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Press release from Marketwire

AvenEx Energy Corp. Announces 2010 Year End Reserves and Contingent Resource Study of Cutbank Ridge Cadomin Assets

Tuesday, March 15, 2011

AvenEx Energy Corp. Announces 2010 Year End Reserves and Contingent Resource Study of Cutbank Ridge Cadomin Assets19:50 EDT Tuesday, March 15, 2011CALGARY, ALBERTA--(Marketwire - March 15, 2011) - AvenEx Energy Corp. ("AvenEx" or the "Company") (TSX:AVF) is pleased to provide summary results of its independent reserves evaluation for the year ended December 31, 2010 and contingent resource study of the Cutbank Ridge Cadomin assets in northeast British Columbia.2010 Year End Highlights-- Increased total proved reserves by 43% to 10.8 million BOE, and increased proved plus probable reserves by 48% to a total of 15.3 million BOE. -- Reserve replacement of 324% on proved reserves and 441% on proved plus probable reserves. -- All-in finding, development and acquisition costs on a proved plus probable basis of $21.43 per BOE including changes in future development costs. -- Completed an economic contingent resource study of AvenEx's Cadomin land holdings in the Cutbank Ridge area resulting in a Best Estimate Contingent Resource gas volume of 165.5 Bcf (27.6 million BOE). -- Achieved record production levels of 5,300 BOED with 47% oil and natural gas liquids at year end 2010. Summary of ReservesThe Company's independent engineering evaluation, effective December 31, 2010, was prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") in accordance with the definitions set out under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") based on forecast prices and costs. The reserves data provided in this news release represent only a portion of the disclosure required under NI 51-101. All of the remaining required disclosure will be contained in the Company's Annual Information Form for the year ended December 31, 2010, which the Company anticipates filing on SEDAR on or about March 29, 2011.Summary of Oil and Gas Reserves 31-Dec-2010, Forecast Prices and Costs Gross Reserves(1) ---------------------------------------------------------- Light and Natural Medium Gas Natural Total Oil Reserve Category Crude Oil Heavy Oil Liquids Gas Equivalent ---------------------------------------------------------------------------- (MBbl) (MBbl) (MBbl) (MMcf) (MBOE)Proved Developed Producing 3,083.2 879.5 153.7 24,720.2 8,236.4 Non-Producing 60.3 - 5.3 2,163.0 426.1 Undeveloped 368.2 - 16.5 10,515.2 2,137.2 ----------------------------------------------------------Total Proved 3,511.7 879.5 175.5 37,398.4 10,799.8 Probable Additional 1,608.2 215.9 81.3 15,471.6 4,484.0 ---------------------------------------------------------- ----------------------------------------------------------Total Proved Plus Probable 5,119.9 1,095.4 256.8 52,870.0 15,283.8 1. Gross Reserves include working interest reserves before deduction of royalties but do not include royalty interest volumes. 2. Oil equivalent amounts (BOE) have been calculated using a conversion rate of 6 mcf: 1bbl. Summary of Net Present Values of Future Net Revenue, Forecast Prices and Costs Company Share of Net Present Value Before Income Tax (k$)(1)(2) ------------------------------------------------------Reserve Category 0% 5% 10% 15% 20%----------------------------------------------------------------------------Proved Developed Producing 227,293.5 183,764.6 154,967.9 134,705.5 119,707.2 Non-Producing 6,659.3 5,733.4 5,034.3 4,490.2 4,055.2 Undeveloped 25,652.1 17,117.4 11,534.8 7,698.6 4,953.3 ------------------------------------------------------Total Proved 259,605.0 206,615.4 171,537.0 146,894.4 128,715.6 Probable Additional 133,783.2 85,889.2 60,667.1 45,762.8 36,150.4 ------------------------------------------------------ ------------------------------------------------------Total Proved Plus Probable 393,388.3 292,504.7 232,204.1 192,657.3 164,866.0 1. McDaniel December 31, 2010 Forecast Prices and Costs. 2. Estimated values do not represent fair market value. Reserves Reconciliation ----------------------- Reserves (MBOE) -------------------------------- TP TPP --------------------------------Dec 31, 2009 Opening Balance 7,675 10,503 2010 Production(1) (1,446) (1,446)Technical Revisions 788 255 2010 Acquistion and Disposition 2,018 3,448 2010 Additions 1,884 2,676 -------------------------------- --------------------------------Dec 31, 2010 Closing Balance 10,919 15,436 (1) Reserve and production totals include company working interest and royalty interest volumes.Reserves ReplacementFor the 12 months ending December 31, 2010, AvenEx added Company interest reserves of 4.69 million BOE proved reserves and 6.38 million BOE proved plus probable reserves. When divided by the 12 