EDITOR: | August 22nd, 2013

Americas Petrogas Completes Independent Evaluation of Its Unconventional Shale Hydrocarbon Resources in Argentina

| August 22, 2013 | No Comments
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August 22, 2013 (Source: Marketwired) — Estimated 56.1 Billion Barrels of Oil Equivalent (“BOE”) Initially in Place and 8.3 Billion BOE RECOVERABLE

Americas Petrogas Inc. (TSX VENTURE:BOE) (the “Company” or “Americas Petrogas”) is pleased to provide information on the Company’s unconventional hydrocarbon resources for its interests in the Vaca Muerta, Lower Agrio and Los Molles shale formations only, within the Company’s blocks located in Argentina’s Neuquén Basin.

These resources were evaluated by the independent consultants Ryder Scott Company, L.P. (“Ryder Scott”) and documented in a Report effective June 30th, 2013 (the “Resource Report”). All of the Company’s nine blocks with unconventional hydrocarbon resources were reviewed in the Resource Report, although not all of the potential resources and formations were evaluated.

The evaluations did not include formations with potential for tight reservoirs such as the Quintuco, Tordillo, Mulichinco and others.

The Contingent and Prospective Resources reported in this news release are in addition to the Oil and Gas Reserves as of December 31, 2012 as previously released and filed on SEDAR.

Barclay Hambrook, President & CEO of Americas Petrogas, commented, “We are delighted with the findings of Ryder Scott’s independent evaluation of the unconventional resource potential across Americas Petrogas’ Neuquén Basin blocks. This evaluation helps highlight the very large upside attributable to Americas Petrogas’ unconventional shale acreage in the Neuquén Basin.”

All values disclosed herein are net to Americas Petrogas’ interest.

Highlights

  • Americas Petrogas, in the blocks evaluated, holds a total of 1,580,822 gross acres or 1,221,803 net acres on the (a) Los Toldos I, II, III and IV blocks (73,581 net acres); (b) Huacalera block (97,390 net acres); (c) Totoral, Yerba Buena and Bajada Colorada blocks (“Southern Concessions”) (1,020,728 net acres); and (d) Loma Ranqueles block (30,104 net acres).
  • The independent resource evaluation was focused on the following geological formations: Vaca Muerta shale, Agrio shale and Los Molles shale.
  • The evaluation was based on complete data from the Company’s five new exploratory wells drilled in the areas (100% exploration success) and from over twenty historical industry wells that penetrated the shales. Four of the five new shale wells have already been tested and the fifth will be tested in the near future. Data used included well electric logs, mud logs, full cores, side wall cores, rock sample analysis, geomechanical data, geochemistry studies, 3D and 2D Seismic and other data from Americas Petrogas’ blocks plus important data from nearby blocks in close proximity.

The following are the most relevant results of this independent evaluation completed by Ryder Scott for Americas Petrogas’ nine blocks that are part of this study:

  1. Best Case P50 total petroleum initially in place (“TPIIP”): 56.1 billion BOE, including,
  • Best Case P50 Undiscovered PIIP (“UPIIP”) of 55.2 billion BOE
  • Best Case P50 Discovered PIIP (“DPIIP”) 925 million BOE
  1. Best Case P50 total petroleum recoverable: 8.3 billion BOE, including,
  • Best Case P50 contingent recoverable resources of 21 million BOE
  • Best Case P50 prospective recoverable resources of 8.29 billion BOE

Please see the tables (and notes thereto) and narrative below for a detailed break-down of the calculation of these amounts.

Disclosure of Resources

The Resource Report has been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGEH”) and National Instrument 51-101 – Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators (“NI 51-101”). The Resource Report provides a summary of the oil, liquids & natural gas resources associated with nine of Americas Petrogas’ blocks in the Neuquén Basin, Argentina as at June 30, 2013. Americas Petrogas engaged Ryder Scott to provide evaluations of its contingent and prospective recoverable resources over the nine blocks with a focus on the Vaca Muerta shale, Agrio shale and Los Molles shale formations.

The Resource Report is based on certain factual data supplied by the Company and Ryder Scott’s opinion of reasonable practice in the industry. The extent and character of ownership and all factual data pertaining to the Company’s properties and contracts (except for certain information available in the public domain) were supplied by the Company to Ryder Scott and accepted without any further investigation. Ryder Scott accepted this data as presented and neither title searches nor field inspections were conducted. The recovery and resources estimates for Americas Petrogas’ properties described herein are estimates only and there is no guarantee that the estimated resources will be recovered. The actual resources for Americas Petrogas’ properties may be greater or less than those calculated.

