CALGARY, ALBERTA, Mar 07 (MARKET WIRE) --
Petrobank Energy and Resources Ltd. (TSX:PBG) announces the results of
our reserves and resources evaluation for the year ended December 31,
2012 conducted by McDaniel and Associates Consultants Ltd. ("McDaniel")
and Sproule Associates Ltd. ("Sproule") and our 2012 fourth quarter and
year-end financial and operating results.
Petrobank was incorporated as 1708589 Alberta Ltd. on October 24, 2012
for the purpose of a corporate reorganization by way of Plan of
Arrangement (the "Arrangement") with PetroBakken Energy Ltd.
("PetroBakken") and the previous Petrobank Energy and Resources Ltd.
("Old Petrobank") which existed until it was amalgamated with PetroBakken
as part of the Arrangement. The purpose of the Arrangement was to
distribute Old Petrobank's majority ownership in PetroBakken to the Old
Petrobank shareholders, effective December 31, 2012. 1708589 Alberta Ltd.
was renamed Petrobank Energy and Resources Ltd. ("Petrobank" or the
"Company") in conjunction with the Arrangement. With the Arrangement
completed, we no longer report PetroBakken's reserves or financial
information. PetroBakken released their 2012 reserves information on
February 21, 2013. The consolidated financial statements as at and for
the years ended December 31, 2012 and 2011 represent the operations of
the assets and liabilities transferred to the Company pursuant to the
Arrangement, which previously comprised the 'Petrobank Standalone'
operating segment (also referred to as 'HBU" (Heavy Oil Business Unit)
and Corporate') in our historic financial disclosure. In the opinion of
management, these consolidated financial statements reflect all
adjustments necessary to present a fair statement of the financial
position and the results of operations in accordance with International
Financial Reporting Standards ("IFRS"), however, they may not reflect
Petrobank's financial position, results of operations and cash flows had
the Company been operating in its current structure during the reporting
periods presented in these consolidated financial statements. The
historic financial results of Old Petrobank are reflected in
PetroBakken's financial statements. PetroBakken expects to announce their
year-end 2012 financial and operating results next week.
This news release includes forward-looking statements and information
within the meaning of applicable securities laws. Readers are advised to
review "Forward-Looking Information and Statements" at the conclusion of
this news release. A full copy of our Year-end and Fourth Quarter 2012
Financial Statements and Management's Discussion and Analysis ("MD&A")
have been filed on our website at www.petrobank.com and under our profile
on SEDAR at www.sedar.com.
Comparisons presented in this press release are the fourth quarter of
2012 compared to the fourth quarter of 2011 and annual comparisons are
2012 to 2011, unless otherwise noted. The comparative 2011 figures were
previously included in Old Petrobank's MD&A for the year ended December
31, 2011 as the 'HBU and Corporate' operating segment. All financial
figures are audited and in Canadian dollars ($) unless otherwise noted.
-- THAI(R) proved plus probable plus possible ("3P") reserves at our
Kerrobert project were reduced to 5.4 million barrels from 8.5 million
barrels at the end of 2011. THAI(R) proved plus probable ("2P") reserves
at our Kerrobert THAI(R) project were reduced to zero from 3.6 million
barrels at the end of 2011. These revisions are due to 2012 production
from the project not sustaining economic production rates assumed by
McDaniel in its year end 2011 report. The Exploitable Oil Initially in
Place ("EOIIP") at our Kerrobert THAI(R) project lands remained
unchanged at 18.7 million barrels (see "Exploitable Oil/Bitumen
Initially in Place").
-- In addition to our THAI(R) project, McDaniel also evaluated our North
Kerrobert and Luseland properties ("Kerrobert Trend Lands"), recognizing
best estimate contingent resources of 20.6 million barrels (see
"Resources and Contingent Resources") and EOIIP of 48.8 million barrels.
Together with the Kerrobert THAI(R) project lands, EOIIP associated with
our Saskatchewan assets totalled 67.5 million barrels.
