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Press release from Marketwire

Celtic Reports Increase in Oil and Gas Reserves and Undeveloped Land at December 31, 2010

Thursday, February 10, 2011

Celtic Reports Increase in Oil and Gas Reserves and Undeveloped Land at December 31, 201019:30 EST Thursday, February 10, 2011CALGARY, ALBERTA--(Marketwire - Feb. 10, 2011) - Celtic Exploration Ltd. ("Celtic" or the "Company") (TSX:CLT) has released its operating results for the three months and twelve months ended December 31, 2010. Summary of results are as follows:---------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31,---------------------------------------------------------------------------- 2010 2009 Change 2010 2009 Change --------------------------------------------------------------------------------------------------------------------------------------------------------Production ---------------------------------------------------------------------------- Oil (BBLS/d) 4,141 4,384 -6% 4,070 3,687 10%---------------------------------------------------------------------------- Gas (MCF/D) 80,607 77,339 4% 79,404 63,028 26%---------------------------------------------------------------------------- Combined (BOE/D) 17,576 17,274 2% 17,304 14,192 22%--------------------------------------------------------------------------------------------------------------------------------------------------------Production per million shares (BOE/D) 194 194 0% 193 163 18%--------------------------------------------------------------------------------------------------------------------------------------------------------Drilling activity ---------------------------------------------------------------------------- Total wells 15 17 -12% 62 55 13%---------------------------------------------------------------------------- Working interest wells 8.2 9.6 -15% 41.9 43.0 -3%---------------------------------------------------------------------------- Success rate on working interest wells 88% 100% -12% 90% 91% -1%--------------------------------------------------------------------------------------------------------------------------------------------------------Undeveloped land ---------------------------------------------------------------------------- Gross acres 685,993 363,473 89%---------------------------------------------------------------------------- Net acres 621,199 294,700 111%--------------------------------------------------------------------------------------------------------------------------------------------------------Reserves ---------------------------------------------------------------------------- Oil (MBBLs) 16,806 15,042 12%---------------------------------------------------------------------------- Gas (MMCF) 304,197 272,236 12%---------------------------------------------------------------------------- Combined (MBOE) 67,506 60,415 12%----------------------------------------------------------------------------ReservesCeltic retains Sproule Associates Limited ("Sproule"), an independent qualified reserve evaluator to prepare a report on 100% of its oil and gas reserves. The Company has a Reserves Committee which oversees the selection, qualifications and reporting procedures of the independent engineering consultants. Reserves as at December 31, 2010 were determined using the guidelines and definitions set out under National Instrument 51-101 ("NI 51-101").At December 31, 2010, Celtic's proved plus probable reserves were 67.5 million BOE, up 12% from 60.4 million BOE at the end of 2009. The Company's net present value of proved plus probable reserves at December 31, 2010, discounted at 10% before tax, was $930.7 million, down 8% from $1,011.9 million at December 31, 2009. Despite a 12% increase in reserves, the net present value was lower compared to the previous year primarily due to lower future natural gas prices used in the December 31, 2010 evaluation. In addition, the Company completed non-core asset dispositions of 2.3 million BOE of proved plus probable reserves during 2010.The reserve life index for proved plus probable reserves was 10.5 years compared to 9.6 years at December 31, 2009. At December 31, 2010, the weighting of proved plus probable reserves was 25% oil and 75% gas.The following table outlines a summary of the Company's reserves at December 31, 2010:----------------------------------------------------------------------------Summary of Reserves ---------------------------------------------------------------------------- Oil (MBBLs) Gas (MMCF) Combined (MBOE) FDC Costs (000's)----------------------------------------------------------------------------Proved Developed Producing 6,326 108,776 24,455 ----------------------------------------------------------------------------Proved Developed Non-producing 743 11,813 2,712 ----------------------------------------------------------------------------Proved Undeveloped 2,381 54,615 