Following is a summary of the independent reserve evaluation for the year ended December 31, 2017 as prepared by Sproule Associates Ltd. (“Sproule”)(1)(2). Please see Crew's reserves press release issued on February 8, 2018 for further details.
2017 Reserves Highlights
Highlights of the Proved Developed Producing (“PDP”), Total Proved (“1P”) and Total Proved Plus Probable (“2P”) reserves from the Sproule Report are provided below. Finding, development and acquisition (“FD&A”) costs and finding and development (“F&D”) costs include changes in future development capital (“FDC”).
- Active Drilling Program Drives Strong Reserves Growth: Relative to year end 2016, PDP reserves increased 31%, 1P reserves grew 11% and 2P reserves increased 14%, with Crew’s reserves replacement ratios on PDP, 1P and 2P totaling 267%, 292% and 650%, respectively.
- Continued Outperformance at West Septimus: PDP reserves at West Septimus increased 68% over 2016, with area 1P and 2P reserves up 16% and 26%, respectively due to the volume ramp up following our successful plant expansion coming on-stream in November.
- Growth in Reserves per Share: Reserves per share (fully diluted) increased across each reserves category, growing approximately 28% on PDP, 9% on 1P and 12% on 2P.
- Robust Recycle Ratios: PDP FD&A has improved over prior years and reflects the success of the Company’s UCR drilling program which features higher-intensity fracture stimulation, longer lateral well lengths and higher condensate gas ratios (“CGRs”).
F&D / boe F&D Recycle FD&A / boe FD&A Recycle PDP $10.60 1.7x $8.47 2.1x 1P $9.58 1.9x $7.31 2.3x 2) $7.09 2.5x $6.43 2.8x
- Increased Reserves Value Presents Opportunity: Crew’s net present value of future net revenue discounted at 10% (before tax) (“NPV10 BT”) increased to $615 million on PDP reserves, over $1.2 billion on 1P reserves and $2.5 billion on 2P reserves, representing increases of 34%, 22% and 24%, respectively over 2016.
- Increased Locations Support Development: 2P Montney drilling locations assigned in the Sproule Report increased 6% to 379, which reflects the conversion of 33 wells to PDP and the disposition of 19 wells, resulting in a net 75 new locations added in 2017.
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Crew's full 2017 NI 51-101 Reserves Disclosure for year ended December 31, 2017 will be filed on SEDAR in March, 2018 within our 2017 Annual Information Form (which will be available on this website or filed on SEDAR by the end of March 2018).
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.