Mr. Paul Starnino reports
HIGH NORTH RESOURCES LTD. ANNOUNCES UPDATE ON DEBENTUREHOLDERS' MEETING, CORPORATE UPDATE AND UPDATE OF RESERVES NUMBERS FROM GLJ PETROLEUM CONSULTANTS LTD.
High North Resources Ltd. has provided updates.
Debentureholders meeting update
High North is pleased to announce that it has received an interim order of the Supreme Court of British Columbia dated May 4, 2015. The interim order provides for, among other things, the holding of an extraordinary meeting of the holders of its 12.00-per-cent convertible unsecured subordinated debentures due April 4, 2015, to approve the previously announced arrangement under the Business Corporations Act (British Columbia), which will provide for, among other things, certain amendments to the debentures. The TSX Venture Exchange has also conditionally approved the arrangement.
The meeting is scheduled to be held on June 4, 2015, at 10 a.m. (Mountain Daylight Time), at First Canadian Centre, conference centre, 350 7th Ave. Southwest, Calgary, Alta., T2P 3N9. The record date for determining the debentureholders entitled to receive notice of and vote at the meeting is April 6, 2015.
In connection with the meeting, High North has entered into support agreements with certain debentureholders. As at the date hereof, holders of approximately 77 per cent of the principal amount of debentures have executed support agreements. Additional debentureholders may execute support agreements prior to the meeting. Pursuant to the terms of the support agreements, each consenting debentureholder has agreed, subject to certain terms and conditions, to vote in favour of the arrangement.
A copy of the form of support agreement will be filed under High North's profile on SEDAR.
The board of directors of High North has unanimously approved the arrangement and recommends that debentureholders vote in favour of the arrangement.
High North intends to mail the notice of extraordinary meeting and management information circular, together with a form of proxy, to debentureholders of record on or about May 7, 2015. The meeting materials will also be available on High North's SEDAR profile on the day of mailing.
Corporate update
In connection with the expiry of the management agreement, Roger Bethell's term as vice-president, exploration, of the company concluded, effective April 30, 2015. Mr. Bethell will continue to serve the company in his capacity as a member of the board of directors of High North.
Reserves update
High North is also pleased to announce that GLJ Petroleum Consultants Ltd. has completed an independent reserves assessment and evaluation report dated April 14, 2015, and effective March 31, 2015, on the reserves attributed to the company's Girouxville property, located in northwestern Alberta, Canada.
The GLJ report was prepared in accordance with the requirements of National Instrument 51-101 (standards of disclosure for oil and gas activities), with the net present value of future net revenue attributable to reserves based on GLJ's price deck as of April 1, 2015. The results of the GLJ report update High North's previously filed Form 51-101 F1 (statements of reserves data and other oil and gas information), dated Jan. 23, 2015, and effective Sept. 30, 2014.
Summary of reserves (forecast prices and costs)
The principal oil and gas assets of High North are located in Girouxville-McLean in the Peace River Arch area of northwestern Alberta. The company holds a 100-per-cent working interest in six wells and 9,600 hectares of leases. A multiwell battery has been installed, and continuing infrastructure construction is subject to obtaining additional financing. High North had drilled and completed five wells, all of which were on production by its fiscal year ended Sept. 30, 2014. The sixth well was drilled during the three months ended Dec. 31, 2014, and completed during February, 2015. The first five wells have produced; however, due to costly water handling and low commodity prices, three wells have been temporarily shut in. The sixth well is capable of production but is currently shut in until water-handling facilities can be installed.
SUMMARY OF OIL RESERVES
AS AT MARCH 31, 2015
Light and medium oil
Gross Net
Reserves category (Mbbl) (Mbbl)
Proved
Proved producing 223 153
Proved developed non-producing 102 87
Proved undeveloped 411 335
Total proved 736 575
Probable 728 558
Total proved plus probable 1,464 1,133
TOTAL FUTURE NET REVENUE
AS AT MARCH 31, 2015
(M$)
Net present value of future
revenue
before income taxes discounted at
(%/year)
Reserves 0% 5% 10% 15% 20%
category
Proved
Proved producing $4,441 $3,602 $3,000 $2,553 $2,211
Proved developed non-
producing 431 263 128 17 (75)
Proved undeveloped 9,972 7,564 5,851 4,598 3,659
Total proved 14,843 11,429 8,979 7,168 5,795
Probable 25,224 17,418 12,716 9,707 7,680
Total proved plus probable 40,067 28,847 21,695 16,875 13,475
NET PRESENT VALUE OF FUTURE REVENUE
(M$)
After income taxes discounted at
(%/year)
Reserves 0% 5% 10% 15% 20% Unit value
category $/bbl
Proved
Proved producing $4,441 $3,602 $3,000 $2,553 $2,211 $19.61
Proved developed non-
producing 431 263 128 17 (75) 1.47
Proved undeveloped 9,972 7,564 5,851 4,598 3,659 17.47
Total proved 14,843 11,429 8,979 7,168 5,795 15.62
Probable 20,389 14,157 10,389 7,970 6,335 22.83
Total proved plus probable 35,232 25,586 19,368 15,138 12,130 19.15
TOTAL FUTURE NET REVENUE (UNDISCOUNTED)
AS AT MARCH 31, 2015
(M$)
Operating Development
Revenue Royalties costs costs
Reserves category
Proved $63,047 $11,169 $25,551 $11,111
Probable 78,366 14,080 29,698 9,156
Proved plus probable 141,413 25,249 55,250 20,267
Future net Future net
revenue revenue
Abandonment before after
and income Income income
reclamation taxes taxes taxes
Reserves category
Proved $373 $14,843 $0 $14,843
Probable 208 25,224 4,835 20,389
Proved plus probable 581 40,067 4,835 35,232
Future development costs
The attached future development costs table sets out the total development costs deducted in the estimate of future net revenue attributable to total proved reserves and proved plus probable reserves using forecast prices and costs.
