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Press release from Marketwire

WestFire Announces 2010 Reserves and Land Evaluation

Monday, March 14, 2011

WestFire Announces 2010 Reserves and Land Evaluation18:26 EDT Monday, March 14, 2011CALGARY, ALBERTA--(Marketwire - March 14, 2011) - WestFire Energy Ltd. ("WestFire" or the "Company") (TSX:WFE) is pleased to announce the results of the independent evaluation of the Company's reserves for the year ended December 31, 2010 (the "GLJ Report") by GLJ Petroleum Consultants Ltd. ("GLJ") and the independent evaluation of the Company's undeveloped land holdings as at December 31, 2010 (the "ILE Report") by Independent Land Evaluations Inc. ("ILE").WestFire's annual audited consolidated financial statements are not yet complete and as a result, WestFire will comment on its finding, development and acquisition costs, operating netback, recycle ratios and net asset value when WestFire announces its 2010 financial results on or about March 23, 2011.2010 Highlights of GLJ and ILE Reports-- Total proved reserves increase of 53% to 8.2 million boe (70% oil); -- Total proved plus probable reserves increase of 45% to 14.2 million boe (73% oil); -- Increased reserves per share by 35% for proved and 28% for proved plus probable; -- Production replacement ratio of 3.1 for proved reserves and 4.8 for proved plus probable reserves; -- Reserve life index of 7.7 years for proved reserves and 13.5 years for proved plus probable reserves based on an annualized field reported December 2010 average production rate; -- Reserves value of $281.4 million (10% discount rate) before tax and $291.6 million (8% discount rate) after tax for proved plus probable reserves; -- Undeveloped land inventory of 209,370 net acres of which 140,152 net acres are on the Viking light oil resource play regions located at Redwater and Provost, Alberta and West-Central Saskatchewan; and -- Undeveloped land inventory valued at $51.9 million in the ILE Report. The Company's 2010 capital program included the acquisition of reserves through three private companies in the Provost area ("Provost Acquisition"). The acquisition represented a strategic entry point into a new Viking core area that complemented WestFire's existing Viking light oil resource asset base.On the Viking light oil resource play, proved plus probable reserves reached 8.6 million barrels of oil equivalent at year-end 2010, which represents 60% of the total corporate reserves. This reserve assignment is the result of our successful 2010 drilling program, the Provost Acquisition and the positive performance of our horizontal multi-stage sand fractured Viking oil wells. Reserves were assigned based primarily on historical production performance at Redwater and west central Saskatchewan. Improved productivities and reserve assignments, reflective of recent improvements in drilling and completion techniques, will be incorporated into future evaluations pending sustained production performance.At December 31, 2010, WestFire had approximately 220 net sections of undeveloped Viking oil prone land which represents a drilling inventory of over 640 net risked locations. The 148 Viking proved undeveloped and probable locations included in the GLJ Report and the 14 net sections attributed to those locations have been excluded from the undeveloped land and drilling inventories. However, the locations recognized by GLJ are considered high quality locations that will be pursued in addition to the over 640 net risked locations.Reserves SummaryThe following table provides summary information based upon the GLJ Report:-------------------------------------------------------------------------------------------------------------------------------------------------------- Natural Gas Light/Medium Oil Heavy Oil Liquids ---------------------------------------------------------------------------- Gross(1) Net(2) Gross(1) Net(2) Gross(1) Net(2) (Mbbl) (mbbl) (Mbbl) (mbbl) (Mbbl) (mbbl)Proved Producing 1,643 1,484 590 535 127 89 Non-Producing 211 184 70 66 38 30 Undeveloped 2,672 2,338 379 348 13 9 -----------------------------------------------------------Total Proved 4,525 4,005 1,039 949 178 129 Probable 3,964 3,366 573 506 112 83 -----------------------------------------------------------Total Proved & Probable 8,490 7,372 1,612 1,455 290 212 ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Conventional Barrels of Oil Natural Gas Equivalent(3)------------------------------------------------------- Gross(1) Net(2) Gross(1) Net(2) (MMcf) (MMcf) (Mboe) (Mboe)Proved Producing 8,917 7,477 3,845 3,354 Non-Producing 4,247 3,721 1,027 900 Undeveloped 1,492 1,319 3,312 2,915 ---------------------------------------Total Proved 14,656 12,518 8,185 7,170 Probable 8,429 7,227 6,055 5,159 ---------------------------------------Total Proved & Probable 23,085 19,744 14,239 12,329 --------------------------------------------------------------------------------------------------------------Notes:1. "Gross" reserves means WestFire's working interest (operating and non- operating) share of reserves before deduction of royalties and include royalty interests of the Company. 