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Corporate Reserves

Significant Reserves Highlights for 2016

NuVista is pleased to announce a significant increase in our reserves value as a result of the 2016 year end independent evaluation of our reserves by GLJ Petroleum Consultants Ltd ("GLJ") (the "GLJ Report"). 2016 marked the completion of our transition to a pure-play condensate rich Montney company. Dispositions and continued Montney development have resulted in 99% of our reserves now being booked in the Montney. In 2016, we have been focused on converting undeveloped locations to producers in Bilbo and Elmworth. Gold Creek reserves were largely unchanged after a year of low activity, however we have commenced a very active drilling program in this area in 2017. At Pipestone, NuVista is just months away from spudding our first well, but industry has already been very active in the area providing positive proven results directly offsetting our acreage.

We have increased our condensate weighting, underpinning our improving net backs and exposure to a recovery in global oil prices despite a volatile natural gas market. The net present value ("NPV") of NuVista's reserves has increased materially while F&D cost performance has continued to improve significantly. For the year ended December 31, 2016 NuVista:

  • Increased Proved Developed Producing ("PDP") reserves 30% from 29.2 to 37.9 MMBoe excluding the 8.2 MMBoe effect of 2016 non-core dispositions. Total Proved plus Probable ("TP+PA") reserves increased from 229.1 to 257.4 MMBoe excluding the 23.7 MMBoe effect of 2016 dispositions. Net of dispositions, the PDP and TP+PA reserves increases were 1% and 2% respectively, however the respective NPV before tax discounted at 10% ("NPVBT10") values increased materially from $297 million and $1,058 million to $388 million and $1,165 million. These increases, net of divestitures, of 31% and 10% for PDP and TP+PA NPVBT10 values respectively were despite a reduction in the GLJ forecast pricing assumptions as compared to the prior year;
  • Replaced 2.0x production on a PDP basis excluding the effect of dispositions, or 4.1x on a TP+PA basis. Replacement of produced and divested volumes combined was 1.0x and 1.2x on a PDP and TP+PA basis, respectively;
  • Achieved record low PDP F&D costs in 2016 of $10.80/Boe, a 47% reduction versus 2015. TP+PA F&D was $8.39/Boe. The PDP recycle ratio based on fourth quarter 2016 funds from operations netback of $17.90/Boe was 1.7x, or 1.4x based on full year 2016 funds from operations netback. The corresponding recycle ratios for TP+PA reserves were 2.1x and 1.8x respectively;
  • Maintained TP+PA Future Development Capital ("FDC") flat versus 2015, at $1.6 billion. This is accompanied by a continued decrease in the ratio of FDC to funds from operations from 15.6x at year end 2014 to 12.9x for 2015 and 11.8x for 2016;
  • Booked eight TP+PA locations on our Pipestone block, for a total of 9.0 MMBoe. This underpins our confidence in the future development potential of the block and corroborates our belief that the block is condensate rich in nature; and
  • Achieved positive PDP technical revisions of 5% based on production performance.

NuVista is pleased to note that our Montney PDP and TP+PA reserves have grown at a compounded annual growth rate of 130% and 84% respectively over the past 5 years. As the proportion of reserves attributed to the Montney has increased, so has the weighting to condensate which now forms 25% of the Company's reserves, up from 19% in 2015.

Summary of Corporate Reserves Data

The following table provides summary reserve information based upon the GLJ Report using the published GLJ January 1, 2017 price forecast:

  Natural Gas(2) Natural Gas
Liquids
Oil(3) Total
 Reserves category(1) Company Gross Interest (MMcf) Company Gross Interest (MBbls) Company Gross Interest (MBbls) Company Gross Interest (MBoe)
Proved        
  Developed producing 155,230 12,000 7 37,878
  Developed non-producing 32,594 2,551 28 8,011
  Undeveloped 359,222 28,036 29 87,936
Total proved 547,047 42,587 65 133,826
Probable 503,075 39,668 21 123,535
Total proved plus probable 1,050,121 82,255 86 257,361
NOTES:
(1) Numbers may not add due to rounding.
(2) Includes conventional natural gas and shale gas and coal bed methane.
(3) Includes light, medium crude oil.

The following table is a summary reconciliation of the 2016 year end working interest reserves with the working interest reserves reported in the 2016 year end reserves report:

 
Natural Gas(1)(3)
(MMcf)

Liquids(1)
(MBbls)

Oil(1)(4)
(MBbls)
Total Oil
Equivalent(1)
(MBoe)
Total proved        
Balance, December 31, 2015 491,521 35,901 72 117,894
Exploration and development(2) 137,859 11,576 - 34,552
Technical revisions 3,229 1,576 - 2,114
Acquisitions 3,375 247 - 810
Dispositions (47,261) (3,403) (5) (11,285)
Economic Factors (6,222) (221) - (1,258)
Production (35,456) (3,089) (3) (9,001)
Balance, December 31, 2016 547,046 42,587 65 133,826
Total proved plus probable        
Balance, December 31, 2015 1,052,372 77,196 135 252,727
Exploration and development(2) 138,076 12,868 0 35,880
Technical revisions (4,454) 2,647 (0) 1,905
Acquisitions 5,430 396 0 1,301
Dispositions (96,894) (7,422) (27) (23,598)
Economic Factors (8,953) (342) (19) (1,853)
Production (35,456) (3,089) (3) (9,001)
Balance, December 31, 2016 1,050,121 82,255 86 257,361
NOTES:
(1) Numbers may not add due to rounding.
(2) Reserve additions for drilling extensions, infill drilling and improved recovery.
(3) Includes conventional natural gas, shale gas and coal bed methane.
(4) Includes light, medium crude oil.

