CALGARY, June 25, 2014 /CNW/ - (TSX:PMT) - Perpetual Energy Inc. ("Perpetual", or the "Company") is pleased to
announce that it has entered into definitive agreements with a joint
venture partner (the "JV Partner") for a portion of its lands in the
Edson area of West Central Alberta (the "East Edson Property"). The
joint venture ("East Edson JV") will significantly accelerate
Perpetual's net production and funds flow growth from the East Edson
Property. Closing is expected to occur on or before July 16, 2014.
Perpetual is also pleased to announce that it has entered into a
transaction to monetize its gas over bitumen royalty credits to a third
party for proceeds of $20.5 million, subject to adjustments. Closing is
expected on or about June 26, 2014.
The Company's independent reserve auditors, McDaniel and Associates
Consultants Ltd., ("McDaniel") have re-assessed the reserves related to
the East Edson Property, giving effect to the East Edson JV, and also
mechanically-adjusted Perpetual's year-end 2013 reserves to an
effective date of May 1, 2014. The capital injected by the East Edson
JV transaction is expected to increase the operating cash flow from the
East Edson Property to a level where the full development can be
self-funded, thereby allowing McDaniel to substantially increase the
reserve bookings to the technical level warranted. Upon closing the
East Edson JV, Perpetual's Company-interest recognized booked reserves
will increase by 60 percent, adding an estimated 36.3 MMboe of
additional proved and probable reserves to Perpetual's corporate
reserves, effective May 1, 2014 as mechanically-updated by McDaniel.
Given the significant reserve recognition associated with the Edson JV,
these transactions translate into an estimated 56 percent increase in
Perpetual's reserve-based net asset value ("NAV") to $4.80 per share as
compared to the reserve-based NAV of $3.07 per share calculated at
year-end 2013.
EAST EDSON JOINT VENTURE
Pursuant to the East Edson JV, the JV Partner will purchase a 50 percent
royalty interest in Perpetual's current developed producing reserves in
the East Edson area (the "Producing Royalty") for $50 million,
effective July 1, 2014. Concurrently, the JV Partner will farm-in on
the Wilrich Formation in certain undeveloped lands restricted to the
East Edson area, contributing $70 million to drill, complete and tie-in
approximately 14 wells in East Edson to earn an additional royalty (the
"Drilling Royalty"). In combination, in exchange for the total
acquisition and funding commitment of $120 million, the Drilling and
Producing Royalties entitle the JV Partner to receive on a priority
basis 5.6 MMcf/d of natural gas from the East Edson Property plus oil
and associated natural gas liquids ("NGL") from July 1, 2014 to
December 31, 2022 and declining thereafter at 10% per year until the
Drilling Royalty and the Producing Royalty terminate on December 31,
2034. NGL yields are expected to average close to 23 bbl/MMcf for the
duration of the East Edson JV. Payment for natural gas, oil and NGL
volumes related to the Producing Royalty and the Drilling Royalty will
be made monthly, less deductions for transportation.
As part of the East Edson JV, Perpetual has committed to spend $30
million to drill, complete and tie-in approximately five additional
wells prior to December 31, 2015, substantially following the spending
of the JV Partner's $70 million farm-in investment. In addition,
Perpetual will construct a new gas plant at East Edson to add 30 MMcf/d
of processing capacity to the East Edson area at an estimated cost of
$30 million. The new plant is expected to be operational by September
1, 2015. Further to this, prior to December 31, 2022, Perpetual has
committed to invest another $30 million to drill, complete and tie-in
approximately 6 more wells. Perpetual will operate all East Edson JV
operations and expects to have executed the farm-in operations related
to approximately 14 wells prior to year-end 2014.
Perpetual has received a non-refundable deposit of $12 million which has
been placed in escrow. Upon closing, an additional $18 million of the
proceeds from the sale of the Producing Royalty and the $70 million of
proceeds to fund the farm-in to earn the Drilling Royalty will also be
placed in escrow to be dedicated to spending on the East Edson JV. The
remaining proceeds of $20 million associated with the sale of the
Producing Royalty are unrestricted funds for general corporate purposes
and will be used to reduce outstanding bank debt.
