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Hot Features
Premium
Chinook Energy Inc. ("Chinook" or the "Company") (TSX:CKE) today announced the
results of its year-end reserve evaluations effective December 31, 2013 as
prepared by its independent evaluators. The Company has also provided an
operations update and an update on the renewal of its credit facilities.
Chinook's audit of its 2013 annual consolidated financial statements is not yet
complete and accordingly all financial amounts referred to in this news release
are unaudited and represent management's estimates. Readers are advised that
these financial estimates are subject to audit and may be subject to change as a
result.
Operational Update and Unaudited 2013 Year-End Results
Chinook's average daily production for fiscal year 2013 was 10,156 barrels of
oil equivalent per day. Average production for the fourth quarter of 2013 was
9,680 barrels of oil equivalent per day. Projected cash flow from operations
(before changes in non-cash working capital) for 2013 is estimated at $88
million or $0.41 per weighted average basic common share outstanding
(unaudited). Year end 2013 net debt is $60 million.
The Canadian business continued to focus on crude oil development in the Grande
Prairie area of Alberta along with the disposition of $21 million of
non-strategic assets representing approximately 580 boe/d of production. The
Tunisian business focused on further light oil development and delineation of
the Bir Ben Tartar Concession (the "BBT Concession"). The 2013 drilling program
consisted of 20 (11.75 net) wells of which 12 (9.44 net) were operated and eight
(2.31 net) were non-operated wells. The results are outlined in the table below:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Wells Drilled
Year ended December 31, 2013 Tunisia Canada Total
----------------------------------------------------------------------------
Gross Net Gross Net Gross Net
----------------------------------------------------------------------------
Exploration
Oil - - 4.00 2.24 4.00 2.24
Gas - - - - - -
Dry 1.00 0.86 - - 1.00 0.86
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1.00 0.86 4.00 2.24 5.00 3.10
----------------------------------------------------------------------------
Development
Oil 4.00 2.63 11.00 6.02 15.00 8.65
Gas - - - - - -
Dry - - - - - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4.00 2.63 11.00 6.02 15.00 8.65
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total 5.00 3.49 15.00 8.26 20.00 11.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada - Grande Prairie Area
Chinook drilled six (4.5 net) horizontal wells during 2013 on the newly acquired
Albright property which added approximately 800 boe/d (82% oil) to the original
acquired production of 280 boe/d (65% oil). These Dunvegan oil wells have
commenced production at rates exceeding management's initial budgeted
expectations. The Company plans to drill four horizontal wells on the lands in
the first quarter of 2014 and management has identified 24 additional locations
on Chinook lands.
At Karr, the Company participated in six (1.89 net) wells during 2013 targeting
Dunvegan oil, bringing the total number of wells on the Karr property to nine
(2.9 net). The operator has continued to reduce the drilling and completion
costs and has commenced the construction of a central battery, which will
further improve the economics of this project. The wells continue to meet or
exceed management's budgeted expectations. Net production from this property is
expected to exceed 700 boe/d in the first quarter of 2014. An additional 16 (7.4
net) horizontal wells have been identified on Chinook lands.
A summary of Chinook's Dunvegan 2013 and 2014 activity is captured below:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Working IP30 IP90
Drilling Frac On Production Interest (net (net %
Location Days Stages Date (%) boe/d) boe/d) Oil
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Karr - 1,700m Total Vertical Depth
Karr 13-8-66-3W6 24 16 January 2013 26 66 161 77
Karr 13-17-66-3W6 22 15 February 2013 37 169 101 86
Karr 15-17-66-3W6 20 14 April 2013 37 128 118 88
Karr 16-17-66-3W6 20 14 April 2013 37 74 111 86
Karr 14-8-66-3W6 19 16 December 2013 26 112
Karr 16-8-66-3W6 17 16 December 2013 26 94
Karr 15-8-66-3W6 19 16 January 2014 26 76
Est. March
Karr 14-17-66-3W6 17 16 2014 37
Est. March
Karr 13-10-66-3W6 16 TBD 2014 26
Beaverlodge - 1,150m Total Vertical Depth
Beaverlodge 16-22-
72-10W6 16 7 March 2013 50 58 35 77
Beaverlodge 13-22-
72-10W6 11 7 March 2013 50 76 50 89
Beaverlodge 1-26-72- September
10W6 17 15 2013 100 240 289 82
Albright - 1,350m Total Vertical Depth
Albright 4-18-71-
10W6 16 12 March 2013 50 53 58 85
Albright 13-19-71-
10W6 15 12 August 2013 100 150 146 85
Albright 14-19-71-
10W6 13 12 August 2013 100 248 220 82
Albright 3-18-71-
10W6 13 16 January 2014 50 250
Albright 13-12-71-
11W6 16 16 February 2014 100
Albright 4- 30-71- Est. March
10W6 16 17 2014 100
Albright 11-19-71- Est. March
10W6 TBD 2014
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current net production from these Dunvegan wells is 1,412 boe/d at 80% oil with
estimated total net drilling, completion, equipping and tie-in costs of $27
million. There are five (3.63 net) additional wells scheduled to come on
production in the first quarter of 2014.
During the fourth quarter of 2013, Chinook received well licences to evaluate
two new Montney prospects. The first horizontal well (0.75 net) was spud on
January 20, 2014 in the Birley/Umbach area of northeastern BC, targeting
liquids-rich natural gas. The well reached total depth in 12 days, six days
faster than originally budgeted, with completion and testing operations
currently underway. The success of the first Birley/Umbach well could lead to a
large-scale development on Chinook's 35 (24 net) sections of land. The second
horizontal Montney well (0.37 net) was spud on January 21, 2014 in the Karr/Gold
Creek area, immediately adjacent to a recently completed industry Montney well
that reported initial test rates of 2,200 boe/d (50% oil) in 2013. Chinook holds
84 (50 net) sections of Montney land in the greater Gold Creek area and has
budgeted a second horizontal well on a separate Montney prospect in the second
half of 2014.
