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PERPETUAL ENERGY INC. UPDATES 2010 YEAR-END RESERVES FOR MONTNEY AT ELMWORTH, RESTATES YEAR-END 2010 RESERVES AND ANNOUNCES ASS

^{Published on 2011-02-23 21:00:40 - Market Wire}
 

 - In 2010, Perpetual added 72.1 Bcfe (12.0 MMboe) of proved and probable reserves, replacing 129% of its production (111% on a total proved basis). - After dispositions of 53.1 Bcfe (8.9 MMboe) and production of 55.9 Bcfe (9.3 MMboe) in 2010, proved and probable reserves increased three percent from 471.6 Bcfe (78.6 MMboe) at year-end 2009 to 487.7 Bcfe (81.3 MMboe) and proved reserves increased two percent to 250.4 Bcfe (41.7 MMboe) at year-end 2010. - Excluding downward revisions related solely to changes in natural gas pricing at year-end 2010 of 22.3 Bcfe (3.7 MMboe), Perpetual's reserves grew eight percent year over year from 471.6 Bcfe (78.6 MMboe) to 510.0 Bcfe (85.0 MMboe), offsetting production of 55.9 Bcfe (9.3 MMboe) and net dispositions of 9.8 Bcfe (1.6 MMboe), which included the disposition of 34.2 Bcf (5.7 MMboe) of probable shut-in gas over bitumen reserves where the effective cash flow through the Government of Alberta's financial solution was retained by Perpetual. - Reserve additions which offset production and dispositions were a result of total net capital spending of $163.2 million, including investment of $114.1 million in exploration and development capital spending programs excluding spending for the development of Perpetual's gas storage asset at Warwick ("Warwick Gas Storage"), as well as various asset acquisitions in the Edson and Birchwavy areas during the year. - Including changes in future development capital ("FDC"), Perpetual realized finding and development costs ("F&D") of $1.67 per Mcfe ($10.02 per BOE) on a proved and probable reserve basis in 2010. This results in a recycle ratio of 3.0 based on a 2010 estimated cash flow netback of $4.94 per Mcfe, which includes cash flow as a result of natural gas hedging gains, and 1.3 based on an estimated 2010 average cash flow netback of $2.24 per Mcfe, excluding natural gas hedges. Excluding changes in FDC, F&D in 2010 was $1.39 per Mcfe ($8.34 per BOE). - Perpetual's realized finding, development and acquisition costs ("FD&A"), including changes in FDC, was $2.15 per Mcfe ($12.90 per BOE) on a proved and probable basis. FD&A costs were significantly impacted by relatively low disposition metrics on a reserve basis associated with the sale of probable shut-in gas over bitumen reserves without the related effective funds flow from future royalty reductions in the Legend, Liege and Surmont areas of 34.2 Bcf (5.7 MMboe) for net proceeds of $39.8 million. Perpetual retained the effective funds flow for these shut-in gas over bitumen reserves making the asset sales incomparable to other transactions, therefore the proceeds and reserves associated from these dispositions have been removed for purposes of the FD&A calculation. Excluding changes in FDC, FD&A in 2010 was $1.93 per Mcfe ($11.58 per BOE). - In addition to their year-end reserve assessment, McDaniel prepared an independent contingent resource assessment report (the "Contingent Resource Report") for the Montney formation in the Elmworth area. Giving consideration to the assignment of reserves in seven sections in the Elmworth area by GLJ, the McDaniel contingent resource report has been adjusted to reflect the assignment of reserves to seven of the 42 sections of land assigned contingent resource by McDaniel. The adjusted report assigns gross original gas in place ("OGIP") on 35 sections of company interest lands of 809.4 Bcf plus associated NGLs. Assuming a range in recovery factors from 20 to 50 percent, gross recoverable sales gas is estimated from a low of 137.6 Bcf with 4.9 MMbbls of NGLs (166.7 Bcfe, 27.8 MMboe) to a high of 344.0 Bcf with 20.2 MMbbls NGLs (465.4 Bcfe, 77.6 MMboe), with McDaniel's best estimate at 35 percent recovery factor translating to 240.8 Bcf with 11.3 MMbbls NGLs (308.8 Bcfe, 51.5 MMboe). On a working interest basis, the best estimate recoverable contingent resource is estimated at 145.0 Bcfe (24.2 MMboe). Perpetual has an additional 34 gross sections in the Elmworth area which have not yet been evaluated through drilling in the Montney formation and therefore have no contingent resource or reserves assigned as yet. - Perpetual's reserve to production ratio ("reserve life index" or "RLI") is 8.7 years on a proved and probable reserves basis (4.9 years on a proved reserves basis) at year-end 2010. - Perpetual's reserve-based net asset value ("NAV") at year-end 2010 is estimated at $5.24 per Share discounted at eight percent. 