Giving effect to the East Edson JV, Perpetual's production, net of the
Producing Royalty volumes, will initially be reduced at the effective
date of July 1, 2014, but quickly recover and surpass the
pre-transaction net production rate as the two rig, joint venture
funded drilling program commences in mid-July. Perpetual's production
is projected to increase from the current rate of approximately 14.5
MMcf/d plus 385 bbl/d of oil and NGL (Average May 2014) to an estimated
exit rate of 26 MMcf/d plus 670 bbl/d of oil and NGL gross, (21 MMcf/d
plus 545 bbl/d of oil and NGL net of volumes attributable to the JV
Partner royalties) at year-end 2014. Furthermore, incorporating the
full effect of the East Edson JV spending, Perpetual anticipates to be
producing approximately 50 MMcf/d plus 1,170 bbl/d of oil and NGL, (44
MMcf/d plus 1,035 bbl/d net of volumes attributable to the JV Partner
royalties) at the start-up of the new East Edson gas plant in September
2015.
Based on proceeds of $120 million, the transaction implies approximately
8 times annualized 2014 cash flow (before tax) and $105,000 per flowing
boe based on projected 2014 production, both accretive to Perpetual's
current valuation.
MONETIZATION OF GAS OVER BITUMEN ROYALTY CREDITS
Perpetual has entered into definitive agreements to effectively monetize
its future gas over bitumen ("GOB") royalty credits associated with the
regulatory shut-in of the Legend property in northeast Alberta for
$20.5 million, effective January 1, 2014. These royalty credits
represent Perpetual's remaining royalty credit entitlements following
pending expiries. With adjustments at closing, Perpetual will receive
net proceeds of approximately $19 million. Perpetual receives GOB
royalty adjustments from Alberta Energy as compensation for lost
production from wells that have been shut-in or denied the right to
produce as a result of bitumen conservation decisions. The monthly
royalty adjustments are based on deemed production, which is calculated
on a well by well basis and declines by 10 percent per year over a 10
year period. GOB royalty adjustments are recognized as revenue. Total
net deemed production for the first quarter of 2014 was 19.5 MMcf/d.
Approximately 2.7 MMcf/d of entitlements to royalty credits terminated
on April 1, 2014 while a further 6.1 MMcf/d of entitlements to royalty
credits will terminate on July 1, 2014 upon expiry of the ten year term
from the date of shut-in for certain wells.
Perpetual will pay a royalty to the purchaser equal to the royalty
credits earned, calculated based on the GOB formula set out in the
Alberta Gas Royalty Regulations, on a monthly basis. However the
Company will retain 35 percent of the revenue related to any excess of
the Alberta Gas Reference Price over the January 1, 2014 price forecast
of the independent reserve evaluator for any month. The gas over
bitumen royalty credits are based on the following formula:
0.5 x (Shut-in "Deemed" Production x 0.8) x (Alberta Reference Price-
$0.3791/GJ)
Thus far, $17 million of the proceeds for the disposition have been
placed in escrow by the purchaser and the transaction is expected to
close on or about June 26, 2014. Perpetual's lenders have advised that
this monetization will result in a $10 million reduction in the
borrowing base under its credit facility to $120 million, resulting in
a net liquidity gain of $9 million.
At May 31, 2014 Perpetual also had an amount receivable for previously
earned but uncollected gas over bitumen royalty credits of
approximately $12.2 million. This receivable arose in periods of low
gas prices where gas Crown royalties were not sufficient to absorb
royalty credits earned. These amounts are now being collected with
approximately $5.9 million realized in the first five months of 2014.
The amount receivable does not expire. The above referenced
transaction does not relate to these previously earned royalty credits
or the outstanding Crown receivable.
RESERVES
Conditional on the closing of the East Edson JV, McDaniel has prepared
an illustrative reserve report (the "Illustrative McDaniel Report"),
effective May 1, 2014, which evaluates the East Edson Property pro
forma for the joint venture and mechanically updates Perpetual's
year-end 2013 reserves to give effect to production and first quarter
2014 drilling activities that converted undeveloped reserves recognized
at year-end to developed and producing reserves. The mechanical
McDaniel update does not consider further technical reserve additions
related to capital activities since December 31, 2013. With the
infusion of committed capital through the East Edson JV, Perpetual will
record a significant increase in reserves at closing. Highlights of the
reserve changes as a result of the East Edson JV and the mechanical
update are as follows:
-
Perpetual's total proved and probable reserves are estimated at 96.5
MMboe, an increase of 34.1 MMboe (55%) from 62.4 MMboe at year-end
2013. The Illustrative McDaniel Report reflects production of 2.3 MMboe
and additions of 36.4 MMboe.
