NE BC Montney Resource Evaluation
The following discussion 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" on the "Advisories" page of this website 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" below. The discussion includes reference to TPIIP, DPIIP and ECR as per the Resource Evaluation as at December 31, 2015, prepared in accordance with the current COGE Handbook guidelines. Unless otherwise indicated on this website, all references to ECR and prospective volumes are Best Estimate ECR and Best Estimate prospective volumes, respectively.
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 natural gas resource plays in North America and Crew's land base comprises 474 net sections, 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 and Tower (the "Evaluated Areas") effective as of December 31, 2015, and based on Sproule's forecast price deck as at December 31, 2015 (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 2014 at 64.3 Tcf. Crew achieved a 15% increase in DPIIP for the Evaluated Areas to 35.2 Tcf, primarily attributed to the 2015 petroleum and natural gas rights exchange with the Province of British Columbia announced in July of 2015.
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 7.1 Tcf and the risked 'development on hold' ECR totaled 0.4 Tcf. Total risked natural gas ECR increased by 5% primarily attributable to the lands acquired through the July 2015 petroleum and natural gas rights exchange with the Province of BC.
The ECR of our NGL's 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 209 MMbbl and risked 'development on hold' NGL ECR totaled 16 MMbbl. Total NGL ECR increased by 32% due to improved liquids yields resulting from successful development of Crew's West Septimus lands.
On the oil-bearing Montney lands, TPIIP increased 3% to 7,895 MMbbl and DPIIP increased 7% to 1,613 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 19 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 following tables summarize the results of the Resource Evaluation along with comparatives to the updated December 31, 2014 evaluation (reflecting the impact of the July 2015 petroleum and natural gas rights exchange with the Province of BC), using the resource categories set out in the COGE Handbook on a "best estimate" case.
|Conventional Natural Gas
|Total Petroleum Initially In Place (TPIIP)||64.3||64.3||0%|
|Discovered Petroleum Initially In Place (DPIIP)||35.2||30.5||15%|
|Undiscovered Petroleum Initially In Place (UPIIP)||29.1||33.8||(14%)|
(1) TPIIP, DPIIP and UPIIP have been estimated using a one percent porosity cut-off in the 2015 report, which means that essentially all gas bearing rock has been incorporated into the calculations.
|Light & Medium Crude Oil
|Total Petroleum Initially In Place (TPIIP)||7,895||7,640||3%|
|Discovered Petroleum Initially In Place (DPIIP)||1,613||1,501||7%|
|Undiscovered Petroleum Initially In Place (UPIIP)||6,282||6,139||2%|
(1) TPIIP, DPIIP and UPIIP have been estimated using a one percent porosity cut-off in the 2015 report, which means that essentially all oil bearing rock has been incorporated into the calculations.
|2015 Reserves and Risked & Unrisked Economic Contingent Resource(1)(2)(3)(6)(7)(8)||Chance of Development||Best
|Best Estimate Risked|
|Conventional Natural Gas (Bcf)|
|Development Pending ECR||87%||8,160||7,090|
|Development on Hold ECR||85%||515||437|
|Natural gas liquids (Mmbbls)(4)(5)|
|Development Pending ECR||88%||238||209|
|Development on Hold ECR||84%||19||16|
|Light & Medium Crude Oil (Mmbbls)|
|Development Pending ECR||90%||21||19|
|Development on Hold ECR||80%||5||4|
(1) All DPIIP other than cumulative production, reserves, and ECR has been categorized as unrecoverable at this time. A portion of the Unrecoverable DPIIP may in the future be determined to be recoverable and reclassified as contingent resources or reserves as additional technical studies are performed, commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.
