CALGARY, Feb. 22, 2018 /CNW/ - OBSIDIAN ENERGY LTD.
(TSX/NYSE – OBE) ("Obsidian Energy", the "Company",
"we", "us" or "our") is pleased to announce
that Jay W. Thornton has been
appointed as Chairman of the Obsidian Energy Board of Directors
(the "Board"), effectively immediately. Mr. George Brookman, who has been the Acting Chair
since August 8, 2017, will remain as
a director on the Board.
"On behalf of the Board, I would like to thank Mr. George Brookman for his leadership as Acting
Chair over the last several months," commented Mr. Thornton.
"George stepped in after the tragic passing of our previous
Chairman, Rick George, and guided
the Company with energy and thoughtful diligence. I look forward to
continuing to steward our base strategy while exploring all
opportunities to unlock shareholder value from our significant
asset base."
Mr. Thornton has served on the Board since June 26, 2013 and has over 27 years of oil and
gas experience, holding various operating and corporate executive
positions with Shell Canada and Suncor Energy Inc. He is currently
a director of North American Energy Partners Inc. and Tervita
Corporation, and was previously a director with the Canadian
Association of Petroleum Producers (CAPP). He is a graduate of
McMaster University with an Honours
degree in Economics. He also completed the Institute of Corporate
Directors (ICD) Education Program.
2017 Year-End Reserves Summary
The Company is pleased to present the results of its year-end
2017 independent reserves evaluation, prepared by Sproule
Associates Limited ("Sproule").
"Our year-end 2017 reserves highlight the revitalized
operational delivery of the business," commented David French, President & CEO. "2017 was the
first time in five years we replaced produced reserves, and grew
both our proved ("1P") and proved plus probable
("2P") volumes. It is gratifying to see the recognition of
our field results by our reserve evaluator.
Our updated book reflects the low decline nature of our Cardium
waterflood business, and a conservative future development profile
with plenty of upside. Continued recognition of the waterflood
potential in our portfolio grew our 2P liquids weighting by six
percent, and we hold a robust 2P reserve life index of 12 years.
Adding reserves at just over $13 per
boe through 2017 demonstrates a powerful engine to reward
investors. We look forward to putting our capital to work."
The financial and operating information in this press release is
based on estimates and is unaudited. Some of the terms below do not
have standardized meanings. Further detail can be found in the "Oil
and Gas Advisory" section contained in this release. This
evaluation was prepared in accordance with definitions, standards,
and procedures set out in the Canadian Oil and Gas Evaluation
Handbook ("COGEH") and National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). Additional reserve information as required under NI
51-101 will be included in our Annual Information Form which will
be filed on SEDAR, EDGAR, and posted to our website, on or about
March 7, 2018. All numbers are shown
prior to the impact of 2018 disposition activity unless otherwise
noted.
Replaced Over 100 Percent of Produced Reserves for the First
Time in Five Years
Increased conviction in inventory quality, high confidence in
undeveloped book additions and efficient development activity drove
strong reserve replacement across the business. We replaced 126
percent of 2017 production on a 2P reserves basis, 131 percent on a
1P reserves basis and 121 percent on a proved developed producing
("PDP") reserves basis.
Integrated Waterflood is Paying Dividends by Lowering Cardium
Operated Development Costs
Cardium operated development costs were $14.12 per boe, down 24 percent from year-end
2016 and 47 percent from year-end 2015. Reserve volumes associated
with waterflood recovery, over and above primary development, now
sit at 8.4 mmboe. The amount of future development capital
("FDC") associated with this waterflood specific volume is
approximately $94 million. As we
continue to demonstrate decline performance in our base wells, we
expect waterflood reserve volumes to increase without the need for
additional future development capital.
Total Corporate operated development costs for 2017 were
$13.27 per boe. 2P finding and
development ("F&D") costs, including changes in future
development capital, were $1.72 per
boe. These costs reflect updates to our undeveloped book to account
for low cost integrated waterflood development.