-- Sproule conducted an evaluation of our assets at Dawson, assigning
initial proved reserves of 0.7 million barrels, 2P reserves of 1.2
million barrels and 3P reserves of 1.7 million barrels. These reserves
were based on cold production from horizontal wells.
-- Sproule assigned best estimate contingent resources of 58.3 million
barrels at Dawson and Exploitable Bitumen Initially in Place (see
"Exploitable Oil/Bitumen Initially in Place") of 436.2 million barrels
based on cyclic steam stimulation, up from 33.2 million barrels of
Exploitable Bitumen Initially in Place assigned by McDaniel in 2011,
primarily as a result of the evaluation of additional lands outside our
proposed Dawson THAI(R) project area.
Q4 and Year-End 2012 Financial and Operating Review
-- We completed a corporate reorganization on December 31, 2012 that saw
Old Petrobank shareholders effectively receive Old Petrobank's
proportionate interest in its PetroBakken shareholdings while
maintaining their interest in the remaining Petrobank assets. Petrobank
shareholders received 1.1051 PetroBakken shares and one Petrobank share
for each Old Petrobank share held at December 31, 2012. Petrobank
continued operations as a well capitalized junior heavy oil exploration
and production company leveraging unique patented technology.
-- We entered 2013 with over $90 million of positive working capital,
including over $100 million of cash, cash equivalents and marketable
securities with no debt.
-- Average production at our Kerrobert THAI(R) project increased to 307
barrels of oil per day ("bopd") in Q4 2012 compared to 305 bopd in Q3
2012 and 41 bopd in Q4 2011. Kerrobert THAI(R) production averaged 261
bopd in 2012.
-- Petrobank reported a net loss of $119.8 million in 2012 ($1.23 per
share) compared to $129.5 million in 2011 ($1.33 per share), primarily
as a result of an increase in impairment expense from $65.9 million to
$185.9 million offset by a deferred income tax recovery in 2012 compared
to a deferred income tax expense in 2011.
-- Petrobank reported expenditures on exploration assets of $41.3 million
in 2012 compared to $166.9 million in 2011. The decrease was primarily
related to the elimination of expenditures on our May River property
(along with our Conklin demonstration project) as a result of the
disposition of the property in February 2012 and the completion of our
Kerrobert expansion development capital in late 2011, offset by an
increase in capitalized pre-commercial operating costs at our Kerrobert
project from a full year of operations.
-- Concurrent with the completion of the Arrangement, we recognized a non-
cash accounting impairment related to our Kerrobert THAI(R) project and
our patents and other intangible assets of $185.9 million, reflecting
assessed value in use at December 31, 2012. We remain focused on
increasing the value of our THAI(R) related assets through the
commercialization of our Kerrobert THAI(R) project, while continuing to
conservatively steward our capital resources and maximize the future
potential of our other assets.
CORPORATE RESERVES AND RESOURCES SUMMARY
The following tables summarize our 2012 year-end reserves and resources
by project area, as well as a comparison of 2011 and 2012 year-end total
Company reserves and resources. For 2012, reserves and resources were
evaluated by McDaniel for the Kerrobert THAI(R) project and Kerrobert
Trend Lands and by Sproule for the Dawson assets. For our year-end 2011
report, all reserve and resource assessments were conducted by McDaniel.
Company Interest(1) Reserves and Resources
Kerrobert Trend Total Total
THAI(R) Lands Dawson Company Company(7) Change
Total Proved - - 0.7 0.7 - 0.7
Proved + Probable
(2P) - - 1.2 1.2 3.6 (2.4)
Proved + Probable +
Possible (3P) (3) 5.4 - 1.7 7.1(6) 8.5(6) (1.4)
Resources(4) - 20.6 58.3 78.9 - 78.9
Place(5) 18.7 48.8 436.2(8) 503.7(8) 80.7(8) 423.0(8)
(1) "Company Interest" reserves, which represent the Company's working
interest share and royalty interest share of reserves before deduction
of the Company's royalty obligations.
(2) "MMbbls" means million barrels.