-
Reserve additions also include an increase in future development capital
of $412 million, $70 million of which will be funded through the East
Edson JV Partner farm-in commitment.
-
Reserves from Perpetual's key diversifying growth plays, liquids-rich
gas in the Greater Edson area and Mannville heavy oil in Eastern
Alberta, now represent 74 percent of Perpetual's total proved and
probable reserves, up from 59 percent at year-end 2013. On a commodity
basis, oil and natural gas liquids represent 13 percent of Perpetual's
total proved and probable reserves (13 percent of proved), unchanged
from year-end.
-
McDaniel's estimate of net present value (discounted at eight percent)
of Perpetual's total proved and probable reserves at May 1, 2014,
giving effect to the East Edson JV transaction, the GOB monetization
and mechanical adjustments, increased 21 percent ($144 million) from
year-end 2013. This increase in net present value will be recorded with
only a modest increase in McDaniel's commodity price forecasts
effective April 1, 2014.
Reserves Disclosure
Company interest reserves included herein are before royalty burdens and
including royalty interests. Reserves information is based on an
independent reserves evaluation report prepared by McDaniel with an
effective date of May 1, 2014, and is illustrative, pending closing of
the East Edson JV. The Illustrative McDaniel Report has been prepared
in accordance with National Instrument 51-101 ("NI 51-101") using
McDaniel's forecast prices and costs. Perpetual's reserves at May 1,
2014, giving effect to the East Edson JV, are summarized below.
Company Interest Reserves at May 1, 2014(1)(2)
|
|
|
|
|
Light and
Medium
Crude Oil
(Mbbl)
|
|
|
|
Heavy
Oil
(Mbbl)
|
|
|
|
Natural
Gas
(MMcf)
|
|
|
Natural
Gas Liquids
(Mbbl)
|
|
|
Oil
Equivalent
(Mboe)
|
Proved Producing
|
|
|
|
34
|
|
|
|
1,957
|
|
|
|
97,373
|
|
|
510
|
|
|
18,730
|
Proved Non-Producing
|
|
|
|
-
|
|
|
|
45
|
|
|
|
10,293
|
|
|
40
|
|
|
1,801
|
Proved Undeveloped
|
|
|
|
-
|
|
|
|
174
|
|
|
|
32,561
|
|
|
426
|
|
|
6,027
|
Total Proved
|
|
|
|
34
|
|
|
|
2,176
|
|
|
|
140,228
|
|
|
976
|
|
|
26,557
|
Probable Producing
|
|
|
|
11
|
|
|
|
1,298
|
|
|
|
36,952
|
|
|
150
|
|
|
7,617
|
Probable Non-Producing, excluding
Gas Over Bitumen ("GOB")
|
|
|
|
-
|
|
|
|
70
|
|
|
|
23,721
|
|
|
18
|
|
|
4,041
|
Probable Undeveloped
|
|
|
|
31
|
|
|
|
293
|
|
|
|
284,804
|
|
|
7,135
|
|
|
54,926
|
Probable Shut-in Gas over Bitumen
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,875
|
|
|
-
|
|
|
3,312
|
Total Probable
|
|
|
|
42
|
|
|
|
1,660
|
|
|
|
365,352
|
|
|
7,304
|
|
|
69,897
|
Total Proved and Probable
|
|
|
|
75
|
|
|
|
3,837
|
|
|
|
505,579
|
|
|
8,280
|
|
|
96,455
|
(1)
|
May not add due to rounding.
|
(2)
|
Reserve numbers reflect Illustrative McDaniel Report pro forma closing
of the East Edson JV.
|
The relative volume of proved and probable undeveloped reserves
increased significantly as a result of the East Edson JV transaction as
the technical reserves that were not deemed eligible for booking by
McDaniel at year-end 2013 are now considered by McDaniel to be
recoverable and eligible for booking, factoring in the dedicated
development funding. The infusion of $70 million of dedicated drilling
capital increases free cash flow to fund future investment in the East
Edson Property. It is anticipated that the spending of the $70 million
of funds in the JV Partner escrow account will be completed by the end
of 2014 and is expected to convert 6.2 MMboe of proved and probable
undeveloped reserves to proved and probable developed producing
reserves.
