The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Petrobank Announces an Increase in May River Contingent Resources

Tuesday, June 28, 2011

Petrobank Announces an Increase in May River Contingent Resources07:00 EDT Tuesday, June 28, 2011CALGARY, ALBERTA--(Marketwire - June 28, 2011) - Petrobank Energy and Resources Ltd. (TSX:PBG) is pleased to announce an increase in our May River best estimate contingent resources to 624.1 million barrels effective June 1, 2011. To date this year, we have drilled 10 oil sands exploration wells at our May River property, which is comprised of 62 sections near Conklin, Alberta. This drilling further defined our resource and prompted the Company to request that our independent reserves evaluator, McDaniel & Associates Consultants Ltd. ("McDaniel"), update our May River property resource estimate.All references to $ are Canadian dollars unless otherwise noted. Contingent resources set forth herein are in respect of our May River property only and exclude reserves and resources for PetroBakken and all other Petrobank properties.HIGHLIGHTSMay River best estimate contingent resources increased 11% to 624.1 million barrels at June 1, 2011 (see "Resources and Contingent Resources"). May River best estimate contingent bitumen resources before tax net present value discounted at 8% increased 28% to $3.8 billion at June 1, 2011. May River proved plus probable reserves remains relatively unchanged at 90.6 million barrels. These reserves are not included in our contingent resource estimates. THAI® best estimate Exploitable Bitumen-in-Place ("EBIP") evaluated at 1.9 billion barrels versus steam assisted gravity drainage ("SAGD") best estimate EBIP of 1.6 billion barrels (see "Exploitable Bitumen-in-Place"). MAY RIVER PROPERTY RESOURCES SUMMARYThe following tables summarize McDaniel's estimates of contingent resources and net present values attributable to the May River property. Contingent Resources (1)as of,June 1, 2011December 31, 2010Change(MMbbl)(MMbbl)%Low Estimate (2)484.9474.02Best Estimate (2)624.1560.111High Estimate (2)793.0697.214(1)Contingent resources, as evaluated by McDaniel, are those quantities of bitumen estimated to be potentially recoverable using SAGD technology from known accumulations but are classified as a resource rather than a reserve primarily due to the absence of regulatory approvals, detailed design estimates and near term development plans. See "Resources and Contingent Resources".(2)A low estimate means higher certainty (P90), a best estimate (P50) means most likely and a high estimate means lower certainty (P10).Before Tax Net Present Value of Contingent Resources Discounted at 8% (1) (2) (3)June 1, 2011December 31, 2010Change($ millions)($ millions)%Low Estimate (2)2,7262,19024Best Estimate (2)3,8313,00028High Estimate (2)5,2523,79438(1)Based on McDaniel forecast bitumen prices as at April 2011 assuming recovery of those quantities of bitumen estimated to be potentially recoverable using SAGD technology from known accumulations. (2)Interest expenses and corporate overhead were not included. (3)The net present values do not represent the fair market value of the resources. Price Forecasts – May River SAGD Bitumen at Fieldgate(1)(2)May RiverApril 1, 2011Dec. 31, 2010Year(CDN$/bbl)(CDN$/bbl)201160.7156.41201262.0958.32201361.9656.82201461.3558.66201560.4960.65201661.7662.69Thereafter inflation rate2.00%2.00%(1) McDaniel's US$/CDN$ exchange rate is 1.00 in 2011 and 0.975 throughout all remaining forecast years. (2) Actual prices used were adjusted for crude oil and bitumen quality differentials, natural gas heat content, transportation and marketing costs specific to the Company's operations. Price forecasts were provided by McDaniel.THAI®Exploitable ResourceAs previously disclosed, McDaniel conducted extensive bottom up analysis of the THAI® technology and subsequently validated THAI® by issuing the THAI® Transition Report effective December 31, 2009. The McDaniel THAI® Transition Report stated that EBIP evaluated using THAI® was estimated to be 17% higher than EBIP evaluated using SAGD extraction in our May River bitumen reservoir because THAI® is able to produce bitumen from a greater portion of the reservoir, specifically the thinner and less homogenous areas, than SAGD. McDaniel's current update of our May River property estimated that best estimate EBIP using THAI® is 1.9 billion barrels, or 20% higher than best estimate EBIP of 1.6 billion barrels using SAGD extraction.Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas exploration and production company with operations in western Canada. The Company operates high-impact projects through two business units and a technology subsidiary. Petrobank's 59% owned TSX-listed subsidiary, PetroBakken Energy Ltd. (TSX:PBN), is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken is applying leading edge technology to a multi‐year inventory of Bakken and Cardium light oil development locations, along with a significant inventory of opportunities in the Horn River and Montney gas resource plays in northeast BC. PetroBakken's strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield. Whitesands Insitu Partnership, a partnership between Petrobank and its wholly-owned subsidiary Whitesands Insitu Inc., owns 104 net sections of oil sands leases in Alberta, 36 sections of oil sands licenses in Saskatchewan and 15 sections of petroleum and natural gas rights along the Kerrobert channel trend near Kerrobert, Saskatchewan, and operates the Kerrobert and Conklin projects which are field-demonstrating Petrobank's patented THAI® heavy oil recovery process. THAI®is an evolutionary in-situ combustion technology for the recovery of bitumen and heavy oil that integrates existing proven technologies and provides the opportunity to create a step change in the development of heavy oil resources globally. THAI®and CAPRI®are registered trademarks of Archon Technologies Ltd., a wholly-owned subsidiary of Petrobank Energy and Resources Ltd., for specialized methods for recovery of oil from subterranean formations through in-situ combustion techniques and methodologies with or without upgrading catalysts. Used under license by Petrobank Energy and Resources Ltd.Forward-Looking Statements: Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to anticipated recovery factors and potential resources. Forward-looking statements are necessarily based upon assumptions and judgments with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, success of future evaluation and development activities, the successful application of technology, prevailing commodity prices, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, and the regulatory and legal environment. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, risks associated with the development and application of early stage technology, recompletions and related activities; timing and rig availability; fluctuation in foreign currency exchange rates; the uncertainty of reserve and resource estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrobank that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, Petrobank assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.Resources and Contingent Resources: In this press release, Petrobank has disclosed estimated volumes of "contingent resources". "Resources" are oil and gas volumes that are estimated to have originally existed in the earth's crust as naturally occurring accumulations but are not capable of being classified as "reserves". "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. In respect of the May River property, contingencies include current uncertainties around the specific scope and timing of the development of the project; lack of regulatory approvals; uncertainty regarding marketing plans for production from the subject area; and need for improved estimation of project costs. Contingent resources do not constitute, and should not be confused with, reserves. There is no certainty that it will be commercially viable to produce any portion of the contingent resources on the May River property.Exploitable Bitumen-In-Place (EBIP):Exploitable Bitumen-in-Place is the estimated discovered volume of oil, from known accumulations, before any production has been removed, which is contained in a subsurface stratigraphic interval that meets or exceeds certain reservoir characteristics considered necessary for the application of known recovery technologies. Examples of such reservoir characteristics include continuous net pay, porosity, and mass bitumen content. EBIP is a resource that does not constitute, and should not be confused with, reserves. There is no certainty that it will be commercially viable to produce any portion of the resource.FOR FURTHER INFORMATION PLEASE CONTACT: John D. WrightPetrobank Energy and Resources Ltd.President and Chief Executive Officer403.750.4400ORChris J. BloomerPetrobank Energy and Resources Ltd.Senior Vice President and Chief Operating Officer, Heavy Oil403.750.4400ORPeter CheungPetrobank Energy and Resources Ltd.Vice President Finance and Chief Financial Officer403.750.4400403.266.5794 (FAX)ir@petrobank.comwww.petrobank.com