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Press release from Marketwire

Birchcliff Energy Ltd. Announces Results of Montney/Doig Natural Gas Play Resource Assessment

Tuesday, April 26, 2011

Birchcliff Energy Ltd. Announces Results of Montney/Doig Natural Gas Play Resource Assessment05:00 EDT Tuesday, April 26, 2011CALGARY, ALBERTA--(Marketwire - April 26, 2011) -NOT FOR DISTRIBUTION TO THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICABirchcliff Energy Ltd. ("Birchcliff") (TSX:BIR) is pleased to announce the results of a resource assessment dated April 20, 2011 that was recently completed by AJM Petroleum Consultants ("AJM") with an effective date of December 31, 2010.This resource assessment was prepared in accordance with the Canadian Oil and Gas Evaluation Handbook ("COGEH") and includes the lands held by Birchcliff at December 31, 2010 that have potential for the Montney/Doig Natural Gas Resource Play in the Peace River Arch area of Alberta (the "AJM Resource Assessment").All resource data disclosed herein is extracted from the AJM Resource Assessment and reflects only Birchcliff's working interest share of resources for its lands in the area covered by the AJM Resource Assessment (the "Study Area").AJM is a qualified reserves evaluator and had previously estimated Birchcliff's proved and proved plus probable reserves at December 31, 2010 in a report dated February 9, 2011 (the "AJM Reserve Report").The AJM Resource Assessment relates only to Birchcliff's Montney/Doig properties and does not include Birchcliff's Worsley light oil resource play or any of Birchcliff's other properties.HighlightsThe highlights of the AJM Resource Assessment include:-- A best estimate of Total Petroleum Initially-In-Place ("PIIP") of 37.13 Tcfe. -- A best estimate of recoverable Contingent Resources of 2.52 Tcfe which is in addition to the Proved plus Probable Reserves of 0.95 Tcfe attributed to the Study Area in the AJM Reserve Report. -- These Contingent Resources are of similar technical quality as the Proved plus Probable Reserves attributed to the Study Area, but are not included in the Proved plus Probable Reserves because they are subject to contingencies described below that primarily relate to the forecast timing of development of such Resources. -- A best estimate of total Discovered Petroleum Initially-In-Place of 6.97 Tcfe. -- A best estimate of Undiscovered Petroleum Initially-In-Place of 30.15 Tcfe which includes a best estimate of recoverable Prospective Resources of 14.53 Tcfe. -- The AJM Resource Assessment covers the lands held by Birchcliff at December 31, 2010 which was comprised of 281 gross (256 net) sections of land which include Montney rights and 221 gross (194 net) sections of land which include Doig rights. -- Birchcliff has acquired another 17 gross (17 net) sections of land that are prospective for the Montney/Doig Natural Gas Resource Play since January 1, 2011 which are not covered by the AJM Resource Assessment. -- The resource estimates contained in the AJM Resource Assessment demonstrate that Birchcliff's lands on the Montney/Doig Natural Gas Resource Play have significant value and future development potential far beyond the Proved plus Probable Reserves that have been assigned to those lands by the AJM Reserve Report. Jeff Tonken, President and Chief Executive Officer of Birchcliff stated "The AJM Resource Assessment is an important data point that independently confirms Birchcliff's lands hold significant resources to execute a large scale development program. Birchcliff is in the favourable position of having a very high working interest in a large land position on a world class natural gas resource."Please see the section of this Press Release that follows and is entitled "Advisories" for a number of important and required cautionary statements relating to the disclosures of Reserves and Resources contained herein.A glossary of definitions of a number of relevant terms are set forth at the end of this Press Release.BackgroundBirchcliff holds significant high working interest acreage in large contiguous blocks on the Montney/Doig Natural Gas Resource Play in the Peace River Arch area of Alberta. Birchcliff's lands are proximal to its 100% owned Pouce Coupe South Gas Plant and to third party gathering and processing infrastructure.AJM was commissioned to estimate, as at December 31, 2010, the total petroleum initially-in-place ("PIIP") and contingent and prospective resources in the Study Area for the Doig Phosphate, Basal Doig, and Montney formations in the greater Pouce Coupe, Elmworth and Bezanson areas of the Peace River Arch region of Alberta. AJM utilized probabilistic methods to generate high, best, and low estimates of these volumes. The Study Area included 281 gross (256 net) sections of land which include Montney rights and 221 gross (194 net) sections of land which include Doig rights in an area ranging from Townships 69 to 81, Ranges 2 to 14W6. The Study Area is bounded in a northwest - southeast direction by the Montney/Doig Deep Basin Edges.Results from the AJM Resource Assessment are presented in the following table for Birchcliff's working interest share of the gross volumes. Proved and proved plus probable reserves determined by the AJM Reserve Report are included in this table for completeness, however reserves were not the focus of the AJM Resource Assessment.