Board Committees
TSX VENTURE SYMBOL: ONR - | View Quote | View Chart | View Financials |
CALGARY, ALBERTA--(CCNMatthews - March 20, 2006) -
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.
Open Range Energy Corp. ("Open Range", the "Company" or the "Corporation") (TSX:ONR) is pleased to announce today exploration success and a significant expansion of its undeveloped land base at its Ansell/Sundance property, as well as the financial and operating results for the one-month-period from the commencement of operations on November 30, 2005 to December 31, 2005, including the Company's independently evaluated year-end reserves.
Exploration Success at Ansell/Sundance
In addition to the previously announced Cadomin natural gas discovery at 10-11-54-20W5M in the Company's multi-zone natural gas fairway at Ansell/Sundance, Open Range has since drilled five gross (2.0 net) successful natural gas wells. Four gross (1.5 net) wells, including the initial discovery, have been tied in and brought on-stream through the Company's new central compression facility. The drilling success rate at Ansell/Sundance to date is 100 percent, and at present the total raw sweet natural gas production is approximately 6 mmcf per day (2.25 mmcf per day net or 375 boe per day net).
The four wells currently on-stream are producing from six Cretaceous pay zones and encountered three additional and as yet untested Cretaceous pay zones. The fifth 43.75 percent working interest well has been drilled and completed and is currently being tied in. Production from this well is expected to commence by April 1, 2006 at an initial rate of 2 mmcf per day (0.88 mmcf per day net or 147 boe per day net).
Open Range's sixth well at Ansell/Sundance, in which the Company has a 40.63 percent working interest, has recently been drilled and cased. The well encountered Cretaceous natural gas shows at various intervals. Completion of this well is anticipated to occur prior to April 30, 2006 depending on weather conditions.
Operating success to date at Ansell/Sundance has validated management's view that this is a multi-zone area that will require drilling densities of up to three to four wells per section to optimally develop. As operator of the jointly held lands, Open Range plans to drill one additional well through spring break-up, followed by five to seven (2.1 to 3.0 net) additional wells during the remainder of 2006.
At December 31, 2005 GLJ Petroleum Consultants Ltd. (GLJ) assigned a range of gross original-gas-in-place of 1.3 bcf to 3.6 bcf per zone to the Ansell/Sundance wells, based on volumetric areas ranging from 40 to 160 acres. Associated NGLs have been booked at 10-15 bbls/mmcf. Reserves have not been assigned to three untested Cretaceous pay zones, which may be completed later in 2006 subject to commingling approval.
Farm-in Agreement
Open Range also announces today its second farm-in agreement in the Ansell/Sundance fairway. The agreement, with a senior Canadian energy trust, provides access to nine sections of land in return for a three well drilling commitment. Each well, which will be drilled with our 50 percent partner, will earn between 60 to 100 percent working interest on two to three sections of land. Following fulfillment of this commitment Open Range will hold an interest in a total of approximately 20,000 gross acres (8,000 net acres) of land, representing a four fold increase in Open Range's land position at Ansell/Sundance since inception.
Holding Application
Open Range and its partner have applied for a holding, consistent with area precedents and reserve assignments from GLJ, in order to drill up to four wells per section over 11 gross sections of land, where the Company has working interests ranging from 37.5 to 50 percent. Application approval is anticipated in Q3, 2006 and if granted will significantly increase the drilling inventory at Ansell/Sundance. It is anticipated that future holdings may be applied for on some or all of the balance of the Open Range et al lands.
3D Seismic
Surveying of the Ansell/Sundance 3D seismic program is underway. The program was recently expanded to cover an area in excess of one township due to Open Range's considerable recent success in acquiring additional lands. The program will be used to optimally position drilling locations targeting the stacked gas saturated Cretaceous sands and potentially identify deeper high impact objectives in the Triassic, Mississippian and Devonian formations. In house data interpretation is anticipated to commence in June 2006.