Ryder Scott has also identified certain contingencies in order to convert the contingent recoverable resources described herein and in the Resource Report into developed reserves. These contingencies are specific to each formation and are related to the maturity of these projects and commercialization contingencies. There are no commercially productive analog fields in this area of the basin to establish expected production rates and recovery efficiencies at this time. There may be a risk that accumulations containing contingent resources may not achieve commercial production.

Summary Tables for Unconventional Shale Resources Across the Company’s Nine Shale Blocks in the Neuquén Basin

The following tables provide a summary of the findings from the Resource Report. Please see Appendix “A” to this news release for certain important definitions.

Table 1
Estimated Working Interest Volumes
Unrisked Undiscovered Hydrocarbons Initially In Place (Prospective Areas)
Leasehold Interests Derived Through Certain Agreements of
Americas Petrogas Inc.
As of June 30, 2013
Concession Formation Original Oil in Place (“OOIP”) (MMBO) Original Gas in Place (“OGIP”) (BCF) OOIP+
OGIP (MMBOE)
P90 P50 P10 P90 P50 P10 P50
Totoral, Yerba Buena, Bajada Colorada
Vaca Muerta 7,926 19,329 31,091 3,104 7,658 12,574 20,606
Los Molles (4 wells) 1,126 2,397 4,320 9,122 22,036 41,561 6,069
Probab-ilistic Aggregation 957 201 -1,442 4,410 -1,465 -11,615 -44
Total 10,009 21,927 33,969 16,636 28,229 42,520 26,631
Huacalera
Vaca Muerta 68 156 259 24,260 31,409 40,250 5,391
Los Toldos I
Vaca Muerta 420 635 850 47,059 50,873 54,963 9,113
Los Toldos II
Vaca Muerta 5,558 6,260 7,063 6,626 7,489 8,552 7,508
Los Toldos III
Vaca Muerta 3 8 13 1,202 1,541 1,920 264
Lower Agrio 298 392 505 257 385 553 456
Probab-ilistic Aggregation 5 0 -5 105 14 -128 2
Total 306 400 513 1,564 1,940 2,345 722
Los Toldos IV
Vaca Muerta 12 26 44 4,173 5,363 6,655 915
Lower Agrio 608 955 1,357 544 932 1,452 1,111
Probab-ilistic Aggregation 9 -1 -5 368 49 -406 7
Total 629 980 1,396 5,085 6,344 7,700 2,033
Loma Ranqueles
Vaca Muerta 37 86 143 13,109 17,551 22,060 3,011
Lower Agrio 333 689 1,087 307 667 1,135 800
Probab-ilistic Aggregation 49 -9 -55 365 33 -429 -3
Total 419 766 1,175 13,781 18,251 22,766 3,808
Total 17,409 31,124 45,225 115,011 144,535 179,097 55,206
Notes:
(1) Prospective resources is the only category of UPIIP that has been categorized as recoverable. There is no certainty that any portion of the resources referred to in the table above will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of these resources.
(2) As prospective resources were determined probabilistically, where appropriate a “Probabilistic Aggregation” term is shown to account for the effects of probabilistic aggregation of separate plays to the block level.
(3) These volumes are arithmetic sums of multiple estimates, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class. Ryder Scott’s report did not include these arithmetic summations.
Table 2
Estimated Working Interest Volumes (Contingent Areas)
Unrisked Discovered Hydrocarbons Initially In Place
Leasehold Interests Derived Through Certain Agreements of
Americas Petrogas Inc.
As of June 30, 2013
Concession Formation OOIP (MMBO) OGIP (BCF) OOIP+OGIP (MMBOE)
P90 P50 P10 P90 P50 P10 P50
Los Toldos I
Vaca Muerta 14 20 27 1,491 1,612 1,742 289
Los Toldos II
Vaca Muerta 471 530 598 561 634 724 636
Total 484 550 625 2,052 2,246 2,466 925
Note:
(1) When calculating DPIIP, there is either no material production or limited production from testing and no reserves are associated with these properties. All DPIIP, other than contingent resources, has been categorized as unrecoverable. There is no certainty that it will be commercially viable to produce any portion of the resources referred to in the table above.
(2) These volumes are arithmetic sums of multiple estimates, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class. Ryder Scott’s report did not include these arithmetic summations.
Table 3
Estimated Working Interest Volumes
Unrisked Contingent (Recoverable) Hydrocarbon Resources
Leasehold Interests Derived Through Certain Agreements of
Americas Petrogas Inc.
As of June 30, 2013
Concession Formation Estimated Ultimate Recovery (“EUR”) Oil/Condensate (MMBO) EUR Gas (BCF) EUR (MMBOE)
C1 C2 C3 C1 C2 C3 P50
Los Toldos I
Vaca Muerta 0.1 1 5 13 91 289 16
Los Toldos II
Vaca Muerta 0.5 4 13 1 5 15 5
Total 0.6 5 18 14 96 304 21
Notes:
(1) There is no certainty that it will be commercially viable to produce any portion of the resources referred to in the table above.
(2) “C” refers to Contingent Resources. Economic contingent resources fall into three categories: low estimate (C1), best estimate (C2) and high estimate (C3).
(3) These volumes are arithmetic sums of multiple estimates, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class. Ryder Scott’s report did not include these arithmetic summations.
Table 4
Estimated Working Interest Volumes
Unrisked Prospective (Recoverable) Hydrocarbon Resources
Leasehold Interests Derived Through Certain Agreements of
Americas Petrogas Inc.
As of June 30, 2013
Concession Formation EUR Oil/Condensate (MMBO) EUR Gas (BCF) EUR (MMBOE)
P90 P50 P10 P90 P50 P10 P50
Totoral, Yerba Buena, Bajada Colorada
Vaca Muerta 394 1,246 2,536 156 493 1,018 1,328
Los Molles (4 wells) 65 185 418 1,891 5,237 11,577 1,058
Probabilistic Aggregation 139 6 -222 1,301 413 -1,871 74
Total 598 1,437 2,732 3,348 6,143 10,727 2,460
Huacalera
Vaca Muerta 14 40 80 4,483 8,497 13,201 1,456
Los Toldos I
Vaca Muerta 83 168 282 7,484 14,095 20,827 2,517
Los Toldos II
Vaca Muerta 200 454 714 254 555 874 546
Los Toldos III
Vaca Muerta 1 2 4 221 417 646 71
Lower Agrio 19 32 50 18 31 53 37
Probabilistic Aggregation 1 0 -1 14 2 -19 1
Total 21 34 53 253 450 680 109
Los Toldos IV
Vaca Muerta 3 7 14 773 1,446 2,253 248
Lower Agrio 41 75 131 37 74 135 88
Probabilistic Aggregation 4 1 -6 43 5 -51 2
Total 48 83 139 853 1,525 2,337 338
Loma Ranqueles
Vaca Muerta 8 22 44 2,450 4,675 7,325 801
Lower Agrio 23 53 101 22 52 104 62
Probabilistic Aggregation 12 3 -18 43 7 -40 4
Total 43 78 127 2,514 4,734 7,389 867
Total 1007 2,294 4,127 19,189 35,999 56,032 8,293
Notes:
(1) Prospective resources is the only category of UPIIP that has been categorized as recoverable. There is no certainty that any portion of the resources referred to in the table above will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of these resources.
(2) As prospective resources were determined probabilistically, where appropriate a “Probabilistic Aggregation” term is shown to account for the effects of probabilistic aggregation of separate plays to the block level.
(3) These volumes are arithmetic sums of multiple estimates, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class. Ryder Scott’s report did not include these arithmetic summations.

