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Corporate Reserves

Significant Reserves Highlights for 2017

NuVista is pleased to announce another significant increase in our reserves value as a result of the 2017 year end independent evaluation of our reserves by GLJ Petroleum Consultants Ltd (“GLJ”) (the “GLJ Report”).  2017 saw significant increases to both Proved Developed Producing (“PDP”) and Total Proved plus Probable (“TP+PA”) reserves. Although GLJ’s assumptions for future commodity prices are lower than year end 2016, the combination of our continued shift to a higher condensate proportion coupled with our access to alternative gas markets outside of Alberta has helped to maintain continued improvement in the reserves value per barrel, leading to material increases to the overall net present value of our reserves. In addition to the growth, a number of strategic accomplishments were delivered including a significant increase to Pipestone reserves, the first booking of undeveloped ERH locations at Gold Creek, and NuVista’s first ever bookings in the Lower Montney zone, at Bilbo. Significant highlights of the evaluation include:

  • Increased PDP reserves 43% from 37.9 to 54.1 MMBoe.  This represents the largest percentage increase in PDP reserves since we began the transition into the Montney.  TP+PA reserves increased 35% from 257 to 347 MMBoe;
  • Increased the respective net present values before tax discounted at 10% (“NPVBT10”) of our PDP and TP+PA reserves materially year over year from $388 million and $1,165 million to $530 million and $1,782 million.  This represented increases of 36% and 53% for the PDP and TP+PA NPVBT10 values, respectively, despite a reduction in the GLJ forecast pricing assumptions as compared to the prior year, particularly for natural gas;
  • Increased Pipestone undeveloped gross drilling location count from 8 to 36. This core area now represents approximately 15% and over 20% of the Company’s TP+PA reserves and NPVBT10, respectively;
  • Booked one PDP and four gross undeveloped drilling locations in the Lower Montney for total TP+PA reserves of 4.2 MMBoe.  This further strengthens our confidence in the future development potential of this emerging horizon and corroborates our belief that the zone is indeed condensate rich in nature;
  • Achieved continued low PDP and TP+PA finding and development (“F&D”) costs in 2017 of $11.35/Boe and $6.95/Boe, respectively. The PDP and TP+PA recycle ratios based on fourth quarter 2017 funds from operations netback were 1.9x and 3.2x, respectively. Based on full year 2017 funds from operations netback the PDP and TP+PA recycle ratios were 1.6x and 2.6x, respectively;
  • Increased TP+PA Future Development Capital (“FDC”) versus 2016, from $1.6 billion to $2.0 billion as a result of the undeveloped reserve adds at Pipestone, Gold Creek, and the Lower Montney. This is accompanied by a continued decrease in the ratio of FDC to funds from operations to 10.0x from 12.9x at year end 2015 and 11.8x at year end 2016;
  • NuVista’s forecast future realized gas prices are impacted less than GLJ’s decrease in AECO gas forecast as NuVista’s firm gas sales market diversification agreements have been reflected in the GLJ Report, and;
  • Achieved positive PDP and TP+PA technical revisions of 7% and 6%, respectively, primarily based on production performance.

NuVista is pleased to note that our TP+PA reserve base has grown consistently over the past 5 years at a compounded annual growth rate of 64% to 347 MMBoe at year end 2017, illustrating the continued advancement of the inventory to underpin our growth strategy to 60,000 Boe/d and beyond. As the proportion of reserves attributed to the Montney has increased, so has the weighting to condensate which now forms 27% of the Company’s PDP reserves, up from 19% in 2015 and 25% last year.

