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Press release from Marketwire

BlackPearl Announces 2011 Year-End Reserves and Resource Estimates and Provides Operations Update

Monday, January 30, 2012

BlackPearl Announces 2011 Year-End Reserves and Resource Estimates and Provides Operations Update16:51 EST Monday, January 30, 2012CALGARY, ALBERTA--(Marketwire - Jan. 30, 2012) -BlackPearl Resources Inc. ("BlackPearl" or the "Company") (TSX:PXX)(FIRST NORTH:PXXS) is pleased to announce the results of its 2011 year-end oil and gas reserves evaluation, contingent resource evaluation and to provide an operations update on the Company's current activities. Highlights include:44% increase in total proved and probable reserves to 35.8 million barrels of oil equivalent; Reserve additions of 13.8 million barrels for the year were offset by production of 2.8 million barrels, representing replacement of 495% of 2011 production; The increase in reserves is primarily attributable to new drilling at Mooney and John Lake, as well as initial recognition of reserves for the Blackrod SAGD pilot; Over 99% of reserves are heavy oil; 752 million barrels of contingent resources (best estimate) on our 3 core properties; A portion of the contingent resource barrels attributable to our thermal project at Blackrod is expected to be recognized as reserves in 2012 after a commercial development application is submitted; Our largest property is the Blackrod SAGD project with 2P reserves and best estimate contingent resources of 650 million barrels of oil and potential production of 80,000 barrels of oil per day; Q4 production of 8,734 boe/day; year-end production in excess of 9,500 boe/day. John Festival, President of BlackPearl, commenting on the new reserves and resource evaluations indicated that, "Our reserve additions in 2011 are a reflection of the growth we have seen in 2011, but more importantly it is a validation of our three core properties and their performance. The ultimate potential at Blackrod, Onion Lake and Mooney is identified in the resource report and as we advance each project, barrels will be moved from the resource category to the reserves category. "At Mooney, additional drilling extended the pool to the west, which will eventually lead to an expansion of our ASP (alkali, surfactant, polymer) flood. At Onion Lake, we are delineating the pool with primary drilling and production, and this will lead to a full-scale thermal project on these lands. Our pilot results at Blackrod have moved two million barrels from resource to reserves and we expect many more barrels to be recognized as reserves as we file our 80,000 barrel per day commercial application in 2012."Over the last three years we have grown production from 5,000 to 10,000 barrels of oil per day. However, 2012 will be the start of a transition period for BlackPearl as we have now set the stage for growth to 30,000 barrels of oil per day by 2016 as we bring on our thermal projects. We did not meet our 2011 exit target of 11,000 barrels of oil per day due to our decision to alter our primary recovery development plans at Onion Lake to accommodate our thermal project which are over the same lands. We expect to maintain a production level of 10,000 to 13,000 barrels of oil per day over the next several years during this transition period. Some of our cash flow will be spent keeping our production at these levels and the remainder will be used to fund the development of our thermal and ASP flood projects. We are currently evaluating additional funding alternatives to develop these major projects." Oil and Gas Reserves The following tables summarize certain information contained in the independent reserves report prepared by Sproule Unconventional Limited ("Sproule") as of December 31, 2011. The report was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR by March 31.On a net present value basis (10% discount, before tax), approximately 42% of the value of the proved plus probable reserves were attributable to the Onion Lake area and 41.6% was attributable to the Mooney area. Summary of Oil and Gas Reserves - Forecasted Prices and Costs (Company interest, before royalties)Oil&NGL ReservesNatural Gas Reserves2011 BOE (1)2010 BOE (1)(Mbbls)(MMcf)(Mboe)(Mboe)Proved developed producing6,5624826,6424,767Proved developed non-producing1,18101,181363Proved undeveloped7,4202147,4566,578Total proved15,16369615,27911,708Probable20,3131,31120,53113,130Total proved plus probable35,4762,00735,81124,838Notes:(1) BOEs may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 Mcf:1 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.Net Present Value of Reserves - Forecasted Prices and CostsNet Present Values of Before Tax Future Net Revenue Discounted at0%5%8%10%12%($000)ProvedDeveloped producing211,754199,475193,025189,047185,298Developed