The following provides additional information relating to the Resource Report for the Neuquén Basin:

Contingencies in the Neuquén Basin which must be overcome to enable the classification of contingent resources as reserves include economic, access to significant capital resources, regulatory, market, facilities and additional infrastructure, corporate commitment and political risks. Corporate commitment will be significantly influenced by initial drilling results of both vertical and horizontal wells and the results of exploration and development activities of the Company and others in the area. As with any resource estimates, the evaluation will change over time as new information becomes available.

The estimate of contingent resources has not been adjusted for risk based on the chance of development. The contingent resources estimates for the Neuquén Basin involve a number of assumptions. The Agrio, Vaca Muerta and Los Molles unconventional resource plays in the Neuquén Basin are still in the early stages of evaluation and appraisal. It currently remains uncertain which development technologies (vertical or horizontal wells, number and size of fracture stimulations, etc.), if any, will be employed to efficiently develop these resources. Well test results to date from the formations have not defined which reservoir properties (clay volume, porosity, saturation, carbonate/clastic ratio, presence of natural fractures, etc.), if any, can predict whether well performance across an area can be expected to be “similar”. A limited amount of production information is available for Vaca Muerta completions while none is available for the Agrio or Los Molles. Due to these uncertainties, contingent resources are only attributed to a limited number of vertical appraisal/development wells adjacent to those wells that have demonstrated the existence of moveable hydrocarbons through flow test and other wells on the concession with a similar log character. Vertical development wells were assumed for estimating contingent resources given that there is insufficient performance history on the performance of horizontal wells. Since most of the concession area has not been tested by drilling, the resource volumes away from the well control have been considered prospective resources.