McDaniel estimates the future development capital ("FDC") required to
convert non-producing and undeveloped reserves to producing reserves at
$642 million, up from $230 million at year-end 2013. This increase of
$412 million is entirely related to the FDC required to develop the
newly booked reserves at East Edson, offset by a reduction in FDC
related to the Company's first quarter 2014 spending program on other
assets which converted previously recognized undeveloped reserves to
producing. Of this FDC, $70 million will be funded with the East Edson
JV funds in escrow received from the JV Partner. The table below
summarizes the FDC estimated by McDaniel by play type to bring
non-producing and undeveloped reserves to production.
Future Development Capital(1)
|
($ millions)
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2017
|
|
|
|
2018
|
|
|
Remainder
|
|
|
Total
|
Eastern Alberta Shallow Gas
|
|
|
|
0.7
|
|
|
|
5.1
|
|
|
|
5.6
|
|
|
|
0.3
|
|
|
|
0.5
|
|
|
1.3
|
|
|
13.5
|
Mannville Heavy Oil
|
|
|
|
2.6
|
|
|
|
7.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
9.8
|
Greater Edson Wilrich (2)
|
|
|
|
100.0
|
|
|
|
92.0
|
|
|
|
68.2
|
|
|
|
66.3
|
|
|
|
54.7
|
|
|
236.0
|
|
|
617.2
|
Deep Basin Other
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1.1
|
Total
|
|
|
|
103.3
|
|
|
|
105.5
|
|
|
|
73.8
|
|
|
|
66.6
|
|
|
|
55.1
|
|
|
237.3
|
|
|
641.6
|
(1)
|
May not add due to rounding.
|
(2)
|
Includes $70 million of East Edson JV Partner capital funding.
|
NET ASSET VALUE
The following net asset value table shows what is normally referred to
as a "produce-out" NAV calculation under which the Company's reserves
would be produced at forecast future prices and costs. The value is a
snapshot in time and is based on various assumptions including
commodity prices and foreign exchange rates that vary over time. It
should not be assumed that the NAV represents the fair market value of
Perpetual's shares. The calculations below do not reflect the value of
the Company's prospect inventory to the extent that the prospects are
not recognized within the NI 51-101 compliant Illustrative McDaniel
Report, except to the extent that value is captured in the independent
estimate of the fair market value of lands with no reserves assigned.
Net Asset Value(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted at
|
($ millions, except as noted)
|
|
|
|
|
|
Undiscounted
|
|
|
|
5%
|
|
|
|
8%
|
|
|
|
10%
|
Total Proved and Probable Reserves(3)
|
|
|
|
|
|
1,462
|
|
|
|
994
|
|
|
|
823
|
|
|
|
732
|
Fair Market Value of Undeveloped Land(4)
|
|
|
|
|
|
170
|
|
|
|
170
|
|
|
|
170
|
|
|
|
170
|
Warwick Gas Storage(5)
|
|
|
|
|
|
28
|
|
|
|
28
|
|
|
|
28
|
|
|
|
28
|
Net Bank Debt(2,6,)
|
|
|
|
|
|
(18)
|
|
|
|
(18)
|
|
|
|
(18)
|
|
|
|
(18)
|
Edson JV Funds on Hand
|
|
|
|
|
|
70
|
|
|
|
70
|
|
|
|
70
|
|
|
|
70
|
Convertible Debentures
|
|
|
|
|
|
(160)
|
|
|
|
(160)
|
|
|
|
(160)
|
|
|
|
(160)
|
Senior Notes
|
|
|
|
|
|
(150)
|
|
|
|
(150)
|
|
|
|
(150)
|
|
|
|
(150)
|
Estimate of Additional Future Abandonment
and Reclamation Costs(7)
|
|
|
|
|
|
(90)
|
|
|
|
(57)
|
|
|
|
(45)
|
|
|
|
(39)
|
Hedge Book(8)
|
|
|
|
|
|
(8)
|
|
|
|
(8)
|
|
|
|
(8)
|
|
|
|
(8)
|
NAV
|
|
|
|
|
|
1,304
|
|
|
|
869
|
|
|
|
710
|
|
|
|
625
|
Shares Outstanding (million) - basic
|
|
|
|
|
|
148
|
|
|
|
148
|
|
|
|
148
|
|
|
|
148
|
NAV per Share ($/Share)
|
|
|
|
|
|
8.81
|
|
|
|
5.87
|
|
|
|
4.80
|
|
|
|
4.22
|
(1)
|
As at May 1, 2014, pro forma adjustments related to the future closing
of the East Edson JV
and monetization of GOB royalty credits (See "Monetization of Gas Over
Bitumen Royalty
Credits").
