96/boe including changes in FDC;
- Due to the reduction in P+P FDC ($10.965 million), coupled with 2013 investment capital of ($8.2 million), total capital was less than zero for the year. As a result, the calculation of P+P FD&A and F&D is not relevant;
- Achieved a TP Recycle Ratio of 4.0 based on FD&A of $8.71/boe, a TP Recycle Ratio of 2.9 based on F&D of $11.96/boe and a 2013 field netback of $34.96/boe;
- Achieved a P+P F&D of $28.60/boe for the two wells drilled in 2013 (not booked in the 2012 reserve report). These wells were drilled to delineate the edge of the Niton/McLeod Cardium play;
- Based on industry results, management believes the application of extended reach horizontal ("ERH") wells with lateral lengths 1.5 mile's and greater has the potential to improve results and overall economics;
- Reserve Life Index (RLI) of 10.9 years (TP) and 18.0 years (P+P) based on 2013 production of 1,175 boe/day;
- The Company has proven up the Cardium light oil opportunity drilling SRH wells. The Company plans on drilling the next wells at Niton/McLeod as ERH's, at locations offsetting its best wells to date; and
- Based on lands currently captured and the implementation of ERH wells, the Company has an unbooked inventory of 51.6 ERH and 31.0 SRH wells at Niton/McLeod.
Summary of Company Reserves as at December 31, 2013(1),(2),(3),(4),(5)
| Reserve Category |
(Gross) |
Before Tax Net Present Value Discounted at 10% ($000s) |
Light Oil
(Mbbl) |
NGL's
(Mbbl) |
Gas
(MMcf) |
Boe's
(Mboe) |
| Proved |
|
|
|
|
|
|
| |
Developed Producing |
1,085.6 |
509.9 |
8,731.5 |
3,050.8 |
$ |
59,386.1 |
| |
Non-Producing |
2.3 |
0.3 |
4.3 |
3.3 |
$ |
88.3 |
| |
Undeveloped |
643.0 |
226.2 |
4,593.1 |
1,634.7 |
$ |
10,462.3 |
| Total Proved |
1,730.9 |
736.5 |
13,328.9 |
4,688.8 |
$ |
69,936.8 |
| |
|
|
|
|
|
|
| Probable |
|
|
|
|
|
|
| |
Developed Producing |
361.9 |
175.9 |
2,872.5 |
1,016.6 |
$ |
10,990.7 |
| |
Non-Producing |
0.8 |
0.1 |
1.8 |
1.2 |
$ |
31.1 |
| |
Undeveloped |
974.9 |
222.4 |
4,981.0 |
2,027.5 |
$ |
20,894.0 |
| Total Probable |
1,337.6 |
398.5 |
7,855.3 |
3,045.2 |
$ |
31,915.9 |
| |
|
|
|
|
|
|
| Total Proved & Probable |
3,068.5 |
1,134.9 |
21,184.2 |
7,734.1 |
$ |
101,852.7 |
2013 Reserve Addition Metrics, Including Change in Future Development Capital
Category
|
Finding, Development & Acquisition Cost, including change in Future Development Capital
FD&A
($/boe) |
Finding & Development Cost, including change in Future Development Capital
F&D
($/boe) |
Future Development Capital ($000's) |
| Total Proved |
$8.71 |
$11.96 |
$32,841 |
| Total Proved & Probable |
- |
- |
$54,261 |
Notes:
(1) The tables above are a summary of the oil, NGL and natural gas reserves of the Company and the net present value of future net revenue attributable to such reserves as evaluated in the McDaniel Report, based on forecast price and cost assumptions. The tables summarize the information from the McDaniel Report, and may differ slightly than the original report due to rounding.
(2) Gross reserves means the total working interest (operating or non‐operating) share of remaining recoverable reserves owned by Hyperion before deductions of royalties payable to others and without including any royalty interests owned by Hyperion.
(3) Based on McDaniel December 31, 2013 escalated price forecast, as applicable.
(4) The net present value of future net revenue attributable to the Company's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves by McDaniel, as applicable.
(5) Commodity pricing was prepared by McDaniel and was used, subject to quality and transportation adjustments, in the evaluation of Hyperion's reserves effective as at December 31, 2013.
Future Development Capital Reconciliation
| |
2012 to 2013
FDC Change
$000's |
Comments |
| Niton - McLeod |
-$5,963 |
Reduced forecast capital based on actual field results for wells drilled in 2013 |
| Garrington |
-$1,316 |
Reduced forecast capital based on offset results for wells drilled in 2013 |
| Buck Lake |
-$701 |
Reduced forecast capital based on offset results for wells drilled in 2013 |
| Pembina |
-$1,475 |
Capital removed as working interest converted to gross overriding royalty |
| McLeod 15-25 well |
-$1,510 |
Capital spent in 2013 to convert undeveloped to developed production well |
| Total Change in FDC |
-$10,965 |
|
The Company will file its Annual Information Form (which will include the Company reserves data and other oil and gas information for the year ended December 31, 2013) as mandated by NI 51-101 along with audited financial statements and related management discussion and analysis on or before April 30, 2013.
Niton / McLeod Go Forward Development
The Niton/McLeod Cardium light oil play has been the focus of the Company's capital activities for the past two years. Given the complex geological environment, there was limited industry understanding of the Cardium opportunity in this area until Hyperion drilled the first successful Hz well in early 2012. Since then the Company has drilled a total of six wells, delineating the play over a distance of approximately 23 kilometers (14 miles).
