The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Hawk Announces Year End Reserves and Provides Operations Update

Tuesday, March 27, 2012

Hawk Announces Year End Reserves and Provides Operations Update16:22 EDT Tuesday, March 27, 2012CALGARY, March 27, 2012 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the "Corporation") is pleased to provide an operations update and a summary of its December 31, 2011 reserve information as evaluated by GLJ Petroleum Consultants Ltd. ("GLJ").HIGHLIGHTSIncreased total proved oil reserves by 17% from 635 Mbbls in 2010 to 733 Mbbls in 2011 and increased total proved plus probable oil reserves by 1% from 1,095 Mbbls to 1,108 Mbbls;Increased crude oil and liquids reserves as a percent of total proved plus probable reserves to 85 percent at the end of 2011 from 81 percent at the end of 2010;Maintained a proved plus probable reserve life index of 8.9 years based on year end reserves divided by annualized December 2011 production;Increased undeveloped land holdings to 39,500 net acres mainly in the plains area of eastern Alberta and western Saskatchewan; andAchieved 100 percent drilling success in the first quarter of 2012 by drilling seven (2.4 net) oil wells in western Saskatchewan.OPERATIONSDuring the first quarter of 2012, Hawk drilled six (1.4 net) vertical oil wells in the Silverdale area of western Saskatchewan and one (1.0 net) vertical oil well in the Edam area of western Saskatchewan. All seven (2.4 net) wells encountered excellent reservoir in the Mannville Formation and have been cased and equipped for production. Completion operations commenced on March 20 and all six (1.4 net) wells at Silverdale are expected to be placed on production prior to March 31, 2012. The well at Edam is also expected to completed and placed on production prior to March 31, 2012.Hawk also shot 4.5 square kilometers ("kms") of three-dimensional seismic at Dankin, Saskatchewan as well as 14.5 kms of two-dimensional seismic at Prairiedale and Carruthers in western Saskatchewan. Hawk intends to use this seismic data to delineate drilling locations for upcoming drilling in 2012. Production for the first quarter of 2012 is expected to average approximately 430 boe/d, with an oil weighting of roughly 93 percent.HEDGINGDuring the first quarter of 2012, Hawk entered into a costless collar contract for West Texas Intermediate Crude ("WTI") on a notional 75 Bbl/d from July 1, 2012 to December 31, 2012 with a floor price of Canadian ("CAD") $95.00 per bbl and a ceiling of CAD $113.38 per bbl. In addition, Hawk currently has in place a contract to fix the differential between WTI and Western Canadian Select heavy oil at CAD $13.96 per bbl on a notional 100 bbls/d to June 30, 2012 and has in place a costless collar transaction for WTI with a floor price of CAD $90 per bbl and a ceiling price of CAD $103.10 per bbl on a notional 100 bbls/d to June 30, 2012.RESERVESGLJ prepared an independent engineering report in accordance with National Instrument 51-101 ("NI 51-101") with an effective date of December 31, 2011 (the "GLJ Report"). The tables below are a summary of the oil, NGL and natural gas reserves attributable to the Corporation and the net present value of future net revenue attributable to such reserves as evaluated in the GLJ Report.The net present value of future net revenue attributable to reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures and well abandonment costs for only those wells assigned reserves by GLJ.  It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to reserves estimated by GLJ represents the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein.  The recovery and reserve estimates of oil, NGL and natural gas reserves provided herein are estimates only.  Actual reserves may be greater than or less than the estimates provided herein.The reserve data provided in this press release only represents a summary of the disclosure required under NI 51-101. Additional reserves disclosure will be provided in the Corporation's Annual Information Form to be filed on SEDAR (www.sedar.com) on or before April 30, 2011.Summary of Oil and Gas Reserves as of December 31, 2011      Reserves Summary Oil Natural Gas Natural Gas Liquids Total Oil Equivalent Reserves CategoryGross(Mbbl)Net(Mbbl) Gross(MMcf)Net(MMcf) Gross(Mbbl)Net(Mbbl) Gross(Mboe)Net(Mboe)Proved             Developed Producing585500 218183 107 632537  Developed Non-producing1311 -- -- 1311  Undeveloped134110 8366 43 152124Total Proved733621 301249 1310 797672Probable374322 864544 43 523415Total Proved plus Probable1,108942 1,164792 1713 1,3191,087Net Present Value Summary as of December 31, 2011 Net Present Value of Future Net Revenue Before Income TaxesDiscounted At (%/year) Unit Value BeforeIncome TaxDiscountedat 10%/yearReserves Category0%M$5%M$10%M$15%M$20%M$ $/boeProved          Developed Producing23,32420,71518,65816,99915,636 34.72   Developed Non-producing612519447389342 41.56  Undeveloped5,1834,2163,4992,9502,520 28.22Total Proved29,11925,45122,60420,33818,498 33.63Probable15,37310,7708,0436,2785,060 19.37Total Proved plus Probable44,49236,22130,64726,61623,558 28.18Total Future Net Revenue (Undiscounted) as of December 31, 2011 Reserves CategoryRevenueM$RoyaltiesM$OperatingCostM$CapitalDevelopmentCostsM$AbandonmentCostsM$Future NetRevenueBeforeIncome TaxM$       Total Proved59,40510,05018,0731,39077329,119Total Proved plus Probable  96,45017,18031,1582,67894144,492Summary of Forecast Pricing and Inflation AssumptionsThe GLJ Report used the following prices, exchange rates, and inflation rate assumptions as of December 31, 2011:      YearWTI CushingOklahoma($US/bbl)Edmonton 40degree APICrude Oil($CAD/bbl)Lloyd Blend atHardisty($CAD/bbl)AECO - NIT Spot($CAD/mmbtu)Inflation