|
(2)
|
Financial information is per Perpetual's April 30, 2014 internal
unaudited consolidated financial
statements.
|
(3)
|
Reserve values per Illustrative McDaniel Report as at May 1, 2014,
including GOB royalty credits
not yet received and excluding GOB royalty credits monetized.
|
(4)
|
Independent third party estimate. Undeveloped lands in the table above
refer only to lands not
assigned reserves in the McDaniel Report. Amounts have been
mechanically-adjusted from
year-end 2013 to reflect the reduction in undeveloped land with no
reserves assigned in the
Greater Edson area.
|
(5)
|
Reflects 30 percent interest in Warwick Gas Storage valued at
proportionate acquisition value
at April 29, 2013.
|
(6)
|
Includes bank debt, net of working capital estimated at May 1, 2014,
excluding Crown receivable
related to the GOB royalty credit not yet received, and including pro
forma proceeds related to
the future closing of the Producing Royalty sale at East Edson and the
monetization of GOB
royalty credits.
|
(7)
|
Amounts are in addition to amounts in the December 31, 2013 McDaniel
report for future well
abandonment costs, net of salvage value, related to developed reserves.
|
(8)
|
Hedging adjustments as at June 24, 2014 relative to McDaniel price
forecast.
|
The above evaluation includes future capital expenditure expectations
required to bring undeveloped reserves recognized by McDaniel that meet
the criteria for booking under NI 51-101 on production. The fair market
value of undeveloped land does not reflect the value of the Company's
extensive prospect inventory which is anticipated to be converted into
reserves and production over time through future capital investment.
OUTLOOK
Giving effect to the East Edson JV and the monetization of gas over
bitumen royalty credits, Perpetual's consolidated net debt, including
$100 million of JV funds in escrow, is estimated to be $245 million
after the closing of the East Edson JV anticipated on July 16, 2014.
Capital expenditures for Q2 - Q4 of 2014
|
|
|
|
|
|
$ millions
|
|
|
|
# of Wells
|
West Central liquids-rich gas(1)
|
|
|
|
|
|
118
|
|
|
|
24 (19.0 net)
|
Mannville heavy oil
|
|
|
|
|
|
17
|
|
|
|
9 (7.8 net)
|
Shallow gas and Other
|
|
|
|
|
|
6
|
|
|
|
-
|
|
|
|
|
|
|
141
|
|
|
|
33 (26.8 net)
|
(1)
|
Includes spending of approximately $85 million at East Edson.
|
Incorporating spending of $85 million in East Edson, as well as a
planned capital program of approximately $56 million for the last three
quarters of 2014 on other assets, year-end 2014 net debt is projected
at $325 million, assuming the current forward market for commodity
prices and existing commodity price risk management contracts as at
June 24, 2014.
The following table shows Perpetual's estimated 2014 funds flow at
various commodity prices:
Projected 2014 funds flow ($ millions)
|
|
|
|
|
AECO Gas Price ($/GJ)(1)
|
WTI price
(US$/bbl)(1)
|
|
|
|
|
|
|
|
$4.00
|
|
|
|
$4.50
|
|
|
|
$5.00
|
|
|
|
$5.50
|
|
|
|
$6.00
|
$ 85
|
|
|
|
75
|
|
|
|
79
|
|
|
|
83
|
|
|
|
87
|
|
|
|
91
|
$ 90
|
|
|
|
78
|
|
|
|
82
|
|
|
|
86
|
|
|
|
90
|
|
|
|
94
|
$ 95
|
|
|
|
81
|
|
|
|
85
|
|
|
|
89
|
|
|
|
93
|
|
|
|
97
|
$100
|
|
|
|
83
|
|
|
|
87
|
|
|
|
91
|
|
|
|
95
|
|
|
|
99
|
$105
|
|
|
|
84
|
|
|
|
88
|
|
|
|
92
|
|
|
|
95
|
|
|
|
100
|
$110
|
|
|
|
85
|
|
|
|
89
|
|
|
|
93
|
|
|
|
97
|
|
|
|
101
|
(1)
|
Commodity price sensitivities reflect average AECO and WTI prices for
June through December 2014. The current settled and forward average
AECO and WTI prices for June to December 2014 as of June 24, 2014
were $4.42 per GJ and US$104.20 per bbl, respectively.