Tunisia
Chinook drilled one horizontal and two vertical (2.58 net) wells on the BBT
Concession during 2013, bringing the total number of wells on the concession to
15 (12.9 net). The Company expects to drill six (5.16 net) development wells on
the BBT Concession in the first half of 2014 and commence the construction of a
central gathering facility and oil battery. The third well of the six well
program was spud on February 11, 2014 with completion and testing operations on
the first two wells, TT-28 and TT-15, currently underway.
In 2014, the Company also plans to participate in one well (0.1 net) on the Borj
El Khadra Permit and one well (0.05 net) on the Adam Concession.
2013 Independent Reserves Evaluation
The independent evaluators of the Company's year-end reserves are as follows:
-- McDaniel & Associates Consultants Ltd. ("McDaniel") evaluated all of the
Canadian properties effective December 31, 2013 and report dated
February 26, 2014; and
-- InSite Petroleum Consultants Ltd. ("InSite") evaluated all of the
Tunisia interests effective December 31, 2013 and report dated February
26, 2014.
The independent reserve evaluations effective December 31, 2013 were prepared in
accordance with definitions, standards and procedures contained in the Canadian
Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101
("NI 51-101"). The reserve evaluation was based on McDaniel's forecast pricing
and foreign exchange rates at December 31, 2013. Chinook's Reserves, Safety and
Environmental Committee and Board of Directors have reviewed and approved the
evaluations prepared by the evaluators.
Reserves included herein are stated on a Company gross basis (working interest
before deduction of royalties and without including any royalty interests)
unless noted otherwise. This news release contains several cautionary statements
that are specifically required by NI 51-101 under the heading "Reader Advisory"
and throughout the release. In addition to the information contained in this
news release more detailed reserves information will be included in Chinook's
Annual Information Form for the year ended December 31, 2013 ("AIF"), which will
be filed on SEDAR at www.sedar.com on or about March 27, 2014.
Reserves Breakdown (Company gross) (1)
(December 31, 2013, escalated price forecast)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(mboe) 2013 2012
----------------------------------------------------------------------------
Proved Producing
Canada 12,711 14,966
Tunisia 1,424 1,516
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved producing 14,136 16,482
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved
Canada 16,020 19,069
Tunisia 4,846 9,880
----------------------------------------------------------------------------
Total proved 20,866 28,949
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved Plus Probable
Canada 25,090 31,207
Tunisia 8,132 20,445
----------------------------------------------------------------------------
Total proved plus probable 33,222 51,652
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: (1) Columns may not add due to rounding.
Company Gross and Net Reserves as at December 31, 2013
The following table summarizes the Company's gross and net reserve volumes
utilizing McDaniel's forecast pricing and cost estimates at December 31, 2013.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Light and
medium oil Heavy oil Natural Gas
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross (1)Net (2) Gross (1) Net (2) Gross (1) Net (2)
Reserves category (mbbl) (mbbl) (mbbl) (mbbl) (mmcf) (mmcf)
----------------------------------------------------------------------------
Canada
Proved
Developed producing 2,947 2,508 65 63 51,435 44,230
Developed non-
producing 519 436 - - 7,021 6,008
Undeveloped 1,190 1,017 - - 1,539 1,394
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 4,656 3,962 65 63 59,995 51,632
Probable 2,375 1,896 22 21 35,088 29,525
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 7,030 5,857 87 85 95,083 81,157
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Proved
Developed producing 1,248 1,197 - - 1,055 960
Developed non-
producing 650 603 - - 3,172 2,814
Undeveloped 2,002 1,965 - - 1,444 1,312
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 3,901 3,766 - - 5,670 5,086
Probable 2,938 2,885 - - 2,089 1,854
----------------------------------------------------------------------------
Total proved plus
probable 6,839 6,651 - - 7,759 6,939
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total company
Proved
Developed producing 4,195 3,705 65 63 52,490 45,190
Developed non-
producing 1,170 1,040 - - 10,192 8,822
Undeveloped 3,192 2,983 - - 2,983 2,706
----------------------------------------------------------------------------
Total proved 8,556 7,727 65 63 65,665 56,718
Probable 5,313 4,781 22 21 37,176 31,379
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 13,869 12,508 87 85 102,842 88,097
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural gas Oil equivalent
liquids (6:1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross(1) Net (2) Gross Net (2)
Reserves category (mbbl) (mbbl) (1)(mboe) (mboe)
----------------------------------------------------------------------------
Canada
Proved
Developed producing 1,128 792 12,711 10,735
Developed non-
producing 145 102 1,835 1,540
Undeveloped 28 20 1,474 1,270
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 1,301 914 16,020 13,544
Probable 825 580 9,070 7,418
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 2,126 1,494 25,090 20,962
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Proved
Developed producing - - 1,424 1,357
Developed non-
producing - - 1,179 1,072
Undeveloped - - 2,243 2,184
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved - - 4,846 4,613
Probable - - 3,286 3,194
----------------------------------------------------------------------------
Total proved plus
probable - - 8,132 7,807
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total company
Proved
Developed producing 1,128 792 14,136 12,092
Developed non-
producing 145 102 3,014 2,612
Undeveloped 28 20 3,716 3,454
----------------------------------------------------------------------------
Total proved 1,301 914 20,866 18,158
Probable 825 580 12,356 10,611
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 2,126 1,494 33,222 28,769
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
(1) Gross reserves are the Company's working interest reserves before
royalty deductions and do not include royalty interest volumes.
(2) Net reserves are after royalty deductions and include royalty interest
volumes.
(3) Columns may not add due to rounding.