 Reserves at December 31, 2010 ------------------------------------------------------------------------- Natural Light and Natural Gas Company Interest Medium Heavy Natural Gas Equiv- (Working plus Crude Oil Oil Gas Liquids alent Royalty Interest) (Mbbl) (Mbbl) (MMcf) (Mbbl) (MMcfe) ------------------------------------------------------------------------- Proved Producing 625 338 187,223 1,397 201,380 Proved Non-Producing - - 20,786 141 21,633 Proved Undeveloped 92 128 22,990 513 27,390 ------------------------------------------------------------------------- Total Proved 716 466 230,999 2,051 250,402 ------------------------------------------------------------------------- Probable Producing 207 161 62,515 510 67,776 Probable Non-Producing excl GOB - 103 32,206 262 34,396 Probable Undeveloped 46 86 103,309 644 107,961 Probable Shut-in Gas over Bitumen - - 27,196 - 27,196 ------------------------------------------------------------------------- Total Probable 253 349 225,225 1,415 237,329 ------------------------------------------------------------------------- Total Proved and Probable 969 816 456,224 3,467 487,731 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Company Interest (Working Interest + Royalty Interest) ------------------------------------------------------------------------- Proved Natural Gas Equivalent (MMcfe) Proved Probable and Probable ------------------------------------------------------------------------- Opening Balance December 31, 2009 244,372 227,204 471,576 Discoveries and Extensions 42,934 33,849 76,783 Technical Revisions 31,744 -4,332 27,442 Acquisitions, net of Dispositions 11,243 -21,096 -9,853 Production -55,933 0 -55,933 Economic Factors -23,987 1,704 -22,283 ------------------------------------------------------------------------- Closing Balance December 31, 2010 250,402 237,329 487,731 ------------------------------------------------------------------------- 

 McDaniel January 1, 2011 Price Forecast ------------------------------------------------------------------------- West Texas Edmonton Intermediate Light Natural Foreign Crude Oil Crude Oil Gas at AECO Exchange Year ($US/Bbl) ($Cdn/Bbl) ($Cdn/MMBtu) ($US/$Cdn) ------------------------------------------------------------------------- 2011 85.00 84.20 4.25 0.975 2012 87.70 88.40 4.90 0.975 2013 90.50 91.80 5.40 0.975 2014 93.40 94.80 5.90 0.975 2015 96.30 97.70 6.35 0.975 2016 99.40 100.90 6.75 0.975 2017 101.40 102.90 7.10 0.975 2018 103.40 104.90 7.40 0.975 2019 105.40 107.00 7.60 0.975 2020 107.60 109.20 7.75 0.975 2021 109.70 111.30 7.85 0.975 2022 111.90 113.60 8.05 0.975 2023 114.10 115.80 8.20 0.975 2024 116.40 118.10 8.40 0.975 Escalate thereafter at 2% 2% 2% 0.975 ------------------------------------------------------------------------- 