Commercial Trades Increased Liquids Weighting by Six
Percent
Through the disposition of natural gas weighted production in
the first quarter of 2017 and gas oil ratio suppression across our
waterflood acreage, our 2P liquids weighting increased by six
percent, to 67 percent total liquids. Including our 2018 legacy
asset disposition, our 2P liquids weighting increased to 69
percent.
The liquids weighting in our reserve book exceeds our 2018
forecasted weighting, representing the light oil growth potential
of the business through increased focus on integrated waterflood
development in the Cardium.
Low Decline Rate Supports Seven Year PDP Reserve Life
Our reserve book assumes an average decline rate of 16 percent
in the next three years, demonstrating the sustainable production
and cash flow inherent in our Cardium waterflood business. Based on
Q4 2017 production and year-end 2017 reserves adjusted for
disposition activity, PDP, 1P and 2P reserve life index
("RLI") is 7 years, 8 years and 12 years, respectively.
Formal Recognition of Deep Basin Potential and Upside to
Undeveloped Book
Sproule has formally recognized the potential of our Deep Basin
position, with five undeveloped locations across the Mannville and Rock
Creek formations. Our total undeveloped reserve book remains
conservative and highly achievable, with approximately 200 total
locations booked, including approximately 130 in the Cardium.
Net Asset Value ("NAV") Demonstrates Highly Confident and
Fundable Upside in the Business
Despite $55 million of negative
pricing impacts, 2P net present value ("NPV") 10 percent
grew to $1.71 billion, relative to
year-end 2016 A&D adjusted NPV10 of $1.67 billion. Our 2P NPV per share, adjusted for
debt, equates to approximately $2.60
per share. Our PDP NPV per share, adjusted for debt, equates to
approximately $1.50 per share.
2017 Year-End Reserves Tables
In 2017, we engaged Sproule, an independent, qualified
engineering firm, to evaluate one hundred percent of our 1P and 2P
reserves. Sproule conducted an independent reserves evaluation of
Obsidian Energy's reserves effective December 31, 2017. This evaluation was prepared
in accordance with definitions, standards, and procedures set out
in COGEH and NI 51-101. The Sproule reserves evaluation was based
on Sproule's December 31, 2017
forecast prices and costs. Reserves included below are Company
gross reserves which are the Company's total working interest
reserves before the deduction of any royalties and excluding any
royalty interests payable to the Company. The numbers in the tables
below may not add due to rounding.
Summary of Reserves
As at December 31,
2017
|
|
|
|
|
|
Reserve
|
Light &