Company Gross Reserve Reconciliation for 2013 (1)
(Company gross reserves before deduction of royalties payable)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6:1 Oil Equivalent (mboe)
Total Proved Plus
Proved Probable Probable
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2012 - opening balance 28,949 22,703 51,652
Additions and extensions 2,195 1,002 3,197
Category transfers 9 (9) -
Discoveries 55 14 69
Acquisitions - - -
Dispositions (1,134) (578) (1,712)
Technical revisions (32) (2,680) (2,649)
Economic factors (2) (5,538) (8,095) (13,633)
Production (3,702) - (3,702)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2013 - closing balance 20,866 12,356 33,222
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note:
(1) Columns may not add due to rounding.
(2) Reserve volumes at Cosmos and Yasmin in Tunisia have been recategorized
from reserves to economic contingent resources due to the inability of the
Company to place the volumes on-stream in a reasonable period of time as
per COGE guidelines. These recategorized volumes on a proved and on a
proved plus probable basis are 5.2 mmboe and 12.6 mmboe, respectively.
In 2013, Chinook completed several dispositions of non-core properties which
resulted in net proceeds of $21 million. Dispositions within the Company's West
Central Alberta operating district represented the vast majority of the proved
and probable reserve reductions of approximately 1.7 mmboe.
Year over year, McDaniel recorded net negative technical revisions related to
performance issues of approximately 1.0 mmboe on a proved plus probable reserves
basis. Offsetting these revisions, the Company recorded a 1.3 mmboe positive
revision related to the proved producing category of reserves. The negative
revisions are partially attributed to well performance from the Braeburn and
Boundary Lake zones drilled in 2011. In addition to the performance related
revisions, the Company elected to remove certain undeveloped reserve bookings
totaling approximately 1.9 mmboe on the basis that the timing of the allocation
of capital to these projects would not meet guidelines to maintain proved or
proved plus probable bookings or in certain circumstances projects generated
minimal net present value. On a proved plus probable basis, these reserve
volumes were primarily natural gas and held minor net present value in the
current price forecast. Chinook has generally good tenure on the lands
associated with these reserves and will maintain these opportunities within its
portfolio for future evaluation while the Company focuses its attention on its
more profitable Dunvegan oil program.
A downward adjustment in the independent price forecast for both natural gas and
Brent crude oil resulted in net negative revisions due to economic factors in
the Canadian reserves affecting proved and probable reserves and net present
values in all areas despite a 4% increase in estimated first year Canadian gas
prices. Of particular note, Chinook added a total of 3.2 mmboe (80% oil and
NGLs) on a proved plus probable basis. The additions are more than 90% focused
in the Company's Canadian core areas of Karr, Albright and Beaverlodge (Dunvegan
oil) and the BBT Concession of southern Tunisia. In Canada, production in 2013
was 3.0 mmboe (69% natural gas, 21% oil and 10% NGLs) while the proved plus
probable reserves added in the same period were 2.2 mmboe (20% natural gas, 78%
oil and 2% NGLs). The success of these core areas will continue to be Chinook's
focus for its capital expenditures given the attractive economics while allowing
for additional testing of high impact resource plays at Karr and Birley/Umbach.
Chinook has determined that an appraisal well is required on a separate
accumulation within the Cosmos Concession prior to proceeding with installation
of permanent facilities. This deferral delays project start-up of both Cosmos
and Yasmin, the latter of which is contemplated as a tie back to the former.
Following Chinook's advisement of the new timeline for progressing the project,
InSite amended the classification of both the Cosmos and Yasmin reserves to
Contingent Resources (Economic). Although there are no technical changes from
the prior year, the development timeline falls outside the guidelines provided
for a reserve categorization.
Reserve Life Index ("RLI")
Chinook's proved plus probable RLI was 9.4 years based upon the McDaniel and
InSite reserves reports and the annualized December 2013 production volumes,
while the proved RLI was 5.9 years. The following table summarizes the RLI split
between Canada and Tunisia:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved Consolidated Canada Tunisia
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserves (mboe) 20,866 16,020 4,846
Annualized December 2013 production (mboe) 3,530 2,904 626
----------------------------------------------------------------------------
Reserve life index (years) 5.9 5.5 7.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved Plus Probable Consolidated Canada Tunisia
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserves (mboe) 33,222 25,090 8,132
Annualized December 2013 production (mboe) 3,530 2,904 626
----------------------------------------------------------------------------
Reserve life index (years) 9.4 8.6 13.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated
Net Present Value ("NPV") Summary (before tax) as at December 31, 2013
(December 31, 2013, escalated price forecast)
Benchmark oil and NGL prices used are adjusted for quality of oil or NGL
produced and for transportation costs. The calculated NPVs include a deduction
for estimated future well abandonment but do not include a provision for
interest, debt service charges and general and administrative expenses. It
should not be assumed that the NPV estimated represents the fair market value of
the reserves.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
----------------------------------------------------------------------------
Proved producing 330,465 280,713 246,550 221,540 202,350
Proved non-producing 116,481 89,090 71,005 58,323 49,011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved
developed 446,946 369,802 317,555 279,863 251,361
Proved undeveloped 141,787 99,987 72,824 53,993 40,363
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 588,734 469,790 390,379 333,857 291,724
Probable 412,877 268,334 191,022 143,664 112,128
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 1,001,611 738,124 581,401 477,521 403,852
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada
Net Present Value Summary (before tax) as at December 31, 2013
(December 31, 2013, escalated price forecast)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved producing 252,566 208,742 179,419 158,435 142,650
Proved non-producing 39,785 29,586 23,582 19,681 16,942