(3) Possible reserves are those additional reserves that are less certain to
be recovered than probable reserves. There is a 10% probability that the
quantities actually recovered will equal or exceed the sum of proved
plus probable plus possible reserves. Stand-alone possible reserves have
been assigned to our Kerrobert THAI(R) project as a result of current
uneconomic production rates associated with the project. It is our
intention to develop such reserves by continuing to operate the project
with a view to increasing production to commercial rates.
(4) 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. See "Resources and Contingent Resources".
(5) Represents exploitable oil initially in place at the Kerrobert THAI(R)
project and Kerrobert Trend Lands and exploitable bitumen initially in
place at Dawson. Exploitable oil or bitumen initially in place is the
estimated discovered volume of oil or bitumen, as applicable, 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. The difference between
exploitable oil initially in place and 3P reserves at the Kerrobert
THAI(R) project is comprised of approximately 145,000 barrels of
production, with the remainder being considered unrecoverable. The
difference between exploitable oil or bitumen initially in place and
contingent resources or reserves on the remaining properties is
(6) This volume is an arithmetic sum of multiple estimates of proved +
probable + possible reserves, which statistical principles indicate may
be misleading as to volumes actually recovered. Readers should give
attention to the estimates of individual classes of proved, probable and
possible reserves, and appreciate the differing probabilities of
recovery associated with each class, as explained herein and in our
annual information form.
(7) Does not include May River (sold February 2012) or PetroBakken
(distributed to Petrobank shareholders December 2012).
(8) For 2012, exploitable bitumen initially in place at Dawson includes
Sproule's assessment of resources associated with all of our lands at
Dawson. For 2011, exploitable bitumen initially in place at Dawson
includes only resources associated with our initial proposed THAI(R)
Net Present Value, Before Tax, Forecast Prices ($ millions)(1)
THAI(R) Trend Lands Dawson Total Company
Total Proved - - $4.0 $4.0
Proved + Probable (2P) - - $7.9 $7.9
Proved + Probable +
Possible (3P) $63.0 - $12.6 $75.6
Contingent Resources - $71.3 $69.1 $140.4
Net Present Value, After Tax, Forecast Prices ($ millions)(1)
THAI(R) Trend Lands Dawson Total Company
Total Proved - - $2.3 $2.3
Proved + Probable (2P) - - $5.1 $5.1
Proved + Probable +
Possible (3P) $45.8 - $8.5 $54.3
Contingent Resources - $39.6 $23.9 $63.5
(1) Kerrobert and Kerrobert Trend Lands based on McDaniel forecast heavy oil
netback prices. Dawson based on Sproule forecast heavy oil netback
prices. Interest expenses and corporate overhead were not included. Net
present values are discounted at 10%. The net present values do not
represent the fair market value of the reserves and/or resources.
Petrobank first received independent recognition of THAI(R) reserves at
our Kerrobert project for year-end 2010. The Kerrobert THAI(R) project
was operational with all 12 production wells capable of production in
September 2011 and has since experienced quarter-over-quarter production
growth. However, at the end of 2012, production was not meeting the
performance criteria assumed by McDaniel in its year end 2011 report,
resulting in a revision of 2P reserves for the project to zero. We
anticipate that 1P and 2P reserves will be assignable to the project when
sustainable commercial production rates are reached. McDaniel also
reduced its estimate of peak production rates, leading to a 36% reduction
in 3P reserves.
McDaniel has assigned best estimate contingent resources and EOIIP on our
Kerrobert Trend Lands of 20.6 million barrels and 48.8 million barrels,
respectively. Including EOIIP associated with the Kerrobert THAI(R)
project, total EOIIP of all the Company's Saskatchewan heavy oil
properties was 67.5 million barrels.
Petrobank engaged Sproule to evaluate our Dawson lands in 2012. Based on
conventional cold production in our THAI(R) project area, Sproule
assigned 0.7 million barrels, 1.2 million barrels and 1.7 million barrels
of 1P, 2P and 3P reserves, respectively. Sproule also provided a resource
evaluation of our Bluesky channel and Bluesky/Gething non-channel lands.
