Pearl Exploration and Production Ltd. ("Pearl" or the "Company") (TSX
VENTURE:PXX)(FIRST NORTH:PXXS) is pleased to announce that it has filed a
reserves report for the period ended December 31, 2006 as evaluated by DeGolyer
and MacNaughton Canada Ltd. ("D&M") and prepared in accordance with National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
This report consolidates to the Company's new calendar year end previous
reserves reports that had been prepared by several reserves auditors. Since the
effective date of the reserve report is to the end of the 2006 calendar year, it
does not include any results reported in 2007 for the ongoing 200 well
development drilling program and does not include any reserves attributable to
the four corporate acquisitions in 2007 which are detailed below.
Pearl President and CEO Keith Hill commented "We are very pleased with the
reserve increases in all categories which are now consolidated under one reserve
auditor. Since our last reserves report we've increased our Proved reserves by
663% and our 2P reserves have risen by 323%. We look forward to additional
significant increases in 2007 reserves as the result of our announced corporate
acquisitions as well as the significant 200 well development program we are
currently undertaking."
The reserves report is available at www.sedar.com and on Pearl's website at
www.pearleandp.com.
RESERVES REPORT
Based on the reserves reports prepared by D&M, forecast prices and costs,
Pearl's net reserves are:
September 30, 2006 December 31, 2006
------------------ -----------------
(Mboe) (Mboe)
Proved Reserves 1,264 9,641
Proved plus Probable Reserves 5,225 22,124
Possible Reserves - 20,059
Proved plus Probable plus
Possible Reserves - 42,183
- Development and exploration capital investments totaled $21.8 million during
2006 The Company has subsequently spent an estimated $110 million in the current
2007 capital program;
- Acquisitions during the fourth quarter of 2006 added reserves totaling 8,374
Mboe Proved and 14,452 Mboe Proved plus Probable;
- The net present value based on forecast pricing and costs, before taxes,
discounted at 10% (NPV) of Pearl's Proved plus Probable reserves increased to
$288.8 million, while the NPV of the total Proved reserves increased to $141.7
million. The NPV of the Proved plus Probable plus Possible reserves is $496
million.
PEARL'S RESERVES SUMMARY
The following tables summarize certain information contained in Pearl's reserves
report.
SUMMARY OF OIL AND GAS RESERVES AS OF DECEMBER 31, 2006 FORECAST PRICES
AND COSTS
Light and Medium Heavy Oil Natural Gas Natural Gas
Crude Oil Liquids
--------------------------------------------------------------------------
Reserves Gross Net Gross Net Gross Net Gross Net
Category (Mbbls)(Mbbls) (Mbbls) (Mbbls) (MMcf) (MMcf) (Mbbls)(Mbbls)
--------------------------------------------------------------------------
Proved Developed
Producing
--------------------------------------------------------------------------
Canada 422 393 4,191 3,386 16,910 13,698 31 21
--------------------------------------------------------------------------
United States 19 16 - - 160 126 - -
--------------------------------------------------------------------------
Total Proved
Developed
Producing 441 409 4,191 3,386 17,070 13,824 31 21
--------------------------------------------------------------------------
Proved Developed
Non-Producing
--------------------------------------------------------------------------
Canada 64 56 555 472 1,644 1,391 1 1
--------------------------------------------------------------------------
United States 89 76 - - 374 286 - -
--------------------------------------------------------------------------
Total Proved
Developed
Non-Producing 153 132 555 472 2,018 1,677 1 1
--------------------------------------------------------------------------
Proved
Undeveloped
--------------------------------------------------------------------------
Canada 89 74 2,213 1,720 5,002 3,939 - -
--------------------------------------------------------------------------
United States - - 220 187 - - - -
--------------------------------------------------------------------------
Total Proved
Undeveloped 89 74 2,433 1,907 5,002 3,939 - -
--------------------------------------------------------------------------
Total Proved
--------------------------------------------------------------------------
Canada 575 523 6,959 5,578 23,556 19,028 32 21
--------------------------------------------------------------------------
United States 108 92 220 187 534 412 - -
--------------------------------------------------------------------------
Total Proved 683 615 7,179 5,765 24,090 19,440 32 21
--------------------------------------------------------------------------
Total Probable
--------------------------------------------------------------------------
Canada 520 482 9,352 7,677 16,278 12,556 22 15
--------------------------------------------------------------------------
United States 10 8 2,597 2,207 9 6 - -
--------------------------------------------------------------------------
Total Probable 530 490 11,949 9,884 16,287 12,562 22 15
--------------------------------------------------------------------------
Total Proved
plus Probable
--------------------------------------------------------------------------
Canada 1,095 1,005 16,311 13,255 39,834 31,584 54 36
--------------------------------------------------------------------------
United States 118 100 2,817 2,394 543 418 - -
--------------------------------------------------------------------------
Total 1,213 1,105 19,128 15,649 40,377 32,002 54 36
--------------------------------------------------------------------------
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 proven reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the proven plus
probable reserves.
Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is only a 10-per-cent probability that
the quantities actually recovered will equal or exceed the sum of the proven
plus probable plus possible reserves.
SUMMARY OF NET PRESENT VALUES OF FUTURE NET REVENUE AS OF DECEMBER 31, 2006
FORECAST PRICES AND COSTS
Before and After Deducting Income Taxes Discounted at
--------------------------------------------------------------------------
Reserves Category 0% 5% 10% 15% 20%
(M$) (M$) (M$) (M$) (M$)
--------------------------------------------------------------------------
Proved Developed
Producing
--------------------------------------------------------------------------
Canada 138,304 120,678 107,124 96,489 87,917
--------------------------------------------------------------------------
United States 1,470 1,403 1,341 1,282 1,228
--------------------------------------------------------------------------
Total Proved
Developed Producing 139,774 122,081 108,465 97,771 89,145
--------------------------------------------------------------------------
Proved Developed
Non-Producing
--------------------------------------------------------------------------
Canada 14,102 11,257 9,098 7,419 6,089
--------------------------------------------------------------------------
United States 4,155 3,570 3,090 2,692 2,359
--------------------------------------------------------------------------
Total Proved
Developed
Non-Producing 18,277 14,847 12,206 10,128 8,463
--------------------------------------------------------------------------
Proved Undeveloped
--------------------------------------------------------------------------
Canada 28,902 23,813 19,263 15,302 11,905
--------------------------------------------------------------------------
United States 2,834 2,259 1,772 1,362 1,015
--------------------------------------------------------------------------
Total Proved
Undeveloped 31,716 26,052 21,018 16,647 12,905
--------------------------------------------------------------------------
Total Proved
--------------------------------------------------------------------------
Canada 181,308 155,748 135,485 119,210 105,911
--------------------------------------------------------------------------
United States 8,459 7,232 6,203 5,336 4,602
--------------------------------------------------------------------------
Total Proved 189,767 162,980 141,688 124,546 110,513
--------------------------------------------------------------------------
Total Probable
--------------------------------------------------------------------------
Canada 204,891 147,309 110,196 84,960 67,078
--------------------------------------------------------------------------
United States 51,457 43,480 36,869 31,367 26,770
--------------------------------------------------------------------------
Total Probable 256,348 190,789 147,065 116,327 93,848
--------------------------------------------------------------------------
Total Proved plus
Probable
--------------------------------------------------------------------------
Canada 386,199 303,057 245,681 204,170 172,989
--------------------------------------------------------------------------
United States 59,916 50,712 43,072 36,703 31,372
--------------------------------------------------------------------------
Total 446,115 353,769 288,753 240,873 204,361
--------------------------------------------------------------------------
The NPV of the reserves shown above are based on D&M's forecast price and cost
scenario, are presented for comparative purposes only and are not necessarily
representative of fair market value.
