(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)
Suroco Energy Inc. (TSX VENTURE:SRN) ("Suroco" or "the Corporation") is pleased
to announce the results of the independent reserves report effective December
31, 2012 for the Corporation. The Corporation's reserves were evaluated by GLJ
Petroleum Consultants of Calgary, Alberta ("GLJ") in compliance with National
Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and in
accordance with the COGE (Canadian Oil and Gas Evaluation) Handbook (the "GLJ
Report").
2012 YEAR-END RESERVE HIGHLIGHTS
-- Total proved reserves of approximately 1.6 million barrels of oil (net
after royalty), with a net present value (before tax and discounted at
10%) of approximately US$61.2 million.
-- Total proved plus probable reserves of approximately 2.6 million barrels
of oil (net after royalty), with a net present value (before tax and
discounted at 10%) of approximately US$90.5 million.
-- Total proved, probable and possible reserves of approximately 3.9
million barrels of oil (net after royalty), with a net present value
(before tax and discounted at 10%) of US$139.2 million.
-- Booked reserves increased in all categories:
-- positive revisions of 122% as compared to 2011 year-end total
company gross proved reserves, resulting in a net increase of 81%
after accounting for 2012 production.
-- positive revisions of 67% as compared to 2011 year-end total company
gross proved plus probable reserves, resulting in a net increase of
46% after accounting for 2012 production.
-- positive revisions of 59% as compared to 2011 year-end total company
gross proved plus probable plus possible reserves, resulting in a
net increase of 45% after accounting for 2012 production.
-- In the Cohembi oilfield, recognition of improved recovery reserves in
the proved developed category resulting from observed response to water
injection that commenced in December 2012.
-- Significant undeveloped improved recovery reserve potential in all
categories via waterflooding or polymer flooding in the Cohembi
oilfield, as supported by a third party reservoir simulation study and
Suroco's internal technical work.
2012 RESERVES
The following table summarizes the Corporation's oil and gas reserves as at
December 31, 2012.
CONSOLIDATED SUMMARY OF OIL AND GAS RESERVES
BASED ON FORECAST PRICES AND COSTS
Company Reserves
----------------------------------------------------
Light and Natural Gas
Medium Oil Heavy Oil Natural Gas Liquids
----------------------------------------------------
Gross Net Gross Net Gross Net Gross Net
Reserves Category MSTB MSTB MSTB MSTB MMscf MMscf Mbbl Mbbl
-------------------------------------------- ------------------------ ------
PROVED
Developed
Producing(2)(6) 1,301 1,195 - - - - - -
Developed Non-
Producing(2)(7) 22 20 - - - - - -
Undeveloped(2)(8) 411 377 - - - - - -
--------------------------------------------- ------
TOTAL PROVED(2) 1,734 1,591 - - - - - -
TOTAL PROBABLE(3) 1,086 993 - - - - - -
--------------------------------------------- ------
TOTAL PROVED +
PROBABLE(2)(3) 2,819 2,585
--------------------------------------------- ------
TOTAL PPP(2)(3)(4) 4,236 3,874 - - - - - -
--------------------------------------------- ------
--------------------------------------------- ------
See "Notes to Tables" below.
The following table summarizes the Corporation's net present values of future
net revenue as at December 31, 2012.
CONSOLIDATED SUMMARY OF NET PRESENT VALUES
BASED ON FORECAST PRICES AND COSTS
Net Present Values of Future Net Revenue
-------------------------------------------
Before Income Tax
Discounted at
-------------------------------------------
0%/yr 5%/yr. 10%/yr. 15%/yr. 20%/yr.
Reserves Category $M $M $M $M $M
------- -------- -------- -------- --------
PROVED
Developed Producing(2)(6) 61,230 56,374 52,321 48,894 45,959
Developed Non-Producing(2)(7) 986 916 854 798 749
Undeveloped(2)(8) 12,425 9,953 8,016 6,473 5,226
------- -------- -------- -------- --------
TOTAL PROVED(2) 74,641 67,243 61,191 56,165 51,934
TOTAL PROBABLE(3) 45,228 35,996 29,310 24,335 20,543
------- -------- -------- -------- --------
TOTAL PROVED + PROBABLE(2)(3) 119,870 103,239 90,501 80,499 72,477
------- -------- -------- -------- --------
TOTAL PPP(2)(3)(4) 198,785 164,316 139,164 120,236 105,609
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Net Present Values of Future Net Revenue
--------------------------------------------
After Income Tax
Discounted at
--------------------------------------------
0%/yr 5%/yr. 10%/yr. 15%/yr. 20%/yr.