Based on Sproule's experience with other operators near our Dawson lands,
they assigned 58.3 million barrels of best estimate contingent resource
and exploitable bitumen initially in place of 436.2 million barrels based
on cyclic steam stimulation, significantly higher than the 33.2 million
barrels assigned by McDaniel in 2011 when our non-channel lands were not
Kerrobert THAI(R) Project, Kerrobert Trend Lands and Kerrobert
Conventional Cold Production Initiative
Fourth quarter 2012 production averaged 307 barrels of oil per day
("bopd"), a small increase from Q3 2012 production of 305 bopd and an
increase from 41 bopd in the fourth quarter of 2011. January 2013
production was 236 bopd based on field estimates.
At our Kerrobert THAI(R) project, our operating focus is to continue to
reduce costs and to significantly increase air injection. With increased
injection, we will generate more heat in the reservoir and therefore
mobilize more oil. This process began in the fourth quarter of 2012 and
will continue through 2013. We began by increasing air injection on two
wells, and we are now increasing air on a full-field basis. As the wells
have different operational characteristics, our operating procedure
involves evaluating individual well performance to assess increasing air
injection rates. Since beginning this process we have increased the field
air injection rate to 20% of design capacity and we now have all wells
involved in the operating plan.
Early in 2013, we experienced frequent interventions into our KP-12
production well due to a build-up of fines that impacted downhole pump
performance. We have recently shut-in this well to evaluate a remediation
We continue to evaluate our Kerrobert Trend Lands, where we have
completed three vertical stratigraphic wells and a large 3D seismic
program. The stratigraphic wells and 3D seismic data contributed to the
increase in the EOIIP assigned by McDaniel to the Kerrobert Trend Lands.
We also completed a 4D seismic update at our Kerrobert THAI(R) project.
Petrobank currently has five conventional cold production wells operating
on our Kerrobert Trend Lands. These wells are not yet producing at
material oil rates.
Dawson Demonstration Project
At Dawson, we commenced cold production operations from both horizontal
THAI(R) production wells in late 2012 and the wells produced at a
combined rate of 20 bopd in the first two months of 2013. These wells
will continue to produce conventional heavy oil, and assist in
pre-conditioning the reservoir until such time as we commence the
start-up of the approved THAI(R) demonstration project.
In early 2013, we purchased 46 sections of land in a Saskatchewan Crown
land sale for approximately $2 million. These lands further enhance our
inventory of opportunities for new THAI(R) projects and conventional
heavy oil resources. We now own approximately 81 sections of land in
Saskatchewan and 31 sections of land at Dawson, Alberta.
LIQUIDITY AND CAPITAL RESOURCES
On completion of the Arrangement with PetroBakken at the end of 2012,
Petrobank began 2013 as a well financed junior heavy oil company
leveraging our heavy oil asset base and patented technology. We ended
2012 with positive working capital of $91 million, including $103 million
of cash and marketable securities, and no third party debt. We expect to
fund our 2013 expenditures with cash on hand and sales revenue from
Our current capital resources are expected to be more than adequate for
our planned 2013 expenditures while providing financial flexibility to
pursue future THAI(R) developments and acquisition opportunities. In
early 2013, we invested approximately $40 million of cash which is not
expected to be used during 2013 in shares and debt securities of
PetroBakken. The primary reason for this investment was to earn a
reasonable return on capital in a company with an asset base, business
plan and management team that was well known to Petrobank at the time of
the investment. These securities were purchased for investment purposes
and may be sold at any time. In addition to the PetroBakken shares
received under PetroBakken's dividend reinvestment plan in January from
the December 2012 dividend, we now hold approximately $48 million of
PetroBakken shares and debt securities based on historical cost. A
committee of Petrobank executives and directors who are independent of
PetroBakken has been formed, which approved the initial investment in
PetroBakken and is authorized to direct the timing of any future
acquisitions or dispositions of PetroBakken securities.