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES
AND COSTS
Light
Sweet
Crude
Oil at Heavy Natural
WTI Edmonton Crude Gas Natural
Cushing 40 degree Oil at Spot Gas
Oklahoma API Hardisty Sulphur Plant-Gate AECO Spot
($US/bbl) ($Cdn/Bbl) ($Cdn/Bbl) ($Cdn/lt) ($Cdn/MMBtu)($Cdn/MMBtu)
--------------------------------------------------------------------------
Forecast
--------------------------------------------------------------------------
2007 65.00 75.12 44.34 35.00 7.32 7.09
--------------------------------------------------------------------------
2008 65.52 75.71 45.01 25.00 7.91 7.73
--------------------------------------------------------------------------
2009 64.27 74.26 45.21 20.00 7.72 7.58
--------------------------------------------------------------------------
2010 61.73 71.30 44.26 17.50 7.48 7.39
--------------------------------------------------------------------------
2011 59.07 68.20 43.15 15.50 7.68 7.63
--------------------------------------------------------------------------
Natural Natural Natural
Gas Gas Gas
Liquids Liquids Liquids Inflation Exchange
Propane Butane Pentanes Rates Rate
($Cdn/bbl) ($Cdn/bbl) ($Cdn/bbl) (%/Year) ($US/$Cdn)
--------------------------------------------------------------------------
Forecast
--------------------------------------------------------------------------
2007 46.57 54.84 76.62 2 0.89
--------------------------------------------------------------------------
2008 46.94 55.27 77.23 2 0.89
--------------------------------------------------------------------------
2009 46.04 54.21 75.74 2 0.89
--------------------------------------------------------------------------
2010 44.21 52.05 72.73 2 0.89
--------------------------------------------------------------------------
2011 42.29 49.79 69.57 2 0.89
--------------------------------------------------------------------------
ADDITIONAL RESERVES TO BE INCORPORATED DUE TO ACQUISITIONS IN 2007
Subsequent to December 31, 2006 Pearl announced the following acquisitions which
will be included in the Company's 2007 reserves reporting:
- The assets of Cipher Exploration Inc. For the three months ended December 31,
2006, Cipher's production averaged approximately 350 boe/d with reserves
estimated to be 3,509 Mboe on a Proved plus Probable basis.
- A 24% working interest in the Mooney oil field, bringing Pearl's working
interest in the field to over 98%. Mooney is a conventional heavy oil field
which produces from the Bluesky sand formation. A high recovery factor is
expected due to the combination of relatively low viscosity 16 degree API
gravity oil and favourable reservoir characteristics which facilitates efficient
oil flow. Based on the 2006 reserves estimate for the Pearl portion of this
field, this acquisition should add approximately 834 Mboe of Proved reserves and
2,023 Mboe of Proved plus Probable reserves.
- The issued and outstanding shares of Watch Resources Ltd. The key producing
asset of Watch is its Fishing Lake conventional heavy oil field in north-central
Alberta. This field is located near Pearl's Onion Lake field and the acquisition
of this field is anticipated to provide synergies with Pearl's Onion Lake
operations while contributing to Pearl's goal of building a solid base of
recoverable resources to provide low risk production and cash flow. Based on a
reserves report prepared by D&M, Watch's reserves are estimated to be 686 Mboe
on a Proved reserves basis and 3,454 Mboe on a Proved plus Probable reserves
basis.
- The announced acquisition of the Blackrod SAGD project in the Athabasca region
of Alberta which has 88 million barrels of Possible reserves net to the Company
based on a reserves report by D&M. A SAGD pilot program is being undertaken with
a goal of upgrading these Possible reserves to the Proved and Probable
categories.
Pearl is a public company focused on delivering disciplined growth by
establishing a North American portfolio of oil and gas projects with an emphasis
on large resource opportunities. Additional information on Pearl is available on
our website at www.pearleandp.com.
All references in this release to boe's are based on a 6 to 1 conversion ratio.
Boe's may be misleading, particularly if used in isolation. A boe conversion of
6 Mcf:1 bbl is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead.
Pearl's Certified Advisor on First North is E. Ohman J:or Fondkommission AB.
Forward-looking statements: This document contains statements about expected or
anticipated future events and financial results that are forward-looking in
nature and as a result, are subject to certain risks and uncertainties, such as
general economic, market and business conditions, the regulatory process and
actions, technical issues, new legislation, competitive and general economic
factors and conditions, the uncertainties resulting from potential delays or
changes in plans, the occurrence of unexpected events, and the Company's
capability to execute and implement its future plans. Actual results may differ
materially from those projected by management. For such statements, we claim the
safe harbour for forward-looking statements within the meaning of the Private
Securities Legislation Reform Act of 1995.
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