The following table summarizes the future development capital included in the GLJ Report:


($ thousands, undiscounted)

Proved
Proved plus
probable
2017 122,210 184,130
2018 163,422 285,479
2019 252,068 354,543
2020 165,115 286,985
2021 192,126 290,325
Remaining - 222,742
Total (Undiscounted) 894,942 1,624,203

The following table outlines NuVista's corporate finding and development costs in more detail:

  3 Year-Average (1) 2016 (1) 2015 (1)
  Proved  Proved plus probable Proved  Proved plus probable Proved  Proved plus probable
After reserve revisions and including changes in future development capital            
Finding and development costs ($/Boe) $11.48 $8.42 $10.13 $8.39 $8.11 $3.69
NOTES:
(1) F&D costs are used as a measure of capital efficiency. The calculation for finding and development costs includes all exploration and development capital for that period (as outlined in the Company's year end financial statements) plus the change in future development capital for that period. This total capital including the change in the future development capital is then divided by the change in reserves for that period including revisions for that same period. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during the year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for the year.

As noted earlier in the highlights, PDP F&D results have improved dramatically over prior years, reaching a record low PDP F&D of $10.80/Boe in 2016 with a corresponding PDP full year recycle ratio of 1.4x. The corresponding recycle ratios for Total Proved and TP+PA reserves were 1.5x and 1.8x respectively. Total Proved and TP+PA F&D costs were favorable in 2016 notwithstanding the increase from 2015. This increase in 2016 is merely due to the anomalously low numbers achieved in 2015 due to a large one-time reduction in FDC due to cost efficiency gains.

Summary of Corporate Net Present Value Data

The estimated net present values of future net revenue before income taxes associated with NuVista's reserves effective December 31, 2016 and based on published GLJ future price forecast as at January 1, 2017 as set forth below are summarized in the following table:

The estimated future net revenue contained in the following table does not necessarily represent the fair market value of the reserves. There is no assurance that the forecast price and cost assumptions contained in the GLJ Report will be attained and variations could be material. The recovery and reserve estimates described herein are estimates only. Actual reserves may be greater or less than those calculated.

  Before Income Taxes
Discount Factor (%/year)
Reserves category (1) ($ thousands) 0% 5% 10% 15% 20%
Proved          
  Developed producing 562,763 457,909 387,982 339,283 303,763
  Developed non-producing 129,157 98,193 79,385 67,185 58,734
  Undeveloped 746,885 396,404 207,449 99,762 35,198
Total proved 1,438,805 952,506 674,815 506,231 397,695
Probable 1,728,286 870,318 489,750 298,124 190,867
Total proved plus probable 3,167,092 1,822,825 1,164,566 804,354 588,562
NOTES:
(1) Numbers may not add due to rounding.

The following table is a summary of pricing and inflation rate assumptions based on published GLJ forecast prices and costs as at January 1, 2017:

  Natural Gas Liquids Oil    
Year Forecast AECO Gas Price ($Cdn/ Mmbtu) Edmonton Condensate ($Cdn/Bbl) Edmonton Propane ($Cdn/Bbl) Edmonton Butane ($Cdn/Bbl) WTI Cushing Oklahoma ($US/Bbl) Edmonton Par Price 40 API ($Cdn/Bbl) Inflation Rates %
/ Year(1)
Exchange Rate(2) ($US/$Cdn)
2017 3.46 72.11 28.43 49.92 55.00 69.33 2.0 0.750
2018 3.10 74.79 26.74 54.19 59.00 72.26 2.0 0.775
2019 3.27 78.75 26.25 56.25 64.00 75.00 2.0 0.800
2020 3.49 79.80 26.73 57.27 67.00 76.36 2.0 0.825
2021 3.67 82.37 27.59 59.12 71.00 78.82 2.0 0.850
2022 3.86 86.06 28.82 61.76 74.00 82.35 2.0 0.850
2023 4.05 89.32 30.06 64.41 77.00 85.88 2.0 0.850
2024 4.16 92.99 31.29 67.06 80.00 89.41 2.0 0.850
2025 4.24 97.59 32.53 69.71 83.00 92.94 2.0 0.850
2026 4.32 99.91 33.46 71.71 86.05 95.61 2.0 0.850
2026+ +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr 2.0 0.850
NOTES:
(1) Inflation rate for costs.
(2) Exchange rate used to generate the benchmark reference prices in this table.
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