SUMMARY OF FINANCIAL RESULTS
The following table provides a summary of Petrobank's financial results
for the three months and year ending December 31, 2012 and 2011. Audited
consolidated financial statements with MD&A will be available on the
Company's website at www.petrobank.com and on the SEDAR website at
Three months ended Years ended
December 31, December 31,
where noted) 2012 2011 Change 2012 2011 Change
Net loss 155,830 59,482 162% 119,846 129,516 (7%)
Per share -
($)(1) 1.60 0.61 162% 1.23 1.33 (8%)
assets 9,746 27,710 (65%) 41,281 166,856 (75%)
Total assets 165,803 440,564 (62%) 165,803 440,564 (62%)
end of period
(000s)(1) 97,597 97,597 - 97,597 97,597 -
(1) Since Petrobank's shares were issued pursuant to the Arrangement, the
per share amounts and shares outstanding for all periods are based on
the number of shares outstanding on December 31, 2012.
INVESTOR CONFERENCE CALL
Management of Petrobank plans to hold a conference call for investors,
financial analysts, media and any interested persons on Friday, March 8,
2013 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss
Petrobank's year-end and fourth quarter 2012 financial and operating
results. The investor conference call details are as follows:
Live call dial-in numbers: 416-340-2217 / 866-696-5910
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 8987176
The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/030813/index.php and is
also available on our website at:
Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural
gas exploration and production company with operations in western Canada.
Petrobank is applying its patented THAI(R) heavy oil recovery process in
the field. THAI(R) is an evolutionary in-situ combustion technology for
the recovery of bitumen and heavy oil. THAI(R) and CAPRI(R) 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.
The determination of oil and natural gas reserves involves the
preparation of estimates that have an inherent degree of associated
uncertainty. Categories of proved, probable and possible reserves have
been established to reflect the level of these uncertainties and to
provide an indication of the probability of recovery. The estimation and
classification of reserves requires the application of professional
judgment combined with geological and engineering knowledge to assess
whether or not specific reserves classification criteria have been
satisfied. Knowledge of concepts including uncertainty and risk,
probability and statistics, and deterministic and probabilistic
estimation methods is required to properly use and apply reserves
The recovery and reserve estimates of oil 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 news release presents only a portion of
the disclosure required under NI 51-101. All of the required information
will be contained in our AIF, which will be filed on SEDAR on or before
March 31, 2013.
Possible Reserves: Possible reserves are those additional reserves that
are less certain to be recovered than probable reserves. There is a 10%
probability that the quantities actually recovered will equal or exceed
the sum of proved plus probable plus possible reserves.
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.
Contingencies at both Dawson and on the Kerrobert Trend lands include
current uncertainties around the specific scope and timing of the
development of the projects; 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 Kerrobert Trend or Dawson lands.
Exploitable Oil/Bitumen Initially In Place: Exploitable Oil/Bitumen
Initially in Place is the estimated discovered volume of oil or bitumen,
as applicable, 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. Exploitable Oil/Bitumen Initially in Place are resources
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.
Net Present Values (NPV): Estimated values of future net revenue
disclosed in this press release do not necessarily represent fair market
Forward-Looking Statements: Certain information provided in this press
release constitutes forward-looking statements. Specifically, this press
release contains forward-looking statements relating to financial
results, results from operations, the timing of certain projects, and
anticipated sources of available financing. Forward-looking statements
are necessarily based on a number of assumptions and judgments, including
but not limited to, assumptions relating to the outlook for commodity and
capital markets, the success of future resource evaluation and
development activities, the successful application of our technology, the
performance of producing wells and reservoirs, well development and
operating performance, general economic 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; weather conditions and access to our
properties; fluctuations in oil prices; the results of exploration and
development drilling, recompletions and related activities; timing and
rig availability; outcome of exploration contract negotiations;
fluctuation in foreign currency exchange rates; the uncertainty of
reserve estimates; changes in environmental and other regulations;
uncertainties associated with the regulatory review and approval process
in respect to our projects; risks associated with the application of
early stage technology; 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 forecasted.
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.
Petrobank Energy and Resources Ltd.
John D. Wright
Chairman and Chief Executive Officer
Petrobank Energy and Resources Ltd.
Chris J. Bloomer
Senior Vice President and Chief Operating Officer, Heavy Oil
Petrobank Energy and Resources Ltd.
Vice President Finance and Chief Financial Officer
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