 GLJ January 1, 2011 Price Forecast ------------------------------------------------------------------------- West Texas Edmonton Intermediate Light Natural Foreign Crude Oil Crude Oil Gas at AECO Exchange Year ($US/Bbl) ($Cdn/Bbl) ($Cdn/MMBtu) ($US/$Cdn) ------------------------------------------------------------------------- 2011 88.00 86.22 4.16 0.98 2012 89.00 89.29 4.74 0.98 2013 90.00 90.92 5.31 0.98 2014 92.00 92.96 5.77 0.98 2015 95.17 96.19 6.22 0.98 2016 97.55 98.62 6.53 0.98 2017 100.26 101.39 6.76 0.98 2018 102.74 103.92 6.90 0.98 2019 105.45 106.68 7.06 0.98 2020 107.56 108.84 7.21 0.98 Escalate thereafter at 2% 2% 2% 0.98 ------------------------------------------------------------------------- 

 Reserve Life Index(1) ------------------------------------------------------------------------- 2010 2009 2008 2007 2006 ------------------------------------------------------------------------- Total Proved 4.9 4.8 4.5 4.7 3.6 Proved and Probable 8.7 8.8 7.5 7.6 4.9 ------------------------------------------------------------------------- (1) Calculated as year-end reserves divided by year one production estimate from McDaniel and GLJ Reports. 

 NPV of Funds Flow Using McDaniel and GLJ January 1, 2011 Forecast Prices and Costs ------------------------------------------------------------------------- Discounted ($ thousands) Undiscounted 5% 10% at 15% ------------------------------------------------------------------------- Proved Producing $ 784,904 $ 630,014 $ 532,180 $ 463,874 Proved Non-Producing 99,657 44,398 26,402 19,055 Proved Undeveloped 57,236 36,027 23,183 14,679 ------------------------------------------------------------------------- Total Proved 941,797 710,439 581,765 497,608 ------------------------------------------------------------------------- Probable Producing 292,665 182,640 129,817 99,343 Probable Non-Producing excl GOB 125,062 85,908 65,021 51,664 Probable Undeveloped 254,815 148,438 98,563 67,743 Probable Shut-in Gas over Bitumen 105,907 73,644 52,952 39,142 ------------------------------------------------------------------------- Total Probable 758,555 490,630 346,353 257,892 ------------------------------------------------------------------------- Total Proved and Probable $1,700,352 $1,201,069 $928,116 $755,500 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Contingent Resource(1,4) ------------------------------------------------------------------------- Working Interest Recov- Recov- Recov- Raw Sales erable erable erable Original Recov- Recov- Natural Natural Natural Gas in erable erable Gas Gas Gas Place Gas(3) Gas Liquids Equivalent Equivalent (MMcf) (MMcf) (MMcf) (Mbbl) (MMcfe) (MMcfe) ------------------------------------------------------------------------- Low(2) 809,420 161,884 137,600 4,857 166,740 78,316 Best(2) 809,420 283,295 240,805 11,332 308,797 144,951 High(2) 809,420 404,715 344,000 20,236 465,413 218,484 ------------------------------------------------------------------------- (1) Contingent resources have been evaluated by McDaniel using the definitions is as defined in section five of the Canadian Oil and Gas Evaluators Handbook, Volume 1. All volumes are reported before the deduction of royalties payable to others. Contingent resource assignments are in addition to any reserve assignments associated with these assets. (2) A Low estimate (90% chance the ultimate recoverable resource will be equal or greater than the stated value), means higher certainty, a Best estimate (50% chance that the ultimate recoverable resource will be greater than or equal to the stated value) means most likely and a High estimate means lower than a 50% chance that the ultimate recoverable resource will be greater than or equal to the stated value (3) McDaniel has assigned recovery factors of 20% (Low), 35% (Best) and 50% (High) in their assessment of recoverable resource. (4) Contingent resources can be sub-classified into economic and uneconomic portions based on a number of assumptions on capital costs, timing, price forecast, etc. Currently sub-classification of these preliminary estimates has not been completed pending a discussion of the above parameters. 

