Pearl Exploration and Production Ltd.



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  Jan 27, 2011 - 16:43 ET
BlackPearl Announces 2010 Year-End Reserves and Resource Estimates and Provides Operations Update

 

CALGARY, ALBERTA--(Marketwire - Jan. 27, 2011) - BlackPearl Resources Inc. ("BlackPearl" or the "Company") (TSX:PXX)(FIRST NORTH:PXXS) is pleased to announce the results of its 2010 year-end oil and gas reserves evaluation, contingent resource evaluation and to provide an operations update on the Company's current activities.

Highlights include:

  • Total proved and probable reserves of 24.8 million barrels of oil equivalent;
  • Reserve additions of 7.7 million barrels for the year, offset by 4 million barrels of property dispositions and production of 2.5 million barrels. Reserves are not yet recognized on the Blackrod property;
  • Over 98% of reserves are heavy oil;
  • 739 million barrels of contingent resources (best estimate) on our 3 core properties;
  • Q4 production of 7,308 boe/day; year-end production in excess of 8,000 boe/day.

Oil and Gas Reserves

The following tables summarize certain information contained in the independent reserves report prepared by Sproule Associates Unconventional Limited ("Sproule") as of December 31, 2010. The report was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR by March 31.

John Festival, President of BlackPearl, commenting on the new reserves evaluation indicated that "we had a good year adding to our proved and probable reserves in 2010; however, the bigger issue for BlackPearl was the recognition of contingent resource on our core areas of Blackrod, Onion Lake and Mooney. Our objective over the next few years is to get these barrels reclassified from the resource category to reserves. Our activities resulted in over 7.5 million barrels of reserve additions for the year, at a cost of about $15 per barrel. The sale of non-core properties reduced our reserves by 4 million barrels but the proceeds from these dispositions will be re-invested in our core areas."

Summary of Oil and Gas Reserves – Forecasted Prices and Costs
 
(Company interest, before royalties) Oil&NGL Reserves Natural Gas Reserves 2010 BOE (1) 2009 BOE (1)
  (Mbbls) (MMcf) (Mboe) (Mboe)
         
Proved developed producing 4,459 1,846 4,767 3,482
Proved developed non-producing 360 13 363 1,080
Proved undeveloped 6,527 310 6,578 7,013
Total proved 11,346 2,169 11,708 11,573
Probable 12,912 1,307 13,130 12,071
Total proved plus probable 24,258 3,476 24,838 23,645
Notes:
(1) BOE's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 Mcf: 1barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Net Present Value of Reserves – Forecasted Prices and Costs
 
  Net Present Values of Before Tax Future Net Revenue Discounted at
  0% 5% 8% 10% 12% 15% 20%
($000's)
Proved              
  Developed producing 173,864 163,756 158,387 155,058 151,909 147,495 140,858
  Developed non-producing 7,812 6,668 6,093 5,747 5,429 4,995 4,371
  Undeveloped 157,468 130,379 117,259 109,511 102,439 92,919 79,422
Total proved 339,145 300,803 281,739 270,317 259,778 245,409 224,652
Probable 397,635 278,904 234,469 211,170 191,516 167,172 136,221
Total proved plus probable 736,780 579,707 516,209 481,487 451,293 412,581 360,873
               
  Net Present Values of After Tax Future Net Revenue Discounted at
  0% 5% 8% 10% 12% 15% 20%
($000's)
Proved              
  Developed producing 173,864 163,756 158,387 155,058 151,909 147,495 140,858
  Developed non-producing 7,812 6,668 6,093 5,747 5,429 4,995 4,371
  Undeveloped 149,517 123,479 110,900 103,481 96,701 87,614 74,728
Total proved 331,194 293,903 275,380 264,286 254,037 240,104 219,958
Probable 306,959 213,017 177,803 159,357 143,887 124,629 100,351
Total proved plus probable 638,152 506,920 453,183 423,643 397,845 364,732 320,308
Notes:
Columns may not add due to rounding

Reconciliation of Changes in Reserves

The following table summarizes the changes in the Company's share of oil and natural gas reserves (before royalties) from December 31, 2009 to December 31, 2010.