Medium
Crude Oil
|
Heavy
Crude Oil
& Bitumen
|
Natural Gas
Liquids
|
Conventional
Natural Gas
|
Barrel of Oil
Equivalent
|
Estimates
Category
|
(mmbbl)
|
(mmbbl)
|
(mmbbl)
|
(bcf)
|
(mmboe)
|
Proved
|
|
|
|
|
|
Developed
producing
|
35
|
6
|
6
|
162
|
75
|
Developed
non-producing
|
0
|
0
|
0
|
2
|
1
|
Undeveloped
|
12
|
2
|
1
|
30
|
20
|
Total
Proved
|
47
|
8
|
8
|
194
|
96
|
Total
Probable
|
19
|
3
|
3
|
64
|
35
|
Total Proved plus
Probable
|
66
|
12
|
10
|
258
|
131
|
Reserves Reconciliation – Proved
|
Light &
Medium
Crude Oil
|
Heavy
Crude Oil
& Bitumen
|
Natural Gas
Liquids
|
Conventional
Natural Gas
|
Barrel of Oil
Equivalent
|
Reconciliation
Category
|
(mmbbl)
|
(mmbbl)
|
(mmbbl)
|
(bcf)
|
(mmboe)
|
Total
Proved
|
|
|
|
|
|
December 31,
2016
|
54
|
10
|
7
|
278
|
117
|
2017 Acquisition
Activity
|
0
|
0
|
0
|
0
|
0
|
2017 Disposition
Activity
|
(8)
|
0
|
(2)
|
(89)
|
(25)
|
December 31, 2016
Adjusted for A&D
|
45
|
10
|
6
|
188
|
92
|
Extensions
|
3
|
0
|
1
|
18
|
7
|
Discoveries
|
0
|
0
|
0
|
0
|
0
|
Infill
Drilling
|
2
|
1
|
0
|
2
|
3
|
Improved
Recovery
|
0
|
0
|
0
|
0
|
0
|
Technical
Revisions
|
2
|
(1)
|
2
|
15
|
5
|
Economic
Factors
|
0
|
0
|
(0)
|
(2)
|
(0)
|
Production
|
(4)
|
(2)
|
(1)
|
(26)
|
(12)
|
December 31,
2017
|
47
|
8
|
8
|
194
|
96
|
2018 Disposition
Activity
|
(1)
|
0
|
(0)
|
(23)
|
(5)
|
December 31, 2017
Adjusted for A&D
|
46
|
8
|
7
|
171
|
91
|
Reserves Reconciliation – Proved Plus Probable
|
Light &
Medium
Crude Oil
|
Heavy
Crude Oil
& Bitumen
|
Natural Gas
Liquids
|
Conventional
Natural Gas
|
Barrel of Oil
Equivalent
|
Reconciliation
Category
|
(mmbbl)
|
(mmbbl)
|
(mmbbl)
|
(bcf)
|
(mmboe)
|
Total Proved Plus
Probable
|
|
|
|
|
|
December 31,
2016
|
75
|
14
|
10
|
374
|
161
|
2017 Acquisition
Activity
|
0
|
0
|
0
|
0
|
0
|
2017 Disposition
Activity
|
(11)
|
0
|
(2)
|
(119)
|
(33)
|
December 31, 2016
Adjusted for A&D
|
64
|
14
|
8
|
256
|
128
|
Extensions
|
4
|
1
|
1
|
23
|
9
|
Discoveries
|
0
|
0
|
0
|
0
|
0
|
Infill
Drilling
|
3
|
2
|
0
|
3
|
5
|
Improved
Recovery
|
5
|
0
|
0
|
7
|
6
|
Technical
Revisions
|
(4)
|
(3)
|
2
|
(2)
|
(6)
|
Economic
Factors
|
0
|
0
|
(0)
|
(2)
|
(0)
|
Production
|
(4)
|
(2)
|
(1)
|
(26)
|
(12)
|
December 31,
2017
|
66
|
12
|
10
|
258
|
131
|
2018 Disposition
Activity
|
(1)
|
0
|
(0)
|
(31)
|
(7)
|
December 31, 2017
Adjusted for A&D
|
65
|
12
|
10
|
227
|
124
|
Summary of Before Tax Net Present Values
|
|
|
|
|
|
As at December 31,
2017
|
|
|
|
|
|
Net Present
Value
|
Discount
Rate
|
$
millions
|
Undiscounted
|
5
Percent
|
10
Percent
|
15
Percent
|
20
Percent
|
Proved
|
|
|
|
|
|
Developed
producing
|
2,203
|
1,534
|
1,178
|
962
|
818
|
Developed
non-producing
|
12
|
10
|
9
|
7
