Journey Energy Inc. Reports 98% Increase to 2014 Year End Reserves

February 24, 2015

CALGARY, Feb. 24, 2015 /CNW/ - Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") is pleased to report its year end 2014 oil and gas reserves evaluation. The reserves evaluation validates our balanced approached between strategic acquisitions and exploration and development, and highlights the continued multi-year success of the Company in enhancing the value of legacy oil pools through the application of new technology. 

Highlights:

  • Invested over $260 million in our capital program resulting in a 98% increase in proved plus probable reserves to 49.7 MMboe and a 45% increase in our proved plus probable net present value, discounted at 10% ("NPV10"), to $607 million.
  • Achieved a substantial increase in NPV10 despite a significant reduction in forecasted commodity prices.
  • Increased average daily production by 97% to 10,350 boe/d.  January 2015 production was approximately 11,250 boe/d, based on field estimates.
  • Proved plus probable net asset value discounted at 10% of $12.22 per basic share outstanding.
  • Proved plus probable, developed, producing net asset value discounted at 10% of  $7.30 per basic share outstanding..
  • Less than 25% of Journey's internally identified capital projects are booked in the reserve report.
  • Proved, developed producing reserves accounted for 45% of total proved plus probable reserves while proved reserves accounting for 61%.
  • Finding, development, and acquisition (FD&A) costs, including change in future development capital:
    • $14.65 per boe for proved reserves.
    • $11.79 per boe for proved plus probable reserves.
  • Finding and development costs (F&D) costs, including change in future development capital:
    • $17.00 per boe for proved reserves.
    • $14.11 per boe for proved plus probable reserves.
  • Journey has consistently achieved 2P FD&A recycle ratios in excess of 2:1. For the year ended December 31, 2014 we achieved a ratio of:
    • 2.6 times for FD&A costs with proved plus probable reserves.
    • 2.2 times for F&D costs with proved plus probable reserves.

COMPANY GROSS WORKING INTEREST OIL AND GAS RESERVES AND NET PRESENT VALUES

The following table provides summary information presented in the GLJ Petroleum Consultants Limited ("GLJ") independent reserves assessment and evaluation effective December 31, 2014 (the "GLJ Report").  GLJ evaluated 100% of Journey's crude oil, natural gas liquids ("NGL") and natural gas reserves.  The evaluation of all of its oil  and gas properties was done in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101").  Detailed reserve information will be presented in the Company's upcoming Statement of Reserves Data and Other Oil and Gas Information section of the Company's Annual Information Form scheduled to be filed on SEDAR on or before March 31, 2015.

Company Gross Reserves
Based on Forecast Price and Costs as at December 31, 2014



Company Gross Reserves (1)


Light/Medium

 Oil

Heavy
Oil

Natural
Gas

NGL

Total

Description

(Mbbl)

(Mbbl)

(MMcf)

(Mbbl)

(Mboe)

Proved






     Producing

7,704

1,371

70,453

1,731

22,548

     Non-producing

6

0

4,408

85

766

     Undeveloped

3,766

218

15,101

366

6,867

Total proved

11,475

1,590

89,602

2,182

30,181

Probable

8,571

1,966

46,974

1,111

19,476

Total proved and probable

20,046

3,555

136,575

3,293

49,657

 

Notes:

(1)

Company Gross Reserves consists of Journey's working interest (operated and non-operated) share of reserves before deduction of royalties payable and without including royalties receivable by the Company.

(2)

In the case of boe's, using boe's derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil (6 Mcf:1 bbl).

(3)

Total values may not add due to rounding.

 

Net Present Values of Future Net Revenue (Based on Forecast Prices and Costs)




Before Tax Net Present Value ($MM)

Description

0%

5%

10%

15%

20%


(MM$)

(MM$)

(MM$)

(MM$)

(MM$)

Proved






Producing

488,523

374,613

300,906

251,821

217,337

Non-producing

6,052

3,994

2,738

1,919

1,358

Undeveloped

174,443

106,756

69,845

47,383

32,656

Total proved

669,018

485,363

373,488

301,123

251,350

Probable

580,276

349,545

233,394

166,475

124,259

Total proved and probable

1,249,294

834,908

606,882

467,598

375,610

 

Notes:

(1)

Total values may not add due to rounding

(2)

Forecast pricing used is the published price forecast from GLJ Petroleum Consultants Ltd. as at December 31, 2014.