----------------------------------------------------------------------------Summary of Birchcliff Reserves and Resources on Birchcliff Lands(1) ----------------------------------------------------------------------------Resource Class Bcfe --------------------------------- Low Best High Estimate Estimate Estimate Case Case Case ---------------------------------------------------------------------------- Cumulative Production (2) 33.9 33.9 33.9 Remaining Reserves (2) 521.7(6) 951.6(5) N/A Surface Loss/Shrinkage 26.5 46.9 N/A Total Commercial 582.0 1,032.5 N/A -------------------------------------------------------------------------- Contingent Resources 2,164.1 2,521.2 3,520.6(4) Unrecoverable (3) 3,498.0 3,419.7 3,435.4 Total Sub-Commercial 5,662.1 5,940.9 6,956.0 -------------------------------------------------------------------------- Total Discovered PIIP 6,244.2 6,973.3 7,988.4 --------------------------------------------------------------------------- Prospective Resources 11,128.0 14,529.2 19,479.8 Unrecoverable (3) 15,037.0 15,623.7 15,599.7 Total Undiscovered PIIP 26,165.0 30,152.8 35,079.5 ---------------------------------------------------------------------------Total Petroleum Initially In Place (PIIP) 32,409.2 37,126.2 43,068.0 ----------------------------------------------------------------------------Notes: 1. All volumes at December 31, 2010. All Reserves and Resources are Gross volumes which are equal to Birchcliff's working interest share before deduction of royalties and without including any royalties held by Birchcliff. 2. Sales gas and related natural gas liquids. 3. Unrecoverable includes surface loss/shrinkage on volumes of Contingent Resources and Prospective Resources. The unrecoverable portion of Undiscovered PIIP is those quantities determined not to be recoverable by future development projects. A portion of these resources may become recoverable in the future as commercial circumstances change or technological developments occur, but the remaining portion may never be recovered due to physical and/or chemical constraints of the reservoir rock and the fluid within it. 4. This volume combines possible reserves and Contingent Resources. Possible reserves were not estimated in the AJM Reserve Report and accordingly, the high estimate of Contingent Resources have been reduced to reflect only the separate estimate of proved plus probable reserves from the AJM Reserve Report but have not been reduced to reflect an estimate of possible reserves. The possible reserves combined within the high estimate of Contingent Resources are not subject to the contingencies applicable to Contingent Resources. 5. The best estimate reflects the estimate of proved plus probable reserves contained in the AJM Reserve Report. 6. The low estimate reflects the estimate of proved reserves contained in the AJM Reserve Report. Resource CategorizationDefinitions of Resources and Reserves are included at the end of this Press Release. A summary of how these definitions are specifically applied to the Montney/Doig resource within the Study Area is presented below. For ease of reference total Petroleum Initially in Place determined by the AJM Resource Assessment is referred to herein as "PIIP".The AJM Resource Assessment presents high, best, and low estimate cases for total PIIP and these in-place volumes are divided between Discovered PIIP and Undiscovered PIIP. Discovered PIIP volumes represent the summation of cumulative historical production, remaining reserves determined by the AJM Reserve Report, Contingent Resources and Unrecoverable Resources. Undiscovered PIIP is split between Prospective Resources and Unrecoverable Resources.The following diagram illustrates the various categories of PIIP recognized by COGEH.To view the diagram, please visit the following link: http://media3.marketwire.com/docs/426bir1.pdf.In connection with the AJM Resource Assessment, Birchcliff provided AJM with detailed geological mapping in the Study Area that divided the Montney/Doig stratigraphic section into nine (9) distinct layers.The AJM Resource Assessment assigned Discovered PIIP to each individual layer of Birchcliff lands where:1. the lands are within four miles of existing production or a confirmed test of producible gas from that layer by Birchcliff or competitors. 