FUTURE DEVELOPMENT COSTS
(M$)
Proved reserves Proved plus probable reserves
Canada (Alberta)
2015 $2,135 $2,135
2016 8,976 8,976
2017 -- 9,156
2018 -- --
2019 -- --
2020 -- --
Remaining -- --
Total (undiscounted) 11,111 20,267
Total discounted (10%) 10,028 17,416
Future development costs are associated with reserves in the GLJ report and do not necessarily represent High North's total capital budget. The company has the following potential sources to finance development costs: cash flow generated from operations, debt, new equity issuances and joint ventures, if appropriate. The current state of the oil and gas industry makes it difficult to access these sources, and therefore the company does not have the ability at this time to finance these future development costs. The company believes that the costs associated with the sources of financing would not make any of the existing properties uneconomic or have a material impact on disclosed reserves or future net revenue.
Oil and gas properties and wells
High North is in the initial stages of developing its lands for Montney oil and gas production. In April, 2014, the company purchased seven sections of land resulting in 20.25 contiguous sections prospective for Montney rights adjacent to its current production in Section 2-76-21W5M. As of March 31, 2015, the company owned 8,576 hectares of undeveloped land with potential Montney rights. The company anticipates a minimum of four horizontal wells per section targeting Montney oil could be drilled on these prospective lands.
The company's production as at March 31, 2015, remains stable at approximately 235 barrels of oil per day. Six wells have been drilled and completed by the company with a 100-per-cent success rate. Currently, two wells are on production. The four shut-in wells are capable of commercial production. The company anticipates that its full production capabilities will be realized once gas production is tied in and a water-handling facility is constructed. The company's operations have recently been, and will continue to be, focused on both of these projects over the next few months.
The Alberta Energy Regulator has granted approval to High North to flare the associated gas production from the wells until Aug. 1, 2015. Therefore, the company is currently pursuing the installation of a power generation facility whereby the produced associated gas will be utilized as fuel gas, and the excess will be marketed to the electrical grid. The company expects that it will then realize the revenue and cash flow for this gas production. In addition, the company believes that its operating costs, specifically propane and diesel costs, will be significantly reduced with the gas coming on production.
In concert with the development of the gas production and power generation facility, the installation of a water-handling and optimization facility is being explored. Once this facility is constructed, High North will be able to significantly reduce its operating costs by reducing both trucking and disposal expenses. High North anticipates that both the gas-to-power and water-handling projects will be on stream by midsummer 2015.
The attached working interest wells table sets forth the number of wells in which the company held a working interest as at March 31, 2015.
WORKING INTEREST WELLS
Oil wells
Gross Net
Alberta, Canada
Producing 2.0 2.0
Non-producing 4.0 4.0
Developed and undeveloped lands
The attached developed and undeveloped lands table sets out the developed and undeveloped landholdings of High North as at March 31, 2015.
DEVELOPED AND UNDEVELOPED LANDS
Expiring hectares
Developed hectares Undeveloped hectares within one year
Gross Net Gross Net Gross Net
Alberta, Canada 1,024 1,024 8,576 8,576 6,656 6,656
Production estimates
The attached production estimates table discloses, for six months from April 1, 2015, to Sept. 30, 2015, the total working interest volume of production estimated by GLJ in the GLJ report from gross proved reserves and gross probable reserves.
PRODUCTION ESTIMATES
Estimated 2015
Estimated 2015 Estimated 2015 company interest
company interest company interest daily production
daily production daily production (total proved
(total proved) (total probable) plus probable)
Crude oil light and
medium (boe/d) 240 53 293
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