(3)

It should not be assumed that the net present values of future net revenues estimated by GLJ represent fair market value of the reserves. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material.

 

FINDING, DEVELOPMENT AND ACQUISITION COSTS ("FD&A")

Journey's finding and development ("F&D") and finding, development and acquisition ("FD&A") costs for 2014, 2013 and the three year average are presented in the tables below.  The capital costs used in the calculations are those costs related to: land acquisition and retention, seismic, drilling; completions; tangible well site, tie-ins, and facilities, plus the change in estimated future development costs ("FDC") as per the independent evaluator's reserve report.  Acquisition costs are the net cash outlays in respect of acquisitions; minus the proceeds from the disposition of properties during the year.  Due to the timing of capital costs and the subjectivity in the estimation of future costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated FDC's generally will not reflect total FDC's related to reserve additions for that year.  The reserves used in this calculation are company interest reserve additions, including technical revisions and changes due to economic factors.  The 2014 capital expenditures are unaudited as the financial results are in the process of being finalized.

The three year average F&D and FD&A costs include the results from 2012 which is the year that Journey completed a reorganization of its operations.  In that year, minimal capital of $35 million was spent drilling 10 net wells, 4.6 MMboe of low netback assets were divested for nominal proceeds, and the corporate operating netback was $19.50 per boe.  Therefore, management believes that the 2012 results, in isolation,  are not indicative of the restructured company's forward looking operations.

 

Proved Finding, Development & Acquisition Costs

2014

2013

3 Year Average

Capital expenditures (including acquisitions; net of dispositions; (unaudited in 000's) (2)

260,390

71,624


Change in future capital (000's)

30,143

-2,704






Total capital for FD&A (unaudited 000's)

290,533

68,920






Reserve additions, including acquisitions (Mboe)

19,826

3,339






Proved FD&A costs – including changes in future capital ($/boe)

14.65

20.64

18.14





Proved FD&A costs – excluding changes in future capital ($/boe)

13.13

21.45

15.97

Recycle ratio(1)








Including changes in future capital

2.1

1.5

1.5





Excluding changes in future capital

2.3

1.4

1.7

 

 

Proved plus Probable Finding, Development

& Acquisition Costs

2014

2013

3 Year Average

Capital expenditures (including acquisitions; net of dispositions; (unaudited, in 000's) (2)

260,390

71,624


Change in future capital (000's)

73,527

3,341






Total capital for FD&A (unaudited; in 000's)

333,917

74,965






Reserve additions, including acquisitions (Mboe)

28,320

5,430






Proved plus Probable FD&A costs – including changes in future capital ($/boe)

11.79

13.81

14.00

Proved plus Probable FD&A costs – excluding changes in future capital ($/boe)

9.19

13.19

10.56

Recycle ratio (1)








Including changes in future capital

2.6

2.2

2.0





Excluding changes in future capital

3.3

2.3

2.6

 


 

Proved Finding & Development Costs

2014

2013

3 Year Average





Capital expenditures (excluding acquisitions, unaudited,
 000's) (2)

87,059

49,697


Change in future capital (000's)

5,480

-10,178






Total capital for F&D (unaudited 000's)

92,539

39,519






Reserve additions, excluding acquisitions (Mboe)

5,442

1,457






Proved F&D costs – including changes in future capital ($/boe)

17.00

27.12

18.31





Proved F&D costs – excluding changes in future capital ($/boe)

16.00

34.11

16.54

Recycle ratio (1)








Including changes in future capital

1.8

1.1

1.5





Excluding changes in future capital

1.9

0.9

1.7

 

 

Proved Plus Probable Finding & Development Costs

2014

2013

3 Year Average





Capital expenditures (excluding acquisitions, unaudited,
 000's) (2)

87,059

49,697


Change in future capital (000's)

13,681

-8,006






Total capital for F&D (unaudited 000's)

100,740

41,691






Reserve additions, excluding acquisitions (Mboe)

