Highlights include:
44% increase in total proved and probable reserves to 35.8 million barrels of oil equivalent;
Reserve additions of 13.8 million barrels for the year were offset by production of 2.8 million barrels, representing replacement of 495% of 2011 production;
The increase in reserves is primarily attributable to new drilling at Mooney and John Lake, as well as initial recognition of reserves for the Blackrod SAGD pilot;
Over 99% of reserves are heavy oil;
752 million barrels of contingent resources (best estimate) on our 3 core properties;
A portion of the contingent resource barrels attributable to our thermal project at Blackrod is expected to be recognized as reserves in 2012 after a commercial development application is submitted;
Our largest property is the Blackrod SAGD project with 2P reserves and best estimate contingent resources of 650 million barrels of oil and potential production of 80,000 barrels of oil per day;
Q4 production of 8,734 boe/day; year-end production in excess of 9,500 boe/day;
John Festival, President of BlackPearl, commenting on the new reserves and resource evaluations indicated that “our reserve additions in 2011 are a reflection of the growth we have seen in 2011, but more importantly it is a validation of our three core properties and their performance. The ultimate potential at Blackrod, Onion Lake and Mooney is identified in the resource report and as we advance each project, barrels will be moved from the resource category to the reserves category.
At Mooney, additional drilling extended the pool to the west, which will eventually lead to an expansion of our ASP (alkali, surfactant, polymer) flood. At Onion Lake, we are delineating the pool with primary drilling and production, and this will lead to a full-scale thermal project on these lands. Our pilot results at Blackrod have moved two million barrels from resource to reserves and we expect many more barrels to be recognized as reserves as we file our 80,000 barrel per day commercial application in 2012.
Over the last three years we have grown production from 5,000 to 10,000 barrels of oil per day. However, 2012 will be the start of a transition period for BlackPearl as we have now set the stage for growth to 30,000 barrels of oil per day by 2016 as we bring on our thermal projects. We did not meet our 2011 exit target of 11,000 barrels of oil per day due to our decision to alter our primary recovery development plans at Onion Lake to accommodate our thermal project which are over the same lands. We expect to maintain a production level of 10,000 to 13,000 barrels of oil per day over the next several years during this transition period. Some of our cash flow will be spent keeping our production at these levels and the remainder will be used to fund the development of our thermal and ASP flood projects. We are currently evaluating additional funding alternatives to develop these major projects. .”
Oil and Gas Reserves
The following tables summarize certain information contained in the independent reserves report prepared by Sproule Unconventional Limited (“Sproule”) as of December 31, 2011. The report was prepared in accordance with 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”). Additional reserve information as required under NI 51-101 will be included in the Company’s Annual Information Form which will be filed on SEDAR by March 31.
On a net present value basis (10% discount, before tax), approximately 42% of the value of the proved plus probable reserves were attributable to the Onion Lake area and 41.6% was attributable to the Mooney area.
Summary of Oil and Gas Reserves – Forecasted Prices and Costs
(For table, see attached file)
Net Present Value of Reserves – Forecasted Prices and Costs
(For table, see attached file)
Reconciliation of Changes in Reserves
The following table summarizes the changes in the Company’s share of oil and natural gas reserves (before royalties) from December 31, 2010 to December 31, 2011.
(For table, see attached file)
The pricing assumptions used in the Sproule evaluation are summarized below.
Pricing Assumptions – Forecast Prices and Costs
(For table, see attached file)
Contingent Resources
The following tables summarize certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2011. The reports were independently prepared in accordance with definitions, standards and procedures contained in the COGE Handbook.
It should not be assumed that the estimates of recovery, production, and net revenue presented in the tables below represent the fair market value of the Company’s contingent resources. There is no assurance that the forecast prices and cost assumptions will be realized and variances could be material. The recovery and production estimates of the Company’s contingent resources provided herein are only estimates and there is no guarantee that the estimated contingent resources will be recovered or produced. Actual contingent resources may be greater than or less than the estimates provided here. There are certain contingencies which currently prevent the classification of these contingent resources as reserves. Information on these contingencies will be outlined in our Annual Information Form. There is no certainty that it will be commercially viable for the Company to produce any portion of the contingent resources on any of its properties.
Summary of Best Estimate (P50) Contingent Resource – By Property (1)(3)
(For table, see attached file)
Operations Update
BlackPearl’s Q4 2011 oil and gas sales volumes were 8,734 boe per day, which represents an 8% increase over Q3 2011 sales volumes and a 20% increase over Q4 2010 sales volumes. Our 2011 year-end exit production was between 9,500 and 10,000 barrels per day. The increase in fourth quarter production is attributable to drilling at Onion Lake and John Lake, as well as, drilling on our phase two expansion lands at Mooney. Our year-end production rates were lower than our guidance of 11,000 barrels of oil per day. The shortfall is partially attributable to 16 vertical wells drilled in 2011 at Onion Lake that have not been brought on production. These wells were originally drilled to help delineate the thermal development area. We planned to then conventionally produce these wells; however, we have since elected not to bring these on production until we establish our plans to accommadate future thermal development of the area. In addition, during the fourth quarter we encountered considerable difficulty locating third party oil processing facilities that had capacity to handle our Onion Lake volumes which resulted in both reduced production and increased inventories. We are currently evaluating construction of our own processing facility for the Onion Lake area.
Our SAGD pilot at Blackrod continues to perform up to our expectations with current production of over 250 barrels of oil per day and an instantaneous steam oil ratio of just over three. We expect oil production to reach our target of 500 to 800 barrels of oil per day later this year.
Polymer injection is continuing at Mooney but we do not anticipate seeing any oil production response from the flood until later this year.
Other
The Company is planning to release its 2011 year-end financial and operating results on February 27, 2012.
Forward-Looking Statements
Certain of the statements made and information contained herein is forward-looking statements and forward looking information (collectively referred to as “forward-looking statements”) within the meaning of Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. Forward-looking statements are typically identified by such words as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "potential", "targeting", "intend", "could", "might", "should", "believe" or similar words suggesting future events or future performance. In addition, statements relating to “reserves” or “resources”, “contingent resource” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resource described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this document contains forward-looking statements pertaining to, the volumes and estimated value of BlackPearl’s proved and probable reserves, the volumes and estimated value of BlackPearl’s contingent resource of bitumen and heavy oil, forecasted future production levels and timing of reaching these production levels, timing of financing decisions to develop our properties and timing of the reclassification of certain of our contingent resources to reserves.
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.
Forward-looking statements are based on the Company's current beliefs as well as assumptions made by, and information currently available to, the Company, including, without limitation, information and assumptions concerning anticipated financial performance, business prospects, strategies, regulatory developments, future commodity prices, future production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market oil and natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
The Corporation does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.
For further information, please contact:
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BlackPearl’s Certified Advisor on First North is Pareto Öhman AB.
Company Registration Number: 409596-1