11,484 ----------------------------------------------------------------------------Total Proved 9,450 175,204 38,651 $ 131,317----------------------------------------------------------------------------Probable Additional 7,356 128,993 28,855 ----------------------------------------------------------------------------Total Proved plus Probable 16,806 304,197 67,506 $ 209,719----------------------------------------------------------------------------Future development capital ("FDC") expenditures included in the reserve evaluation have been reduced by drilling royalty credits ("DRC's") earned and expected to be claimed in the first quarter of 2011. FDC included in the total proved reserve evaluation are expected to be spent as follows: $100.9 million in 2011, $17.7 million in 2012 and $12.7 million in 2013 and thereafter. FDC included in the proved plus probable reserve evaluation are expected to be spent as follows: $144.2 million in 2011, $50.3 million in 2012 and $15.2 million in 2013 and thereafter.The following table outlines the change in the Company's reserves year-over-year:----------------------------------------------------------------------------Reserves Reconcilliation ---------------------------------------------------------------------------- Oil Oil Gas Gas Combined Combined Total Proved + Total Proved + Total Proved + Proved Probable Proved Probable Proved Probable (MBBLs) (MBBLs) (MMCF) (MMCF) (MBOE) (MBOE)--------------------------------------------------------------------------------------------------------------------------------------------------------Balance, December 31, 2009 8,856 15,042 159,592 272,236 35,455 60,415 -------------------------------------------------------------------------------------------------------------------------------------------------------- Discoveries 372 548 6,271 9,034 1,417 2,054 ---------------------------------------------------------------------------- Extensions 1,188 3,360 20,872 55,896 4,667 12,676 ---------------------------------------------------------------------------- Infill Drilling 535 1,113 13,141 24,026 2,725 5,117 ---------------------------------------------------------------------------- Technical Revisions 989 (145) 4,278 (29,093) 1,702 (4,994)---------------------------------------------------------------------------- Economic Factors (93) (141) (2,129) (2,539) (448) (564)---------------------------------------------------------------------------- Acquisitions 339 587 2,910 5,015 824 1,423 ---------------------------------------------------------------------------- Dispositions (1,250) (2,072) (749) (1,396) (1,375) (2,305)--------------------------------------------------------------------------------------------------------------------------------------------------------Net Additions 2,080 3,250 44,594 60,943 9,512 13,407 -------------------------------------------------------------------------------------------------------------------------------------------------------- Production (1,486) (1,486) (28,982) (28,982) (6,316) (6,316)--------------------------------------------------------------------------------------------------------------------------------------------------------Balance, December 31, 2010 9,450 16,806 175,204 304,197 38,651 67,506 --------------------------------------------------------------------------------------------------------------------------------------------------------Percentage Increase in Reserves 7% 12% 10% 12% 9% 12%----------------------------------------------------------------------------In aggregate, Celtic's technical revisions are positive 4.8% for proved reserves and negative 8.3% for proved plus probable reserves on a BOE basis.The following table outlines forecasted future prices that Sproule has used in their evaluation of the Company's reserves at December 31, 2010:----------------------------------------------------------------------------Future Commodity Price Forecast ---------------------------------------------------------------------------- WTI Cushing NYMEX HH AECO-C USD/CAD Crude Oil Natural Gas Natural Gas Exchange (US$/BBL) (US$/MMBTU) ($/GJ) (US$)----------------------------------------------------------------------------2011 88.40 4.44 3.83 0.932----------------------------------------------------------------------------2012 89.14 5.01 4.42 0.932----------------------------------------------------------------------------2013 88.77 5.32 4.73 0.932----------------------------------------------------------------------------2014 88.88 6.80 6.24 0.932----------------------------------------------------------------------------2015 90.22 6.90 6.34 0.932----------------------------------------------------------------------------Five Year Average 89.08 5.69 5.11 0.932----------------------------------------------------------------------------The average price of oil steadily increased in each of the years from 2005 to 2008; however, in 2009 oil prices