|
Adjusting for the pro forma effect of the East Edson JV transaction,
Perpetual expects full year 2014 production to average 20.1 Mboe/d
(19.5 Mboe/d net of the East Edson JV royalty production), with a
forecast exit rate of 23.1 Mboe/d (21.9 Mboe/d, net of East Edson JV
royalty production).
On a preliminary basis, the planned capital program for 2015 of
approximately $120 million, including spending of the remaining funds
held in escrow for the committed development of the East Edson
Properties, is expected to be within Perpetual's estimated funds flow.
The following table shows Perpetual's estimated 2015 funds flow at
various commodity prices:
Projected 2015 funds flow ($ millions)
|
|
|
|
|
AECO Gas Price ($/GJ)(1)
|
WTI price
(US$/bbl)(1)
|
|
|
|
|
|
|
|
$4.00
|
|
|
|
$4.50
|
|
|
|
$5.00
|
|
|
|
$5.50
|
|
|
|
$6.00
|
$ 85
|
|
|
|
108
|
|
|
|
129
|
|
|
|
151
|
|
|
|
172
|
|
|
|
193
|
$ 90
|
|
|
|
114
|
|
|
|
135
|
|
|
|
157
|
|
|
|
178
|
|
|
|
199
|
$ 95
|
|
|
|
121
|
|
|
|
143
|
|
|
|
164
|
|
|
|
185
|
|
|
|
207
|
$100
|
|
|
|
126
|
|
|
|
148
|
|
|
|
170
|
|
|
|
191
|
|
|
|
212
|
$105
|
|
|
|
132
|
|
|
|
154
|
|
|
|
175
|
|
|
|
196
|
|
|
|
217
|
$110
|
|
|
|
135
|
|
|
|
157
|
|
|
|
178
|
|
|
|
199
|
|
|
|
221
|
(1)
|
The current settled and forward average AECO and WTI prices for
calendar 2015 as of June 24, 2014 were $4.00 per GJ and
US$96.95 per bbl, respectively.
|
Looking ahead to year-end 2015, consolidated net debt is estimated to
remain flat at $325 million, and the year-end debt to trailing funds
flow ratio is projected to be at 2.6 times, assuming the current market
for commodity prices, the successful execution of the East Edson JV,
and no acquisitions, dispositions or other changes to the Company's
capital structure. 2015 production is estimated to average 24.5 Mboe/d
(23.4 Mboe/d, net of East Edson JV royalty production), with an
expected 2015 exit rate of 25.4 Mboe/d (24.3 Mboe/d, net of East Edson
JV royalty production).
CONFERENCE CALL AND WEBCAST
Perpetual will be hosting a conference call and webcast at 9:00 a.m.,
Mountain Time, Thursday, June 26, 2014 to review this information.
Interested parties are invited to take part in the conference call by
dialing one of the following telephone numbers 10 minutes before the
start time: Local area 403.451.9838; or toll free 1.888.231.8191. For a
replay of this call please dial: 1.855.859.2056, passcode: 66411650
until 23:59 MT, July 3, 2014. To participate in the live webcast please
visit www.perpetualenergyinc.com or http://event.on24.com/r.htm?e=814535&s=1&k=6A23377BBB75DE4E3D3BE832467646D9. The webcast will be archived and the webcast presentation will be
posted on Perpetual's website shortly following the presentation. The
Toronto Stock Exchange has neither approved nor disapproved the
information contained herein.
Uncertainties in Estimating Reserves
There are numerous uncertainties inherent in estimating quantities of
crude oil, natural gas and NGL reserves and the future funds flows
attributed to such reserves. The reserve and associated funds flow
information set forth above are estimates only. In general, estimates
of economically recoverable crude oil, natural gas and NGL reserves and
the future net funds flows therefrom are based upon a number of
variable factors and assumptions, such as historical production from
the properties, production rates, ultimate reserve recovery, timing and
amount of capital expenditures, marketability of oil and natural gas,
royalty rates, the assumed effects of regulation by governmental
agencies and future operating costs, all of which may vary materially.