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved
developed 292,351 238,328 203,001 178,116 159,592
Proved undeveloped 46,744 29,971 20,416 14,338 10,169
----------------------------------------------------------------------------
Total proved 339,095 268,299 223,416 192,454 169,761
Probable 223,921 131,503 88,871 65,493 51,088
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 563,016 399,802 312,287 257,947 220,849
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Net Present Value Summary (before tax) as at December 31, 2013
(December 31, 2013, escalated price forecast)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
----------------------------------------------------------------------------
Proved producing 77,899 71,971 67,132 63,105 59,700
Proved non-producing 76,696 59,504 47,423 38,642 32,069
----------------------------------------------------------------------------
Total proved
developed 154,595 131,475 114,555 101,748 91,768
Proved undeveloped 95,043 70,016 52,408 39,655 30,195
----------------------------------------------------------------------------
Total proved 249,639 201,491 166,963 141,403 121,963
Probable 188,956 136,831 102,151 78,171 61,040
----------------------------------------------------------------------------
Total proved plus
probable 438,595 338,321 269,114 219,574 183,003
----------------------------------------------------------------------------
Consolidated
Net Present Value Summary (after tax) as at December 31, 2013
(December 31, 2013, escalated price forecast)
The after-tax NPV of Chinook's oil and natural gas properties reflects the tax
burden on the properties on a stand-alone basis and does not consider the
business-entity-level tax situation, or tax planning. It does not provide an
estimate of the value at the level of the business entity, which may be
significantly different. The financial statements and the management's
discussion and analysis ("MD&A") of Chinook should be consulted for information
at the level of the business entity.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
----------------------------------------------------------------------------
Proved producing 312,484 265,022 232,609 208,968 190,876
Proved non-producing 81,995 64,070 52,249 43,870 37,611
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved
developed 394,478 329,092 284,858 252,839 228,487
Proved undeveloped 123,818 87,590 63,857 49,240 35,101
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 518,296 416,682 348,714 300,079 263,588
Probable 346,441 233,088 170,037 130,043 102,663
----------------------------------------------------------------------------
Total proved plus
probable 864,737 649,770 518,752 430,122 366,251
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada
Net Present Value Summary (after tax) as at December 31, 2013
(December 31, 2013, escalated price forecast)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved producing 252,566 208,742 179,419 158,435 142,650
Proved non-producing 39,785 29,586 23,582 19,681 16,942
----------------------------------------------------------------------------
Total proved
developed 292,351 238,328 203,001 178,116 159,592
Proved undeveloped 46,744 29,971 20,416 14,338 10,169
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 339,095 268,299 223,416 192,454 169,761
Probable 187,848 115,647 81,114 61,405 48,810
----------------------------------------------------------------------------
Total proved plus
probable 526,943 383,946 304,531 253,859 218,571
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Net Present Value Summary (after tax) as at December 31, 2013
(December 31, 2013, escalated price forecast)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discounted Discounted Discounted Discounted
at at at at
($ thousands) Undiscounted 5% 10% 15% 20%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved producing 59,917 56,281 53,190 50,533 48,226
Proved non-producing 42,210 34,484 28,667 24,190 20,669
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved
developed 102,127 90,764 81,857 74,723 68,894
Proved undeveloped 77,074 57,619 43,441 32,902 24,933
----------------------------------------------------------------------------
Total proved 179,201 148,383 125,298 107,625 93,827
Probable 158,593 117,441 88,923 68,638 53,853
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved plus
probable 337,794 265,824 214,221 176,262 147,679
----------------------------------------------------------------------------
----------------------------------------------------------------------------
McDaniel & Associates Consultants Ltd. Escalating Price Forecast as at December
31, 2013 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Edmonton
WTI Light Henry Hub AECO
Crude Oil Brent Crude Oil Natural Gas Natural Gas
(US$/bbl) (US$/bbl) (Cdn$/bbl) (US$/mmbtu) (Cdn$/mmbtu)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2014 95.00 105.00 95.00 4.25 4.00
2015 95.00 102.50 96.50 4.50 4.25
2016 95.00 100.20 97.50 4.75 4.55
2017 95.00 97.70 98.00 5.00 4.75
2018 95.30 98.00 98.30 5.25 5.00
----------------------------------------------------------------------------
95.06 100.68 97.06 4.75 4.51
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Edmonton
Condensate
and Natural US/Cdn
Gasoline Propane Butane Exchange
(Cdn$/bbl) (Cdn$/bbl) (Cdn$/bbl) (US$/Cdn)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2014 102.50 50.20 76.60 0.950
2015 101.60 50.50 77.80 0.950
2016 100.60 50.60 78.60 0.950
2017 101.20 51.30 79.00 0.950
2018 101.50 52.00 79.20 0.950
----------------------------------------------------------------------------
101.48 50.92 78.24 0.950
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note:
(1) Prices escalate at two percent per year after 2018.
Future Development Costs ("FDC")
Changes in forecast FDC occur annually as a result of development activities,
acquisition and disposition activities and capital cost estimates that reflect
the independent evaluators' best estimate of what it will cost to bring the
proved undeveloped and probable reserves on production using forecast prices and
costs.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ millions)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2013 2012
----------------------------------------------------------------------------
Proved
Canada 36.8 28.1
Tunisia 86.0 242.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 122.8 270.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved Plus Probable
Canada 57.4 66.7
Tunisia 156.3 402.4
----------------------------------------------------------------------------
Total proved plus probable 213.7 469.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Chinook's approved 2014 budget includes the drilling of 11 wells (7.0 net) in
Canada and 6.0 wells (4.3 net) in Tunisia.