|
6
|
Undeveloped
|
473
|
216
|
99
|
39
|
4
|
Total
Proved
|
2,689
|
1,761
|
1,286
|
1,008
|
828
|
Total
Probable
|
1,488
|
701
|
421
|
291
|
217
|
Total Proved plus
Probable
|
4,176
|
2,461
|
1,707
|
1,299
|
1,046
|
Future Development Capital ("FDC")
As at December 31,
2017
|
|
|
Future Development
Capital
|
|
|
$
millions
|
Total
Proved
|
Total Proved
Plus Probable
|
2018
|
74
|
91
|
2019
|
114
|
138
|
2020
|
79
|
98
|
2021
|
102
|
121
|
2022
|
87
|
112
|
2023 and
subsequent
|
0
|
0
|
Total,
Undiscounted
|
457
|
560
|
Total, Discounted
@ 10%
|
359
|
440
|
Summary of Pricing and Inflation Rate Assumptions
|
|
Canadian
Light
|
Natural
Gas
|
|
|
WTI
|
Sweet
Crude
|
AECO-C
|
Exchange
|
As at December 31,
2017 (1)
|
Cushing,
Oklahoma
|
40°
API
|
Spot
|
Rate
|
Sproule
Forecast
|
($US/bbl)
|
($Cdn/bbl)
|
($Cdn/MMbtu)
|
($US/$Cdn)
|
|
|
|
|
|
|
|
|
|
Year
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
Forecast
|
|
|
|
|
|
|
|
|
2018
|
55.00
|
65.00
|
65.44
|
74.51
|
2.85
|
3.27
|
0.79
|
0.82
|
2019
|
65.00
|
70.00
|
74.51
|
78.24
|
3.11
|
3.22
|
0.82
|
0.85
|
2020
|
70.00
|
71.40
|
78.24
|
80.64
|
3.65
|
3.91
|
0.85
|
0.85
|
2021
|
73.00
|
72.83
|
82.45
|
82.25
|
3.80
|
4.00
|
0.85
|
0.85
|
2022
|
74.46
|
74.28
|
84.10
|
83.90
|
3.95
|
4.10
|
0.85
|
0.85
|
2023
|
75.95
|
75.77
|
85.78
|
85.58
|
4.05
|
4.19
|
0.85
|
0.85
|
2024
|
77.47
|
77.29
|
87.49
|
87.29
|
4.15
|
4.29
|
0.85
|
0.85
|
2025
|
79.02
|
78.83
|
89.24
|
89.03
|
4.25
|
4.40
|
0.85
|
0.85
|
2026
|
80.60
|
80.41
|
91.03
|
90.81
|
4.36
|
4.50
|
0.85
|
0.85
|
2027
|
82.21
|
82.02
|
92.85
|
92.63
|
4.46
|
4.61
|
0.85
|
0.85
|
2028
|
83.85
|
|
94.71
|
|
4.57
|
|
0.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Prices Escalate at
two percent after 2028, with the exception of foreign exchange
which stays flat
|
Year-End 2017 Financial Results Conference Call
Details
Obsidian Energy plans to release its financial results for the
year ended December 31, 2017 before
markets open on Wednesday, March 7,
2018. A conference call will be held to discuss the results
at 6:30 a.m. MST (8:30 a.m. EST) that morning.
To listen to the conference call, please call 647-427-7450 or
1-888-231-8191 (toll-free). This call will be broadcast live on the
Internet and may be accessed directly at the following URL:
http://event.on24.com/wcc/r/1602755-1/F3B454234B7BA6D9E327EEC65E28F03E
A digital recording will be available for replay two hours after
the call's completion, and will remain available until March 21, 2018, 21:59
Mountain Time (23:59 Eastern
Time). To listen to the replay, please dial 416-849-0833 or
1-855-859-2056 (toll-free) and enter Conference ID 1898936,
followed by the pound (#) key.