For those reasons, estimates of the economically recoverable crude oil,
NGL and natural gas reserves attributable to any particular group of
properties, classification of such reserves based on risk of recovery
and estimates of future net revenues associated with reserves prepared
by different engineers, or by the same engineers at different times,
may vary. The Company's actual production, revenues, taxes and
development and operating expenditures with respect to its reserves
will vary from estimates thereof and such variations could be material.
BOE Equivalents
Perpetual's aggregate proved and probable reserves are reported in
barrels of oil equivalent (boe). Boe may be misleading, particularly if
used in isolation. In accordance with NI 51-101 a boe conversion ratio
for natural gas of 6 Mcf: 1 boe has been used, which is based on an
energy equivalency conversion method primarily applicable at the burner
tip and does not necessarily represent a value equivalency at the
wellhead. As the value ratio between natural gas and crude oil based on
the current prices of natural gas and crude oil is significantly
different from the energy equivalency of 6:1, utilizing a conversion on
a 6:1 basis may be misleading as an indication of value.
Forward-Looking Information
Certain information regarding Perpetual in this news release including
management's assessment of future plans and operations may constitute
forward-looking statements under applicable securities laws. The
forward looking information includes, without limitation those
statements included under the heading "Outlook", anticipated benefits
of the East Edson JV and gas over bitumen royalty credit monetization
transaction and the anticipated closing dates of such transactions and
amounts and allocation of capital spending; statements regarding
estimated reserves and production and timing thereof; prospective
drilling, forecast average production; completions and development
activities; infrastructure expansion and construction; estimated FDC
required to convert proved and probable non-producing and undeveloped
reserves to proved producing reserves; anticipated effect of commodity
prices on reserves; estimates of gross recoverable gas sales; estimated
net asset value; prospective oil and natural gas liquids production
capability; projected realized natural gas prices and funds flow;
projected ending net debt levels; estimated asset retirement
obligations; anticipated effect of commodity prices on future
development capital and reserves; commodity prices and foreign exchange
rates; and gas price management. Various assumptions were used in
drawing the conclusions or making the forecasts and projections
contained in the forward-looking information contained in this press
release, which assumptions are based on management analysis of
historical trends, experience, current conditions and expected future
developments pertaining to Perpetual and the industry in which it
operates as well as certain assumptions regarding the matters outlined
above. Forward-looking information is based on current expectations,
estimates and projections that involve a number of risks, which could
cause actual results to vary and in some instances to differ materially
from those anticipated by Perpetual and described in the
forward-looking information contained in this press release. Undue
reliance should not be placed on forward-looking information, which is
not a guarantee of performance and is subject to a number of risks or
uncertainties, including without limitation those described under "Risk
Factors" in Perpetual's MD&A for the year-ended December 31, 2013 and
those included in other reports on file with Canadian securities
regulatory authorities which may be accessed through the SEDAR website
(www.sedar.com and at Perpetual's website www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not
exhaustive. Forward-looking information is based on the estimates and
opinions of Perpetual's management at the time the information is
released and Perpetual disclaims any intent or obligation to update
publicly any such forward-looking information, whether as a result of
new information, future events or otherwise, other than as expressly
required by applicable securities law.
Also included in this press release are estimates of Perpetual's
consolidated net debt after giving effect to the East Edson JV and 2014
and 2015 funds flow, which are based on the various assumptions as to
production levels, including estimated average production of 20.1
Mboe/d for 2014 and 24.500 Mboe/d for 2015, capital expenditures, and
other assumptions (including price assumptions for natural gas and oil
disclosed in this news release and an exchange rate assumption of
(US/CAD) $0.925 for 2014 and 2015. To the extent any such estimate
constitutes a financial outlook, it was approved by management and the
Board of Directors of Perpetual on June 24, 2014 and is included to
provide readers with an understanding of Perpetual's anticipated funds
flows based on the capital expenditure and other assumptions described
herein and readers are cautioned that the information may not be
appropriate for other purposes.
SOURCE Perpetual Energy Inc.
Cameron R. Sebastian
Vice President, Finance and Chief Financial Officer
Claire A. Rosehill
Investor Relations and Business Analyst