Reserves Category $M $M $M $M $M
------- -------- -------- -------- --------
PROVED
Developed Producing(2)(6) 49,468 45,526 42,217 39,405 36,988
Developed Non-Producing(2)(7) 661 605 556 513 476
Undeveloped(2)(8) 8,319 6,399 4,893 3,694 2,726
------- -------- -------- -------- --------
TOTAL PROVED(2) 58,449 52,530 47,666 43,612 40,189
TOTAL PROBABLE(3) 29,532 23,020 18,315 14,827 12,182
------- -------- -------- -------- --------
TOTAL PROVED + PROBABLE(2)(3) 87,981 75,550 65,981 58,439 52,371
------- -------- -------- -------- --------
TOTAL PPP(2)(3)(4) 140,854 116,279 98,261 84,650 74,099
------- -------- -------- -------- --------
------- -------- -------- -------- --------
See "Notes to Tables" below.
The price forecast used in the variable dollar economics is available on the GLJ
website at www.gljpc.com.
The following table sets forth a reconciliation of the Corporation's reserves by
product type:
RECONCILIATION OF COMPANY GROSS
RESERVES BY PRINCIPAL PRODUCT TYPE
BASED ON FORECAST PRICES AND COSTS
Light and Medium Oil
--------------------------------------------------
Gross
Gross Proved
Total Plus
Gross Gross Proved Probable
Total Total Plus Gross Plus
Proved Probable Probable Possible Possible
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
-------- --------- --------- -------- --------
At December 31, 2011 958 969 1,926 - -
Production (Sales) (393) - (393) - -
Acquisitions - - - - -
Dispositions - - - - -
Discoveries - - - - -
Extensions 224 158 382 - -
Economic Factors - - - - -
Technical Revisions 181 (71) 109 - -
Improved Recovery 764 31 795 - -
--------------------------------------------------
At December 31, 2012 1734 1086 2,819 - -
A complete filing of the Corporation's Statements of Reserves Data and Other Oil
and Gas Information (form 51-101F1), Report on Reserves Data by Independent
Qualified Reserves Evaluator or Auditor (form 51-101F2) and Report of Management
and Directors on Oil and Gas Disclosure (form 51-101F3), will be available in
the Annual Information Form of the Corporation that will be filed prior to the
end of April 2013.
IMPACT OF OPERATIONAL ACTIVITIES ON RESERVES
The Corporation's activities in the Suroriente Block of Colombia during 2012
resulted in a net upward adjustment in total company gross proved reserves of
1,169,200 barrels of light and medium oil before production adjustments. This
increase is partially attributable to the following development activities:
-- Seven successful appraisal wells were drilled and placed on production
in the Cohembi oilfield during 2012.
-- Water injection for improved recovery was initiated in the Cohembi
oilfield in mid-December of 2012 and within 2 to 7 days a related
pressure response was observed in surrounding wells.
The remaining upward adjustments are the result of further evaluation of the
production and pressure data from wells in the Cohembi oilfield, which has
provided additional confidence in the discovered oil initially-in-place estimate
and the high degree of continuity and reservoir quality within the pool.
DISCOVERED OIL INITIALLY-IN-PLACE AND IMPROVED RECOVERY POTENTIAL IN THE COHEMBI
VILLETA N OIL POOL
In the third quarter of 2012, the Corporation followed up on the 2011 integrated
development study of the Cohembi oil pool conducted by DeGolyer and MacNaughton
of Dallas (see the Corporation's February 24, 2012 press release) with an
updated reservoir simulation study conducted by Kade Technologies Inc. ("Kade")
of Calgary. Geological data from five new wells and an additional year of
production and pressure data was incorporated. The Kade study estimated the
discovered light or medium oil initially-in-place (DOIIP) for the Cohembi
Villeta N pool to be approximately 126 million barrels (100% gross field basis).
The oil recovery factor technically achievable by waterflooding was estimated at
25%-34% of the DOIIP based on a 20-well development plan (requiring 10
additional wells to be drilled in 2013 and 2014). The concept of chemical
enhanced recovery with polymer injection was also investigated, resulting in a
predicted incremental oil recovery factor of 11% to 21% over waterflood
recovery. On this basis, the operator and the Corporation are planning a 2013
laboratory feasibility and design study using core acquired from previously
drilled Cohembi wells to identify an optimal chemical enhanced recovery plan.
The incremental reserve potential achievable by improved recovery techniques in
Cohembi may not have been fully recognized in the GLJ Report, as the field has
not yet been adequately delineated. Company gross total proved reserves of 1.4
million barrels of oil for Cohembi are assigned in the GLJ Report on the basis
of a DOIIP of 100 million barrels of oil, with primary recovery of 7% of the
DOIIP, plus incremental improved recovery of 12% (for a total recovery of 19%)
over an area that includes 70% of the DOIIP in Cohembi.
