CALGARY, March 10 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company") (TSX: WAV.A and WAV.B) achieved outstanding per share reserves and value growth in 2007 and is pleased to provide its 2007 reserves information (NI 51-101 compliant). As Breaker plans to announce its audited 2007 financial statements after the close of the market on March 26, 2008, certain financial estimates have been made herein to facilitate discussion of its 2007 capital program. Readers are advised that these financial estimates are subject to audit and may be revised as necessary.
Highlights
----------
Breaker grew its reserves in 2007 by 44% to 18.0 million boe. The Company achieved strong per share reserves and net asset value growth on a cost effective basis. Through maintaining fiscal discipline and selecting quality capital investment opportunities, Breaker is pleased to report the following results for 2007:
Growth in Proved plus Probable light oil reserves per fully
diluted share 112%
Growth in Proved reserves per fully diluted share 49%
Growth in Proved plus Probable reserves per fully diluted share 39%
Estimated Net Asset Value (NAV) per fully diluted share:
Using 5% BT (forecast pricing) $10.04/share
(77% increase from 2006 year end)
Using 10% BT (forecast pricing) $7.56/share
(61% increase from 2006 year end)
FD&A Proved (without future capital) $10.64/boe
FD&A Proved plus Probable (without future capital) $ 8.74/boe
FD&A Proved (including change in future capital
discounted at 10%) $17.06/boe
FD&A Proved plus Probable (including change in
future capital discounted at 10%) $14.88/boe
Proved plus Probable Reserves Replacement Ratio 4.4
Proved plus Probable Reserve Life Index
(est. Q4/07 average production 4,523 boe/d) 10.9 years
The results presented above are based on unaudited, estimated total capital expenditures for 2007 of $62.5 million and unaudited, estimated 2007 production totaling 1,608,463 boe or an average of 4,407 boe/d, and forecast pricing (Sproule December 31, 2007).
Breaker 2007 Reserve Information
--------------------------------
In accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities (NI 51-101), Sproule Associates Limited (Sproule) prepared the Breaker Sproule Report. This report evaluated, as at December 31, 2007, 100 percent of Breaker's oil, natural gas, and natural gas liquids reserves.
The tables below disclose in the aggregate, the Corporation's gross and net proved and proved plus probable reserves and Net Present Value (NPV) as estimated in the Breaker Sproule Report. These estimates were calculated using forecast prices and costs.
"Forecast prices and costs" means future prices and costs used by Sproule in the Sproule Report that are generally accepted as being a reasonable outlook of the future, or fixed or currently determinable future prices or costs to which the Corporation is bound.
"Gross" reserves equate to those reserves that are referred to as "Company Gross" reserves by the Canadian Securities Administrators (CSA) in NI 51-101. Gross Reserves are Company gross reserves, which are the Company's working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of the Company.
"Net After Royalty" reserves are the Company's working interest (operating or non-operating) share after deduction of royalty obligations plus the Company's royalty interests in reserves.
The net present value of future net revenue attributable to Breaker's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves by Sproule. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to Breaker's reserves estimated by Sproule represent the fair market value of those reserves. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to effects of aggregations. Other assumptions and qualifications relating to costs, prices and future production and other matters are summarized herein. The recovery and reserve estimates of Breaker's oil, natural gas, and NGL reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.