2. the lands are to the west of the Montney/Doig Deep Basin Edge, and 3. AJM believed the layer can be geologically mapped confidently across the lands. The AJM Resource Assessment categorized all other PIIP as Undiscovered PIIP.Based on AJM's review of all wells penetrating the zone(s), related well tests, and geological mapping AJM determined that the four mile radius referred to above is the maximum distance from a confirmed test that results in sufficient confidence that the drilling of a future well will result in producible gas. Wellbores that penetrate the zone but have not been tested were used for geological mapping purposes but were not considered to be a test of the zone.The AJM Resource Assessment assigned Discovered PIIP to two distinct play intervals within portions of five of the nine individually mapped layers of the Montney/Doig. These play intervals are referred to as the Basal Doig/Upper Montney Play (which includes the Doig Phosphate, Basal Doig, and Montney D5 layers) and the Middle/Lower Montney Play (which includes the Montney D1 and Montney TSE layers).Within the Study Area, the Basal Doig/Upper Montney Play is producing in Townships 75-80 Ranges 9-13W6 area while the Middle/Lower Montney Play is produced in the area in Townships 74-80 Ranges 6-13W6 (and west of the deep basin edge).The AJM Resource Assessment has categorized each of the Montney D2, D3, D4 and C layers as Undiscovered PIIP. A portion of the Undiscovered PIIP in any of these zones on Birchcliff lands could in the future be categorized as Discovered PIIP when a well is completed in that zone by Birchcliff or another operator within a four (4) mile radius of such lands and the well is successfully tested to confirm producible gas.The AJM Resource Assessment classified Discovered PIIP on 150 gross (131 net) sections of the 281 gross (256 net) sections of Birchcliff lands that include Montney rights. Of these lands, 43 gross (34 net) sections also have reserves assigned by the AJM Reserve Report. Undiscovered PIIP was classified on a further 131 gross (126 net) sections of Birchcliff lands.The AJM Resource Assessment classified Discovered PIIP on 136 gross (112 net) sections of the 221 gross (194 net) sections of Birchcliff lands that include Doig rights. Of these lands, 71 gross (59 net) sections also have reserves assigned by the AJM Reserve Report. Undiscovered PIIP was classified on 86 gross (82 net) are classified as undiscovered.Birchcliff believes that over time, a significant portion of the Undiscovered PIIP associated with each of the Montney and Doig rights will be converted from Undiscovered PIIP to Discovered PIIP.Discovered ResourcesCommercial quantities of Discovered PIIP are comprised of cumulative production and reserves. Birchcliff's reserves were previously determined by the AJM Reserve Report and reserves were not the focus of the AJM Resource Assessment.Sub-commercial quantities of Discovered PIIP are divided by the AJM Resource Assessment between Contingent Resources and Unrecoverable Resources.Contingent Resources are those quantities of petroleum estimated to be potentially recoverable from known accumulations using established technology, but are not classified as reserves due to one or more contingencies.The AJM Resource Assessment provides a best estimate of recoverable Contingent Resources of 2.52 Tcfe. It is important to note that these Contingent Resources do not have less technical or geological merit than the proved plus probable reserves category they relate to. The Contingent Resources are considered sub-commercial because their commercialization is subject to certain contingencies relating primarily to the expected timing of their development by Birchcliff.The contingencies applicable to the Contingent Resources becoming reserves as set forth in the AJM Resource Assessment are:1. The early stage of development of the Montney/Doig resource play such that Birchcliff's development activities are still on a relatively small scale in comparison to the size of the resource. 2. A general lack of access to markets resulting from a general lack of infrastructure capacity and manpower (both internal and third party) required to develop a resource of this size. 3. The deliberate and measured pace at which Birchcliff, its working interest partners and other operators are developing these resources in the current natural gas price environment. 4. Self imposed limitations of Birchcliff to develop the resources in a timely manner as a result of other priorities and strategic opportunities may limit capital availability. Birchcliff expects to continue to increase its development activities in future years which should result in the conversion of Contingent Resources to Reserves. Birchcliff believes these same development activities are likely to also convert a portion of Prospective Resources to Contingent Resources. The pace of this conversion is expected to be dependent upon the above factors, natural gas prices, and other market conditions.Importantly, the AJM Resource Assessment states that:1. AJM is not aware of any contingencies other than those set forth above that would prohibit Birchcliff from developing the Contingent Resources; and 2. the probability of future commerciality of Birchcliff's Montney/Doig Contingent resources within the Study Area is high, even under current natural gas price conditions. The unrecoverable portion of Discovered PIIP is that quantity deemed not to be recoverable by future development projects. A portion of these resources may become recoverable in the future as commercial circumstances change or technological developments occur, but the remaining portion may never be recovered due to physical and/or chemical constraints of the reservoir rock and the fluid within it.Undiscovered ResourcesThose volumes of total PIIP that are classified as Undiscovered PIIP are divided between Prospective