INSIGNIA ENERGY ANNOUNCES A 77% INCREASE TO ITS OIL AND NATURAL GAS LIQUID RESERVES

CALGARY, Feb. 8 /CNW/ - Insignia Energy Ltd. ("ISN" - TSX) ("Insignia" or the "Company") is pleased to announce the results of its independent reserve evaluation, effective December 31, 2010, of the Company's reserves by GLJ Petroleum Consultants Ltd. ("GLJ").

2010 YEAR-END RESERVE HIGHLIGHTS

  • Proved producing reserves increase by 34% to 3.9 MMboe, proved reserves increased by 14% to 6.2 MMboe and proved plus probable ("P+P") reserves increased by 10% to 14.7 MMboe, compared to 2009 year end levels, on a per share basis and on an absolute basis.
  • Insignia's reserve additions totaled 2.4 MMboe on P+P reserves and 1.8 MMboe on proved reserves.
  • The Company increased its oil and natural gas liquid reserves by 98% and 77% on total proved and total P+P reserves, respectively, compared to its 2009 year end reserves.
  • Based on fourth quarter 2010 average production of 3,289 boe per day, Insignia's reserve life index ("RLI") is 12.2 years on P+P basis and 5.1 years on a proved basis.

NET ASSET VALUE ("NAV")(a)

The net present value of the future net revenue attributable to the Company's P+P reserves (before tax and discounted at 10%) was $121.6 million resulting in a net asset value per share of $3.54 per fully diluted common share.

               
 
$Millions, except per share amounts
     
      December 31, 2010 NAV
GLJ Price Forecast (2011-01)
P+P Reserves Discounted at 10% (Before Tax) (b)             121.6
Undeveloped Lands (c)             25.9
Net Debt (Unaudited) (a)(d)             (35.8)
Proceeds from Dilutive Stock Options to NAV             3.8
Net Asset Value             115.5
Shares Outstanding (000's) (e)             32,643
NAV/Share             $3.54

(a)   Financial information is based on management prepared financial statements for the year ended December 31, 2010 which are in the process of being audited by Insignia's independent auditors and, accordingly, such financial information is subject to change based on the results of the audit. See "Cautionary Statements - Unaudited Financial Information" below.
(b)   Company's working interest (operating or non-operating) share after deduction of royalty obligations plus the Company's royalty interest in reserves.
(c)   Undeveloped land value is based on a management prepared internal estimate as at December 31, 2010.  Insignia had a total of 188,390 net undeveloped acres at year end 2010.
(d)   Net Debt excludes any future income tax asset. 
(e)   Represents total common shares outstanding (basic) plus the dilutive stock options (December 31, 2010-1,982,500).

RESERVES

See "Cautionary Statement - Information Regarding Disclosure on Oil and Gas Reserves and Operational Information" for explanations and discussions and "Cautionary Statement - Forward looking information and statements" for a statement of principal assumptions and risks that may apply.

The Company's total P+P reserves increased by 10% in 2010 to 14.7 MMboe, proved reserves increased by 14% to 6.2 MMboe and proved producing reserves increase by 34% to 3.9 MMboe. 

Summary of Oil and Gas Reserves as of December 31, 2010

  LIGHT AND
MEDIUM OIL
HEAVY OIL CONVENTIONAL
NATURAL GAS
NATURAL GAS
LIQUIDS
TOTAL OIL
EQUIVALENT
RESERVES CATEGORY Gross
(Mbbl)
Net
(Mbbl)
Gross
(Mbbl)
Net
(Mbbl)
Gross
(MMcf)
Net
(MMcf)
Gross
(Mbbl)
Net
(Mbbl)
Gross
(Mboe)
Net
(Mboe)
PROVED                    
Producing 430 370 35 30 18,410 17,279 326 243 3,859 3,523
Developed Non-Producing 8 7 8 8 697 585 17 12 149 124
Undeveloped 593 526 - - 8,271 7,592 187 145 2,158 1,937
TOTAL PROVED 1,030 903 43 38 27,377 25,456 530 400 6,167 5,584
PROBABLE 614 509 54 43 43,007 38,083 648 457 8,484 7,357
TOTAL PROVED PLUS PROBABLE 1,644 1,413 97 81 70,384 63,539 1,178 858 14,650 12,942