Oil and Gas Advisory
This press release contains a number of oil and gas metrics,
including "FDC", "F&D costs", "Operated Development Costs",
"NAV", and "RLI" which do not have standardized meanings or
standard methods of calculation and therefore such measures may not
be comparable to similar measures used by other companies. Such
metrics have been included herein to provide readers with
additional measures to evaluate the Company's performance; however,
such measures are not reliable indicators of the future performance
of the Company and future performance may not compare to the
performance in previous periods. FDC is the sum of all booked
capital. F&D costs are the sum of exploration and development
costs incurred in the period, plus the change in estimated FDC for
the reserves category, all divided by the change in reserves during
the period. F&D costs exclude the impact of acquisitions and
divestitures. Operated Development Costs are the sum of drill,
complete, equip, and tie-in costs to bring operated wells spud in
the period on production, divided by the reserves added from these
wells. NPV per share, adjusted for debt, is synonymous for
NAV, and is based on the present value of future net revenues
discounted at 10% before tax, adjusted for unaudited net debt as at
December 31, 2017. The NPV per share
is divided by the number of Obsidian Energy shares outstanding as
at December 31, 2017. Reserves life
index is calculated as total Company gross reserves divided by
unaudited fourth quarter 2017 production.
Under NI 51-101, proved reserves estimates are defined as having
a high degree of certainty to be recoverable with a targeted 90
percent probability in aggregate that actual reserves recovered
over time will equal or exceed proved reserve estimates. For proved
plus probable reserves under NI 51-101, the targeted probability is
an equal (50 percent) likelihood that the actual reserves to be
recovered will be greater or less than the proved plus probable
reserve estimate. The reserve estimates set forth below are
estimates only and there is no guarantee that the estimated
reserves will be recovered. Actual reserves may be greater than or
less than the estimates provided herein.
Abbreviations Contained in the Press Release
Oil and Natural
Gas Liquids
|
Natural
Gas
|
bbl
|
barrel or
barrels
|
GJ
|
gigajoule
|
bbl/d
|
barrels per
day
|
GJ/d
|
gigajoules per
day
|
mbbl
|
thousand
barrels
|
mcf
|
thousand cubic
feet
|
mmbbl
|
million
barrels
|
mmcf
|
million cubic
feet
|
NGLs
|
natural gas
liquids
|
bcf
|
billion cubic
feet
|
mmboe
|
million barrels of
oil equivalent
|
mcf/d
|
thousand cubic feet
per day
|
mboe
|
thousand barrels of
oil equivalent
|
mmcf/d
|
million cubic feet
per day
|
boe/d
|
barrels of oil
equivalent per day
|
m3
|
cubic
metres
|
|
|
mmbtu
|
million British
thermal units
|
Other
|
|
AECO
|
the Alberta benchmark
price for natural gas.
|
BOE or
boe
|
barrel of oil
equivalent, using the conversion factor of 6 Mcf of natural gas
being equivalent to one barrel of oil.
|
WTI
|
West Texas
Intermediate, the reference price paid in United States dollars at
Cushing, Oklahoma for crude oil of standard grade.
|
API
|
American Petroleum
Institute.
|
°API
|
the measure of the
density or gravity of liquid petroleum products derived from a
specific gravity.
|
MM$
|
million
dollars.
|
|
|
|
|
|
Forward Looking Statements
Certain statements contained in this press release constitute
forward-looking statements or information (collectively
"forward-looking statements"). Forward-looking statements
are typically identified by words such as "anticipate", "continue",
"estimate", "expect", "forecast", "budget", "may", "will",
"project", "could", "plan", "intend", "should", "believe",
"outlook", "objective", "aim", "potential", "target" and similar
words suggesting future events or future performance. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated
and can be profitably produced in the future. In particular, this
document contains forward-looking statements pertaining to, without
limitation, the following: that our updated reserve book reflects
the low decline nature of our Cardium waterflood business, and a
conservative future development profile with plenty of upside; that
we hold a robust 2P reserve life index; that our reserve additions
at certain costs through 2017 demonstrate a powerful engine to
reward investors and that we look forward to putting our capital to
work; that additional reserve information, as required under NI
51-101, will be included in our Annual Information Form which will
be filed on SEDAR, EDGAR and our website on or about March 7, 2018; our expectations for FDC and as we
continue to demonstrate decline performance in our base wells, and
that we expect waterflood reserves volumes to increase without the
need for additional development capital; that our liquids weighting
of our reserve book exceeds our forecast which demonstrates the
light oil growth potential of the business through increased focus
on integrated waterflood development in the Cardium; the average
decline rate for the next three years in our reserve book which
demonstrate the sustainable production and cash flow inherent in
our Cardium waterflood business; our expected RLIs; and that our
total undeveloped reserve book remains conservative and highly
achievable.
