Athabasca Oil Corporation Announces 2013 Year-End Results and a 32% Increase in Proved Plus Probable Reserves
March 19, 2014 (Source: CNW) — Athabasca Oil Corporation (“Athabasca” or the “Company”) (TSX: ATH) announced today its 2013 year-end financial and operating results and also released its 2013 year-end reserve and resource estimates.
- gross proved plus probable reserves increased by 32% year-over-year;
- produced an average of 6,397 barrels of oil equivalent per day (“boe/d”) comprised of 49% liquids in 2013; fourth quarter production averaged 6,697 boe/d, in line with guidance;
- completed 59% of Hangingstone Project 1, a 12,000 barrel per day (“bbl/d”) steam assisted gravity drainage (“SAGD”) project;
- capital expenditures totaled $762 million including $282 million in Light Oil, $466 million in Thermal Oil and $14 million for corporate assets;
- at December 31, 2013, Athabasca had liquidity of approximately $673 million, including cash and cash equivalents, short-term investments and funds available under Athabasca’s undrawn credit facility.
The Company is filing its financial statements for the 12 month period and management’s discussion and analysis (“MD&A”) for the three and 12 month periods ended December 31, 2013. The Company is also filing its annual information form for the year ended December 31, 2013, which includes the Company’s statement of reserves data and other detailed information concerning the evaluations that were conducted by the Company’s independent qualified reserves evaluators, GLJ Petroleum Consultants Ltd. (“GLJ”) and DeGolyer and MacNaughton Canada Limited (“D&M”), effective as at December 31, 2013. These documents can be retrieved electronically from Athabasca’s website (www.atha.com and later this morning from SEDAR www.sedar.com).
The year-end independent reserve and resource evaluations reported gross proved plus probable reserves to be 482 million barrels of oil equivalent. Athabasca also holds 10.5 billion barrels of contingent resources (best estimate) as of December 31, 2013 (for details about the Company’s reserve and resource estimates see Schedule A provided below).
“The delay of the Dover approval made 2013 a challenging year for Athabasca,” says Sveinung Svarte, President and CEO. “However, we also delivered many significant milestones as we continued our transition from a largely exploration stage Company to becoming a producer. Looking forward, and with the Dover Order in Council received, we expect 2014 to be a pivotal year as Athabasca continues to focus on realizing the significant resource potential of its assets.”
Athabasca’s production averaged 6,397 boe/d (49% liquids) in 2013 compared to 1,684 boe/d (42% liquids) in 2012, representing a 280% increase. The Company also recognized a higher netback of $31.29/boe during 2013 compared to $23.49/boe in 2012 due to increasing commodity prices, higher liquids content and reductions in operating costs.
In 2013, the Company deployed $282 million of capital in Light Oil including infrastructure, drilling and completion activities in the Fox Creek area.
Athabasca drilled 20 and completed 22 horizontal Montney wells during 2013. At the end of the year, land tenure for over 95% of the Company’s prime Montney land had been extended into the intermediate term, allowing for increased focus on Athabasca’s extensive Duvernay position.
In the third quarter of 2013, Athabasca recommenced its Duvernay drilling program with a goal of delineating and continuing its high-graded land position in the Kaybob region. One vertical well and three horizontal wells were rig released by the end of 2013. The horizontal wells will be completed and brought on production by mid-year 2014. Athabasca currently holds 350,000 net acres of potential liquids-rich Duvernay land, including 200,000 net acres which contain greater than 20 meters of shale pay and lie in the heart of the Duvernay Kaybob fairway.
In December 2013, Athabasca sold a 50% interest in its gas pipeline and two of its batteries in the Kaybob area for gross proceeds of $146 million. Athabasca has fully recovered its initial investment in these facilities, retains operatorship of this key area infrastructure and maintains sufficient capacity to accommodate its anticipated production growth for the next few years.
The Light Oil division now holds proved plus probable reserves of 33 million barrels of oil equivalent, an increase of approximately 48% compared to the prior year.
In 2013, the Company spent $466 million of capital in the Thermal Oil division including $404 million on Hangingstone, $38 million on Dover West, $18 million on the Company’s 40% interest in the Dover Commercial Project (“DCP”) and $6 million on other Thermal Oil projects.
Athabasca made significant progress in the development of Hangingstone Project 1. The central processing facility, well pads, pipelines and area infrastructure are progressing. Construction continues on site with module fabrication and installation on track. The project was 59% complete at year-end 2013 with contracts secured for 80% of the sanctioned value of the project. Construction of Hangingstone Project 1 is anticipated to be complete near the end of 2014, with first steam targeted towards the end of the first quarter 2015.
