(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)
Suroco Energy Inc. (TSX VENTURE:SRN) ("Suroco" or "the Corporation") announces a
revision of the results of the independent reserves report effective December
31, 2013 for the Corporation. The revised volumes and values stated in this news
release represent immaterial changes to those presented in the Corporation's
original release of March 4, 2014 and its press release of March 24, 2014. 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"). This revision is being made
as a result of inconsistencies in the use of Canadian and United States dollar
amounts in which values representing Canadian dollars were reported as United
States dollars. Oil pricing relative to the GLJ price forecast was also
adjusted.
2013 YEAR-END RESERVE HIGHLIGHTS
-- Total proved reserves of approximately 1.9 million barrels of oil (net
after royalty), with a net present value (before tax and discounted at
10%) of approximately US$64.9 million. Equivalent to approximately US$34
per barrel and US$0.48 per share, based on 134.3 million common shares
currently outstanding.(1)
-- Total proved plus probable reserves of approximately 2.9 million barrels
of oil (net after royalty), with a net present value (before tax and
discounted at 10%) of approximately US$89.1 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$115.5 million.
-- Booked reserves increased as follows:
-- company gross proved producing reserves grew by 78% from the prior
year, resulting in a net increase of 32% after accounting for 2013
production;
-- company gross proved reserves grew by 54% from the prior year,
resulting in a net increase of 19% after accounting for 2013
production;
-- company gross proved plus probable reserves grew by 33% from the
prior year, resulting in a net increase of 11% after accounting for
2013 production; and
-- company gross proved plus probable plus possible reserves grew by
15% from the prior year, resulting in a net increase of 1% after
accounting for 2013 production.
-- In the Cohembi oilfield, recognition of additional pool extensions
resulting from the drilling of 5 wells in the southern half of the
field. Also, recognition of improved recovery reserves in the southern
half of the field resulting from waterflood project expansion and
subsequent observed producing well responses.
-- Continued recognition for enhanced recovery by polymer injection for the
Cohembi oilfield in the possible category, supported by ongoing core
studies and reservoir simulation.
-- Initial booking of probable and possible reserves for a new pool
discovery resulting from the drilling of the Quinde-4 well. This booking
was based on log information only. However, subsequent testing activity
in 2014 indicates that material Quinde reserve potential remains
unbooked in all categories.
(1) All per share amounts do not factor in the dilutive effect of any dilutive
instruments or the effect of outstanding debt or cash balances on net asset
value.
2013 RESERVES
The following table summarizes the Corporation's oil and gas reserves as at
December 31, 2013.
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) 1,711 1,569 - - - - - -
Developed Non-
Producing(2)(7) 0 0 - - - - - -
Undeveloped(2)(8) 356 326 - - - - - -
------ ------ ------ ------ ------ ------ ------ ------
TOTAL PROVED(2) 2,067 1,895 - - - - - -
TOTAL PROBABLE(3) 1,070 977 - - - - - -
------ ------ ------ ------ ------ ------ ------ ------
TOTAL PROVED +
PROBABLE(2)(3) 3,136 2,872
------ ------ ------ ------ ------ ------ ------ ------
TOTAL PPP(2)(3)(4) 4,258 3,894 - - - - - -
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
See "Notes to Tables" below.
The following table summarizes the Corporation's net present values of future
net revenue as at December 31, 2013.
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) 66,384 61,650 57,633 54,184 51,194
Developed Non-
Producing(2)(7) 0 0 0 0 0
Undeveloped(2)(8) 10,341 8,645 7,306 6,233 5,362
---------- ---------- ---------- ---------- ----------
TOTAL PROVED(2) 76,725 70,295 64,939 60,418 56,556
TOTAL PROBABLE(3) 35,113 28,837 24,151 20,574 17,787
---------- ---------- ---------- ---------- ----------
TOTAL PROVED +
PROBABLE(2)(3) 111,838 99,131 89,090 80,991 74,343
---------- ---------- ---------- ---------- ----------
TOTAL PPP(2)(3)(4) 151,301 131,000 115,465 103,280 93,158
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
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) 52,676 48,763 45,459 42,636 40,198
Developed Non-
Producing(2)(7) 0 0 0 0 0
Undeveloped(2)(8) 7,187 5,838 4,783 3,945 3,271
---------- ---------- ---------- ---------- ----------
TOTAL PROVED(2) 59,863 54,601 50,242 46,581 43,469
TOTAL PROBABLE(3) 24,461 19,693 16,164 13,494 11,433
---------- ---------- ---------- ---------- ----------
TOTAL PROVED +
PROBABLE(2)(3) 84,324 74,294 66,406 60,075 54,901
---------- ---------- ---------- ---------- ----------
TOTAL PPP(2)(3)(4) 110,764 95,457 83,764 74,615 67,304
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
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, 2012 1734 1,086 2,819 - -
Production (Sales) (601) - (601) - -
Acquisitions - - - - -
Dispositions - - - - -
Discoveries - 79 79 - -
Extensions 257 47 304 - -
Infill Drilling 101 (17) 84
Economic Factors - - - - -
Technical Revisions 285 (53) 232 - -
Improved Recovery 291 (72) 220 - -
--------- ---------- ---------- ----------------------
At December 31, 2013 2067 1,070 3136 - -
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 2014.
IMPACT OF OPERATIONAL ACTIVITIES ON RESERVES
The Corporation's activities in the Suroriente Block of Colombia during 2013
resulted in a net upward adjustment in total company gross proved plus probable
reserves of 919,400 barrels of light and medium oil before production
adjustments. This increase is partially attributable to the following
development activities:
-- Five successful appraisal wells were drilled and placed on production in
the Cohembi oilfield during 2013.
-- Expansion of the Cohembi water injection scheme for improved recovery in
the southern portion of the field. Positive pressure responses were
observed in all the southern producing wells during December of 2013.
-- The remaining upward adjustments are the result of ongoing 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.
2013 RESERVES ASSIGNED TO QUINDE-4 AREA
A small amount of probable and possible reserves were assigned based solely on
open hole logging results of the Quinde-4 well, drilled in late December, 2013.
Completion and testing operations conducted in January and February, 2014 have
subsequently demonstrated excellent results. In the month of February, 2014,
Quinde-4 produced on natural flow for the first 17 days at an average rate of
1,065 barrels of oil per day (155 barrels of oil per day net to the Corporation
after royalty), and then produced by electric-submersible pump to February 25,
2013 at an average rate of 2,642 barrels of oil per day (385 barrels of oil per
day net to the Corporation after royalty) with zero percent watercut, for total
production in the month of February of 42,509 barrels of oil (6,192 barrels of
oil net to the Corporation after royalty). Additional drilling is planned to
further develop this discovery, details of which will be included in a future
announcement. Given the results of the Quinde-4 well, and the support for
near-term additional development drilling of this field, the Corporation
believes that material reserve potential is unbooked at this time.
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.
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, development plans and
potential for future booked reserves. 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
known 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.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts responsibility
for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Suroco Energy Inc.
Alastair Hill
President and Chief Executive Officer
(403) 232-6784
Suroco Energy Inc.
Travis Doupe
VP Finance and Chief Financial Officer
(403) 232-6784
(403) 232-6747 (FAX)
www.suroco.com
(TSXV:SRN)
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