December 2005 Operating and Financial Highlights
- Formed the Company on November 30, 2005 and commenced trading on the TSX on December 2, 2005 under the symbol ONR;
- Ansell/Sundance exploration drilling results add production, reserves and significant drilling inventory;
- Total capital of $6.4 million prior to year end was expended drilling 3.0 gross (1.0 net) wells, installation of natural gas compression and land purchases at Ansell/Sundance;
- Exit-rate production of 512 boe per day, up from approximately 400 boe per day on November 30;
- Positive funds from operations of $616,958 and positive earnings of $128,158 for December;
- Proven and probable reserve-life-index of 7.8 years;
- Estimated net asset value at December 31, 2005 of $3.89/diluted share;
- Commenced review of seismic data over option lands from Daylight Energy Trust;
- Established $10.4 million in bank lines; and
- $5 million in working capital surplus at year-end.
Reserves Highlights, December 31, 2005
- Independent evaluation by GLJ Petroleum Consultants Ltd., effective December 31, 2005, in accordance with definitions set out under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101);
- Gross proved reserves of 1.186 million boe representing 82 percent of the gross proved plus probable reserves of 1.449 million boe;
- No reserves have been booked for future drilling locations or potential uphole pay zones; and
- Net present value of proved plus probable reserves calculated at $32.4 million before tax @ NPV 10 percent.
Summary of Reserves by Category (forecast prices and costs - December 31, 2005)
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Reserve Category (mboe) % of Total
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Proved Producing 1,007 69%
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Proved Developed non-Producing 143 10%
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Proved Undeveloped 0 0%
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Total Proved 1,150 79%
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Probable 257 18%
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Total Company Gross Working
Interest Reserves - Proved
plus Probable Reserves 1,407 97%
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Proved and Probable Company
interests in Royalties 42 3%
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Total Company interest reserves
- Proved plus Probable Reserves 1,449 100%
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In GLJ's report, "Company Interest" reserves and values refer to the sum of royalty interest and working interest reserves before deduction of royalty burdens payable. "Working Interest" reserves equate to those reserves that are referred to as "Company Gross" reserves by the Canadian Securities Administrators in NI 51-101.
Table 2.2.1 MD&A
NI 51-101
SUMMARY OF RESERVES AS OF DECEMBER 31, 2005 (Forecast Prices & Costs)
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Light & Medium Oil Natural Gas (1)
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Gross (2) Net (3) Gross (2) Net (3)
RESERVES CATEGORY (Mbbls) (Mbbls) (MMcf) (MMcf)
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PROVED
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Developed Producing 32.0 30.0 5,277.0 4,514.0
Developed Non-Producing 0.0 0.0 806.0 705.0
Undeveloped 0.0 0.0 0.0 0.0
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Total Proved 32.0 30.0 6,083.0 5,218.0
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PROBABLE 11.0 10.0 1,343.0 1,137.0
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TOTAL PROVED + PROBABLE 43.0 40.0 7,426.0 6,355.0
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Natural Gas Liquids TOTAL
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Gross (2) Net (3) Gross (2) Net (3)
RESERVES CATEGORY (Mbbls) (Mbbls) (Mboe) (Mboe)
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PROVED
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Developed Producing 96.0 63.0 1,007.0 846.0
Developed Non-Producing 9.0 7.0 143.3 124.0
Undeveloped 0.0 0.0 0.0 0.0
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Total Proved 105.0 70.0 1,150.3 970.0
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PROBABLE 22.0 14.0 257.0 214.0
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TOTAL PROVED + PROBABLE 127.0 85.0 1,407.3 1,184.0
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(1) Estimates of Reserves of natural gas include associated and
non-associated gas.
(2) "Gross Reserves" are Company's working interest share of remaining
reserves before the deduction of royalties.
(3) "Net Reserves" are Company's working interest share of remaining
reserves less all Crown, freehold, and overriding royalties and
interests owned by others.