month Company interest production of 1.45 million BOE, these additions represent reserves replacements of 324% for proved reserves and 441% for proved plus probable reserves.2010 Finding and Development CostsThe following table summarizes the finding and development (F&D) and the finding, development and acquisition (FD&A) costs of AvenEx for 2010 and the three year average from 2008 to 2010: 2010 Three-Year Average ------------------------------------------- Total Total Proved Proved Total plus Total plus Proved Probable Proved Probable -------------------------------------------Finding and Development ----------------------------------------------------------------------------------------------------Explore and Develop (k$) 29,981 29,981 64,488 64,488Change in Future Capital (k$) 8,550 8,381 12,194 11,763 ------------------------------------------- -------------------------------------------Total (k $) 38,531 38,362 76,682 76,251Reserve Additions (MBOE) 2,672 2,931 4,532 4,999F&D Excluding Future Capital ($/BOE) 11.22 10.23 14.23 12.90F&D Including Future Capital ($/BOE) 14.42 13.09 16.92 15.25----------------------------------------------------------------------------Finding, Development and Acquisition -----------------------------------------------------------------------------------------------------Explore and Develop (k$) 112,687 112,687 171,350 171,350Change in Future Capital (k$) 17,526 24,026 24,240 31,211 ------------------------------------------- -------------------------------------------Total (k $) 130,213 136,713 195,589 202,561Reserve Additions (MBOE) 4,690 6,379 8,206 10,715FD&A Excluding Future Capital ($/BOE) 24.03 17.67 20.88 15.99FD&A Including Future Capital ($/BOE) 27.76 21.43 23.83 18.90----------------------------------------------------------------------------AvenEx calculates the FD&A costs inclusive of all exploration and development expenditures including land and seismic. Under NI 51 - 101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital ("FDC") required to bring the proved undeveloped and probable reserves to production. For continuity, AvenEx has presented herein FD&A costs calculated both excluding and including FDC. As a result of the corporate acquisition of Great Plains Exploration Ltd. and various land and seismic acquisitions in 2010, AvenEx has included the expenditure of $21 million in the FD&A analysis. The Company has added approximately 103,000 net undeveloped acres to its land base in 2010. In all cases, the FD&A number is calculated by dividing the identified capital expenditures by the applicable reserve additions.Evaluation of Economic Contingent Resources for Cutbank Ridge in the Cadomin FormationTo gain a better understanding of the size and quality of the Company's asset base and growth potential of the Cadomin resource in the Cutbank Ridge of northeast British Columbia, AvenEx engaged McDaniel to prepare an evaluation of the economic contingent resources for its Cutbank Ridge land holdings. The evaluation was prepared in accordance with the definitions set out under NI 51-101.The Cadomin formation in the Cutbank Ridge area is a deep basin gas resource which produces sweet natural gas from a conglomeratic sandstone reservoir ranging from 10 to 30 meters in thickness at depths of approximately 2,500 meters. AvenEx currently holds Cadomin rights in 26,000 gross acres (37 drilling spacing units) at an average working interest of 79%. These lands are contiguous with the Cutbank Ridge Cadomin play in which over 200 horizontal wells have been drilled to date. The evaluation of the AvenEx lands identifies 81 gross horizontal drilling locations in the full development scenario of this contingent Cadomin resource.Economic contingent resources fall into three categories: low estimate (1C), best estimate (2C) and high estimate (3C). The three classifications of contingent resources have the same degree of technical certainty as the corresponding reserves categories. In determining their economic viability, the same commodity price assumptions are applied as estimating proved, probable and possible reserves. Low, best and high estimates are measures of the probability that the disclosed volumes could be exceeded. The low volume estimate is a measure whereby there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate of resources should hydrocarbons be discovered. The best volume estimate is a measure whereby there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate of resources should hydrocarbons be discovered. The high volume estimate is a measure whereby there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate of resources should hydrocarbons be discovered.The Discovered GIIP (Gas Initially In Place) underlying Company lands was evaluated at 419.5 Bcf of natural gas with