Following is a summary of the independent reserve evaluation for the year ended December 31, 2019 as prepared by Sproule Associates Ltd. (“Sproule”)1,2. Please see Crew's reserves press release issued on February 10, 2020 for further details.
2019 Reserves Highlights
Highlights of our proved developed producing (“PDP”), total proved (“1P”) and total proved plus probable (“2P”) reserves from the Sproule Report are provided below. All finding, development and acquisition (“FD&A”)1,2 costs and finding and development (“F&D”)1,2 costs below include changes in future development capital (“FDC”).
Crew’s 2019 capital program focused on the development of the Company’s Ultra-Condensate Rich (“UCR”)3 area emphasizing growth in high-value condensate production and reserves. Continued efforts to control both capital expenditures and operating costs and our ongoing initiatives to improve efficiencies led to net capital expenditures of $95.0 million ($114.1 million gross)1,4. This capital program resulted in the drilling of 8.0 net extended reach horizontal (“ERH”) wells in B.C., of which 6.0 net wells were drilled in Greater Septimus, and the completion of 12.0 net wells in our UCR area at Greater Septimus.
- Proved Developed Producing Reserves Growth: In 2019, Crew added 11.3 MMboe of PDP reserves representing approximately 19% of 2018 PDP reserves, bringing the total to 63.1 MMboe at year-end, 5% higher than 2018. PDP FD&A2 costs were $8.79 per boe resulting in a recycle ratio2 of 1.4x.
- Proved Reserves Increased 17% over 2018: Crew added 37.5 MMboe of 1P reserves, which increased 17% to 202.0 MMboe, and achieved a 1P FD&A cost of $6.16 per boe resulting in a recycle ratio of 2.0x. The Company’s PDP and 1P reserves additions were achieved in concert with lower development capital due to efficiency enhancements in part associated with increasing the number of ERH wells. Crew’s 2P reserves replaced production and remained stable at 410.6 MMboe, as the Company reduced 2P FDC by $107 million, reflecting improved cost efficiencies and the removal of longer-dated reserve additions.
- Continued Strong Performance from UCR Area: Reserves assigned at Crew’s UCR area of operations increased meaningfully in 2019 across all reserve categories:
- 2P totaled 97.3 MMboe, 1P was 50.8 MMboe, and PDP was 15.8 Mmboe.
- Condensate5 reserves in the area increased over 2018 with PDP up 110% to 4.0 MMbbls; 1P up 52% to 13.7 MMbbls and 2P increased by 24% to 26.4 MMbbls.
- In Crew’s UCR area the estimated net present value of future net revenue discounted at 10% (before tax) (“NPV10 BT”) for 2P reserves assigned by Sproule to 17.5 net sections was $856.0 million6.
- Longer Laterals Improve Recoveries: Significant efficiencies and improvements in recoveries have been gained with the ERH program in Crew’s UCR area relative to previous shorter-reach horizontal wells, with a 35% improvement in drilling cost per lateral length realized from 2016 to 2019. The ERH program can generate equivalent recoveries and superior economic returns with a smaller environmental footprint, lower operating costs and significantly lower development costs. Crew now has 50 ERH undeveloped 2P locations assigned by Sproule in the UCR area.
- Strong Capital Efficiencies and Recycle Ratios1,2: Continued development success was realized at Crew’s UCR area, leveraging improved completions design, longer ERH wells and reduced drill times to improve per well recoveries with reduced capital. Recycle ratios shown below are based on the estimated fourth quarter 2019 corporate operating netback of $12.16 per boe1,4 divided by the F&D or FD&A costs. For informational purposes, the estimated annual operating netback for 2019 is $14.05 per boe1,4.
|2019 F&D and FD&A Costs|
|F&D per boe||F&D recycle7||FD&A per boe||FD&A recycle7|
- Three Year Costs Trending Lower: With an ongoing focus on reduced capital costs and capturing drilling and completions efficiencies, Crew achieved another consecutive year of declining average three year 2P F&D and FD&A costs in 2019 which totaled $5.66 per boe and $5.02 per boe, respectively, reflecting reductions of 4% and 9% from 2018, respectively.
(1) All 2019 financial amounts are unaudited. See advisories.
(2) "Finding, Development and Acquisitions costs" or "FD&A costs", "Finding and Development costs" or "F&D costs" and “recycle ratio” do not have standardized meanings. See the table “Capital Program Efficiency” and "Information Regarding Disclosure on Oil and Gas Reserves and Operational Information" contained in this news release.
(3) Ultra-Condensate Rich” or “UCR” is not defined in NI 51-101 and means a fairway of land at Crew’s Greater Septimus area of operations where productive zones have high condensate rates (initial 30-day condensate / gas ratio rates of greater than 75 bbls per mmcf).
(4) Non-IFRS Measure. “Operating netback” and “net capital expenditures” do not have standardized measures prescribed by International Financial Reporting Standards (“IFRS”), and therefore may not be comparable with the calculations of similar measures for other companies. See “Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures” within this press release and the Company’s MD&A for details including reasons for use.
(5) Condensate is defined as a mixture of pentanes and heavier hydrocarbons recovered as a liquid at the inlet of a gas processing plant before the gas is processed and pentanes and heavier hydrocarbons obtained from the processing of raw natural gas.
(6) Excludes field-level facility and maintenance operating expenses.
(7) Crew’s estimated operating netback in fourth quarter 2019, used in the above calculations, averaged $12.16 per boe (unaudited), while the Company’s estimated full year 2019 operating netback averaged $14.05 per boe (unaudited). See ‘Unaudited Financial Information’ and ‘Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures’ in the advisories.
Crew's full NI 51-101 Reserves Disclosure for year ended December 31, 2019 is available within our 2019 Annual Information Form (also available on SEDAR).
(1) See "Advisories" (Cautionary Statements and Advisories)