Net Present Values of Future Net Revenue
As of December 31, 2010, Forecast Prices and Costs

  BEFORE INCOME TAXES
DISCOUNTED AT
(%/year)
AFTER INCOME TAXES
DISCOUNTED AT
(%/year)
RESERVES CATEGORY 0%
(M$)
5%
(M$)
10%
(M$)
15%
(M$)
20%
(M$)
0%
(M$)
5%
(M$)
10%
(M$)
15%
(M$)
20%
(M$)
PROVED                    
    Producing 88,634 71,860 61,037 53,451 47,818 88,634 71,860 61,037 53,451 47,818
    Non-Producing 3,214 2,672 2,272 1,969 1,733 3,214 2,672 2,272 1,969 1,733
    Undeveloped 40,344 20,595 10,222 4,118 220 40,344 20,595 10,222 4,118 220
TOTAL PROVED 132,192 95,127 73,531 59,538 49,770 132,192 95,127 73,531 59,538 49,770
TOTAL PROBABLE 141,334 79,439 48,057 30,048 18,858 141,234 79,422 48,053 30,047 18,858
TOTAL PROVED PLUS PROBABLE 273,526 174,567 121,588 89,585 68,628 273,427 174,549 121,584 89,584 68,628

Notes:

(1)      Net present value of future net revenue may not represent fair market value.
(2)      Other Company revenue and costs not related to a specific production group have been allocated proportionately to the above noted production groups.
(3)      Estimated future abandonment and reclamation costs related to a property have been taken into account by GLJ in determining reserves that should be attributed to a property and, in determining the aggregate future net revenue therefrom, there was deducted the reasonable estimated future well abandonment costs.  No allowance was made, however, for reclamation of well sites or the abandonment and reclamation of any facilities or wells which have no reserves assigned.

Summary of Pricing and Inflation Rate Assumptions
Forecast Prices and Costs, GLJ Forecast Effective January 1, 2011

  OIL NATURAL GAS  
Year WTI at Cushing Oklahoma ($US/Bbl) Edmonton City Gate ($Cdn/Bbl) Natural Gas AECO Average Price ($Cdn/Mmbtu) Pentanes Plus Edmonton Par ($Cdn/Bbl) Butanes Edmonton Par ($Cdn/Bbl) Inflation Rates(1) %/Year Exchange Rate(2) ($US/$Cdn)
Forecast              
2011 88.00 86.22 4.16 90.54 67.26 2.0 0.980
2012 89.00 89.29 4.74 91.96 68.75 2.0 0.980
2013 90.00 90.92 5.31 92.74 70.01 2.0 0.980
2014 92.00 92.96 5.77 94.82 71.58 2.0 0.980
2015 95.17 96.19 6.22 98.12 74.07 2.0 0.980
2016 97.55 98.62 6.53 100.59 75.94 2.0 0.980
2017 100.26 101.39 6.76 103.42 78.07 2.0 0.980
2018 102.74 103.92 6.90 106.00 80.02 2.0 0.980
2019 105.45 106.68 7.06 108.82 82.15 2.0 0.980
2020 107.56 108.84 7.21 111.01 83.80 2.0 0.980
2021+ Escalated oil, gas and product prices at 2% per year thereafter

Notes:

(1)     Inflation rates for forecasting prices and costs.
(2)     Exchange rates used to generate the benchmark reference prices in this table.

Reconciliation of Gross Reserves By Principal Product Type
Forecast Prices and Costs

  LIGHT AND MEDIUM OIL HEAVY OIL CONVENTIONAL NATURAL GAS
FACTORS Proved
(Mbbl)
Probable
(Mbbl)
Proved
Plus
Probable
(Mbbl)
Proved
(Mbbl)
Probable
(Mbbl)
Proved
Plus
Probable
(Mbbl)
Proved
(MMcf)
Probable
(MMcf)
Proved
Plus
Probable
(MMcf)
December 31, 2009 331 199 530 26 9 35 27,676 42,074 69,749
Discoveries - - - - - - - - -
Extensions 765 462 1,227 21 37 59 2,117 1,266 3,382
Infill Drilling - - - - - - 3,150 3,600 6,750
Improved Recovery - - - - - - - - -
Technical Revisions 68 (46) 23 29 8 37 (361) (3,472) (3,833)
Acquisitions - - - - - - - - -
Dispositions - - - - - - (62) (12) (74)
Economic Factors (1) (2) (3) - - - (521) (448) (969)
Production (133) - (133) (33) - (33) (4,621) - (4,621)
December 31, 2010 1,030 614 1,644 43 54 97 27,377 43,007 70,384