Resources and Unrecoverable resources. Prospective Resources are potentially recoverable petroleum from undiscovered accumulations via future development projects.In the AJM Resource Assessment a significant amount of Montney/Doig resources have been categorized as Undiscovered Prospective Resources primarily due to their distance from currently tested portions of the relevant formations. The best estimate of such Prospective Resources contained in the AJM Resource Assessment is 14.53 Tcfe.The AJM Resource Assessment states that based on the geological mapping of the Montney/Doig Natural Gas Resource Play in the Study Area the probability of discovery of these Undiscovered Resources is relatively high.The unrecoverable portion of Undiscovered PIIP are those quantities deemed not to be recoverable by future development projects. A portion of these resources may become recoverable in the future as commercial circumstances change or technological developments occur, but the remaining portion may never be recovered due to physical and/or chemical constraints of the reservoir rock and the fluid within it.Science and TechnologyPlease see the Press Release that Birchcliff issued on March 17, 2011 for a description of the advanced science and technology that is being used by Birchcliff and how this science and technology is being used to advance Birchcliff's understanding of the Montney/Doig Natural Gas Resource Play and to optimize the drilling and multi stage fracture stimulation of horizontal wells on the play. These learnings have been utilized by AJM in its preparation of the AJM Resource Assessment.ConclusionThe AJM Resource Assessment demonstrates that Birchcliff's lands on the Montney/Doig Natural Gas Resource Play have significant value and future development potential far beyond the proved plus probable reserves that have been assigned to Birchcliff lands by the AJM Reserve Report.Birchcliff expects that its land holdings on Montney/Doig Natural Gas Resource Play will provide substantial future growth and create significant value for its shareholders.Resource and Reserve DefinitionsUncertainty RangesCOGEH describes low, best, and high estimates for reserves and resources as follows:Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on: the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable and shall be disclosed.Reserves are classified according to the degree of certainty associated with the estimates.Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.ResourcesThe term "Resources" encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including Discovered and Undiscovered (recoverable and unrecoverable) plus quantities already produced. Total Resources is equivalent to total Petroleum Initially In Place ("PIIP").Total Petroleum Initially In Place ("PIIP") is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered.Discovered Petroleum Initially-In-Place is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of Discovered Petroleum Initially In Place includes Production, Reserves, and Contingent Resources; the remainder is 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.Undiscovered Petroleum Initially-In-Place is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of Undiscovered Petroleum Initially-In-Place is referred to as Prospective Resources and the remainder as Unrecoverable.Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.Unrecoverable is that portion of Discovered and Undiscovered PIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.Production is the cumulative quantity of petroleum that has been recovered at a given date.ADVISORIESDiscovered ResourcesWith respect to the Discovered Resources (including Contingent Resources) described in this Press Release, there is no certainty that it will be commercially viable to produce any portion of these Resources.Undiscovered ResourcesWith respect to the Undiscovered Resources described in this Press Release (including Prospective Resources), there is no certainty that any portion of such Resources will be discovered. If such Resources are discovered, there is no certainty that it will be commercially viable to produce any portion of such Resources.Reserves For A Portion Of PropertiesThe reserves disclosure contained herein relates to a portion of Birchcliff's properties. Accordingly, the estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation.Bcfe ConversionsTrillions of cubic feet of gas equivalent and billions of cubic feet of gas equivalent ("Tcfe" or "Bcfe")may be misleading, particularly if used in isolation. A Tcfe or Bcfe conversion ratio of six thousand cubic feet (6 mcf) of natural gas to one barrel of oil or natural gas liquids (1 bbl) is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.Boe ConversionsBarrels of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (6 mcf) of natural gas to one barrel of oil (1 bbl) is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.Forward Looking InformationThis Press Release contains certain forward-looking statements and forward-looking information (hereinafter collectively referred to as "forward-looking information") within the meaning of applicable Canadian securities laws. These statements