2. "Net" reserves means WestFire's working interest (operated and non- operated) share of reserves after deduction of royalties and include royalty interests of the Company. 3. Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. 4. Columns may not add due to rounding Reserves ValueThe net present value (before tax and at various discount rates) of WestFire's reserves effective December 31, 2010 and based on the GLJ's (2011 - 01) forecast prices and costs are summarized in the following table:--------------------------------------------------------------------------------------------------------------------------------------------------------($ thousands)(1) 0% 5% 10% 15% 20%----------------------------------------------------------------------------Proved Producing 111,891 96,938 85,834 77,292 70,529 Non-Producing 32,074 23,861 18,872 15,591 13,290 Undeveloped 117,811 87,590 65,999 50,140 38,211 -------------------------------------------------Total Proved(2) 261,776 208,389 170,705 143,023 122,029 Probable 232,587 157,007 110,706 80,684 60,306 -------------------------------------------------Total Proved plus Probable(2) 494,363 365,396 281,411 223,707 182,335 --------------------------------------------------------------------------------------------------------------------------------------------------------Notes:1. The estimated future net revenues are stated before deducting future estimated site restoration costs and are reduced for estimated future abandonment costs and estimated capital for future development associated with the reserves. 2. Columns may not add due to rounding. Price ForecastThe GLJ (2011-01) forecast prices (1) are summarized as follows:-------------------------------------------------------------------------------------------------------------------------------------------------------- Natural Edmonton Natural Gas at Light Heavy Gas at Plant Exchange WTI @ Crude Crude at AECO-C Gate Rate Cushing Oil Hardisty Spot Spot $US/ $US/ $Cdn/ $Cdn/ $Cdn $Cdn/Year $Cdn bbl(2) bbl(3) bbl(4) /MMBtu(5) MMBtu(6)----------------------------------------------------------------------------2011 0.980 88.00 86.22 68.79 4.16 3.92 2012 0.980 89.00 89.29 68.33 4.74 4.51 2013 0.980 90.00 90.92 67.03 5.31 5.06 2014 0.980 92.00 92.96 67.84 5.77 5.52 2015 0.980 95.17 96.19 70.23 6.22 5.97 2016 0.980 97.55 98.62 72.03 6.53 6.28 2017 0.980 100.26 101.39 74.08 6.76 6.50 2018 0.980 102.74 103.92 75.95 6.90 6.65 2019 0.980 105.45 106.68 78.00 7.06 6.80 2020 0.980 107.56 108.84 79.59 7.21 6.95 2021 + 0.980 +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr --------------------------------------------------------------------------------------------------------------------------------------------------------Note:1. Then current dollars. 2. NYMEX WTI Near Month Futures Contract Crude Oil at Cushing, Oklahoma. 3. Light, Sweet Crude Oil (40 API, 0.3%S) at Edmonton. 4. Heavy Crude Oil Proxy (12 API) at Hardisty. 5. AECO-C Spot refers to the one month price averaged for the year. 6. The plant gate price represents the price before raw gas gathering and processing charges are deducted. Reserves ReconciliationThe following reconciliation of WestFire's gross(1) reserves compares changes in the Company's reserves as at December 31, 2009 to the reserves as at December 31, 2010, based on the GLJ (2011 - 01) forecast prices and costs.-------------------------------------------------------------------------------------------------------------------------------------------------------- Light and Medium Natural Gas Oil Heavy Oil Liquids Proved Proved Proved Total Plus Total Plus Total Plus Proved Probable Proved Probable Proved Probable (Mbbls) (Mbbls) (Mbbls) (Mbbls) (Mbbls) (Mbbls)----------------------------------------------------------------------------Balance, December 31, 2009 2,455 4,890 555 1,173 159 247 Extensions & Improved Recovery 2,068 3,574 259 357 22 39 Infill Drilling 0 0 368 294 0 0 Technical Revisions 102 281 (9) (77) 28 37 Acquisitions 281 339 0 0 11 13 Dispositions (105) (319) 0 0 (3) (7)Production (276) (276) (135) (135) (38) (38)----------------------------------------------------------------------------Balance, December 31, 2010(2) 4,525 8,490 1,039 1,612 178 290 ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Conventional Barrels of Oil Natural Gas Equivalent Proved Proved Total Plus Total Plus Proved Probable Proved Probable (MMcf) (MMcf) (Mboe) (Mboe)-------------------------------------------------------Balance, December 31, 2009 13,164 21,177 5,363 9,839 Extensions & Improved Recovery 2,216 3,183 2,719 4,501 Infill Drilling 78 62 381 304 Technical Revisions 1,918 1,533 441 495 Acquisitions 467 566 369 447 Dispositions (374) (622) (171) (430)Production (2,813) (2,813) (917) (917)-------------------------------------------------------Balance, December 31, 2010(2) 14,656 23,085 8,185 14,239 --------------------------------------------------------------------------------------------------------------Notes:1. "Gross" reserves means WestFire's working interest (operating and non- operating) share of reserves before deduction of royalties and include royalty interests of the Company. 