NI 51-101 Finding and Development Costs ("F&D")
NI 51-101 requires that finding and development costs be calculated including
changes in undiscounted FDC. Chinook's F&D costs, calculated in accordance with
NI 51-101 are set forth below.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Finding and Development Cost Three
(Proved Reserves) year
($ thousands, except per unit amounts) 2013 2012 2011 total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exploration and development costs
excluding acquisitions and
dispositions(unaudited) (1) 87,990 84,316 124,987 297,286
Net change from previously allocated
future development capital (147,570) 78,689 20,471 (48,410)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total exploration and development costs
including the net change in FDC (59,581) 163,005 145,452 248,876
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve additions excluding
acquisitions and dispositions (mboe) (3,247) 4,151 2,671 3,575
Total proved finding and development
costs (per boe) $18.35 $39.27 $54.45 $69.61
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Finding and Development Cost Three
(Proved plus Probable Reserves)($ year
thousands, except per unit amounts) 2013 2012 2011 total
----------------------------------------------------------------------------
Exploration and development costs
excluding acquisitions and
dispositions(unaudited) (1) 87,990 84,316 124,981 297,286
Net change from previously allocated
future development capital (254,271) 103,880 31,893 (118,498)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total exploration and development costs
including the net change in FDC (166,282) 188,196 156,874 178,788
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve additions excluding
acquisitions and dispositions (mboe) (13,016) 4,682 2,877 (5,457)
Total proved plus probable finding and
development costs (per boe) $12.78 $40.19 $54.53 $(32.77)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
All-In Finding, Development and Acquisition Costs
NI 51-101 specifies how F&D costs should be calculated if they are reported.
Essentially NI 51-101 requires that exploration and development costs incurred
in the year along with the change in estimated FDC be aggregated and then
divided by the applicable reserve additions. The calculation specifically
excludes the effects of acquisition and dispositions (as well as revisions) on
both reserves and costs. By excluding acquisitions, dispositions and revisions,
the Company believes that the provisions of NI 51-101 may not fully reflect the
Company's ongoing reserve replacement costs. Since acquisitions, dispositions
and revisions can have an impact on the Company's annual reserve replacement
costs, excluding these amounts could result in an inaccurate portrayal of the
Company's costs. Accordingly, the Company also provides "all-in" F&D costs that
incorporate all acquisitions net of any dispositions and revisions in the year.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
All-In Finding, Development and
Acquisition Cost Including FDC,
Acquisitions, Dispositions and Three
Revisions (Proved Reserves) year
($ thousands, except per unit amounts) 2013 2012 2011 total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exploration and development costs
including acquisitions and
dispositions(unaudited) (1) 74,474 11,861 50,978 137,313
Net change from previously allocated
future development capital (147,656) 84,418 17,452 (45,786)
----------------------------------------------------------------------------
Total exploration and development
costs including the net change in FDC (73,182) 96,279 68,430 91,527
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve additions including
acquisitions, dispositions and
revisions (mboe) (4,381) 1,246 64 (3,071)
All-in total proved finding,
development and acquisition costs
(per boe) $16.70 $77.25 $1,074.93 $29.80
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
All-In Finding, Development and
Acquisition Cost Including FDC,
Acquisitions, Dispositions and
Revisions (Proved plus Probable Three
Reserves) year
($ thousands, except per unit amounts) 2013 2012 2011 total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exploration and development costs
including acquisitions and
dispositions(unaudited) (1) 74,474 11,861 50,978 137,313
Net change from previously allocated
future development capital (255,383) 107,738 23,573 (124,072)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total exploration and development costs
including the net change in FDC (180,909) 119,599 74,551 13,242
----------------------------------------------------------------------------
Reserve additions including
acquisitions, dispositions and
revisions (mboe) (14,728) 305 (1,335) (15,758)
All-in total proved plus probable
finding and development costs (per
boe) $12.28 $391.53 $(55.84) $(0.84)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: (1) Excludes non-cash costs, including decommissioning liabilities.
Adjusted Finding and Development Costs
Chinook's adjusted F&D costs after giving effect to revisions and economic
factors is set forth below. This has been provided in order to reflect the
Company's pure capital efficiency with respect to the reserve additions achieved
through organic capital expenditures.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted Finding and Development Cost
Including FDC, excluding Acquisitions,
Dispositions, Revisions, and Economic
Factors (Proved Reserves) Three year
($ thousands, except per unit amounts) 2013 2012 2011 total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exploration and development costs
excluding acquisitions and
dispositions(unaudited) (1) 87,990 84,316 124,981 297,286
Net change from previously allocated
future development capital 12,750 52,099 12,685 77,534
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total exploration and development costs
including the net change in FDC 100,739 136,415 137,666 374,820
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve additions including
acquisitions, dispositions and
revisions (mboe) 2,259 2,145 3,942 8,346
Adjusted total proved finding and
development costs (per boe) $44.59 $63.61 $34.92 $44.91
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted Finding and Development Cost
Including FDC, excluding Acquisitions,
Dispositions, Revisions, and Economic
Factors (Proved plus Probable
Reserves) Three year
($ thousands, except per unit amounts) 2013 2012 2011 total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exploration and development costs
excluding acquisitions and
dispositions(unaudited) (1) 87,990 84,316 124,981 297,286
Net change from previously allocated
future development capital 11,120 95,915 39,390 146,425
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total exploration and development costs
including the net change in FDC 99,110 180,230 164,371 443,711
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve additions including
acquisitions, dispositions and
revisions (mboe) 3,266 4,339 6,480 14,085
Adjusted total proved plus probable
finding and development costs (per
boe) $30.35 $41.54 $25.37 $31.50
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total exploration and development costs incurred in the most recent financial
year and the change during that year in estimated future development costs,
generally will not reflect the total cost of reserve additions in that year.
Recycle Ratio
The recycle ratio is calculated as the annual netback per barrel divided by the
non-adjusted F&D costs set forth above. The recycle ratio is comparing the
netback from existing reserves to the cost of finding new reserves and may not
accurately indicate investment success unless the replacement reserves are of
equivalent quality as the produced reserves.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved Consolidated Canada Tunisia
----------------------------------------------------------------------------
Operating netback before commodity price
contracts ($/boe)(unaudited) (1) 28.88 18.04 75.97
51-101 F&D costs ($/boe)(unaudited) 18.35 44.91 25.01
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recycle ratio 1.6x 0.4x 3.0x
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved Plus Probable Consolidated Canada Tunisia
----------------------------------------------------------------------------
Operating netback before commodity price
contracts ($/boe)(unaudited) (1) 28.88 18.04 75.97
51-101 F&D costs ($/boe)(unaudited) 12.78 (22.78) 17.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recycle ratio 2.3x (0.8x) 4.5x
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: (1) Operating netback is calculated by deducting royalties and net
production expenses from revenue.