 Pre-tax Net Asset Value at December 31, 2010(1) ------------------------------------------------------------------------- ($ millions Discounted except as noted) Undiscounted 5% 8% at 10% ------------------------------------------------------------------------- Total Proved and Probable Reserves(2) $ 1,700 $ 1,201 $ 1,021 $ 928 Fair Market Value of Undeveloped Land(3) 204 204 204 204 Market Value of TriOil Resources Ltd. Shares 6 6 6 6 Warwick Gas Storage(4) 65 65 65 65 Net Bank Debt (unaudited)(5) (206) (206) (206) (206) Convertible Debentures (unaudited) (235) (235) (235) (235) Estimate of Additional Future Abandonment and Reclamation Costs(6) (110) (63) (46) (38) Mark to McDaniel's cost of WGSI Forward Sale Obligation(7) (40) (34) (31) (29) ------------------------------------------------------------------------- Net Asset Value $ 1,385 $ 939 $ 778 $ 695 ------------------------------------------------------------------------- Shares Outstanding (million) - basic 148.3 148.3 148.3 148.3 ------------------------------------------------------------------------- Net Asset Value per Share ($/Share) $ 9.34 $ 6.33 $ 5.24 $ 4.68 ------------------------------------------------------------------------- (1) Financial information is per Perpetual's 2010 preliminary unaudited consolidated financial statements. (2) Reserve values per McDaniel and GLJ Reports as at December 31, 2010. (3) Third party estimate. (4) Book value recorded at cost as at December 31, 2010. (5) Includes $10 million held in escrow at year-end relating to the Warwick Gas Storage facility funding arrangement. (6) Amounts are net of salvage value and in addition to amounts in the McDaniel and GLJ reports for future well abandonment costs related to developed reserves. See "ABANDONMENT AND RECLAMATION COSTS". (7) Value of Perpetual's open hedging transactions related to the Warwick Gas Storage funding arrangement at year end 2010 assuming settlement against the McDaniel price forecast. 

 Fair Market Value of Undeveloped Land ------------------------------------------------------------------------- Total Area Acres Value ($) $/Acre ------------------------------------------------------------------------- North 1,000,197 $41,042,433 $41.03 South 405,289 59,761,578 147.45 West Central(1) 140,082 66,445,075 474.33 New Ventures 25,350 8,607,925 339.56 Heavy Oil 333,259 27,809,494 83.45 ------------------------------------------------------------------------- Totals 1,904,177 $203,666,505 $106.96 ------------------------------------------------------------------------- (1) Adjusted to reflect the Elmworth Montney reserve assignment by GLJ. 

 Abandonment and Reclamation Costs ------------------------------------------------------------------------- ($ millions Discounted net to perpetual) Undiscounted 5% 8% at 10% ------------------------------------------------------------------------- Well abandonment costs for developed reserves included in McDaniel and GLJ reports $ 56 $ 35 $ 28 $ 24 Well abandonment costs for undeveloped reserves included in McDaniel and GLJ reports 28 14 10 7 ------------------------------------------------------------------------- Well abandonment costs for Total Proved and Probable reserves included in McDaniel and GLJ reports 84 49 37 31 Estimate of other abandonment and reclamation costs not included in McDaniel and GLJ reports 231 136 103 86 ------------------------------------------------------------------------- Total estimated future abandonment and reclamation costs 315 186 140 117 Salvage value (148) (88) (66) (55) ------------------------------------------------------------------------- Abandonment and reclamation costs, net of salvage 167 98 74 62 Well abandonment costs for developed reserves included in McDaniel and GLJ reports(1) (56) (35) (28) (24) ------------------------------------------------------------------------- Estimate of additional future abandonment and reclamation costs, net of salvage(2) $ 110 $ 63 $ 46 $ 38 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Note the well abandonment costs for developed reserves included in the McDaniel and GLJ reports previously incorrectly included the total developed and undeveloped well abandonment costs included in those reports. (2) Future abandonment and reclamation costs not included in the McDaniel and GLJ reports, net of salvage value. 