non-producing32,43127,15724,58023,05921,676Undeveloped150,102117,965103,02894,41786,701Total proved394,286344,598320,634306,523293,674Probable643,638442,749368,748330,335298,185Total proved plus probable1,037,924787,347689,382636,858591,859Net Present Values of After Tax Future Net Revenue Discounted at0%5%8%10%12%($000)ProvedDeveloped producing211,754199,475193,025189,047185,298Developed non-producing32,43127,15724,58023,05921,676Undeveloped150,102117,965103,02894,41786,701Total proved394,286344,598320,634306,523293,674Probable499,439343,694286,239256,416231,470Total proved plus probable893,725688,292606,873562,940525,137Notes:Columns may not add due to roundingReconciliation of Changes in ReservesThe following table summarizes the changes in the Company's share of oil and natural gas reserves (before royalties) from December 31, 2010 to December 31, 2011.Oil & NGLsNatural gasBOEProvedProbableTotalProvedProbableTotalTotal(Mbbls)(Mbbls)(Mbbls)(MMcf)(MMcf)(MMcf)(Mboe)Balance, Dec 31, 201011,34712,91224,2592,1701,3073,47624,838Production(2,722)-(2,722)(350)-(350)(2,781)Extensions4,6842,3927,0762522384907,158Discoveries2,0184372,455---2,455Technical revisions(386)(407)(793)(73)(288)(361)(853)Improved recovery-4,9274,927-3203204,980Acquisitions24254296---296Dispositions(5)(1)(6)(1,181)(288)(1,468)(251)Economic factors(14)(1)(15)(123)23(100)(32)Balance, Dec 31, 201115,16320,31335,4766951,3112,00735,811The pricing assumptions used in the Sproule evaluation are summarized below.Pricing Assumptions - Forecast Prices and CostsYearWTI Cushing 40° APIEdmonton Par Price 40° APIWestern Canadian Select 20.5° APIAlberta AECO-C SpotInflation rateExchange rate(US$/bbl)(CDN$/bbl)(CDN$/bbl)(CDN$/MMBtu)(%/yr)(US$/Cdn$)201298.0796.8782.343.162.01.012201394.9093.7579.693.782.01.012201492.0090.8977. rate of 2.0% thereafterNotes:(1) The pricing assumptions were provided by Sproule Unconventional Limited. (2) None of the Company's future production is subject to a fixed or contractually committed price.Definitions:1. "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.b. "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.c. "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.d. "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty. e. "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.f. "Undeveloped" reserves are those reserves expected to be recovered from know accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.g. The Net Present Value (NPV) is based on Sproule Forecast Pricing and costs. The estimated NPV does not necessarily represent the fair market value of our reserves. There is no assurance that forecast prices and costs assumed in the Sproule evaluations will be attained, and variances could be material. Contingent Resources The following tables summarize certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2011. The reports were independently prepared in accordance with definitions, standards and procedures contained in the COGE Handbook. It should not be assumed that the estimates of recovery, production, and net revenue presented in the tables below represent the fair market value of the Company's contingent resources. There is no assurance that the forecast prices and cost assumptions will be realized and variances could be material. The recovery and production estimates of the Company's contingent resources provided herein are only estimates and there is no guarantee that the estimated contingent resources will be recovered or produced. Actual contingent resources may be greater than or less than the estimates provided here. There are certain contingencies which currently prevent the classification of these contingent resources as reserves. Information on these contingencies will be outlined in our Annual Information Form. There is no certainty that it will be commercially viable for the Company to produce any portion of the contingent resources on any of its properties.Summary of Best Estimate (P50) Contingent Resource - By Property (1)(3) ProjectGross(2) Heavy Oil/BitumenNet Present Values of Before Tax Future Net Revenue as of December 31, 2011Contingent Resources - Best Estimate Discounted at0%5%8%10%12%(MMboe)($million)Blackrod64816,5166,1283,5612,5221,804Onion Lake672,8611,4911,039824656Mooney371,055494336264210Total75220,4328,1134,9363,6102,670 Project Gross(2) Heavy Oil/BitumenNet Present Values of After Tax Future Net Revenue as of December 31, 2011 Contingent Resources - Best Estimate Discounted at0%5%8%10%12%(MMboe)($million)Blackrod64812,3594,4502,5211,7471,418Onion Lake672,0891,071735575450Mooney37791368249195154Total75215,2395,8893,5052,5172,022Notes:These volumes are arithmetic sums of multiple estimates of contingent resources, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class as explained. Contingent Resources are defined in the COGE Handbook as 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 