Summary of Reserves and Values
-------------------------------------------------------------------------
Proved Total
Proved Developed Proved Proved
Developed Non- Undevel- Total Total Plus
Producing producing oped Proved Probable Probable
-------------------------------------------------------------------------
MARKETABLE
RESERVES
-------------------------------------------------------------------------
Light/Medium
Oil (mbbls)
-------------------------------------------------------------------------
Gross 2,567 104 2,676 5,346 3,369 8,715
-------------------------------------------------------------------------
Net After
Royalty 2,258 85 2,352 4,695 2,927 7,622
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Heavy Oil
(mbbls)
-------------------------------------------------------------------------
Gross 191 0 236 427 426 852
-------------------------------------------------------------------------
Net After
Royalty 172 0 186 357 351 709
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gas (mmcf)
-------------------------------------------------------------------------
Gross 24,530 1,671 10,286 36,486 12,430 48,916
-------------------------------------------------------------------------
Net After
Royalty 19,210 1,255 8,106 28,572 9,738 38,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Natural Gas
Liquids (mbbls)
-------------------------------------------------------------------------
Gross 175 11 37 223 62 285
-------------------------------------------------------------------------
Net After
Royalty 135 7 25 167 46 213
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Oil Equivalent
(mboe)
-------------------------------------------------------------------------
Gross 7,021 393 4,663 12,077 5,928 18,005
-------------------------------------------------------------------------
Net After
Royalty 5,767 301 3,913 9,981 4,948 14,929
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BEFORE TAX PRESENT VALUE ($MM)
-------------------------------------------------------------------------
0% 236,025 7,002 140,682 383,709 213,821 597,531
-------------------------------------------------------------------------
5% 187,034 5,808 86,688 279,529 121,642 401,172
-------------------------------------------------------------------------
10% 159,319 4,908 58,527 222,753 79,822 302,575
-------------------------------------------------------------------------
15% 140,741 4,210 41,508 186,459 56,565 243,024
-------------------------------------------------------------------------
20% 127,106 3,654 30,216 160,977 41,975 202,952
-------------------------------------------------------------------------
The above summary of reserves and values was based on the following price
and cost assumptions:
Summary of Pricing and Inflation Rate Assumptions (Forecast Prices and
Costs) Sproule December 31, 2007
-------------------------------------------------------------------------
Edmonton Hardisty Cromer
Par Price Heavy Medium Natural
WTI 40 12 29.3 Gas AECO Infla-
Cushing degrees degrees degrees Spot tion Exchange
(Oklahoma) API API API Price Rate Rate
-------------------------------------------------------------------------
($Cdn/ ($Cdn/ ($Cdn/ ($Cdn/ ($US/
Year ($US/bbls) bbls) bbls) bbls) mmbtu) (%/yr) $Cdn)
-------------------------------------------------------------------------
2008 89.61 88.17 54.67 75.83 6.51 2.0 1.000
-------------------------------------------------------------------------
2009 86.01 84.54 52.42 72.71 7.22 2.0 1.000
-------------------------------------------------------------------------
2010 84.65 83.16 51.56 71.52 7.69 2.0 1.000
-------------------------------------------------------------------------
2011 82.77 81.26 50.38 69.89 7.70 2.0 1.000
-------------------------------------------------------------------------
2012 82.26 80.73 50.05 69.43 7.61 2.0 1.000
-------------------------------------------------------------------------
2013 82.81 81.25 50.38 69.88 7.78 2.0 1.000
-------------------------------------------------------------------------
2014 84.46 82.88 51.39 71.28 7.96 2.0 1.000
-------------------------------------------------------------------------
2015 86.15 84.55 52.42 72.71 8.14 2.0 1.000
-------------------------------------------------------------------------
2016 87.87 86.25 53.47 74.17 8.32 2.0 1.000
-------------------------------------------------------------------------
2017 89.63 87.98 54.55 75.66 8.51 2.0 1.000
-------------------------------------------------------------------------
Thereafter +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr 1.000
-------------------------------------------------------------------------
Breaker Reserves Reconciliation, Gross (Forecast Prices and Costs,
unaudited)
-------------------------------------------------------------------------
Total Total Proved
Oil Equivalent (mboe) Proved Plus Probable
-------------------------------------------------------------------------
Opening Balance, Gross 7,722 12,318
-------------------------------------------------------------------------
Technical 1,651 1,784
-------------------------------------------------------------------------
Extensions and Discoveries 4,322 4,815
-------------------------------------------------------------------------
