CALGARY, ALBERTA--(BUSINESS WIRE)-- Seven Generations Energy Ltd. ("7G" or the "Company") (TSX: VII) is pleased to report the results of its December 31, 2014 independent reserve assessment prepared by McDaniel & Associates Consultants Ltd. in accordance with Canadian reporting standards. The report follows the most recent report with an effective date of July 1, 2014, which was prepared for the Company's Initial Public Offering that closed in November 2014.
| Effective Date |
July 1, 2014
| Effective Date |
December 31, 2014
|Proved Developed Producing Reserves (MMboe)||17.1||34.1||99.4%|
|Total Proved Reserves (MMboe)||328.0||420.7||28.3%|
|Total Proved Plus Probable Reserves (MMboe)||649.1||788.6||21.5%|
The Company is also updating its business plan in response to persisting low commodity prices and announced today that it has adjusted its 2015 capital budget downwards by $250 - $300 million, resulting in a revised program size of $1.30 to $1.35 billion. The Company plans to defer spending of approximately $200 - $250 million and also expects, through negotiations with suppliers and business partners, to capture additional cost savings on 2015 projects of at least $50 million, resulting in an aggregate spending reduction of approximately 15% - 20% from the earlier announced budget of $1.60 billion. Despite these reductions, the Company is affirming its production guidance, anticipating 2015 production to be between 55,000 and 60,000 boe per day. The Company plans to effect these reductions largely by deferring spending on wells in lands outside of the region that the Company calls the Nest, and deferring spending on establishing the potential of other exploratory zones within its lands. CEO, Pat Carlson said, "Our Nest well performance remains very strong as indicated by the reserve revisions. The resulting increased confidence in the Nest to meet our production targets enables us to defer activities focused on establishing the performance potential of additional resources." 7G plans to focus most of its 2015 activity on its Nest 2 area, which it believes can support the Company's market obligations. The Company believes these lands possess natural gas and liquids that can be developed with low supply costs that provide an attractive investment opportunity even at today's depressed commodity prices.
The Company continues to realize efficiencies in drilling, enabling it to reduce its drilling fleet from a recent peak of 14 rigs to the presently engaged 10 rigs. "The ability to run fewer rigs while maintaining production targets is a function of reduced time to drill wells, improved early production rates, higher liquid to gas ratios and increased on-time well rates when compared to what was forecast in the Company's autumn 2014 Prospectus," says CEO, Pat Carlson. "The commodity price down turn has opened up the services marketplace and we are receiving meaningful price concessions from most of our suppliers. We expect to be able to continue to engage some of the industry's most modern and efficient equipment, helping us to further reduce our capital costs," commented President and Chief Operating Officer, Marty Proctor.
The Company has initiated but not completed work on an in-process inventory of 47 new wells. Bringing these wells on production, with a significant proportion of the capital already dedicated, should be sufficient to meet the Company's original production guidance for 2015. Meeting its 2016 and 2017 projections will require the Company to drill more wells and add facilities. 7G plans to finish the expansion of its Lator refrigeration plant to its 250 MMcf/d rich gas sales capacity and to initiate the construction of a second refrigeration plant which, when complete in 2016, will provide processing capacity for 500 MMcf/d and allow the Company to continue to profitably deliver rich gas volumes into its firm transportation commitments. "We continue to see both our infrastructure and takeaway capacity as highly strategic and valuable components of our development plan," said Mr. Proctor. "While committed volumes provide a production target, we have complete flexibility in how we grow and have the ability to flow third party volumes or even look to short term assignments of our transportation commitments, should we choose to alter our pace of growth."
Commenting on the current energy price environment, Corporate Planning Vice President, Chris Law stated, "At current commodity prices, Nest 2 wells continue to exhibit attractive economics. 7G has very little in the way of contractual operating liabilities, which gives the Company a high degree of flexibility to adapt its business plan to market opportunities. The Company will continue to manage its balance sheet prudently and finance its growth in a responsible manner."
About the Company
Seven Generations Energy Ltd. is an Alberta-based company engaged in the development of the Kakwa River Project (the "Project"). Located approximately 100 kilometers south of Grande Prairie, Alberta, the Project is a tight, liquids-rich gas and light oil project in the early stages of development. 7G has its corporate headquarters in Calgary, Alberta and its operations headquarters in Grande Prairie, Alberta.
Reader Advisory :
This press release contains "forward-looking information" or "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking statements") regarding the Company. Any statements included in this press release that address activities, events or developments that the Company "expects," "believes," "plans," "projects," "estimates," or "anticipates" will or may occur in the future are forward-looking statements. In particular, this press release contains forward-looking statements pertaining to the following: planned deferral of capital spending; anticipated cost reductions; estimated future production; the Company's development plans and ability to meet its market obligations; expectations regarding supply costs and equipment to be utilized; planned facilities expansion and increases in processing capacity. In addition, references to reserves are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated.
With respect to forward-looking information contained in this press release, assumptions have been made regarding, among other things: future oil, natural gas liquids and natural gas prices; the Company's ability to obtain qualified staff and equipment in a timely and cost efficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which the Company conducts its business; the Company's future production levels; future capital investments to be made by the Company; future cash flows from production; geological and engineering estimates in respect of the Company's reserves; the geography of the areas in which the Company is conducting exploration and development activities; and the Company's ability to obtain financing on acceptable terms.
Actual results could differ materially from those anticipated in this forward-looking information as a result of the risk factors set forth in the Company's Supplemented PREP Prospectus dated October 29, 2014, that is available on SEDAR at www.sedar.com , including, but not limited to: volatility in market prices and demand for oil, natural gas liquids and natural gas and hedging activities related thereto; general economic, business and industry conditions;variance of the Company's actual capital costs, operating costs and economic returns from those anticipated; risks related to the exploration, development and production of oil and natural gas reserves and resources; actions by governmental authorities, including changes in government regulation, royalties and taxation; the availability, cost or shortage of rigs, eq uipment, raw materials, supplies or qualified personnel; uncertainty associated with estimates of oil, natural gas liquids and natural gas reserves and the variance of such estimates from actual future production; the ability to satisfy obligations under the Company's firm commitment transportation arrangements; changes in the interpretation and enforcement of applicable laws and regulations; seasonality of the Company's activities and the Canadian oil and gas industry; and extensive competition in the Company's industry.
Except as required by law, the Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. Do not place undue reliance on forward-looking statements.
Seven Generations has adopted the standard of 6 Mcf:1 Bbl when converting natural gas to oil equivalent. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 Bbl 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 the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.
Developed Producing Reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
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 reserves plus probable reserves.
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.
|Bbl||barrel or barrels|
|Boe||barrels of oil equivalent|
|Mcf||million cubic feet|
|MMcf/d||million cubic feet per day|
|MMboe||millions of barrels of oil equivalent|