Presented below is the recycle ratio as calculated by using the annual netback
per barrel divided by the calculated all-in finding, development and acquisition
costs (excluding abandonment and furniture and fixtures) and including the
effects of revisions.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved Consolidated Canada Tunisia
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating netback before commodity price
contracts ($/boe)(unaudited) (1) 28.88 18.04 75.97
All-in F&D costs ($/boe)(unaudited) 16.70 (745.45) 24.91
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recycle ratio 1.7x 0.0x 3.1x
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved Plus Probable Consolidated Canada Tunisia
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating netback before commodity price
contracts ($/boe)(unaudited) (1) 28.88 18.04 75.97
All-in F&D costs ($/boe)(unaudited) 12.28 (5.41) 17.03
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recycle ratio 2.4x (3.3x) 4.5x
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: (1) Operating netback is calculated by deducting royalties and net
production expenses from revenue.
Presented below is the recycle ratio as calculated by using the annual netback
per barrel divided by the calculated finding and development costs (excluding
acquisitions and dispositions, abandonment and furniture and fixtures) and
excluding the effects of revisions and economic factors.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved Consolidated Canada Tunisia
----------------------------------------------------------------------------
Operating netback before commodity price
contracts ($/boe)(unaudited) (1) 28.88 18.04 75.97
Adjusted F&D costs net of acquisitions,
revisions and economic factors
($/boe)(unaudited) 44.59 34.56 65.15
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recycle ratio 0.6x 0.5x 1.2x
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved Plus Probable Consolidated Canada Tunisia
----------------------------------------------------------------------------
Operating netback before commodity price
contracts ($/boe)(unaudited) (1) 28.88 18.04 75.97
Adjusted F&D costs net of acquisitions,
revisions and economic factors
($/boe)(unaudited) 30.35 22.09 48.35
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recycle ratio 1.0x 0.8x 1.6x
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: (1) Operating netback is calculated by deducting royalties and net
production expenses from revenue.
Corporate Net Asset Value
The Company's net asset value as of December 31, 2013, is detailed in the
following table. This net asset value determination is a "point-in-time"
measurement and does not take into account the possibility of Chinook being able
to recognize additional reserves through successful future capital investment in
its existing properties beyond those included in the 2013 year-end reserve
reports.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2013 Before Tax NPV 5% Before Tax NPV 10%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ thousands) $/share ($ thousands) $/share
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Company
Proved developed producing
reserves NPV (1,2) 280,713 1.31 246,550 1.15
Total proved reserves NPV (1,2) 469,790 2.19 390,379 1.82
Proved plus probable reserves
NPV (1,2) 738,124 3.45 581,401 2.71
Undeveloped acreage (3) 52,217 0.24 52,217 0.24
Net debt (4) (59,432) (0.28) (59,432) (0.28)
----------------------------------------------------------------------------
Net asset value (basic) (5) 730,909 3.41 574,186 2.68
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada
Proved developed producing
reserves NPV (1,2) 208,742 0.97 179,419 0.84
Total proved reserves NPV (1,2) 268,299 1.25 223,416 1.04
Proved plus probable reserves
NPV (1,2) 399,802 1.87 312,287 1.46
Undeveloped acreage (3) 52,217 0.24 52,217 0.24
Net debt (4) (59,432) (0.28) (59,432) (0.28)
----------------------------------------------------------------------------
Net asset value (basic) (5) 392,588 1.83 305,072 1.42
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Proved developed producing
reserves (NPV) (1,2) 71,971 0.34 67,132 0.31
Total proved reserves NPV (1,2) 201,491 0.94 169,963 0.78
Proved plus probable reserves
NPV (1,2) 338,321 1.58 269,114 1.26
----------------------------------------------------------------------------
Net asset value (basic) (5) 338,321 1.58 269,114 1.26
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2013 Before Tax NPV 15%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ thousands) $/share
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Company
Proved developed producing
reserves NPV (1,2) 221,540 1.03
Total proved reserves NPV (1,2) 333,857 1.56
Proved plus probable reserves
NPV (1,2) 477,521 2.23
Undeveloped acreage (3) 52,217 0.24
Net debt (4) (59,432) (0.28)
----------------------------------------------------------------------------
Net asset value (basic) (5) 470,306 2.19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada
Proved developed producing
reserves NPV (1,2) 158,435 0.74
Total proved reserves NPV (1,2) 194,454 0.91
Proved plus probable reserves
NPV (1,2) 257,947 1.20
Undeveloped acreage (3) 52,217 0.24
Net debt (4) (59,432) (0.28)
----------------------------------------------------------------------------
Net asset value (basic) (5) 250,733 1.16
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Proved developed producing
reserves (NPV) (1,2) 63,105 0.29
Total proved reserves NPV (1,2) 141,403 0.66
Proved plus probable reserves
NPV (1,2) 219,574 1.03
----------------------------------------------------------------------------
Net asset value (basic) (5) 219,574 1.03
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2013 After Tax NPV 5% After Tax NPV 10%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ thousands) $/share ($ thousands) $/share
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Company
Proved developed producing
reserves NPV (1,2) 265,022 1.24 232,609 1.09
Total proved reserves NPV (1,2) 416,682 1.95 348,714 1.63
Proved plus probable reserves
NPV (1,2) 649,770 3.03 518,752 2.42
Undeveloped acreage (3) 52,217 0.24 52,217 0.24
Net debt (4) (59,432) (0.28) (59,432) (0.28)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value (basic) (5) 642,555 3.00 511,537 2.39
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada
Proved developed producing
reserves NPV (1,2) 208,742 0.97 179,419 0.84
Total proved reserves NPV (1,2) 268,299 1.25 223,416 1.04
Proved plus probable reserves
NPV (1,2) 383,946 1.79 304,531 1.42
Undeveloped acreage (3) 52,217 0.24 52,217 0.24
Net debt (4) (59,432) (0.28) (59,432) (0.28)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value (basic) (5) 376,731 1.76 297,316 1.39
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Proved developed producing
reserves NPV (1,2) 56,281 0.26 53,190 0.25
Total proved reserves NPV (1,2) 148,383 0.69 125,298 0.58
Proved plus probable reserves
NPV (1,2) 265,824 1.24 214,221 1.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value (basic) (5) 265,824 1.24 214,221 1.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2013 After Tax NPV 15%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ thousands) $/share
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Company
Proved developed producing
reserves NPV (1,2) 208,968 0.98
Total proved reserves NPV (1,2) 300,079 1.40
Proved plus probable reserves
NPV (1,2) 430,122 2.01
Undeveloped acreage (3) 52,217 0.24
Net debt (4) (59,432) (0.28)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value (basic) (5) 422,907 1.97
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada
Proved developed producing
reserves NPV (1,2) 158,435 0.74
Total proved reserves NPV (1,2) 192,454 0.90
Proved plus probable reserves
NPV (1,2) 253,859 1.19
Undeveloped acreage (3) 52,217 0.24
Net debt (4) (59,432) (0.28)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value (basic) (5) 246,645 1.15
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tunisia
Proved developed producing
reserves NPV (1,2) 50,533 0.24
Total proved reserves NPV (1,2) 107,625 0.50
Proved plus probable reserves
NPV (1,2) 176,262 0.82
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value (basic) (5) 176,262 0.82
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
(1) Evaluated by independent reserve evaluators as at December 31, 2013. Net
present value of future net revenue does not represent the fair market
value of the reserves.