Reference: Item 2.2.(1) of Form 51-101F1
Table 2.2.2
NI 51-101
SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2005 (Forecast Prices & Costs)
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Net Present Value (NPV) of Future Net Revenue (FNR)
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Before Income Taxes - Discounted at (%/yr)
0 5 10 15 20
RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$) (MM$)
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PROVED
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Developed
Producing 32.9 27.8 24.4 22.0 20.1
Developed
Non-Producing 5.5 4.7 4.2 3.8 3.5
Undeveloped 0.0 0.0 0.0 0.0 0.0
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Total Proved 38.3 32.6 28.6 25.8 23.6
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PROBABLE 7.5 5.1 3.8 3.0 2.5
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TOTAL PROVED
+ PROBABLE 45.9 37.6 32.4 28.8 26.0
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Net Present Value (NPV) of Future Net Revenue (FNR)
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After Income Taxes - Discounted at (%/yr)
0 5 10 15 20
RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$) (MM$)
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PROVED
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Developed
Producing 30.6 25.7 22.4 20.1 18.3
Developed
Non-Producing 4.0 3.4 3.0 2.6 2.4
Undeveloped 0.0 0.0 0.0 0.0 0.0
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Total Proved 34.7 29.1 25.4 22.7 20.7
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PROBABLE 6.4 4.1 2.9 2.3 1.8
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TOTAL PROVED
+ PROBABLE 41.1 33.2 28.3 24.9 22.5
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Reference Item 2.2(2) of Form 51-101F1
NPV of FNR includes all resource income: Sale of oil, gas, by-product reserves; Processing of third party reserves; Other income.
Income Taxes includes all resource income, appropriate income tax calculations and prior tax pools
Table 2.2.3
NI 51-101
TOTAL FUTURE NET REVENUE (Undiscounted)
AS OF DECEMBER 31, 2005 (Forecast Prices & Costs)
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Operating Development
Revenue Royalties Cost Costs
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RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$)
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PROVED 61.4 8.4 13.0 0.6
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TOTAL PROVED + PROBABLE 74.4 10.3 16.5 0.6
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Well BT Future AT Future
Aband. Net Revenue Income Net Revenue
Costs (1) Taxes (1)
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RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$)
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PROVED 1.0 38.3 3.7 34.7
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TOTAL PROVED + PROBABLE 1.0 45.9 4.8 41.1
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(1) BT equals Before Taxes and AT equals After Taxes
Reference Item 2.2(3)(b) of Form 51-101F1
Capital Expenditures
Pursuant to the Plan of Arrangement, costs incurred in the Ansell/Sundance area, excluding the completion of the Cadomin zone in the 10-11-54-20W5M well and the drilling and completion of the Cadomin zone in the 14-02-54-20W5M well, were incurred for Open Range's account. Costs incurred by Open Range totalled $3.7 million in drilling, completions and equipping, $1.1 million in land and seismic, $1.2 million in facilities and $0.4 million in corporate assets by December 31, 2005.
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($000s) Inception to Date %
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Land and seismic 1,132 16%
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Drilling, completion and equipping 3,667 52%
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Facilities 1,235 17%
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Corporate assets 382 5%
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Total 6,416 90%
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Asset Retirement Obligation 683 10%
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Total Capital 7,099 100%
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Finding and development costs
Finding and development costs could not be calculated as the opening reserves on June 30, 2005 were mechanical updates, not full reserve reports. As well, operations and capital expenditures on Daylight assets and some capital from Tempest assets were not charged to Open Range from the period June 30 to November 30, 2005. Future development capital in the December 31, 2005 reserve report was $0.6 million proved and $0.6 million proved plus probable (NPV 10 percent).
Reserve Life Index
Using December 2005 average production and December 31, 2005 year-end proved plus probable reserves, Open Range has a reserve life index of 7.8 years. Potential reserve additions from the Ansell/Sundance area may extend the Corporation's reserve life index.