are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as Contingent Resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Best estimate (P50) is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually 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% probability that the quantities actually recovered will equal or exceed the best estimate. The estimates of contingent resources (best estimate) and future net revenue for individual properties may not reflect the same confidence levels as estimates of contingent resources (best estimate) and future net revenues for all properties, due to the effects of aggregation. "Gross" means the Company's working interest share in the contingent resources of bitumen and heavy oil before deducting royalties. The Company has a 100% working interest at Blackrod and Mooney, and a 79.795 to 87.5% working interest at Onion Lake. The amounts included in these tables do not include the volume and value of BlackPearl's proved and probable reserves previously assigned by Sproule to these properties. Operations Update BlackPearl's Q4 2011 oil and gas sales volumes were 8,734 boe per day, which represents an 8% increase over Q3 2011 sales volumes and a 20% increase over Q4 2010 sales volumes. Our 2011 year-end exit production was between 9,500 and 10,000 barrels per day. The increase in fourth quarter production is attributable to drilling at Onion Lake and John Lake, as well as, drilling on our phase two expansion lands at Mooney. Our year-end production rates were lower than our guidance of 11,000 barrels of oil per day. The shortfall is partially attributable to 16 vertical wells drilled in 2011 at Onion Lake that have not been brought on production. These wells were originally drilled to help delineate the thermal development area. We planned to then conventionally produce these wells; however, we have since elected not to bring these on production until we establish our plans to accommadate future thermal development of the area. In addition, during the fourth quarter we encountered considerable difficulty locating third party oil processing facilities that had capacity to handle our Onion Lake volumes which resulted in both reduced production and increased inventories. We are currently evaluating construction of our own processing facility for the Onion Lake area.Our SAGD pilot at Blackrod continues to perform up to our expectations with current production of over 250 barrels of oil per day and an instantaneous steam oil ratio of just over three. We expect oil production to reach our target of 500 to 800 barrels of oil per day later this year.Polymer injection is continuing at Mooney but we do not anticipate seeing any oil production response from the flood until later this year. Other The Company is planning to release its 2011 year-end financial and operating results on February 27, 2012.Forward-Looking StatementsCertain of the statements made and information contained herein is forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. Forward-looking statements are typically identified by such words as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "potential", "targeting", "intend", "could", "might", "should", "believe" or similar words suggesting future events or future performance. In addition, statements relating to "reserves" or "resources", "contingent resource" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resource described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this document contains forward-looking statements pertaining to, the volumes and estimated value of BlackPearl's proved and probable reserves, the volumes and estimated value of BlackPearl's contingent resource of bitumen and heavy oil, forecasted future production levels and timing of reaching these production levels, timing of financing decisions to develop our properties and timing of the reclassification of certain of our contingent resources to reserves. Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.Forward-looking statements are based on the Company's current beliefs as well as assumptions made by, and information currently available to, the Company, including, without limitation, information and assumptions concerning anticipated financial performance, business prospects, strategies, regulatory developments, future commodity prices, future production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market oil and natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.The Corporation does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.BlackPearl's Certified Advisor on First North is Pareto Öhman AB.Company Registration Number: 409596-1FOR FURTHER INFORMATION PLEASE CONTACT: John FestivalBlackPearl Resources IncPresident and Chief Executive Officer(403) 215-8313john.festival@pxx.caORDon CookBlackPearl Resources IncChief Financial Officer(403) 215-8313(403) 265-8324 (FAX)