2. Columns may not add due to rounding. The Corporation has no unconventional reserves (Bitumen, Synthetic Crude Oil, Natural Gas from Coal, etc.).Land HoldingsDuring 2010, WestFire was very active acquiring developed and undeveloped lands through acquisitions and Crown land sales in Alberta and Saskatchewan.The Company retained ILE to complete an independent evaluation of the Company's undeveloped land holdings as at December 31, 2010. The ILE Report has estimated the value of WestFire's net undeveloped acreage at $51.9 million.-------------------------------------------------------------------------------------------------------------------------------------------------------- Developed Undeveloped Total(acres) Gross Net Gross Net Gross Net----------------------------------------------------------------------------Alberta 52,643 35,389 137,710 103,738 190,353 139,127Saskatchewan 44,520 33,895 110,862 104,807 155,382 138,702Other 2,005 206 2,640 825 4,645 1,031----------------------------------------------------------------------------Total 99,168 69,490 251,212 209,370 350,380 278,860--------------------------------------------------------------------------------------------------------------------------------------------------------Undeveloped acreage on the Viking light oil resource play located at Redwater and Provost, Alberta and West-Central Saskatchewan comprises 67 percent of the total or 209,370 net acres.Cautionary StatementsReserves and Operational InformationThe reserves data set forth in this press release is based upon an independent reserve assessment and evaluation prepared by GLJ with an effective date of December 31, 2010 and dated March 4, 2011 and summarizes the Company's crude oil, natural gas liquids and natural gas reserves and the net present values before income taxes of future net revenue for the Company's reserves using forecast prices and costs based on the GLJ Report. The GLJ Report has been prepared in accordance with the standards contained in National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" of the Canadian Securities Administrators ("NI 51-101").All evaluations of future net cash flows are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables in this press release represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.The reserve data provided in this release only represents a summary of the disclosure required under NI 51-101. Additional disclosure will be provided in the Company's Annual Information Form filed at www.sedar.com on or before March 31, 2011.Forward-looking information and statementsThis news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following: the volumes and estimated value of WestFire's oil and gas reserves; the life of WestFire's reserves; the volume and product mix of WestFire's oil and gas production; future oil and natural gas prices; future results from operations and operating metrics; future costs, expenses and royalty rates; future interest costs and the exchange rate between the $US and $Cdn.The recovery and reserve estimates of WestFire's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of WestFire which have been used to develop such statements and information but which may prove to be incorrect. Although WestFire believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because WestFire can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund WestFire's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which WestFire operates; the timely receipt of any required regulatory approvals; the ability of WestFire to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which WestFire has an interest in to operate the field in a safe, efficient and effective manner; the ability of WestFire to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of WestFire to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which WestFire operates; and the ability of WestFire to successfully market its oil and natural gas products.The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of WestFire's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of WestFire or by third party operators of WestFire's properties, increased debt levels or debt service requirements; inaccurate estimation of WestFire's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in WestFire's public disclosure documents (including, without limitation, those risks identified in this news release and WestFire's Annual Information Form to be filed on SEDAR on or before March 31, 2011).The forward-looking information and statements contained in this news release speak only as of the date of this news release, and WestFire does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.BOE EquivalentBarrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.About WestFireWestFire is a Calgary, Alberta based oil and gas exploration, development and production company whose shares are traded on the Toronto Stock Exchange under the trading symbol of "WFE". Currently, the Company has 44.8 million shares issued and outstanding.FOR FURTHER INFORMATION PLEASE CONTACT: Lowell JacksonWestFire Energy Ltd.President and CEO(403) 718-3601(403) 261-9658 (FAX)ORStephen BurttWestFire Energy Ltd.Vice President Finance and CFO(403) 718-3603(403) 261-9658 (FAX)The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.