An estimate of risked NPV of future net revenues of the development pending contingent resources subclass only is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of Crew proceeding with the required investment. It includes contingent resources that cannot be classified as reserves until the contingencies are lifted. There is uncertainty that the risked NPV of future net revenue will be realized. The other subclasses of resources are not included in this NPV and therefore this is not reflective of the value of the resource base.
|Prospective Resources (1)(2)(3)(4)(5)(6)(7)||Chance of Commerciality||Best Estimate Unrisked||Best Estimate Risked|
|Conventional Natural gas (Tcf)||65%||10,225||6,695|
|Natural gas liquids (Mmbbl)||65%||354||231|
|Light & Medium Crude Oil (Mmbbl)||66%||145||95|
(1) All UPIIP other than prospective resources has been categorized as unrecoverable at this time.
Resource volumes are estimated using volumetric calculations of the in-place quantities, combined with performance from analog reservoirs. The currently producing assets of Crew and other industry parties in the Montney area of NE B.C. are used as performance analogs for ECR within Crew's areas of operations. The evaluation of ECR is based on an independent third party evaluation that assumes all of Crew's ECR will be recovered using horizontal multi-stage hydraulic fracturing and multi-well pad drilling, which are established technologies.
Crew's ability to recover additional resources is subject to numerous factors, that include minimal well data from the Montney formation in certain intervals; access to capital that would enable us to continue development; low commodity prices which could impact economics; the future performance of wells; regulatory approvals; access to required services; overall industry cost structures; and the continued efficacy of fracture stimulation technologies. In order for ECR to be converted into reserves, Crew's management and technical teams must continue to assess commercial production rates, devise firm development plans that incorporate timing, infrastructure and capital commitments. With continued development and delineation, some resources currently classified as ECR are expected to be reclassified as Reserves.
A key contingency that prevents the classification of ECR as Reserves is the additional drilling, completions and testing required to confirm viable commercial rates. Sproule assigned ECR beyond those areas which were assigned Reserves but which were within three miles of existing wells, or production tests. Further, a lack of infrastructure in the Evaluated Areas which is required to develop the resources, such as gas gathering, processing and natural gas liquids separation facilities, further impedes the reclassification of ECR to Reserves. In addition to these factors, and the general operational risks facing the oil and gas industry, there are several technical and non-technical contingencies that need to be overcome in order to reclassify ECR to Reserves. These include evaluation drilling, corporate commitment and timing of production and development of the ECR.
There is no certainty that any portion of the prospective resources will be discovered. There is uncertainty that it will be commercially viable to produce any portion of the prospective (if discovered) or contingent resources.
Definitions of Oil and Gas Resources and Reserves
Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows:
- Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
- Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
Cumulative Production is the cumulative quantity of petroleum that has been recovered at a given date.
Resources encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including Discovered and Undiscovered (recoverable and unrecoverable) plus quantities already produced. "Total resources" is equivalent to "Total Petroleum Initially-In-Place". Resources are classified in the following categories:
Total Petroleum Initially-In-Place ("TPIIP") is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered.
Discovered Petroleum Initially-In-Place ("DPIIP") is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable.
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.
Economic Contingent Resources ("ECR") are those contingent resources which are currently economically recoverable.
Project Maturity Subclass Development On Hold is defined as a contingent resource that has been assigned a reasonable chance of development, but there are major non‐technical contingencies to be resolved that are usually beyond the control of the operator.
Project Maturity Subclass Development Unclarified is defined as a contingent resource that requires further appraisal to clarify the potential for development and has been assigned a lower chance of development until contingencies can be clearly defined.
Project Maturity Subclass Development not Viable is defined as a contingent resource where no further data acquisition or evaluation is currently planned and hence there is a low chance of development.
Undiscovered Petroleum Initially-In-Place ("UPIIP") is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of undiscovered petroleum initially in place is referred to as "prospective resources" and the remainder as "unrecoverable."
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development.
Unrecoverable is that portion of DPIIP and UPIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.
Uncertainty Ranges are described by the Canadian Oil and Gas Evaluation Handbook as low, best, and high estimates for reserves and resources. The Best Estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.