  NATURAL GAS LIQUIDS BOE
FACTORS Proved
(Mbbl)
Probable
(Mbbl)
Proved
Plus
Probable
(Mbbl)
Proved
(Mboe)
Probable
(Mboe)
Proved
Plus
Probable
(Mboe)
December 31, 2009 452 636 1,087 5,421 7,856 13,277
Discoveries - - - - - -
Extensions 52 8 61 1,191 719 1,910
Infill Drilling 109 124 233 634 724 1,358
Improved Recovery - - - - - -
Technical Revisions (1) (118) (119) 36 (735) (699)
Acquisitions - - - - - -
Dispositions - - - (10) (2) (12)
Economic Factors (4) (2) (6) (92) (79) (171)
Production (77) - (77) (1,013) (0) (1,013)
December 31, 2010 530 648 1,178 6,167 8,483 14,650

Note:  Insignia has no unconventional reserves (Bitumen, Synthetic Crude Oil, Natural Gas from Coal, etc.).

FD&A COSTS

In 2010 Insignia's capital program was dominated by the drilling of 11 (7.9 net) wells (~80% of the program) in the Company's three core areas.  Exploration and Development Expenditures ("E&D") included opportunistic land purchases and low cost seismic purchases in a low natural gas price environment.  In 2010 Insignia spent $31.8 million on E&D of which $4.5 million was on land and seismic and $26.6 million on drilling, completions and equipping.

  2010 2009 Three Year Average 2008-2010
  Proved Proved plus Probable Proved Proved plus Probable Proved Proved plus Probable
Exploration and Development expenditures ($ thousands) (note 2) 31,821 31,821 12,131 12,131 49,817 49,817
Net Acquisitions/(Dispositions)  ($ thousands)  (note 2) (291) (291) 110,259 110,259 155,281 155,281
Change in future development capital  ($ thousands)            
   - Exploration and Development 12,692 23,834 (270) (5,331) 11,838 18,303
   - Acquisitions/Dispositions - - 25,563 98,756 26,915 108,574
                  
Reserves additions after revisions (Mboe)            
   - Exploration and Development 1,769 2,398 244 127 2,083 2,625
   - Acquisitions/Dispositions (10) (12) 4,927 11,855 5,574 13,202
       1,759 2,386 5,171 11,982 7,657 15,826
Finding, Development & Acquisition Costs ($/boe)
Including Change in Future Development Cost (note 1)
  Exploration and development 25.16 23.21 48.61 53.54 29.60 25.95
  Acquisitions/Dispositions 28.14 23.58 27.57 17.63 32.69 19.99
  Total F,D&A 25.14 23.20 28.56 18.01 31.85 20.98
Excluding Change in Future Development Cost
   Exploration and development 17.98 13.27 49.72 95.52 23.91 18.98
   Acquisitions/Dispositions 28.14 23.58 22.38 9.30 27.86 11.76
   Total F,D&A 17.92 13.21 23.67 10.21 26.78 12.96
             
Reserves Replacement Ratio 174% 236% 989% 2291%    
Reserve Life Index based on fourth quarter production (years) 5.1 12.2 6.6 16.2    

Notes:

  1. Calculation includes reserve revisions and changes in future development costs. Insignia also calculates finding, development and acquisition ("FD&A") costs which incorporate both the costs and associated reserve additions related to acquisitions net of any dispositions during the year. Since acquisitions can have a significant impact on Insignia's annual reserve replacement costs, the Company believes that FD&A costs provide a more meaningful portrayal of Insignia's cost structure.  The aggregate of the exploration and development costs incurred in the most recent financial year end 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 that year.
  2. 2010 figures include information based on estimated unaudited financial results that may change on the completion of the audited financial statements.