  Oil & NGLs Natural gas BOE
  Proved Probable Total Proved Probable Total Total
  (Mbbls) (Mbbls) (Mbbls) (MMcf) (MMcf) (MMcf) (Mboe)
Balance, Dec 31, 2009 10,754 11,795 22,549 4,914 1,659 6,573 23,645
  Production (2,327) - (2,327) (1,261) - (1,261) (2,537)
  Extensions 3,242 1,624 4,866 36 10 46 4,874
  Technical revisions 1,841 42 1,883 773 407 1,181 2,080
  Improved recovery 128 31 159 - - - 159
  Acquisitions 154 253 407 43 15 58 417
  Dispositions (2,489) (944) (3,434) (2,327) (782) (3,110) (3,952)
  Economic factors 42 113 155 (8) (2) (10) 153
Balance, Dec 31, 2010 11,347 12,912 24,259 2,170 1,307 3,477 24,838

The pricing assumptions used in the Sproule evaluation are summarized below.

Pricing Assumptions – Forecast Prices and Costs
 
Year WTI
Cushing
40° API
Edmonton
Par Price
40° API
Western
Canadian
Select
20.5° API
Alberta
AECO-C
Spot
Inflation
rate
Exchange
rate
  (US$/bbl) (CDN$/bbl) (CDN$/bbl) (CDN$/MMBtu) (%/yr) (US$/Cdn$)
2011 88.40 93.08 80.04 4.04 1.5 .932
2012 89.14 93.85 80.71 4.66 1.5 .932
2013 88.77 93.43 78.48 4.99 1.5 .932
2014 88.88 93.54 76.70 6.58 1.5 .932
2015 90.22 94.95 77.86 6.69 1.5 .932
2016 91.57 96.38 79.03 6.80 1.5 .932
2017 92.94 97.84 80.23 6.91 1.5 .932
2018 94.34 99.32 81.44 7.02 1.5 .932
2019 95.75 100.81 82.67 7.14 1.5 .932
2020 97.19 102.34 83.92 7.26 1.5 .932
Escalation rate of 1.5% thereafter
Notes:
(1)   The pricing assumptions were provided by Sproule Associates Unconventional Limited
(2)   None of the Company's future production is subject to a fixed or contractually committed price.

On a net present value basis (10% discount, before tax), approximately 64% of the value of reserves were attributable to the Onion Lake area and 31% was attributable to the Mooney area. No reserves were assigned to the Blackrod project.

Definitions:

(a) "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.
(b) "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 plus probable reserves.
(c) "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(d) "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.
(e) "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(f) "Undeveloped" reserves are those reserves expected to be recovered from know accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.
(g) The Net Present Value (NPV) is based on Sproule Forecast Pricing and costs. The estimated NPV does not necessarily represent the fair market value of our reserves. There is no assurance that forecast prices and costs assumed in the Sproule evaluations will be attained, and variances could be material.

Contingent Resources

The following tables summarize certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2010. The reports were independently prepared in accordance with definitions, standards and procedures contained in the COGE Handbook.

It should not be assumed that the estimates of recovery, production, and net revenue presented in the tables below represent the fair market value of the Company's contingent resources. There is no assurance that the forecast prices and cost assumptions will be realized and variances could be material. The recovery and production estimates of the Company's contingent resources provided herein are only estimates and there is no guarantee that the estimated contingent resources will be recovered or produced. Actual contingent resources may be greater than or less than the estimates provided here. The contingencies which currently prevent the classification of these contingent resources as reserves consist of further delineation drilling, regulatory applications, preparation of firm development plans and corporate approvals to proceed with development. Once all regulatory and corporate approvals are received and any other contingencies are removed, the resources may then be reclassified as reserves. There is no certainty that it will be commercially viable for the Company to produce any portion of the contingent resources on any of its properties.