Positive factors relevant to the contingent resource estimates include the fact that minor production from the Vaca Muerta has occurred in conventional wells in many parts of the basin, the unconventional shale oil and shale gas potential of the Vaca Muerta has been the focus of significant appraisal drilling by multiple operators in the basin over the last several years, there is significant infrastructure that may be accessible in certain parts of the Neuquén Basin, logs and other data from historical wells which have penetrated the Vaca Muerta formation, and the fact that the Company has drilled, logged and acquired additional information in three wells targeting this unconventional potential in the Vaca Muerta; however, these wells are in various stages of evaluation. Negative factors and uncertainties associated with recovery of the Neuquén Basin resources include, but are not limited to, the lack of long-term shale oil and shale gas production history over the majority of the Neuquén Basin, lack of infrastructure in some locations, potential for variations in the quality of the Vaca Muerta formation where minimal well data currently exists, access to the substantial amount of capital which would be required to develop the resources, low commodity prices that would curtail the economics of development and the future performance of wells, regulatory approvals and/or changes to laws, access to the required services at the appropriate cost and topographic or surface restrictions. Prospective resources have both an associated chance of discovery (geological chance of success) and a chance of development.

About Americas Petrogas Inc.

Americas Petrogas Inc. is a Canadian company whose shares trade on the TSX Venture Exchange under the symbol “BOE”. Americas Petrogas has conventional and unconventional (shale and tight sands) oil and gas interests in numerous blocks in the Neuquén Basin of Argentina. Americas Petrogas has joint venture partners, including ExxonMobil, Apache and Gran Tierra Energy, on various blocks in Argentina. For more information about Americas Petrogas, please visit www.americaspetrogas.com.

Advisories

The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “approximate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions. In particular, this news release contains forward-looking statements pertaining to resources of the Company and other oil and gas information. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company’s control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Company’s actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits the Company will derive from them. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The forward-looking statements in this news release are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements. Investors are encouraged to review and consider the additional risk factors set forth in the Company’s Annual Management’s Discussion and Analysis (MD&A), which is available on SEDAR at www.sedar.com.

Throughout this press release, the terms BOE (barrels of oil equivalent), MMBO (millions of barrels of oil), MMBOE (millions of barrels of oil equivalent), and BCF (billion cubic feet) are used. Such terms when used in isolation, may be misleading. All calculations converting natural gas to BOE have been made using a conversion ratio of six thousand cubic feet (six “Mcf”) of natural gas to one barrel of oil, unless otherwise stated. The use of BOE may be misleading, particularly if used in isolation, as the conversion ratio of six Mcf of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Certain information in this document may constitute “analogous information” as defined in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”), including, but not limited to, information relating to the areas in geographical proximity to prospective lands held by Americas Petrogas and production information related to wells that are believed to be on trend with the Company’s properties. Such information has been obtained from government sources, regulatory agencies or other industry participants. Management of Americas Petrogas believes the information is relevant as it helps to define the reservoir characteristics in which Americas Petrogas may hold an interest. Americas Petrogas is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor. Such information is not an estimate of the reserves or resources attributable to lands held or to be held by Americas Petrogas and there is no certainty that the reservoir data and economics information for the lands held or to be held by Americas Petrogas will be similar to the information presented herein. The reader is cautioned that the data relied upon by Americas Petrogas may be in error and/or may not be analogous to such lands held or to be held by Americas Petrogas.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

APPENDIX “A”
DEFINITIONS

The following sets out important definitions, which are used in this news release.

“Contingent resources” 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.

Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage.

“Discovered petroleum initially-in-place” or “discovered resources”
or “DPIIP”
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.

“Prospective resources” 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.

“Total petroleum initially-in-place”, “total resources” or “TPIIP” That quantity of petroleum that is estimated to exist originally in naturally occurring accumulations; equal to DPIIP plus UPIIP.

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.

“Undiscovered petroleum initially-in-place”, “undiscovered resources” or “UPIIP” 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”; the remainder is “unrecoverable”.

“Uncertainty Ranges” Uncertainty Ranges are described 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.
“Unrecoverable” That portion of DPIIP or 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.


Raj Shah

Editor:

Raj Shah has professional experience working for over a half a dozen years at financial firms such as Merrill Lynch and First Allied Securities Inc., ... <Read more about Raj Shah>


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