(2) Net present values for before and after tax are based on McDaniel's
December 31, 2013 escalated price forecast.
(3) Undeveloped land value has been valued by an independent evaluator for
all Canadian lands.
(4) Net debt as at December 31, 2013, including working capital deficit
(estimated and unaudited). See "Net Debt" discussion below.
(5) Basic shares at December 31, 2013 totaled 214,187,681 common shares.
Renewal of Credit Facilities
Chinook's Canadian revolving term credit facility was maintained at $115 million
during the semi-annual redetermination in December 2013. The Company had drawn
$78.5 million pursuant to its Canadian revolving term facility as at December
31, 2013 and is currently drawn the same amount under this facility. As at
December 31, 2013 the Company's net debt, which is calculated as bank debt
adjusted for working capital excluding mark-to-market derivative contracts, was
$60 million. The next review and renewal of this facility is scheduled to take
place in June 2014.
Chinook's borrowing base amount available under the international credit
facility was redetermined to be USD$23.8 million at the semi-annual review in
January 2014, down from the previous USD$46.5 million. The reduction in the
borrowing base amount reflects the delay in bringing production on-stream as a
result of the deferred 2013 capital program and a short term increase in
operating costs until a gathering facility is constructed. The Company has never
drawn on this facility and the next review and renewal is scheduled to take
place in June 2014.
About Chinook Energy Inc.
Chinook is a Calgary-based public oil and gas exploration and development
company that combines high quality natural gas-weighted assets in Western Canada
with an exciting high growth oil business onshore and offshore Tunisia in North
Africa.
Oil and Gas Advisory
Reserves are estimated remaining quantities of oil and natural gas and related
substance anticipated to be recoverable from known accumulations, as of a given
date, based on the analysis of drilling, geological, geophysical and engineering
data; the use of established technology, and specified economic conditions,
which are generally accepted as being reasonable. Reserves are classified
according to the degree of certainty associated with the estimates as follows:
Proved Reserves are those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves.
Probable Reserves are those additional reserves that are less certain to be
recovered than 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.
The reserves information contained in this press release has been prepared in
accordance with NI 51-101. Complete NI 51-101 reserves disclosure will be
included in the Company's Annual Information Form for the year ended December
31, 2013 which is expected to be filed on or about March 27, 2014. Listed below
are cautionary statements applicable to the Company's reserves information that
are specifically required by NI 51-101:
-- Individual properties may not reflect the same confidence level as
estimates of reserves for all properties due to the effects of
aggregation.
-- This news release contains estimates of the net present value of the
Company's future net revenue from its reserves. Such amounts do not
represent the fair market value of the Company's reserves.
Reader Advisory
Forward-Looking Statements
In the interest of providing shareholders and potential investors with
information regarding Chinook, including management's assessment of the future
plans and operations of Chinook, certain statements contained in this news
release constitute forward-looking statements or information (collectively
"forward-looking statements") within the meaning of applicable securities
legislation. Forward-looking statements are typically identified by words such
as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will",
"project", "could", "plan", "intend", "should", "believe", "outlook",
"potential", "target" and similar words suggesting future events or future
performance. In addition, statements relating to "reserves" and "resources" are
deemed to be forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and/or resources
described exist in the quantities predicted or estimated and can be profitably
produced in the future. In particular, this news release contains, without
limitation, forward-looking statements pertaining to: estimated cash flows,
drilling plans at certain of the Company's core areas, anticipated filing dates
for the Company's annual filings, the volumes and estimated value of Chinook's
oil and natural gas reserves; the life of Chinook's reserves; the volume and
product mix of Chinook's oil and natural gas production; estimated on-production
dates for certain drilled wells; estimated total costs for the Company's
Dunvegan wells; future oil and natural gas prices and Chinook's commodity risk
management program; future results from operations and operating metrics;
scheduled reviews of the Company's credit facilities; and future development,
exploration, acquisition and development activities (including drilling plans)
and related production expectations.