Economic Factors -26 -22
-------------------------------------------------------------------------
Improved Recovery 0 699
-------------------------------------------------------------------------
Acquisition 18 20
-------------------------------------------------------------------------
Production (1,609) (1,609)
-------------------------------------------------------------------------
Closing Balance, Gross 12,078 18,005
-------------------------------------------------------------------------
Breaker Finding, Development, and Acquisition (FD&A) Costs (unaudited)
-------------------------------------------------------------------------
Proved Plus
Capital Costs ($MM) unaudited Proved Probable
-------------------------------------------------------------------------
2007 Exploration, Development and Acquisition
Capital Expenditures 62.5 62.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Future Development Costs year end 2007 (FDC)
(disc@10%) 62.3 92.3
-------------------------------------------------------------------------
Future Development Costs year end 2006 (FDC)
(disc@10%) 24.5 48.4
-------------------------------------------------------------------------
Change in FDC (disc@10%) 37.8 43.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2007 Capital + Change in FDC (disc@10%) 100.3 106.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Proved Plus
FD&A Costs ($/boe) unaudited Proved Probable
-------------------------------------------------------------------------
Exploration, Development and Acquisition
without FDC 10.64 8.74
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exploration, Development and Acquisition
with change in FDC (disc@10%) 17.06 14.88
-------------------------------------------------------------------------
Breaker's exploration and development efforts on properties acquired during previous years added significant production and reserve additions which was recognized at year end 2007. These activities yielded reserve additions at lower costs compared to previous year's additions which were primarily based on acquisition costs. Breaker will continue to develop its asset base with the expectation of further additions to both production and reserves in the future, and in accordance with its business strategy will obtain new growth platforms for continued growth.
Breaker's netback for 2007 was $30.48/boe (unaudited). Using this
netback the following recycle ratios are calculated:
-------------------------------------------------------------------------
Proved Plus
Recycle Ratio, unaudited Proved Probable
-------------------------------------------------------------------------
For FD&A without FDC 2.9 3.5
-------------------------------------------------------------------------
For FD&A incl. change in FDC (disc@10%) 1.8 2.0
-------------------------------------------------------------------------
Breaker's current netback, at higher oil and gas prices than those
experienced in 2007, is estimated to be well in excess of $40/boe (unaudited).
Accordingly current recycle ratios would be higher than displayed in the
above table which utilizes 2007 netbacks.
Breaker's reserves quality improved in the form of a higher percentage of
Proved Reserves, as demonstrated by the following metrics:
-------------------------------------------------------------------------
Percentage of
Total Proved Plus Probable Percentage Change
--------------------------
Year 2006 2007
-------------------------------------------------------------------------
Proved Total 62.7 67.1 7
-------------------------------------------------------------------------
Probable Total 37.3 32.9 (12)
-------------------------------------------------------------------------
Proved Plus Probable 100.0 100.0
-------------------------------------------------------------------------
Breaker 2007 Net Asset Value per Fully Diluted Share Information
(unaudited)
Using Reserve Value at December 31, 2007 - Forecast Pricing and Costs:
-------------------------------------------------------------------------
($MM except share amounts) 5% BT 10% BT
-------------------------------------------------------------------------
Proved Plus Probable Reserve Value
(incl. future capital) 401.2 302.6
-------------------------------------------------------------------------
Undeveloped Land (197,803 acres
@ $150/acre) 29.7 29.7
-------------------------------------------------------------------------
Seismic 9.4 9.4
-------------------------------------------------------------------------
Estimated Net Debt (51.2) (51.2)
-------------------------------------------------------------------------
Option Proceeds 9.9 9.9
-------------------------------------------------------------------------
Total Net Assets 399.0 300.4
-------------------------------------------------------------------------
Fully Diluted Shares Outstanding (MM) 39.7 39.7
-------------------------------------------------------------------------
Estimated Net Asset Value per
Fully Diluted Share ($) 10.04 7.56
-------------------------------------------------------------------------
In addition to the approximately 197,803 net acres of undeveloped land that Breaker has an ownership interest in, the Company also had access to approximately 115,000 acres via farm-in.