 2010 FD&A Costs - Company Interest Reserves ------------------------------------------------------------------------- Proved Excluding Proved GOB Excluding Disposition & ($millions (unaudited), GOB Price except as noted) Proved Disposition(2,4) Revisions(2,4) ------------------------------------------------------------------------- F&D Costs, Excluding FDC Exploration and Development Capital Expenditures(1) $114.0 $114.0 $114.0 Reserve Additions Including Revisions - Bcfe 50.7 50.7 74.7 F&D - $/Mcfe(6) $2.25 $2.25 $1.53 F&D Costs, Including FDC Exploration and Development Capital Expenditures(1) $114.0 $114.0 $114.0 Total Change in FDC $(0.6) $(0.6) $(0.6) ------------------------------------------------------------------------- Total F&D Capital including Change in FDC $114.2 $114.2 $114.2 Reserve Additions Including Revisions - Bcfe 50.7 50.7 74.7 F&D Costs - $/Mcfe(6) $2.24 $2.24 $1.52 FD&A Costs, Excluding FDC Exploration and Development Capital Expenditures(1) $114.0 $114.0 $114.0 Net Acquisitions $51.3 $91.1 $91.1 ------------------------------------------------------------------------- FD&A Capital Including Net Acquisitions $165.3 $205.1 $205.1 Reserve Additions Including Net Acquisitions - Bcfe 62.0 62.0 85.9 FD&A Costs - $/Mcfe(6) $2.67 $3.31 $2.39 FD&A Costs, Including FDC FD&A Capital Including Net Acquisitions $165.3 $205.1 $205.1 Total Change in FDC $(0.6) $(0.6) $(0.6) ------------------------------------------------------------------------- Total FD&A Capital Including Change in FDC $165.5 $205.3 $205.3 Reserve Additions Including Net Acquisitions - Bcfe 62.0 62.0 85.9 FD&A Costs Including FDC - $/Mcfe(6) $2.66 $3.30 $2.38 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Proved and Probable Proved and Excluding Probable GOB Excluding Disposition & Proved & GOB Price Probable Disposition(2,3) Revisions(2,3,5) ------------------------------------------------------------------------- F&D Costs, Excluding FDC Exploration and Development Capital Expenditures(1) $114.0 $114.0 $114.0 Reserve Additions Including Revisions - Bcfe 81.9 81.9 104.2 F&D - $/Mcfe(6) $1.39 $1.39 $1.09 F&D Costs, Including FDC Exploration and Development Capital Expenditures(1) $114.0 $114.0 $114.0 Total Change in FDC $22.8 $22.8 $22.8 ------------------------------------------------------------------------- Total F&D Capital including Change in FDC $138.5 $138.5 $138.5 Reserve Additions Including Revisions - Bcfe 81.9 81.9 104.2 F&D Costs - $/Mcfe(6) $1.67 $1.67 $1.31 FD&A Costs, Excluding FDC Exploration and Development Capital Expenditures(1) $114.0 $114.0 $114.0 Net Acquisitions $51.3 $91.1 $91.1 ------------------------------------------------------------------------- FD&A Capital Including Net Acquisitions $165.3 $205.1 $205.1 Reserve Additions Including Net Acquisitions - Bcfe 72.1 106.3 128.6 FD&A Costs - $/Mcfe(6) $2.29 $1.93 $1.60 FD&A Costs, Including FDC FD&A Capital Including Net Acquisitions $165.3 $205.1 $205.1 Total Change in FDC $22.8 $22.8 $22.8 ------------------------------------------------------------------------- Total FD&A Capital Including Change in FDC $189.8 $229.6 $229.6 Reserve Additions Including Net Acquisitions - Bcfe 72.1 106.3 128.6 FD&A Costs Including FDC - $/Mcfe(6) $2.61 $2.15 $1.77 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) $57.7 MM of capital associated with the Warwick Gas Storage project has been excluded, includes $14.2 MM of undeveloped land purchases (2) Disposition proceeds totaling $39.8 MM associated with the Legend, Liege and Surmont dispositions have been added back into the net acquisition capital. (3) 34.2 Bcf (5.7 MMboe) of probable reserves associated with the Legend, Liege and Surmont dispositions have been added back into the net acquired reserves. (4) 24.0 Bcf (6.0 MMboe) of proved reserves associated with price related revisions have been added back into the total reserve additions and revisions. (5) 22.3 Bcf (5.7 MMboe) of proved and probable reserves associated with price related revisions have been added back into the total reserve additions and revisions. (6) "Mcfe" may be misleading, particularly if used in isolation. An Mcfe conversion ratio of 1 bbl: 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.