Mr. Bud Love reports
TERRA ENERGY ANNOUNCES 2014 YEAR-END RESERVES EVALUATION AND RELATED METRICS
Terra Energy Corp. has released the results of its year-end reserves evaluation, as prepared by GLJ Petroleum Consultants Ltd., as at Dec. 31, 2014. This evaluation was performed in accordance with the requirements of National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities. In addition, the company has released the results of its independent valuation of undeveloped lands, as prepared by Seaton-Jordan & Associates Ltd. as at Dec. 31, 2014.
Summary
The rapid decline in commodity pricing experienced by the industry has had a significant impact on the valuation of the company reserves at Dec. 31, 2014, and the company's ability to replace those reserves during the year. The following are reserves evaluation highlights for year-end 2014, comparing results as at Dec. 31, 2014, and those as at Dec. 31, 2013:
- Total proved and probable reserves decreased 2,579,000 barrels of oil equivalent or 15 per cent from
17.36 million barrels of oil equivalent to 14,781,000 barrels of oil equivalent, inclusive of 1,308,000 barrels of oil equivalent produced during the
year.
- Net present value (before tax) of total proved and probable reserves
(NPV 10 per cent) decreased from $175.6-million as at Dec. 31, 2013, by 34 per cent
to $115.4-million as at Dec. 31, 2014.
- Total proved reserves decreased 18 per cent from 11,698,000 barrels of oil equivalent to 9,624,000 barrels of oil equivalent.
- Reserve life index calculated at year-end 2014 is 7.4 years on total
proved reserves and 11.3 years on total proved and probable reserves,
using average daily production from the fourth quarter 2014 of 3,584 barrels of oil equivalent per day.
- NAV per share as at Dec. 31, 2014, is estimated at approximately
$1.11 basic and $1.05 diluted.
Oil and gas reserves
The tables summarize certain information contained in the GLJ report effective Dec. 31, 2014. Detailed reserves information as required under National Instrument 51-101 will be included in Terra's annual information form which has been be filed on SEDAR. Oil equivalent amounts have been calculated using a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil.
RECONCILIATION SUMMARY
(mboe)
Total proved
Proved Probable plus probable
Opening -- Dec. 31, 2013 11,697 5,663 17,360
Technical revisions (631) (733) (1,363)
Drilling extensions 260 163 423
Improved recovery 45 7 51
Acquisitions 3 - 3
Economic factors (443) 56 (387)
Current year production (1,308) - (1,308)
-------- ------- --------
Closing -- Dec. 31, 2014 9,624 5,156 14,781
SUMMARY OF RESERVES BY CATEGORY
Dec. 31, 2013, Dec. 31, 2014
total Oil Natural Liquids Total
(mboe) (mbbl) gas (mmcf) (mbbl) (mboe)
Reserves category
Proved producing 7,781 863 29,540 538 6,324
Proved non-producing 3,917 924 13,090 195 3,300
------ ----- ------ ----- ------
Total proved 11,698 1,787 42,630 733 9,624
Total probable 5,663 1,275 21,338 325 5,156
------ ----- ------ ----- ------
Total proved plus probable 17,360 3,062 63,968 1,058 14,781
The estimated future net revenues are presented before deducting future estimated site restoration costs and are reduced for future abandonment costs and estimated future capital for future development associated with non-producing, undeveloped and probable additional reserves.
SUMMARY OF NET PRESENT VALUES OF FUTURE NET REVENUE ($000S)
DISCOUNTED BEFORE INCOME TAXES
Dec. 31, 2013 Dec. 31, 2014
0% 10% 0% 10%
Reserves category
Proved producing $128,708 $ 84,713 $ 75,419 $ 47,337
Proved non-producing 61,749 39,620 54,673 29,134
-------- -------- -------- --------
Total proved 190,457 124,332 130,091 76,470
Total probable 108,231 51,290 91,863 38,965
-------- -------- -------- --------
Total proved plus probable $298,688 $175,622 $221,953 $115,435
FORECAST PRICES USED IN THE GLJ REPORT
Year Dec. 31, 2013, Dec. 31, 2014,
evaluation evaluation
AECO ($/mmBtu)
2015 $4.03 $3.31
2016 $4.26 $3.77
2017 $4.50 $4.02
2018 $4.74 $4.27
2019 $4.97 $4.53
WTI (U.S.$/bbl)
2015 $97.50 $62.50
2016 $97.50 $75.00
2017 $97.50 $80.00
2018 $97.50 $85.00
2019 $97.50 $90.00
Note: Inflation is accounted for at 2.0 per cent
per year.
Land valuation
Terra's gross undeveloped landholdings decreased from 462,693 gross acres (311,921 net) as at Dec. 31, 2013, to 358,529 gross acres (217,905 net) as at Dec. 31, 2014, representing a decrease of 23 per cent (30 per cent net). The decrease was largely attributable to undeveloped land expiring and being sold by the company.
SUMMARY OF THE COMPANY'S UNDEVELOPED LANDHOLDINGS BROKEN DOWN BY PROVINCE
Dec. 31, 2013 Dec. 31, 2014
Gross acreage Net acreage Gross acreage Net acreage
Alberta 206,191 159,764 122,675 83,822
British Columbia 256,095 152,117 235,327 133,938
Saskatchewan 406 40 527 145
------- ------- ------- -------
Totals 462,693 311,921 358,529 217,905
Undeveloped land values
2013 2014
Alberta $ 12,453,639 $ 7,269,808
British Columbia $ 20,909,598 $ 19,163,427
Saskatchewan $ 15,403 $ 44,181
---------------- ----------------
Totals $ 33,378,640 $ 26,477,416
The undeveloped landholdings of the company were evaluated as at Dec. 31, 2014, by Seaton-Jordan. The value of Terra's net undeveloped landholdings is estimated to be approximately $26.5-million as at Dec. 31, 2014. This valuation represents a decrease of 21 per cent compared with last year's valuation of undeveloped land as prepared by Seaton-Jordan.
NAV PER SHARE AS AT DEC. 31, 2014
(in thousands of dollars, except per share amounts)
2013 2014
P+P reserves (NPV 10%) $ 175,622 $ 115,436
Undeveloped land (1) $ 33,379 $ 26,477
Net debt $ (20,982) $ (23,173)
Net asset value $ 188,019 $ 118,740
Shares outstanding 101,663 106,663
Basic NAV per share $ 1.85 $ 1.11
Option and warrant value $ 4,316 $ 2,573
Option and warrant shares 4,795 9,355
----------------- -----------------
Diluted net asset value $ 192,335 $ 121,313
Diluted shares outstanding 106,458 116,018
Fully diluted NAV per share $ 1.81 $ 1.05
(1) Based on Dec. 31, 2013 and 2014, Seaton-Jordan reports.
We seek Safe Harbor.
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