Company gross total proved plus probable reserves of 2.3 million barrels of oil
for Cohembi are assigned in the GLJ Report on the basis of a DOIIP of 110
million barrels of oil, with primary recovery of 8% of the DOIIP, plus
incremental improved recovery of 17% (for a total recovery of 25%) over an area
that includes 74% of the DOIIP in Cohembi.
Company gross total proved plus probable plus possible reserves of 3.6 million
barrels of oil for Cohembi are assigned in the GLJ Report on the basis of a
DOIIP of 125 million barrels of oil, with primary recovery of 8% of the DOIIP,
plus incremental improved recovery of 28% (for a total recovery of 36%) over an
area that includes 85% of the DOIIP in Cohembi.
Prior to 2013, development in the Cohembi oilfield has been focused in the
northern, western, and central parts of the interpreted pool area. Seismic
interpretation and reservoir simulation indicate additional development
potential away from the developed area, primarily in the south but also further
west and north. The Corporation in now in the process of a four well appraisal
and development drilling program from the Cohembi-6 multi-well surface pad that
is expected to increase the area available for improved recovery, particularly
in the proved reserve category.
RESERVES COMMITTEE
The Corporation has a reserves committee, which has a majority of independent
board members, which reviews the qualifications and appointment of the
independent reserve evaluators. The committee also reviews the procedures for
providing information to the evaluators. All booked reserves are based upon
annual evaluations by the independent qualified reserve evaluators in accordance
with the COGE Handbook. The evaluations are conducted from the fundamental
geological and engineering data. The reserves committee, chaired by Mr. Daryl
Gilbert, has reviewed the reserves information and approved the reserves report.
GENERAL
The Corporation is a Calgary-based junior oil and gas company, which explores
for, develops and sells crude oil, natural gas liquids and natural gas in
Colombia. The Corporation's common shares trade on the TSX Venture Exchange
under the symbol SRN.
CAUTIONARY LANGUAGE
Possible reserves are those additional reserves that are less certain to be
discovered than probable reserves. There is a 10% probability that the
quantities actually recovered will equal or exceed the sum of proved plus
probable plus possible reserves.
With respect to the Suroriente Block, the GLJ Report reports company gross total
reserves as follows: (a) proved reserves of 1,773,600 barrels of oil; (b) proved
plus probable reserves of 2,819,300 barrels oil; and (c) proved plus probable
plus possible reserves of 4,235,800 barrels of oil.
The estimates of reserves for individual properties may not reflect the same
confidence level as estimates of reserves for all properties, due to effects of
aggregation.
FORWARD-LOOKING STATEMENTS
Certain statements included in this press release constitute forward-looking
statements under applicable securities legislation. These statements relate to
future events or future performance of the Corporation. All statements other
than statements of historical fact are forward-looking statements. In some
cases, forward-looking statements can be identified by terminology such as
"may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate",
"predict", "potential", "continue", or the negative of these terms or other
comparable terminology. Forward-looking statements or information in this press
release include, but are not limited to, the characteristics of the
Corporation's oil and natural gas properties, reserve quantities and the
discounted present value of future net cash flows from such reserves, net
revenue, capital expenditures, exploration plans and development plans. In
addition, this press release may contain forward-looking statements attributed
to third party industry sources. Undue reliance should not be placed on these
forward-looking statements, as there can be no assurance that the plans,
intentions or expectations upon which they are based will occur. By their
nature, forward-looking statements involve numerous assumptions, known and
unknown risks and uncertainties, both general and specific, that contribute to
the possibility that the predictions, estimates, forecasts, projections and
other forward-looking statements will not occur, which may cause actual
performance and 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 assumptions, risks and uncertainties
include, among other things, the state of the economy in general and capital
markets in particular; fluctuations in oil prices; the results of exploration
and development drilling, recompletions and related activities; changes in
environmental and other regulations; risks associated with oil and gas
operations and future exploration activities; and other factors, many of which
are beyond the control of the Corporation. You can find an additional discussion
of those assumptions, risks and uncertainties in the Corporation's Canadian
securities filings.
The forward-looking statements contained in this press release are made as of
the date of this press release. Except as required by law, the Corporation
disclaims any intention and assumes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Additionally, the Corporation undertakes no obligation to
comment on the expectations of, or statements made by, third parties in respect
of the matters discussed above. New factors emerge from time to time, and it is
not possible for management of the Corporation to predict all of these factors
and to assess in advance the impact of each such factor on the Corporation's
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
statement or information. The forward-looking statements contained herein are
expressly qualified by this cautionary statement. Moreover, neither the
Corporation nor any other person assumes responsibility for the accuracy and
completeness of the forward-looking statements.