were considerably lower than the previous year. In 2010, WTI oil prices recovered and averaged US$79.43 per bbl, up from US$61.63 per bbl in 2009. Average annual natural gas prices at AECO-C from 2005 to 2008 traded in a range from $6.31 to $8.14 per GJ; however, in 2009, AECO-C averaged a much lower price of $3.97 per GJ and continued at this level averaging $3.94 per GJ in 2010.Sproule is forecasting WTI oil prices to average US$89.08 per bbl over the next five years, 3% higher than the average price of US$86.55 per bbl over the past five years. For natural gas, AECO-C natural gas prices are forecasted to average $5.11 per GJ over the 2011 to 2015 period, a decrease of 19% from the average price of $6.30 per GJ during the 2006 to 2010 period.The following table is a net present value summary (before tax) as at December 31, 2010:----------------------------------------------------------------------------Net Present Value Summary (before tax) ---------------------------------------------------------------------------- Undiscounted NPV 5% BT NPV 10% BT NPV 15% BT ($000's) ($000's) ($000's) ($000's)----------------------------------------------------------------------------Proved Developed Producing 611,593 492,560 417,036 364,530----------------------------------------------------------------------------Proved Developed Non- producing 61,397 51,291 44,015 38,542----------------------------------------------------------------------------Proved Undeveloped 209,767 149,212 110,277 83,249----------------------------------------------------------------------------Total Proved 882,757 693,063 571,328 486,321----------------------------------------------------------------------------Probable Additional 796,790 501,413 359,422 276,414----------------------------------------------------------------------------Total Proved plus Probable 1,679,547 1,194,476 930,750 762,735----------------------------------------------------------------------------The following table is a net present value summary (after tax) as at December 31, 2010:----------------------------------------------------------------------------Net Present Value Summary (after tax) ---------------------------------------------------------------------------- Undiscounted NPV 5% AT NPV 10% AT NPV 15% AT ($000's) ($000's) ($000's) ($000's)----------------------------------------------------------------------------Proved Developed Producing 571,867 465,578 397,629 349,990----------------------------------------------------------------------------Proved Developed Non- producing 46,040 38,551 33,201 29,202----------------------------------------------------------------------------Proved Undeveloped 157,143 108,659 77,370 55,641----------------------------------------------------------------------------Total Proved 775,051 612,788 508,200 434,833----------------------------------------------------------------------------Probable Additional 596,942 373,961 266,417 203,471----------------------------------------------------------------------------Total Proved plus Probable 1,371,993 986,749 774,617 638,305----------------------------------------------------------------------------The Company's net present value of proved plus probable reserves, discounted at 10% before tax was $930.7 million, down 14% from $1,011.9 million at December 31, 2009. As mentioned above, lower forecasted natural gas prices negatively affected the value of reserves as at December 31, 2010. In addition, during 2010, the Company disposed of 2.3 million BOE of proved plus probable reserves relating to non-core assets. Production relating to properties disposed in 2010 was approximately 650 BOE per day.The following table provides detailed calculations relating to finding, development and acquisition ("FD&A") costs and recycle ratios for 2010 and 2009:---------------------------------------------------------------------------- Year ended Year ended December 31, December 31, Cumulative sinceProved Reserves 2010 2009 Incorporation--------------------------------------------------------------------------------------------------------------------------------------------------------Capital expenditures ($000's) (unaudited) 172,785 148,761 1,109,420----------------------------------------------------------------------------Change in FDC costs required to develop reserves ($000's) 40,844 (1,483) 131,317----------------------------------------------------------------------------Total capital costs ($000's) 213,629 147,278 1,240,737----------------------------------------------------------------------------Reserve additions, net (MBOE) 9,512 11,426 62,665----------------------------------------------------------------------------FD&A cost, before FDC ($/BOE) 18.16 13.02 17.70----------------------------------------------------------------------------FD&A cost, including FDC ($/BOE) 22.46 12.89 19.80----------------------------------------------------------------------------Operating