New Royalty Framework
---------------------
On October 25, 2007, the Government of Alberta announced a "New Royalty Framework" for oil and natural gas royalties in the province of Alberta. New royalty rates will apply to production in Alberta effective January 1, 2009. Breaker requested that Sproule estimate the impact to the reserve evaluation based upon the currently released information on the new royalty regime. As of December 31, 2007, the province had not introduced the enabling legislation nor had they provided enough clarity on a number of issues for Sproule to provide a precise calculation of net reserves and before tax net present value under the new regime. It is possible that the announced changes may be amended before coming into force. Under the forecast price assumptions, Sproule has estimated that the change to the before tax net present value, discounted at 10 percent, on proved plus probable reserves would be a reduction of approximately 11 percent, as at December 31, 2007.
The estimated net asset value reduction has increased from the previously announced figure primarily due to advancing the date of the discounted cash flow stream by a year.
Operational Update
------------------
Breaker is currently very active with its development and exploration programs. At the beginning of March, Breaker had 4 drilling rigs drilling its oil prospects at Irricana, Girouxville and East Prairie. In addition, the company has commenced its 3-D seismic program at Monias, British Columbia. Monias is a high-impact exploration project targeting a 100% working interest Leduc reef prospect that has an unrisked potential target size of 1 tcf.
Summary
-------
In 2007 Breaker added 7.2 million boe of high-quality oil and gas Proved
plus Probable Reserves via total capital expenditures of approximately
$62.5 million (unaudited). Breaker continues to execute on its business plan
of making strategic acquisitions balanced with a focused exploration,
development and exploitation plan, which resulted in the following at year end
2007:
- Proved plus Probable reserves growth to 18.0 million boe, a 44%
increase over year end 2006.
- Increased Proved plus Probable reserves per fully diluted share by
39% in 2007.
- Net Asset Value (BT 5%) of $10.04 per fully diluted share based on
forecast price assumptions.
- FD&A Proved (without future capital) of $10.64/boe in 2007.
- FD&A Proved plus Probable (without future capital) of $8.74/boe in
2007.
- FD&A Proved (including change in future capital discounted at 10%) of
$17.06/boe in 2007.
- FD&A Proved plus Probable (including change in future capital
discounted at 10%) of $14.88/boe in 2007.
- Proved Recycle Ratio (including change in future capital discounted
at 10%) of 1.8
- Proved plus Probable Recycle Ratio (including change in future
capital discounted at 10%) of 2.0
- Proved plus Probable Reserve Life Index (based on est. Q4 2007
average production) of 10.9 years.
- Current inventory of more than 300 net drilling locations for oil and
natural gas.
- Breaker maintains an excellent balance sheet with a bank line of $95
million and estimated debt/Q4 annualized cash flow of 1.2 times.
Breaker Energy Ltd. is a junior oil and gas company focused on creating shareholder value by growing per share production and reserves through acquisitions and a focused exploration, development and exploitation plan.
Breaker has 36,269,504 Class A shares and 900,000 Class B shares outstanding.
Breaker Energy trades on the TSX under the symbols WAV.A and WAV.B.
Forward-looking Statements
This press release contains forward-looking statements including management's assessment of future plans and operations, expectations of future production, cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses and health, safety and environmental risks), acquisitions, commodity price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other factors that could affect Breaker's operations and/or financial results are included in Breaker's reports on file with Canadian securities regulatory authorities. The forward-looking statements contained in this press release are made as of the date hereof and Breaker undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boe/d means barrel of oil per day.
In this press release: (i) mmboe means million boe; (ii) boe/d means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic feet; (v) mmcf means million cubic feet; (vi) mcf/d means thousand cubic feet per day; and (vii) mmcf/d means million cubic feet per day.
The TSX does not accept responsibility for the adequacy or accuracy of
this release.
%SEDAR: 00021180E