Following is a summary of the independent reserve evaluation for the year ended December 31, 2016 as prepared by Sproule Associates Ltd. (“Sproule”)(1)(2). Please see Crew's reserves press release issued on February 9, 2017 for further details.
2016 Reserves Highlights
- Strong capital efficiencies and recycle ratios were achieved resulting in finding, development and acquisition (“FD&A”) costs and finding and development (“F&D”) costs, including changes in future development capital (“FDC”), as follows:
- Total proved plus probable (“2P”) FD&A costs were $5.57 per boe with a recycle ratio of 3.1 times and F&D costs were $5.65 per boe with a recycle ratio of 3.0 times;
- Total proved (“1P”) FD&A costs of $6.19 per boe, leading to a recycle ratio of 2.8 times and F&D costs of $6.30 per boe, with a recycle ratio of 2.7 times;
- Proved developed producing (“PDP”) F&D costs (including FDC) were $9.35 per boe in 2016 with a recycle ratio of 1.8 times, compared to $12.87 per boe in 2015, and $22.43 per boe in 2014, a reduction of 27% and 58%, respectively.PDP FD&A costs were $8.68 per boe, leading to a recycle ratio of 2.0 times;
- Three year average F&D costs, including FDC, continued to decline reflecting improved capital efficiencies and the ongoing transformation to a lower-cost, high-netback, Montney-focused producer.Crew’s three year average 1P and 2P F&D costs per boe were $9.15 and $7.39 in 2016, a reduction of 17% and 12%, respectively, compared to 2015 and were 37% and 25% lower, respectively, relative to 2014;
- Reserves increased meaningfully across all categories with significant reserves replacement net of annual production of 8,361 mboe:
- PDP reserves increased 11% to 46.0 mmboe, replacing 154% of produced reserves;
- 1P reserves increased 26% to 153.2 mmboe, replacing 482% of produced reserves;
- 2P reserves increased 24% to 323.9 mmboe, replacing 857% of produced reserves;
- Reserves per share improved across each reserves category, increasing 19% on 2P, 21% on 1P and 7% on PDP;
- The net present value discounted at 10% (before tax) (“NPV10 BT”) of 1P reserves increased by 20% to $1,011 million, and 2P reserves increased by 21% to $2,012 million relative to December 31, 2015; and
- Longer term development was supported with a 32% increase in 2P booked undeveloped future Montney drilling locations in the Sproule report to a total of 356 potential drilling locations.
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Crew's full 2016 NI 51-101 Reserves Disclosure for year ended December 31, 2016 was filed on SEDAR in March, 2017 within our 2016 Annual Information Form (available on this website or filed on SEDAR) .
The following discussion in "Northeast British Columbia Montney Resource Evaluation" is subject to a number of cautionary statements, assumptions and risks as set forth therein. See "Information Regarding Disclosure on Oil and Gas Reserves, Resources and Operational Information" at the end of this statement for additional cautionary language, explanations and discussion, and see "Forward-looking Information and Statements" for a statement of principal assumptions and risks that may apply. See also "Definitions of Oil and Gas Resources and Reserves". This discussion includes reference to TPIIP, DPIIP and ECR as per the Resource Evaluation as at December 31, 2016, prepared in accordance with the NI 51-101 and current COGE Handbook guidelines. Unless otherwise indicated, all references to ECR and prospective volumes are Best Estimate ECR and Best Estimate prospective volumes, respectively. All information referenced in the Resource Evaluation is prior to the pending disposition of Crew’s Goose area, expected to close in the second quarter of 2017.
In accordance with NI 51-101 Crew’s contingent resources have been subclassified into specified project maturity subclasses. Those that apply to Crew’s resources include “development pending”, “development on hold”, and “development not viable”. Sproule considers the ‘development pending’ and ‘development on hold’ project maturity subclasses to be economic and are therefore included in ECR. The economic status of the ‘development not viable’ project maturity subclass is undetermined and is therefore not included in the ECR reported. The “development not viable” sub-classification represented less than 2% of the sum of all three sub-classifications on a BOE basis, and accordingly, has not been considered to be material for reporting purposes. Crew does not have any resources within the “development unclarified” subclass.
The Montney formation in NE BC has been identified as a world-class unconventional resource play with the potential for significant volumes of recoverable resources. The area includes dry gas, liquids-rich gas and light oil development opportunities, with Crew having access to all three hydrocarbon windows. It is one of the largest and lowest cost liquids-rich natural gas resource plays in North America and Crew’s land base comprises 300,000 net acres, ideally situated in some of the most prospective parts of the play, with good access to infrastructure and multiple egress options.
Sproule was engaged to conduct an updated independent Montney resource evaluation of Crew’s principal lands in the NE BC Montney region including Septimus, West Septimus, Groundbirch/Monias, Attachie, Tower and other minor NE BC Montney lands (the “Evaluated Areas”) effective as of December 31, 2016, and based on Sproule’s forecast price deck as at December 31, 2016 (the “Resource Evaluation”). The Resource Evaluation highlights the development potential on the Company’s undeveloped land base providing Crew with significant opportunities to progress conversion of Resource to ECR and ultimately to increased reserve bookings over time. Further, the diversity of Crew’s NE BC Montney assets with exposure to liquids-rich gas, crude oil and dry natural gas allows us to effectively navigate through commodity price cycles.
TPIIP for the natural gas-bearing lands in the Evaluated Areas remains unchanged relative to year end 2015 at 64.3 Tcf. Natural gas ECR was evaluated on an unrisked and risked basis in the Resource Evaluation and was subdivided into the Maturity Subclasses of ‘development pending’ and ‘development on hold’. The risked ‘development pending’ natural gas ECR totaled 7.3 Tcf and the risked ‘development on hold’ ECR totaled 0.43 Tcf, which includes 104 bcf of ‘development pending’ natural gas and 26 bcf of ‘development on hold’ natural gas on Crew’s oil-bearing lands.
The ECR of our ngl was also evaluated on an unrisked and risked basis in the Resource Evaluation and was subdivided into the Maturity Subclasses of ‘development pending’ and ‘development on hold’. The risked ‘development pending’ ngl ECR totaled 211 MMbbl and risked ‘development on hold’ ngl ECR totaled 16 MMbbl which includes 3 mmbbls of ‘development pending’ ngl and 1 mmbbls of ‘development on hold’ ngl on Crew’s oil-bearing lands.
On the oil-bearing Montney lands, TPIIP increased 1% to 7,979 MMbbl and DPIIP increased 2% to 1,647 MMbbl. Oil ECR was evaluated on an unrisked and risked basis in the Resource Evaluation and was subdivided into the Maturity Subclasses of ‘development pending’ and ‘development on hold’. The risked ‘development pending’ oil ECR totaled 17 MMbbl and risked ‘development on hold’ oil ECR totaled 4 MMbbl.
Risking of the contingent resources included a quantitative assessment of the contingencies applicable to the project including evaluation drilling, corporate commitment and timing of production and development. Risking of the prospective resources included a quantitative assessment of these same factors, as well as a quantitative assessment of the chance of discovery.
The tables provided on the Detailed Resource Disclosure page summarize the results of the Resource Evaluation including comparatives to the updated December 31, 2015 evaluation using the resource categories set out in the COGE Handbook on a “best estimate” case.