With respect to forward-looking statements contained in this
document, we have made assumptions regarding, among other things
that we do not dispose of any material producing properties; our
ability to execute our long-term plan as described herein and in
our other disclosure documents and the impact that the successful
execution of such plan will have on our Company and our
shareholders; that the current commodity price and foreign exchange
environment will continue or improve; future capital expenditure
levels; future crude oil, natural gas liquids and natural gas
prices and differentials between light, medium and heavy oil prices
and Canadian, WTI and world oil and natural gas prices; future
crude oil, natural gas liquids and natural gas production levels;
future exchange rates and interest rates; future debt levels; our
ability to execute our capital programs as planned without
significant adverse impacts from various factors beyond our
control, including weather, infrastructure access and delays in
obtaining regulatory approvals and third party consents; our
ability to obtain equipment in a timely manner to carry out
development activities and the costs thereof; our ability to market
our oil and natural gas successfully to current and new customers;
our ability to obtain financing on acceptable terms, including our
ability to renew or replace our syndicated bank facility and our
ability to finance the repayment of our senior notes on maturity;
and our ability to add production and reserves through our
development and exploitation activities.
Although we believe that the expectations reflected in the
forward-looking statements contained in this document, and the
assumptions on which such forward-looking statements are made, are
reasonable, there can be no assurance that such expectations will
prove to be correct. Readers are cautioned not to place undue
reliance on forward-looking statements included in this document,
as there can be no assurance that the plans, intentions or
expectations upon which the forward-looking statements are based
will occur. By their nature, forward-looking statements involve
numerous assumptions, known and unknown risks and uncertainties
that contribute to the possibility that the forward-looking
statements contained herein will not be correct, which may cause
our actual performance and financial results in future periods to
differ materially from any estimates or projections of future
performance or results expressed or implied by such forward-looking
statements. These risks and uncertainties include, among other
things: the possibility that we will not be able to continue to
successfully execute our long-term plan in part or in full, and the
possibility that some or all of the benefits that we anticipate
will accrue to our Company and our securityholders as a result of
the successful execution of such plans do not materialize; the
possibility that we are unable to execute some or all of our
ongoing asset disposition program on favourable terms or at all;
general economic and political conditions in Canada, the U.S. and globally, and in
particular, the effect that those conditions have on commodity
prices and our access to capital; industry conditions, including
fluctuations in the price of crude oil, natural gas liquids and
natural gas, price differentials for crude oil and natural gas
produced in Canada as compared to
other markets, and transportation restrictions, including pipeline
and railway capacity constraints; fluctuations in foreign exchange
or interest rates; unanticipated operating events or environmental
events that can reduce production or cause production to be shut-in
or delayed (including extreme cold during winter months, wild fires
and flooding); and the other factors described under "Risk Factors"
in our Annual Information Form and described in our public filings,
available in Canada at
www.sedar.com and in the United
States at www.sec.gov. Readers are cautioned that this list
of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this document speak
only as of the date of this document. Except as expressly required
by applicable securities laws, we do not undertake any obligation
to publicly update any forward-looking statements. The
forward-looking statements contained in this document are expressly
qualified by this cautionary statement.
Obsidian Energy shares are listed on both the Toronto Stock
Exchange and New York Stock Exchange under the symbol "OBE". All
figures are in Canadian dollars unless otherwise stated.
SOURCE Obsidian Energy Ltd.