Rate%Exchange Rate($US/$CAD)201297.0097.9681.313.292.00.982013100.00101.0282.333.932.00.982014100.00101.0282.334.392.00.982015100.00101.0282.334.842.00.982016100.00101.0282.335.302.00.982017100.00101.0282.335.752.00.982018101.35102.4083.455.992.00.982019103.38104.4785.146.112.00.982020105.45106.5886.866.232.00.982021107.56108.7388.626.362.00.98Escalated at 2.0 % per year thereafter.FINDING, DEVELOPMENT AND ACQUISITION COSTS (1)          2011 2010 Three Year Average ProvedProved plusProbable ProvedProved plusProbable ProvedProved plusProbableExploration and development costs (M$) (2)10,90710,907 15,28015,280 30,34930,349Acquisitions (M$) (2)-- -- 12,62112,621Change in future development cost (M$)                  Exploration and development40(1,475) 9363,211 1,3902,574 Acquisitions-- -- --         Net reserve additions and revisions (Mboe)         Exploration and development208103 268573 553803 Acquisitions-- -- 553826 208103 268573 1,1061,629         Finding, Development and Acquisition costs - including future development cost ($/boe)     Exploration and development52.5591.57 60.5032.27 57.3740.99 Acquisitions-- -- 22.8315.29 Total FD&A costs ($/boe)52.5591.57 60.5032.27 40.1027.96(1)The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.(2)The Corporation's annual audit of the 2011 financial statements has not been completed and accordingly all financial amounts are management's best estimates which are unaudited and subject to change.NET ASSET VALUE   M$, except per share amounts   December 31, 2011   Proved plus probable reserves discounted at 10% (before taxes) 30,647Undeveloped land (1) 4,941Net debt and working capital deficit (2)   (1,340)Proceeds from dilutive options   380Net asset value   34,628Fully diluted Class A shares outstanding (000's) (3) 35,524Net asset value per fully diluted Class A share $0.97Fully diluted Class A and Class B shares outstanding (000's) (4) 46,324Net asset value per fully diluted Class A and Class B shares $0.75(1)Undeveloped land is based on management's internal estimate at December 31, 2011. Hawk had a total of 39,530 net acres of land at December 31, 2011 assessed at an average value of $125 per net acre.(2)The Corporation's annual audit of the 2011 financial statements has not been completed and accordingly all financial amounts are management's best estimates which are unaudited and subject to change.(3)Includes Class A shares outstanding at December 31, 2011 of 34,480,953 plus dilutive options of 1,043,000.(4)For purposes of this calculation, Class B shares were converted to Class A shares at $1.00 per share such that the 1,080,000 Class B shares outstanding at December 31, 2011 were converted into 10,800,000 Class A shares.LAND HOLDINGS          Developed Undeveloped TotalAcresGrossNet GrossNet GrossNetAlberta1,6801,676 23,79623,028 25,47624,704Saskatchewan1,9741,555 21,00615,782 22,98017,337Manitoba (1)-- 720720 720720Total3,6543,231 45,52239,530 49,17642,761(1)The Corporation disposed of all of its undeveloped acreage in Manitoba in the first quarter of 2012 for cash proceeds of $300,000.Hawk is an emerging company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares and Class B Shares of Hawk trade on the TSX Venture Exchange under the trading symbols of HWK.A and HWK.B, respectively.Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.Certain statements contained in this press release constitute forward-looking statements. All forward-looking statements are based on the Corporation's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These 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 statements. Hawk believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.In particular, but without limiting the forgoing, this press release contains forward-looking statements pertaining to the following: the volumes and estimated value of the Corporation's oil and gas reserves; future oil and natural gas prices; future costs, expenses, royalty rates and the exchange rate between the $US and $CAD; supply and demand for oil and natural gas; planned development of the Corporation's oil and natural gas properties; and future capital expenditure programs. The material factors and assumptions used to develop these forward looking statements include, but are not limited to: the ability of the Corporation to engage drilling contractors, to obtain and transport equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its activities and plans; the ability of the Corporation to market its oil and natural gas and to transport its oil and natural gas to market; the timely receipt of regulatory approvals and the terms and conditions of such approval; the ability of the Corporation to obtain drilling success consistent with expectations; and the ability of the Corporation to obtain capital to finance its exploration, development and operations.Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors including, without limitation: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; changes in tax laws and incentive programs relating to the oil and natural gas industry; failure to realize the anticipated benefits of acquisitions; general business and market conditions; and certain other risks detailed from time to time in Hawk's public disclosure documents.Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Except as required under applicable securities laws, Hawk does not undertake any obligation to publicly update or revise any forward-looking statements.Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.       For further information: Steve Fitzmaurice  President, CEO and Chairman  Tel: (403) 264-0191 Ext 225  Email: steve@hawkexploration.ca  Dennis Jamieson Chief Financial Officer Tel: (403) 264-0191 Ext 234 Email: dennis@hawkexploration.ca