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Production (mboe) (December 2005 Average) 512 boe/d
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Proved reserves (mboe) 1,186,000
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Proved reserve-life-index (years) 6.3
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Proved plus probable reserves (mboe) 1,449,000
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Proved plus probable reserve-life-index (years) 7.8
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Net Asset Value
Open Range presents one method for calculating net asset value (NAV) below. This calculation is presented for December 31, 2005 and incorporates estimates that may not be comparable year-over-year and are only at one point in time. An independent evaluation was performed for reserves but not for the land values. The reader is cautioned that the presentation does not reflect all aspects of the Corporation.
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($000s except number of shares and per share) December 31, 2005
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Present value of reserves (P+P discounted at 10%) 32,419
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Undeveloped acreage 8,244
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Working capital surplus 4,997
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Option proceeds(i) 4,767
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Estimated value 50,427
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Shares (thousands)(i) 12,947
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Estimated NAV per share(i) 3.89
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(i) Includes the exercise of all 1,034,000 stock options at their average exercise price of $4.61 based on a December 31, 2005 closing price of $4.75/share.
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Period from
November 30 to
Operating and Financial Highlights December 31, 2005
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Operating
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Production
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Crude oil and NGL (bbls/d) 45
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Natural gas (mcf/d) 2,800
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Combined (boe/d @ 6:1) 512
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Average realized prices
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Crude oil and NGL ($/bbl) 57.02
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Natural gas ($/mcf) 12.98
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Combined average ($/boe) 76.04
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Operating costs ($/boe) 9.21
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Transportation costs ($/boe) 0.93
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Operating net-back ($/boe) 38.88
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Financial ($thousands, except per share and share data)
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Petroleum and natural gas sales 1,207
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Funds from operations 617
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Per basic and diluted share 0.06
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Net income 128
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Per basic and diluted share 0.01
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Total assets 48,319
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Total liabilities 13,206
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Working capital surplus 4,997
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Capital expenditures 6,416
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Securities outstanding as at December 31, 2005
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Common 11,912,941
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Stock Options ($4.61 exercise price) 1,034,000
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2006 Guidance
Open Range management estimates that production in the first quarter of 2006 will be approximately 700 boe per day, of which more than 90 percent will be natural gas. This is consistent with Open Range's 2006 production target of an average of 900 boe per day, with natural gas estimated to constitute approximately 90 percent of overall production at 5.0 mmcf per day. This is a substantial increase from initial production of approximately 400 boe per day from the arrangement that closed on November 30, 2005. Open Range's $20 million 2006 capital program contemplates drilling 15 wells targeted primarily towards the Company's west central high growth property at Ansell/Sundance and includes $5 million for land and seismic and $500,000 for facilities.
The Management Discussion and Analysis and the December 31, 2005 Audited Financial Statements for the Corporation are posted on www.SEDAR.com. Open Range has also filed an Annual Information Form for the year ended December 31, 2005, which includes the following reports required under National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities": Form 51-101F1, Statement of Reserves Data and Other Oil and Gas Information; Form 51-101F2, Reports of Reserve Data by Independent Qualified Reserves Evaluators; and Form 51-101F3, Report of Management and Directors on Oil and Gas Disclosure. The Annual Information Form can be found for viewing by electronic means on the System for Electronic Document Analysis and Retrieval at www.sedar.com.
The Annual General Meeting for Open Range Energy Corp. is scheduled to take place on Thursday, May 18th at 10:00 AM in Roxy Theatre B - Sunlife Plaza @ 140 - 4th Avenue SW, Calgary, AB.
Open Range Energy Corp. is a publicly traded Canadian energy company involved in the exploration, development and production of natural gas and crude oil in western Canada.
Reader Advisory
This disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond Open Range's control, including: the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Open Range's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Open Range will derive there from. All amounts are denominated in Canadian funds unless otherwise specified.
THE TORONTO STOCK EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE INFORMATION CONTAINED HEREIN.
Open Range Energy Corp.
A. Scott Dawson, P.Eng.
President and Chief Executive Officer
(403) 205-3704
www.openrangeenergy.com