netback ($/BOE) (unaudited) 23.38 25.00 29.31----------------------------------------------------------------------------Recycle ratio - proved 1.0 x 1.9 x 1.5 x--------------------------------------------------------------------------------------------------------------------------------------------------------P+P Reserves --------------------------------------------------------------------------------------------------------------------------------------------------------Capital expenditures ($000's) (unaudited) 172,785 148,761 1,109,420----------------------------------------------------------------------------Change in FDC costs required to develop reserves ($000's) 64,702 (30,697) 209,719----------------------------------------------------------------------------Total capital costs ($000's) 237,487 118,064 1,319,139----------------------------------------------------------------------------Reserve additions, net (MBOE) 13,407 11,997 91,363----------------------------------------------------------------------------FD&A cost, before FDC ($/BOE) 12.89 12.40 12.14----------------------------------------------------------------------------FD&A cost, including FDC ($/BOE) 17.71 9.84 14.44----------------------------------------------------------------------------Operating netback ($/BOE) (unaudited) 23.38 25.00 29.31----------------------------------------------------------------------------Recycle ratio - proved plus probable 1.3 x 2.5 x 2.0 x----------------------------------------------------------------------------During 2010, the Company's capital expenditures (unaudited), net of dispositions, resulted in proved plus probable reserve additions of 13.4 million (12.0 million in 2009) BOE, resulting in FD&A costs of $17.71 ($9.84 in 2009) per BOE, including FDC costs. Proved reserve additions in 2010 were 9.5 million (11.4 million in 2009) BOE, resulting in FD&A costs of $22.46 ($12.89 in 2009) per BOE, including FDC costs.Higher FD&A costs in 2010 compared to the previous year were a result of the Company's strategy to incur significant expenditures in 2010 on land and drilling in two new resource plays: a Montney play at Resthaven, Alberta and a Duvernay play at Kaybob, Alberta. With success in these plays, the Company would have the potential to add significant reserves in 2011 and in the future.The recycle ratio is a measure for evaluating the effectiveness of a company's re-investment program. The ratio measures the efficiency of capital investment. It accomplishes this by comparing the operating netback per BOE to that years' reserve FD&A cost per BOE. Since incorporation, Celtic has successfully achieved a recycle ratio of 2.0 times on a proved plus probable basis. In 2010, the recycle ratio was 1.3 times.Celtic's 2010 capital investment program resulted in net reserve additions that replaced 2010 production by a factor of 1.5 (2.2 in 2009) times on a proved basis and 2.1 (2.3 in 2009) times on a proved plus probable basis.Advisory Regarding Forward-Looking StatementsThis document contains expectations, beliefs, plans, goals, objectives, assumptions, information and statements about future events, conditions, results of operations or performance that constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") under applicable securities laws. Undue reliance should not be placed on forward-looking statements. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements. We caution that the foregoing list of risks and uncertainties is not exhaustive. Events or circumstances could cause actual dates to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. The forward-looking statements contained in this document are made as of the date hereof and the Company does not intend, and does not assume any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.Measurements and AbbreviationsAll dollar amounts are referenced in Canadian dollars, except when noted otherwise. Where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel and sulphur volumes have been converted to oil equivalence at 0.6 long tons per barrel. The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. References to oil in this discussion include crude oil and natural gas liquids ("NGLs"). NGLs include condensate, pentane, propane, butane and ethane. References to gas in this discussion include natural gas and sulphur.Net present value is abbreviated as "NPV". Working interest is abbreviated as "WI". Million cubic feet is abbreviated as "MMCF". Thousand cubic feet is abbreviated as "MCF". Barrels are abbreviated as "BBLS". Giga joules are abbreviated as "GJ".FOR FURTHER INFORMATION PLEASE CONTACT: David J. WilsonCeltic Exploration Ltd.President and Chief Executive Officer(403) 201-5340ORSadiq H. LalaniCeltic Exploration Ltd.Vice President, Finance and Chief Financial Officer(403) 215-5310ORSuite 500, 505 - 3rd Street SWCeltic Exploration Ltd.Calgary, Alberta, Canada T2P 3E6www.celticex.com