the Company's working interest share at 338.0 Bcf of natural gas. The Low, Best and High Estimate contingent resources as of December 31, 2010 were evaluated and the Company share gross and net contingent resources are presented below:Estimated Company Share of Economic Contingent Resources as of December 31, 2010Classification / Level of Certainty Gross (1) Net (2)---------------------------------------------------------------------------- (MMcf) (MMcf)Low Estimate Contingent Resources 67,600 57,387 Best Estimate Contingent Resources 165,493 135,576 High Estimate Contingent Resources 207,440 166,529 1. Gross resources include the working interest contingent resources before deductions of royalties payable to others. 2. Net contingent resources include gross resources after royalties payable to others plus royalty interest resources received. Estimated Company Share of Net Present Values Before Income Taxes as of December 31, 2010 Based on Forecast Prices and Costs Before Tax Net Present Value (k$) (1)(2) ---------------------------------------------------------Classification / Level of Certainty 0% 5% 10% 15% 20%----------------------------------------------------------------------------Low Estimate Contingent Resources 94.1 43.8 16.3 0.4 -9.1Best Estimate Contingent Resources 348.3 161.5 78.4 37.1 14.9High Estimate Contingent Resources 541.3 250.3 128.9 70.0 38.21. Based on McDaniel & Associates January 1, 2011 forecast natural gas prices. 2. The net present values do not represent the fair market value of the contingent resources. Contingent resources have been considered where there are contingencies that impede the commerciality of known projects with discovered resources in place. The following are considerations for commerciality that distinguish contingent resources from reserves for the Company's Cadomin resources:-- Timing of Development - AvenEx does not currently have plans to fully develop the Cadomin resource within the timing set out in the McDaniel report. -- Facility Constraints - While capacity currently exists for the peak rates defined in the McDaniel report, AvenEx cannot guarantee this capacity will exist in future years. AvenEx has participated in nine horizontal Cadomin wells in the Cutbank Ridge area since 2006 to validate the resource potential on the Company lands. These wells have consistently met expectations with IP 30 rates averaging 5.7 MMCF of gas per day per well. AvenEx's net share in all classifications of economic contingent resources does not include the 18,900 MMcf of net proved plus probable gas reserves assigned to the Cadomin in the Company's December 31, 2010 reserve report.Information Regarding Disclosure on Oil and Gas Reserves, Resources and Operational InformationAll amounts in this news release are stated in Canadian dollars unless otherwise specified. Where applicable, natural gas has been converted to barrels of oil equivalent ("BOE") based on 6 Mcf: 1 BOE. The BOE rate is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead. Use of BOEs in isolation may be misleading. In accordance with Canadian practice, production volumes and revenues are reported on a company gross basis, before deduction of Crown and other royalties, unless otherwise stated. Unless otherwise specified, all reserves volumes in this news release (and all information derived therefrom) are based on "company interest reserves" using forecast prices and costs. "Company interest reserves" consist of "company gross reserves" (as defined in National Instrument 51-101 adopted by the Canadian securities regulators ("NI 51-101") plus AvenEx's royalty interests in reserves. "Company interest reserves" are not a measure defined in NI 51-101 and does not have a standardized meaning under NI 51-101. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year. Our oil and gas reserves statement for the year ended December 31, 2010, which will include complete disclosure of our oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be contained within our Annual Information Form which will be available on our SEDAR profile at www.sedar.com.This news release contains references to estimates of gas classified as discovered gas initially in place which are not, and should not be confused with, oil and gas reserves. "Discovered gas initially in place" ("DGIIP") is defined in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") as the quantity of hydrocarbons that are estimated to be in place within a known accumulation prior to production. DGIIP is divided into recoverable and unrecoverable portions, with the estimated future recoverable portion classified as reserves and contingent resources and the remainder as at evaluation date is by definition classified as unrecoverable. Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. There is no certainty that it will be economically viable to produce any portion of the resources.Projects have not been defined to develop the resources in the evaluated areas as at the evaluation date. Such projects, in the case of the Cutbank Ridge resource development, have historically been developed sequentially over a number of drilling seasons and are subject to annual budget constraints, AvenEx's policy of orderly development on a staged basis, the timing of the growth of third party infrastructure, the short and long-term view of AvenEx on gas prices, the results of exploration and development activities of AvenEx and others in the area and possible infrastructure capacity constraints.Year End 2010 Audited Financial StatementsAvenEx intends to file its audited financial statements and related management's discussion and analysis ("MD&A") for the year ended December 31, 2010 together with a first quarter 2011 operational update on or around March 29, 2011. The estimated results used in this press release are subject to any final changes upon the completion of the audited financial statements.AvenEx Energy Corp. was created to provide stable, sustainable dividends to shareholders while providing modest growth. AvenEx is focused on energy with two distinct business units, namely Oil & Gas development and production and LPG marketing and logistics.AvenEx trades on the TSX under the symbol AVF. For further information on AvenEx please go to our website at: www.avenexenergy.com.This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.Forward Looking InformationThis news release contains certain forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information. In particular, but without limiting the foregoing, this news release contains forward- looking information pertaining to the following: the recognition of significant additional reserves and contingent resources, the volumes and estimated value of AvenEx's oil and gas reserves and contingent resources;;the volume and product mix of AvenEx's oil and gas production; future oil and natural gas prices; future results from operations and operating metrics; and future development, exploration, acquisition and development activities (including drilling plans) and related production expectations.The forward-looking information and statements contained in this news release reflect several material factors and expectations and assumptions of AvenEx including, without limitation: that AvenEx will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities will be consistent with past results; the continued and timely development of infrastructure in areas of new production; the general continuance of current industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the accuracy of the estimates of AvenEx's reserve and resource volumes; certain commodity price and other cost assumptions; and the continued availability of adequate debt and equity financing and cash flow to fund its plans expenditures. There are a number of assumptions associated with the development of AvenEx, including the quality of the reservoirs, continued performance from existing wells, future drilling programs and performance from new wells, the growth of infrastructure, well density per section, recovery factors and development necessarily involves known and unknown risks and uncertainties, including those risks identified in this press release. AvenEx believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.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 statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; the early stage of development of some areas; the potential for variation in the quality of the formations, changes in the demand for or supply of AvenEx's products; unanticipated operating results or production declines; unanticipated results from AvenEx's exploration and development activities; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of AvenEx or by third party operators of AvenEx's properties, increased debt levels or debt service requirements; inaccurate estimation of AvenEx'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 AvenEx's public disclosure documents (including, without limitation, those risks identified in this news release and in AvenEx's Annual Information Form).The forward-looking information and statements contained in this news release speak only as of the date of this news release, and none of AvenEx or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.FOR FURTHER INFORMATION PLEASE CONTACT: Grant LeslieAvenEx Energy Corp.COO Energy(403) 237-9949(403) 237-0903 (FAX)ORGary H. DundasAvenEx Energy Corp.Vice-President, Finance and CFO(403) 237-9949(403) 237-0903 (FAX)ORSuite 300, 808 - 1st Street S.W.AvenEx Energy Corp.Calgary, Alberta T2P 1M9www.avenexenergy.com