7,138

2,664






Proved  plus Probable F&D costs – including changes in future capital ($/boe)

14.11

15.65

14.10

Proved plus Probable  F&D costs – excluding changes in future capital ($/boe)

12.20

18.66

10.93

Recycle ratio (1)








Including changes in future capital

2.2

2.0

2.0





Excluding changes in future capital

2.5

1.6

2.5

 

Notes:

(1)

Recycle ratio is calculated as the operating netback per boe divided by F&D or FD&A costs per boe as applicable. The operating netbacks used in the respective years are as follows: 2014 (unaudited) - $30.61/boe; 2013 - $30.56 and the three year average is $27.86.

(2)

Development capital has been adjusted for the effects of reserves categorized as acquisitions and dispositions 

 

Future Development Costs

The following table provides the breakdown of future development costs deducted in the estimation of the future net revenue attributable to the proved and proved plus probable reserve categories noted below:

Year

Proved Reserves

($ thousands)

Proved plus Probable Reserves

($ thousands)

2015

30,665

52,362

2016

48,494

82,960

2017

12,593

60,904

2018

1,259

3,877

2019

420

2,043

Remaining

2,013

2,568

Total (Undiscounted)

95,444

204,714

 

Net Asset Value

The following table provides a calculation of Journey's estimated net asset value and net asset value per share as at December 31, 2014 based on the estimated future net revenues associated with Journey's reserves as presented in the GLJ Report.

Reserves category

NPV10 (1)

($000's)

NAV (2) 

($000's)

NAVPS (3) ($/share)

Proved, developed, producing

300,906

223,110

5.15

Total proved

373,488

295,692

6.83

Proved plus probable producing

393,782

315,986

7.30

Proved plus probable

606,882

529,086

12.22

 

Notes:


(1)

Future net revenues as per the GLJ report on a before tax basis, discounted at 10%.

(2)

Net asset value is the discounted future net revenues and adjusted for the following:


a)

Undeveloped land value of $22,779 thousand as per management's estimate of value at December 31, 2014.


b)

Net debt of $100,575 thousand (unaudited) as at December 31, 2014.

(3)

Calculated using the total basic shares outstanding as at December 31, 2014 of 43,304 thousand.

 

About the Company

Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey's strategy is to become a growth plus sustainable yield company focused on drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions and growing its production base. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.

ADVISORIES

Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the final long form prospectus of Journey dated June 12, 2014 (the "Prospectus"). Forward-looking information may relate to our future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, dividend policy, long-term objectives and the declaration and payment of dividends. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective cash flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date.  No assurance can be given that the expectations set out in the Prospectus or herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.

All reserve references in this press release are "Company Gross Reserves". Company gross reserves are the Company's total working interest share of reserves before deduction of any royalties and excluding any royalty interests of the Company.

All future net revenues are stated prior to provision of general and administrative expenses, interest, but after the deduction of royalties, operating costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein are not representative of fair market value.

Readers are cautioned that the above list of risks and factors are not intended to be exhaustive. Additional information on these and other factors that could affect our operating and financial results are, or will be, included in reports filed with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Non-GAAP Measures

This press release includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.

No securities regulatory authority has either approved or disapproved of the contents of this press release.

"Net debt" is used by management to assess the efficiency, liquidity and general financial strength of Journey. Net debt is calculated as bank debt plus net working capital deficiency or minus the working capital surplus. Working capital deficiency (surplus) is calculated as current assets less current liabilities, but excludes the current portion of derivative contract assets or liabilities.

"Operating netback" is calculated as the average sales price of the Company's commodities less royalties, transportation costs and operating expenses. Operating netbacks is a per-boe measure used in operational decision making as well as peer analysis.

SOURCE Journey Energy Inc.

Alex G Verge, President and Chief Executive Officer, 403-303-3232, alex.verge@journeyenergy.ca, or Gerry Gilewicz, Chief Financial Officer, 403-303-3238, gerry.gilewicz@journeyenergy.ca; Journey Energy Inc., 700, 517 - 10th Avenue SW, Calgary, AB T2R 0A8, 403-294-1635, www.journeyenergy.ca