Summary of Best Estimate (P50) Contingent Resource – By Property (1)(3)
 
Project Gross(2)
Heavy Oil//
Bitumen
Net Present Values of Before Tax Future Net Revenue as of December 31, 2010
Contingent Resources – Best Estimate Discounted at
    0% 5% 8% 10% 12% 15% 20%
  (MMboe) ($million)
                 
Blackrod 619 14,882 5,041 2,854 2,011 1,447 912 453
Onion Lake 80 3,307 1,551 1,044 817 647 465 276
Mooney 40 998 474 325 257 205 148 87
Total 739 19,187 7,066 4,223 3,085 2,299 1,525 816
Project Gross(2)
Heavy Oil//
Bitumen
Net Present Values of After Tax Future Net Revenue as of December 31, 2010
Contingent Resources – Best Estimate Discounted at
    0% 5% 8% 10% 12% 15% 20%
  (MMboe) ($million)
                 
Blackrod 619 11,132 3,700 2,065 1,438 1,020 627 294
Onion Lake 80 2,414 1,117 742 574 449 314 173
Mooney 40 749 352 239 188 148 105 59
Total 739 14,295 5,169 3,046 2,200 1,617 1,046 526
Notes:
(1)   These volumes are arithmetic sums of multiple estimates of contingent resources, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class as explained.
(2)   Contingent Resources are defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as Contingent Resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage.
(3)   Best estimate (P50) is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.
(4)   The estimates of contingent resources (best estimate) and future net revenue for individual properties may not reflect the same confidence levels as estimates of contingent resources (best estimate) and future net revenues for all properties, due to the effects of aggregation.
(5)   "Gross" means the Company's working interest share in the contingent resources of bitumen and heavy oil before deducting royalties. The Company has a 100% working interest at Blackrod and Mooney, and a 87.5% working interest at Onion Lake.
(6)   The amounts included in these tables do not include the volume and value of BlackPearl's proved and probable reserves previously assigned by Sproule to these properties.

Operations Update

BlackPearl's Q4 2010 oil and gas sales volumes were 7,308 boe per day, which represents a 10% increase over Q3 2010 volumes and a 38% increase over Q4 sales in 2009. BlackPearl's production averaged 6,951 boe/day in 2010, a 32% increase over 2009.Our 2010 year-end exit production was in excess of 8,000 barrels per day. The increase in production is attributable to development drilling at Onion Lake, where we drilled 22 wells in the last half of the year. We continue to expect to reach production levels of 11,000 – 13,000 barrels of oil per day by the end of 2011; however, first quarter 2011 production will be impacted by the recent sale of the Salt Lake property, conversion of some of the wells at Mooney from producers to polymer injectors and potentially reduced shipments as a result of temporary pipeline restrictions introduced by pipeline operators.

We currently have one rig drilling development wells at Onion Lake and an additional rig at Blackrod drilling delineation wells to support our commercial development application expected to be filed in early 2012. We have a very active drilling program at Onion Lake planned for 2011 and we are planning to add one or two additional rigs in the near future to ensure we can complete the program as planned. Facility construction is continuing on the Blackrod SAGD pilot and the Mooney polymer flood project. Construction on both of these projects is expected to be completed in April.

Other

The Company is planning to release its 2010 year-end financial and operating results on February 28, 2011.

Forward-Looking Statements

Certain of the statements made and information contained herein is forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. Forward-looking statements are typically identified by such words as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "potential", "targeting", "intend", "could", "might", "should", "believe" or similar words suggesting future events or future performance. In addition, statements relating to "reserves" or "resources", "contingent resource" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resource described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this document contains forward-looking statements pertaining to, and which rely on assumptions as to, without limitation, the volumes and estimated value of BlackPearl's proved and probable reserves, the volumes and estimated value of BlackPearl's contingent resource of bitumen and heavy oil, forecasted production levels, future oil and gas prices, future taxes payable, capital expenditure programs and operating costs.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, there can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.

Forward-looking statements are based on the Company's current beliefs as well as assumptions made by, and information currently available to, the Company, including, without limitation, information and assumptions concerning anticipated financial performance, business prospects, strategies, regulatory developments, future commodity prices, future production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market oil and natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

The Corporation does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.

BlackPearl's Certified Advisor on First North is E. Öhman J:or Fondkommission AB.

Company Registration Number: 409596-1



FOR FURTHER INFORMATION PLEASE CONTACT:

BlackPearl Resources Inc.
John Festival
President and Chief Executive Officer
(403) 215-8313
john.festival@pxx.ca
or
BlackPearl Resources Inc.
Don Cook
Chief Financial Officer
(403) 215-8313
(403) 265-8324 (FAX)
don.cook@pxx.ca
www.blackpearlresources.ca
 
 

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