By the end of 2013, 15 producer wells and 10 injector wells had also been drilled. Drilling was completed on time and within budget. The reservoir quality is consistent with expected results derived from Athabasca’s extensive appraisal drilling and reservoir modeling.
The Company submitted an application to the Alberta Energy Regulator in 2013 for the Hangingstone 70,000 bbl/d expansion project. With the filing of this regulatory application, Athabasca now has gross proved plus probable reserves of 450 million barrels in its Thermal Oil division, an increase of 31% compared to the prior year. Within its Thermal Oil division, Athabasca also holds 10.5 billion barrels of contingent resources (best estimate).
Athabasca received regulatory approvals for its Leduc Carbonate thermal assisted gravity drainage (“TAGD”) pilot and demonstration project in September 2013. TAGD uses electrical conductive heating rather than steam to enable bitumen recovery.
Dover Commercial Project
In early 2014, outstanding statements of concern from the Fort McKay First Nation regarding the DCP were resolved. Fort McKay discontinued its appeal of the Alberta Energy Regulator’s approval of the DCP, and the project received Order in Council on March 13, 2014. The Company expects final regulatory approval from Alberta Environment in the coming weeks, which will allow Athabasca to exercise its put option to sell its remaining 40% interest in the project.
In the fourth quarter of 2013, Athabasca expanded its revolving senior secured first lien credit facility from $200 million to $350 million providing Athabasca with additional borrowing capacity. At December 31, 2013, Athabasca had liquidity of approximately $673 million, including cash and cash equivalents, short-term investments and the $350 million credit facility, which is currently undrawn.
Athabasca’s Board of Directors approved an initial 2014 capital budget of $460 million, and subsequently approved an additional $20 million for its 40% interest in the DCP. The 2014 capital budget focuses on the Company’s key near term priorities, including the completion of Hangingstone Project 1, preparation for a Hangingstone Expansion and a targeted Duvernay drilling and completion program. Athabasca has set a first quarter production guidance range of 6,000 to 6,500 boe/d. Second quarter production is expected to be in the range of 5,500 to 6,000 boe/d which contemplates a scheduled shut-down of the Keyera Simonette plant in April, 2014.
Upon receipt of the Dover put option proceeds, affirmation of the productivity of Athabasca’s new Duvernay wells and determination of the outcome of its Duvernay joint venture process, Athabasca expects to provide an updated capital budget in July.
Athabasca will continue to evaluate additional funding sources, including joint ventures, to advance the development of its portfolio of Light Oil and Thermal Oil opportunities. Athabasca remains committed to a disciplined approach to growth and will only allocate financial resources and personnel to projects that are fully funded.
Amendment to Athabasca’s Corporate By-laws
On March 18, 2014, the Company’s Board of Directors repealed Athabasca’s corporate By-Law No. 1 dated effective August 23, 2006, and approved Amended and Restated By-Law No. 1 (the “Amended and Restated By-Law“) to take its place.
Among other things, the Amended and Restated By-Law enacts new provisions that: (i) fix a deadline by which shareholders must submit a notice of director nominations to the Company prior to any annual or special meeting of shareholders where directors are to be elected; and (ii) specifies the information that a nominating shareholder must include in such a notice in order for it to be valid (the “Advance Notice Provisions“). The purpose of the Advance Notice Provisions is to, among other things, allow Athabasca’s shareholders to receive adequate notice of director nominations with sufficient information regarding all of the nominees to enable them to cast an informed vote to elect directors.
The minimum quorum requirement for shareholder meetings has also been increased to require that two shareholders holding or representing not less than 10% of the shares entitled to be voted at such a meeting must be present at the meeting.
The Amended and Restated By-Law also provides that the chairman shall no longer have a second or casting vote in the event of an equality of votes at either a board meeting or a shareholder meeting.
The Amended and Restated By-Law is effective immediately. At the next Athabasca shareholder meeting, shareholders will be asked to confirm and ratify the Amended and Restated By-Law.
Conference Call and Webcast, March 19, 2014
7:30 am Mountain Time (9:30 am Eastern Time)
A conference call and webcast to discuss the 2013 year-end results will be held for the investment community and media on March 19, 2014 at 7:30 a.m. MT (9:30 a.m. ET). To participate, please dial 888-231-8191 (toll-free in North America) or 647-427-7450 approximately 15 minutes prior to the conference call. An archived recording of the call will be available from approximately 12:30 pm ET on March 19, 2014 until midnight on March 25, 2014 by dialing 855-859-2056 (toll-free in North America) or 416-849-0833 and entering conference password 31086128.
This conference call is also available by webcast for listening purposes only. The webcast link can be found on Athabasca’s website www.atha.com or via the following URL: http://www.newswire.ca/en/webcast/detail/1304749/1439715.