Summary of Corporate Reserves Data

The following table provides summary reserve information based upon the GLJ Report using the published GLJ January 1, 2018 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 215,138 18,254 2 54,112
  Developed non-producing 26,903 2,350 24 6,857
  Undeveloped 437,149 36,854 0 109,712
Total proved 679,193 57,458 25 170,682
Probable 695,995 59,996 8 176,003
Total proved plus probable 1,375,188 117,454 34 346,685
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 2017 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, 2016 547,046 42,587 65 133,826
Exploration and development(2) 161,428 16,480 - 43,385
Technical revisions 28,946 4,411 (1) 9,234
Acquisitions - - - -
Dispositions (12,190) (566) (33) (2,630)
Economic Factors (6,549) (1,167) (2) (2,261)
Production (39,488) (4,286) (4) (10,871)
Balance, December 31, 2017 679,193 57,458 25 170,682
Total proved plus probable        
Balance, December 31, 2016 1,050,121 82,255 86 257,361
Exploration and development(2) 332,845 35,058 0 90,532
Technical revisions 52,536 5,818 0 14,574
Acquisitions 0 0 0 0
Dispositions (18,395) (928) (46) (4,040)
Economic Factors (2,431) (463) (2) (871)
Production (39,488) (4,286) (4) (10,871)
Balance, December 31, 2017 1,375,188 117,454 34 346,685
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
2018 173,900 233,828
2019 173,971 307,873
2020 355,028 382,029
2021 172,228 251,606
2022 176,935 267,535
Remaining - 569,147
Total (Undiscounted) 1,052,063 2,012,018

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

  3 Year-Average (1) 2017 (1) 2016 (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) $9.56 $6.40 $9.70 $6.95 $10.13 $8.39
NOTES:
(1) F&D costs are used as a measure of capital efficiency. The calculation for F&D costs includes all exploration and development capital for that period as outlined in the Company’s year end financial statements and unaudited estimated amount for 2017 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.

Total Proved F&D was $9.70/Boe in 2017, down from $10.13/Boe in 2016 and in-line with our three year average of $9.56/Boe. Total Proved plus Probable F&D was $6.95/Boe in 2017, down from $8.39/Boe in 2016 and marginally above the three year average of $6.40/Boe. The three year average Total Proved plus Probable F&D is marginally below 2017 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, 2017 and based on published GLJ future price forecast as at January 1, 2018 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 778,436 627,270 529,549 463,144 415,557
  Developed non-producing 126,190 92,125 72,607 60,256 51,799
  Undeveloped 1,112,436 611,997 349,014 199,444 108,352
Total proved 2,017,062 1,331,392 951,170 722,844 575,709
Probable 2,837,043 1,430,985 830,939 531,658 363,117
Total proved plus probable 4,854,104 2,762,377 1,782,109 1,254,503 938,826
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, 2018:

                  Pricing
 Year Forecast AECO
Gas
($Cdn/ MMBtu)
NYMEX
Gas
($US/ MMBtu)
Midwest
Gas at
Chicago
($US/ MMBtu)
Edmonton
C5+
($Cdn/Bbl)
Edmonton
Propane
($Cdn/Bbl)
Edmonton
Butane
($Cdn/Bbl)
WTI
Cushing
Oklahoma
($US/Bbl)
Edmonton
Par Price
40 API
($Cdn/Bbl)
Exchange
Rate(2)
($US/$Cdn)
2018 2.20 2.85 2.75 76.42 40.40 53.74 59.00 70.25 0.790
2019 2.54 3.00 2.90 74.68 36.53 49.18 59.00 70.25 0.790
2020 2.88 3.25 3.15 74.38 35.93 49.22 60.00 70.31 0.800
2021 3.24 3.50 3.40 77.16 36.06 50.99 63.00 72.84 0.810
2022 3.47 3.70 3.60 79.88 36.29 52.93 66.00 75.61 0.820
2023 3.58 3.86 3.76 82.53 37.59 54.82 69.00 78.31 0.830
2024 3.66 3.94 3.84 86.14 39.33 57.35 72.00 81.93 0.830
2025 3.73 4.02 3.92 89.76 41.06 59.88 75.00 85.54 0.830
2026 3.80 4.10 4.00 92.57 42.41 61.84 77.33 88.35 0.830
2027 3.88 4.18 4.08 94.43 43.30 63.15 78.88 90.22 0.830
2028+ +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr 0.830
NOTES:
(1)

Costs are inflated at 2% per annum.

(2)

Exchange rate used to generate the benchmark reference prices in this table.

(3)

NuVista’s future realized gas prices are forecasted based on a combination of various benchmark prices in addition to the AECO benchmark in order to reflect the favorable price diversification to other markets which NuVista has undertaken. Pricing at these markets has been accounted for in the GLJ Report. Additional information on NuVista’s gas marketing diversification will be available in our Q4 2017 MD&A as well as in our corporate presentation.

2500, 525 8th Ave SW
Calgary, Alberta T2P 1G1
Phone: (403) 538-8500
Fax: (403) 538-8505
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1-403-538-8500