Statements relating to "reserves" are deemed to be forward-looking statements or
information, as they involve the implied assessment, based on certain estimates
and assumptions, that the reserves described can be profitable in the future.
There are numerous uncertainties inherent in estimating quantities of proved
reserves, including many factors beyond the control of the Corporation. The
reserve data included herein represents estimates only. In general, estimates of
economically recoverable oil and natural gas reserves and the future net cash
flows therefrom are based upon a number of variable factors and assumptions,
such as historical production from the properties, the assumed effects of
regulation by governmental agencies and future operating costs, all of which may
vary considerably from actual results. All such estimates are to some degree
speculative and classifications of reserves are only attempts to define the
degree of speculation involved. For those reasons, estimates of the economically
recoverable oil and natural gas reserves attributable to any particular group of
properties and classification of such reserves based on risk of recovery and
estimates of future net revenues expected therefrom, prepared by different
engineers or by the same engineers at different times, may vary substantially.
The actual production, revenues, taxes and development and operating
expenditures of the Corporation with respect to these reserves will vary from
such estimates, and such variances could be material.
Estimates with respect to proved reserves that may be developed and produced in
the future are often based upon volumetric calculations and upon analogy to
similar types of reserves rather than actual production history. Estimates based
on these methods are generally less reliable than those based on actual
production history. Subsequent evaluation of the same reserves based upon
production history will result in variations, which may be substantial, in the
estimated reserves.
Consistent with the securities disclosure legislation and policies of Canada,
the Corporation has used forecast prices and costs in calculating reserve
quantities included herein. Actual future net cash flows also will be affected
by other factors such as actual production levels, supply and demand for oil and
natural gas, curtailments or increases in consumption by oil and natural gas
purchasers, changes in governmental regulation or taxation and the impact of
inflation on costs.
All evaluations of future revenue are after the deduction of future income tax
expenses, unless otherwise noted in the tables, royalties, development costs,
production costs and well abandonment costs but before consideration of indirect
costs such as administrative, overhead and other miscellaneous expenses. The
estimated future net revenue contained in the table above does not necessarily
represent the fair market value of the Corporation's reserves. There is no
assurance that the forecast price and cost assumptions contained in the GLJ
Report will be attained and variances could be material. Other assumptions and
qualifications relating to costs and other matters are included in the GLJ
Report. The recovery and reserves estimates on the Corporation's properties
described herein are estimates only. The actual reserves on the Corporation's
properties may be greater or less than those calculated.
NOTES TO TABLES
1. "Gross Reserves" are the Corporation's working interest (operating or
non-operating) share before deducting of royalties and without including
any royalty interests of the Corporation. "Net Reserves" are the
Corporation's working interest (operating or non-operating) share after
deduction of royalty obligations, plus the Corporation's royalty
interests in reserves.
2. "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.
3. "Probable" reserves are those additional reserves that are less certain
to be recovered than proved reserves. It is equally likely that the
actual remaining quantities recovered will be greater or less than the
sum of the estimated proved plus probable reserves.
4. "Possible" reserves are those additional reserves that are less certain
to be recovered than probable reserves. It is unlikely that the actual
remaining quantities recovered will exceed the sum of the estimated
proved plus probable plus possible reserves.
5. "Developed" reserves are those reserves that are expected to be
recovered from existing wells and installed facilities or, if facilities
have not been installed, that would involve a low expenditure (e.g. when
compared to the cost of drilling a well) to put the reserves on
production.
6. "Developed Producing" reserves are those reserves that are expected to
be recovered from completion intervals open at the time of the estimate.
These reserves may be currently producing or, if shut-in, they must have
previously been on production, and the date of resumption of production
must be known with reasonable certainty.
7. "Developed Non-Producing" reserves are those reserves that either have
not been on production, or have previously been on production, but are
shut in, and the date of resumption of production is unknown.
8. "Undeveloped" reserves are those reserves expected to be recovered from
know accumulations where a significant expenditure (for example, when
compared to the cost of drilling a well) is required to render them
capable of production. They must fully meet the requirements of the
reserves classification (proved, probable, possible) to which they are
assigned.
Some values in the tables set forth above may not add due to rounding.
FOR FURTHER INFORMATION PLEASE CONTACT:
Suroco Energy Inc.
Alastair Hill
President and Chief Executive Officer
(403) 232-6784
(403) 232-6747 (FAX)
Suroco Energy Inc.
Travis Doupe
VP Finance and Chief Financial Officer
(403) 232-6784
(403) 232-6747 (FAX)
www.suroco.com
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