With respect to the forward-looking statements contained in this news release,
Chinook has made assumptions regarding, among other things: that Chinook will
continue to conduct its operations in a manner consistent with past operations,
the ability of Chinook to continue to operate in Tunisia with limited logistical
security and operational issues, future capital expenditure levels, future oil
and natural gas prices, future oil and natural gas production levels, Chinook's
ability to obtain equipment in a timely manner to carry out development
activities, the Company's lenders reviewing Chinook's credit facilities in the
time periods currently scheduled, the impact of increasing competition, the
ability of Chinook to add production and reserves through development and
exploitation activities, certain commodity price and other cost assumptions, the
continued availability of adequate debt and equity financing and cash flow to
fund its planned expenditures, all costs in respect of certain wells being
accurately estimated. Although Chinook believes that the expectations reflected
in the forward-looking statements contained in this news release, and the
assumptions on which such forward-looking statements are made, are reasonable,
there can be no assurance that such expectations will prove to be correct.
Readers are cautioned not to place undue reliance on forward-looking statements
included in this news release, as there can be no assurance that the plans,
intentions or expectations upon which the forward-looking statements are based
will occur. By their nature, forward-looking statements involve numerous
assumptions, known and unknown risks and uncertainties that contribute to the
possibility that predictions, forecasts, projections and other forward-looking
statements will not occur, which may cause Chinook's actual performance and
financial 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 risks and uncertainties include, without limitation, political and
security risks associated with Chinook's Tunisian operations, risks associated
with oil and gas exploration, development, exploitation, production, marketing
and transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve and resource estimates, environmental
risks, competition from other producers, inability to retain drilling rigs and
other services, capital expenditure costs, including drilling, completion and
facilities costs, unexpected decline rates in wells, delays in projects and/or
operations resulting from surface conditions, wells not performing as expected,
delays resulting from or inability to obtain the required regulatory approvals
and ability to access sufficient capital from internal and external sources and
increased costs or unforeseen costs. As a consequence, actual results may differ
materially from those anticipated in the forward-looking statements. Readers are
cautioned that the forgoing list of factors is not exhaustive. Additional
information on these and other factors that could effect Chinook's operations
and financial results are included in reports on file with Canadian securities
regulatory authorities and may be accessed through the SEDAR website
(www.sedar.com) and at Chinook's website (www.chinookenergyinc.com).
Furthermore, the forward-looking statements contained in this news release are
made as at the date of this news release and Chinook does not undertake any
obligation to update publicly or to revise any of the forward-looking
statements, whether as a result of new information, future events or otherwise,
except as may be required by applicable securities laws.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6
mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil.
Boes may be misleading, particularly if used in isolation. A boe conversion
ratio of 6 mcf:1 bbl (barrel) 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.
Initial Production Rates
Any reference in this news release to initial, early and/or test or
production/performance rates (including IP30 and IP90) are useful in confirming
the presence of hydrocarbons, however, such rates are not determinative of the
rates at which such wells will continue production and decline thereafter.
Additionally, such rates may also include recovered "load oil" fluids used in
well completion stimulation. While encouraging, readers are cautioned not to
place reliance on such rates in calculating the aggregate production for
Chinook. The initial production rate may be estimated based on other third party
estimates or limited data available at this time. In all cases in this news
release initial production or test rates are not necessarily indicative of
long-term performance of the relevant well or fields or of ultimate recovery of
hydrocarbons.
Reserve Life Index
The reader is also cautioned that this news release contains the term reserve
life index ("RLI"), which is not a recognized measure under International
Financial Reporting Standards ("IFRS"). Management believes that this measure is
a useful supplemental measure of the length of time the reserves would be
produced over at the rate used in the calculation. Readers are cautioned,
however, that this measure should not be construed as an alternative to other
terms determined in accordance with IFRS as a measure of performance. Chinook's
method of calculating this measure may differ from other companies, and
accordingly, they may not be comparable to measures used by other companies.
Cash flow from operations
The reader is also cautioned that this news release contains the term cash flow
from operations, which is not a recognized measure under IFRS and is calculated
from cash flow from continuing operations adjusted for changes in non-cash
working capital. Management believes that cash flow is a key measure to assess
the ability of Chinook to finance capital expenditures and debt repayments.
Readers are cautioned, however, that this measure should not be construed as an
alternative to other terms such as cash flow from operating activities, net
income or other measures of financial performance calculated in accordance with
IFRS. Chinook's method of calculating this measure may differ from other
companies, and accordingly, they may not be comparable to measures used by other
companies.
Net Debt
The reader is cautioned that this news release contains the term net debt, which
is not a recognized measure under IFRS and is calculated as bank debt adjusted
for working capital excluding mark-to-market derivative contracts. Working
capital excluding mark-to-market derivative contracts is calculated as current
assets less current liabilities both of which exclude derivative contracts and
current liabilities excludes the current portion of debt. Management uses net
debt to assist them in understanding Chinook's liquidity at specific points in
time. Mark-to-market derivative contracts are excluded from working capital, in
addition to net debt, as management intends to hold each contract through to
maturity of the contract's term as opposed to liquidating each contract's fair
value or less.
Future Oriented Financial Information
This news release, in particular the information in respected of anticipated
cash flow, may contain Future Oriented Financial Information ("FOFI") within the
meaning of applicable securities laws. The FOFI has been prepared by management
of the Company to provide an outlook of the Company's activities and results and
may not be appropriate for other purposes. The FOFI has been prepared based on a
number of assumptions including the assumptions discussed under the heading
"Forward-Looking Statements" and assumptions with respect to production rates
and commodity prices. The actual results of operations of the Company and the
resulting financial results may vary from the amounts set forth herein, and such
variations may be material. The Company and its management believe that the FOFI
has been prepared on a reasonable basis, reflecting management's best estimates
and judgments.
FOR FURTHER INFORMATION PLEASE CONTACT:
Chinook Energy Inc.
Walter Vrataric
President and Chief Executive Officer
(403) 261-6883
Chinook Energy Inc.
L. Geoff Barlow
Vice-President, Finance and Chief Financial Officer
(403) 261-6883
www.chinookenergyinc.com
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