About Athabasca Oil Corporation
Athabasca Oil Corporation is a dynamic, Canadian energy company with a diverse portfolio of thermal and light oil assets. Situated in Alberta’s Western Canadian Sedimentary Basin, the Company has amassed a significant land base of extensive, high quality resources. With 10.5 billion barrels of bitumen resources (contingent resources, best estimate) and growing light oil production, Athabasca is positioned to become a major oil producer. Athabasca’s common shares trade on the TSX under the symbol “ATH”. For more information, visit www.atha.com.
This News Release contains forward-looking information that involves various risks, uncertainties and other factors. All information other than statements of historical fact is forward-looking information. The use of any of the words “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “should,” “believe,” “predict,” “pursue” and “potential” and similar expressions are intended to identify forward-looking information. The forward-looking information is not historical fact, but rather is based on the Company’s current plans, objectives, goals, strategies, estimates, assumptions and projections about the Company’s industry, business and future financial results. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. No assurance can be given that these expectations will prove to be correct and such forward-looking information included in this News Release should not be unduly relied upon. This information speaks only as of the date of this News Release. In particular, this News Release may contain forward-looking information pertaining to the following: the timing of the completion of the construction of Hangingstone Project 1 and of first steam for Hangingstone Project 1; expectations regarding the receipt of regulatory approval from Alberta Environment in respect of the DCP; expected production from the light oil division in the first quarter and second quarter of 2014; expectations regarding the review and revision of the 2014 capital budget; the evaluation of funding sources, potential joint ventures and the future allocation of capital.
The information and statements in this News Release relating to Athabasca’s estimated proved reserves, probable reserves and contingent resources (best estimate) are also deemed to be forward-looking information, 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 that the reserves and resources described can be profitably produced in the future. The reserves and resources estimates contained in this News Release were evaluated by GLJ and D&M in their respective reserves and resources reports dated effective December 31, 2013. For important additional information regarding Athabasca’s reserves and resources estimates and the evaluations that were conducted by GLJ and D&M please see “Independent Reserve and Resource Evaluations” in Athabasca’s AIF that is or will be available on SEDAR at www.sedar.com as well as the “Reserves and Resource Information” at the end of Schedule A attached to this news release.
With respect to forward-looking information contained in this News Release, assumptions have been made regarding, among other things: geological and engineering estimates in respect of Athabasca’s reserves and resources; the geography of the areas in which the Company is conducting exploration and development activities; the applicability of technologies for the recovery and production of Athabasca’s reserves and resources; the Company’s ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which the Company conducts and will conduct its business; future capital expenditures to be made by the Company; future sources of funding for the Company’s capital programs; the Company’s future debt levels; the impact that the agreements relating to the PetroChina transaction (the “PetroChina Transaction Agreements”) will have on the Company, including on the Company’s financial condition and results of operations; and the Company’s ability to obtain financing on acceptable terms.
Actual results could differ materially from those anticipated in this forward-looking information as a result of the risk factors set forth in the Company’s AIF, including, but not limited to: the substantial capital requirements of Athabasca’s projects and the ability to obtain financing for Athabasca’s capital requirements; failure to meet the conditions precedent to the exercise by Athabasca of the Dover Put Option, including failure to receive the approval of Alberta Environment when anticipated or at all; the potential impact of the exercise of the Dover Put Option on Athabasca; the potential for adverse consequences in the event that Athabasca defaults under certain of the PetroChina Transaction Agreements; failure by counterparties (including, without limitation, PetroChina International and Phoenix Energy Holdings Limited (“Phoenix”)) to make payments or perform their operational or other obligations to the Athabasca in compliance with the terms of contractual arrangements between Athabasca and such counterparties, including in compliance with the time schedules set out in such contractual arrangements, and the possible consequences thereof; aboriginal claims; fluctuations in market prices for crude oil, natural gas and bitumen blend; general economic, market and business conditions in Canada, the United States and globally; failure to obtain regulatory approvals or maintain compliance with regulatory requirements; dependence on Phoenix as the joint venture participant in the Dover Oil Sands Project, until such time as Athabasca’s interests in the Dover assets have been sold to Phoenix pursuant to the exercise of the Dover Put Option; failure to meet development schedules and potential cost overruns; variations in foreign exchange and interest rates; factors affecting potential profitability; risks related to future acquisition and joint venture activities; reliance on, competition for, loss of, and failure to attract key personnel; global financial uncertainty; uncertainties inherent in estimating quantities of reserves and resources; changes to Athabasca’s status given the