The initial concept was to use SRH wells with a lateral length of 1.0 mile completed with multi stage fracs to optimize production and yield competitive economic returns. Results from the initial six wells have demonstrated initial production rates that have varied well to well, though the reserve assignment per well has been similar. Hyperion is very encouraged by the results achieved thus far and is now focused on improving initial production rates.
Given the Cardium is a low permeability reservoir, industry has evolved to drilling ERH wells with a lateral length of 1.5 miles or greater to improve initial production rates, improve capital efficiencies and accelerate capital payouts. Hyperion's significant contiguous land position at Niton/McLeod (29,030 net acres) lends itself to development using ERH wells. The Company plans to use ERH on upcoming wells that offset its best performing SRH wells to date.
Based on industry results, drilling an ERH well has the potential to more than double initial production compared to a SRH well. The evolution to ERH wells in the Cardium at Niton/McLeod is expected to improve capital efficiency in excess of 20% and accelerate capital payouts to less than 1.5 years.
Based on lands currently captured, and with the successful implementation of an ERH development program, the Company has an unbooked inventory of 51.6 ERH and 31.0 SHR wells at Niton/McLeod. All wells at Niton/McLeod included in the reserves evaluated in the McDaniel Report were based upon SRH wells. Going forward the Company plans to convert wells currently booked as SRH to ERH where it has sufficient contiguous lands.
Subsequent Event
On January 31, 2013, Hyperion sold its Chip lake asset of 100 boe/d (70% gas, 12% NGL and 18% oil) for total consideration of $3.4 million cash, net of adjustments. The following reserves were attributed to Chip Lake in the McDaniel Report:
- Total Proved Reserves of 210.9 mboe (65% gas); and
- Total Proved plus Probable Reserves of 285.1 mboe (65% gas).
No Proven Undeveloped or Proved plus Probable Undeveloped locations were assigned to Chip Lake.
Net Asset Value Calculation - Year End 2013(1),(2),(3),(4),(50,(6),(7),(8)
| |
Before Sale of Chip Lake |
|
After Sale of Chip Lake |
|
| $,000 |
|
$/Basic
& FD Share |
|
$,000 |
|
$/Basic
& FD Share |
|
| Total Proven+Probable (P+P) Value - (BT NPV10%) |
$ |
101,853 |
|
$ |
1.88 |
|
$ |
96,693 |
|
$ |
1.78 |
|
| Land Value |
$ |
11,572 |
|
$ |
0.21 |
|
$ |
9,012 |
|
$ |
0.17 |
|
| Seismic & Tax Pools |
$ |
1,268 |
|
$ |
0.02 |
|
$ |
1,237 |
|
$ |
0.02 |
|
| Year End 2013 Net Debt |
$ |
(31,892 |
) |
$ |
(0.59 |
) |
$ |
(28,792 |
) |
$ |
(0.53 |
) |
| Net Asset Value (P+P) |
$ |
82,801 |
|
$ |
1.53 |
|
$ |
78,150 |
|
$ |
1.44 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Proven+Probable Developed Producing (P+PDP) Value - (BT NPV10%) |
$ |
70,377 |
|
$ |
1.30 |
|
$ |
65,217 |
|
$ |
1.20 |
|
| Net Asset Value (P+PDP) |
$ |
51,325 |
|
$ |
0.95 |
|
$ |
46,674 |
|
$ |
0.86 |
|
(1) The tables above are a summary of the oil, NGL and natural gas reserves of the Company and the net present value of future net revenue attributable to such reserves as evaluated in the McDaniel Report, based on forecast price and cost assumptions. The tables summarize the information from the McDaniel Report, and may differ slightly than the original report due to rounding.
(2) Gross reserves means the total working interest (operating or non‐operating) share of remaining recoverable reserves owned by Hyperion before deductions of royalties payable to others and without including any royalty interests owned by Hyperion.
(3) Based on McDaniel December 31, 2013 escalated price forecast, as applicable.
(4) The net present value of future net revenue attributable to the Company's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves by McDaniel, as applicable.
(5) Commodity pricing was prepared by McDaniel and was used, subject to quality and transportation adjustments, in the evaluation of Hyperion's reserves effective as at December 31, 2013.
(6) The land value is a summary of the Seaton-Jordan 31, 2012 Report, mechanically adjusted to December 31, 2013.
(7) Seismic and Tax Pools are internal Company estimates.
(8) Net debt is at December 31, 2013.
Forward Looking and Cautionary Statements:
This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Hyperion. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted. These statements speak only as of the date specified in the statements.
In particular, this press release may contain forward looking statements pertaining to the following:
- the performance characteristics of the Company's oil and natural gas properties;
- oil and natural gas production levels;
- capital expenditure programs;
- the quantity of the Company's oil and natural gas reserves and anticipated future cash flows from such reserves;
- projections of commodity prices and costs;
- supply and demand for oil and natural gas;
- expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
- treatment under governmental regulatory regimes.
The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:
- volatility in market prices for oil and natural gas;
- liabilities inherent in oil and natural gas operations;
- uncertainties associated with estimating oil and natural gas reserves;
- competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
- incorrect assessments of the value of acquisitions and exploration and development programs;
- geological, technical, drilling and processing problems;
- fluctuations in foreign exchange or interest rates and stock market volatility;
- failure to realize the anticipated benefits of acquisitions;
- general business and market conditions; and
- changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.
These factors should not be construed as exhaustive. Unless required by law, Hyperion does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.
Estimated values contained in this press release do not represent fair market value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.