relate to future events or future performance and are based upon the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. All statements other than statements of historical fact are forward-looking statements. In some cases, words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur, are intended to identify forward-looking statements.In particular, this Press Release contains forward-looking information relating to Birchcliff's intention to continue to grow its reserves and production and to continue to scale up the development of its assets and to convert Undiscovered Resources to Discovered Resources and to convert Contingent Resources to Reserves.The Corporation cannot guarantee future results, levels of activity, performance or achievements. Consequently, there is no representation by the Corporation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information.With respect to such forward-looking information the key assumptions on which the Corporation relies are: that future prices for crude oil and natural gas, future currency exchange rates and interest rates, and future availability of debt and equity financing will be at levels and costs that allow the Corporation to manage, operate and finance its business and develop its properties and meet its future obligations; that the regulatory framework in respect of royalties, taxes and environmental matters applicable to the Corporation will not become so onerous as to preclude the Corporation from viably managing, operating and financing its business and the development of its properties; that the Corporation will continue to be able to identify, attract and employ qualified staff and obtain the outside expertise and specialized and other equipment it requires to manage, operate and finance its business and develop its properties; and its various assumptions as to future prices for crude oil and natural gas, currency exchange rates, inflation rates, future well production rates, well drainage areas, success rates of future well drilling and future costs and availability of labour and services. With respect to estimates of Reserves and Resource volumes and numbers of future wells to be drilled, a key assumption is the validity of the commodity prices, currency exchange rates, future capital and operating costs and well production rates forecast by the Corporation's independent reserves evaluator. With respect to the number of future wells to be drilled, a key assumption is the validity of the geological and other technical interpretations that have been performed by Birchcliff's technical staff and that indicate that commercially economic reserves can be recovered from Birchcliff's lands as a result of drilling such future wells.Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Forward-looking information involves numerous assumptions, uncertainties and both known and unknown risks. There is a risk that such predictions, forecasts, and projections may not occur. Although the Corporation believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Some of those risks include: risks inherent in the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable facilities outages; risks and uncertainties involving geology of oil and natural gas deposits; uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk; general economic conditions in Canada, the United States and globally; changes in governmental regulation of the oil and gas industry, including environmental regulation; fluctuations in foreign exchange rates or interest rates; adverse conditions in the debt and equity markets; and competition from others for scarce resources.The foregoing list of risk factors is not exhaustive. The forward-looking information contained in this Press Release is expressly qualified by this cautionary statement. Additional information on these and other risk factors that could affect operations or financial results are included in the Corporation's most recent Annual Information Form. In addition, information is available in the Corporation's other reports filed with Canadian securities regulatory authorities. Forward-looking information is based on estimates and opinions of management at the time the information is presented. The Corporation is not under any duty to update the forward-looking information after the date of this Press Release to conform such information to actual results or to changes in the Corporation's plans or expectations, except as otherwise required by applicable securities laws.Birchcliff is a publicly traded company that trades on the TSX Exchange under the symbol "BIR".This press release is not for distribution to United States Newswire Services or for dissemination in the United States.FOR FURTHER INFORMATION PLEASE CONTACT: Jeff TonkenBirchcliff Energy Ltd.President and CEO(403) 261-6401(403) 261-6424 (FAX)ORMyles BosmanBirchcliff Energy Ltd.Vice President, Exploration and COO(403) 261-6401(403) 261-6424 (FAX)ORKaren PaganoBirchcliff Energy Ltd.Vice President, Engineering(403) 261-6401(403) 261-6424 (FAX)ORJim SurbeyBirchcliff Energy Ltd.Vice President, Corporate Development(403) 261-6401(403) 261-6424 (FAX)The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.