current stage of development; uncertainties inherent in SAGD, TAGD and other bitumen recovery processes; risks related to hydraulic fracturing; expiration of leases and permits; risks inherent in Athabasca’s operations, including those related to exploration, development and production of petroleum, natural gas and oil sands reserves and resources, including the production of oil sands reserves and resources using SAGD, TAGD or other in-situ technologies; risks related to gathering and processing facilities and pipeline systems; availability of drilling and related equipment and limitations on access to Athabasca’s assets; increases in operating costs could make Athabasca’s projects uneconomic; the effect of diluent and natural gas supply constraints and increases in the costs thereof; gas over bitumen issues affecting operational results; environmental risks and hazards and the cost of compliance with environmental regulations, including GHG regulations and potential Canadian and U.S. climate change legislation; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; risks related to Athabasca’s filings with taxation authorities, including the risk of tax related reviews and reassessments; changes to royalty regimes; political risks; failure to accurately estimate abandonment and reclamation costs; exploration, development and production risks inherent in crude oil and natural gas operations, including the production of crude oil and natural gas using multi-stage fracture and other stimulation technologies; the potential for management estimates and assumptions to be inaccurate; long term reliance on third parties; reliance on third party infrastructure; seasonality; hedging risks; risks associated with establishing and maintaining systems of internal controls; insurance risks; claims made in respect of Athabasca’s operations, properties or assets; the effect of a change of control under the PetroChina Transaction Agreements; competition for, among other things, capital, the acquisition of reserves and resources, export pipeline capacity and skilled personnel; the failure of Athabasca or the holder of certain licenses, leases or permits to meet specific requirements of such licenses, leases or permits; risks related to the Athabasca’s amended credit facilities; breaches of confidentiality; costs of new technologies; alternatives to and changing demand for petroleum products; risks related to the Athabasca’s common shares; and risks pertaining to Athabasca’s senior secured notes.
The forward-looking statements included in this News Release are expressly qualified by this cautionary statement. Athabasca does not undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable securities laws.
Independent reserve and resource evaluations
The Company’s independent qualified reserves evaluators, GLJ and D&M, completed independent reserve and resource evaluations effective December 31, 2013. The Company’s estimated bitumen reserves are located in the Hangingstone, Dover West Sands and Dover areas in the Company’s Thermal Oil division. The Dover project is part of the 40% joint venture between Athabasca and Phoenix Energy Holding Limited (“Phoenix”), a subsidiary of PetroChina International. The Company’s light oil, natural gas and natural gas liquids reserves are located primarily in the Fox Creek area within the Company’s Light Oil division.
The following table shows the Company’s estimated reserves by project:
|Dover West Sands (MMbbls)||–||87|
|Thermal Oil Division||51||450|
|Light Oil Division (MMboe)||15||33|
|Consolidated Reserves (MMboe)||66||482|
|(1)||Refer to “Reserves and Resource Information” below for important information regarding the Company’s reserves estimates. Subtotals do not add due to the impact of rounding.|
|(2)||The Company’s investment in Dover is accounted for using the equity method and the reserve estimates set out above reflect the Company’s indirect undivided 40% working interest in the Dover assets.|
The table below summarizes the Company Interest Contingent Resources (Best Estimate) of all six of Athabasca’s thermal oil projects, as evaluated by GLJ and D&M effective December 31, 2013.
|Company Interest Contingent Resources (MMbbls)(1)||Best
|TOTAL D&M REPORT||2,893|
|Dover West Sands||2,957|
|Dover West Leduc Carbonates||3,001|
|TOTAL GLJ REPORT||7,599|
|TOTAL COMPANY INTEREST CONTINGENT RESOURCES||10,492|
|(1)||Refer to the “Reserves and Resource Information” below important information regarding the Company’s Contingent Resources estimates. Subtotals do not add due to the impact of rounding.|
|(2)||The Company’s investment in Dover is accounted for by the equity method and the reserve estimates set out above reflect the Company’s indirect undivided 40% working interests in the Dover assets.|
|(3)||GLJ considers the estimated Contingent Resources of 418 MMbbls (Best Estimate) to be sub-economic based upon a 10% discount factor.|
RESERVES AND RESOURCE INFORMATION
The estimates of reserves for individual properties or projects may not reflect the same confidence level as estimates of reserves for all properties due to the effect of aggregation. Reserves figures included in the table that is provided above have been rounded to the nearest MMbbl or MMboe. There is no certainty that it will be commercially viable to produce any portion of the resources. Contingent Resources included in the table that is provided above have been rounded to the nearest MMbbl.
Netback values are calculated by subtracting royalties and operating and transportation expenses from petroleum and natural gas sales.
Boes may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil (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. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
For additional important information regarding the reserves and resources of the Company evaluated by GLJ and D&M, effective December 31, 2013, including the definitions for the resource categories used in this Press Release, please refer to the Company’s AIF that is available on SEDAR at www.sedar.com.
SOURCE Athabasca Oil Corporation
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