FDC USING FORECAST PRICES AND COSTS
Year Proved
Future Development
Costs
  Proved plus Probable
Future Development
Costs
  ($ thousands)   ($ thousands)
2011 22,990   27,186
2012 10,914   48,094
2013 4,994   30,946
2014 47   10,176
2015 541   4,475
2016 and subsequent -   7,729
Undiscounted total 39,487   128,611
Discounted @ 10%/yr 35,702   106,775

On Insignia's current properties, management has identified in excess of 150 drilling locations which the Company may exploit.  In the 2010 year end reserve report, 11 net wells have been included in the proved reserves and 33 net wells have been included in the P+P reserves. Entering 2011, the Company has a significant unbooked drilling inventory.

LAND HOLDINGS

The Company has completed an internal evaluation of the fair market value of the Company's undeveloped land holdings as at December 31, 2010. This evaluation was completed principally using industry activity levels, third party transactions and land acquisitions that occurred in proximity to Insignia's undeveloped lands during the past year. The Company has estimated the value of its net undeveloped acreage at $25.9 million.

A summary of the Company's land holdings at December 31, 2010 is outlined below:

             
  Developed Undeveloped Total
(acres) Gross Net Gross Net Gross Net
Alberta 87,698 57,373 154,310 128,497 242,008 185,870
Other 26,298 21,482 74,555 59,893 100,853 81,375
Total 113,996 78,855 228,865 188,390 342,861 267,245

CAUTIONARY STATEMENTS

Unaudited financial information

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2010, such as exploration and development expenditures, finding, development and acquisition costs, net debt, operating netback and net asset value, are based on estimated unaudited financial results for the quarter and year then ended, and are subject to the same limitations as discussed under "Forward- looking information and statements" set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2010 and changes could be material.

Information Regarding Disclosure on Oil and Gas Reserves and Operational Information

The reserves data set forth above is based upon an independent reserves assessment and evaluation prepared by GLJ with an effective date of December 31, 2010 (the "GLJ Report"). The presentation summarizes the Company's crude oil, natural gas liquids and natural gas reserves and the net present values before income tax of future net revenue for the Company's reserves using forecast prices and costs based on the GLJ Report. The GLJ Report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101.

All evaluations and reviews of future net cash flows are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables above represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.

The reserve data provided in this release only represents a summary of the disclosure required under National Instrument 51-101 ("NI 51-101").  Additional disclosure will be provided in the Company's Annual Information Form filed on www.sedar.com on or before March 31, 2011.

In relation to the disclosure of net asset value ("NAV"), the NAV table shows what is normally referred to as a "produce-out" NAV calculation under which the current value of the Company's reserves would be produced at forecast future prices and costs and do not necessarily represent a "going concern" value of the Company. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the future net revenues estimated by GLJ represent the fair market value of the reserves, nor should it be assumed that Insignia's internally estimated value of its undeveloped land holdings represent the fair market value of the lands.

Non-GAAP Measures Advisory

The above information includes non-GAAP measures not defined under generally accepted accounting principles ("GAAP"), including operating netback, recycle ratio, net cash and reserve life index. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Operating netback is calculated as revenue less royalties, operating expenses, transportation expenses and net of any realized gains or losses on financial contracts. Recycle ratio is calculated as operating netback divided by the capital cost of reserve replacement which is one of our indicators to ensure our capital programs are adding reserves at an economic cost. Reserve life index is calculated by dividing our reserves by our annualized fourth quarter production which is one of our indicators for quality of a reserve base.

Forward-looking information and statements

This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following: the volumes and estimated value of Insignia's oil and gas reserves; the life of Insignia's reserves; the volume and product mix of Insignia's oil and gas production; future oil and natural gas prices; future results from operations and operating metrics; future costs, expenses and royalty rates; future interest costs and the exchange rate between the $US and $CAD.

In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Insignia which have been used to develop such statements and information but which may prove to be incorrect. Although Insignia believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Insignia can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund Insignia's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Insignia operates; the timely receipt of any required regulatory approvals; the ability of Insignia to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Insignia has an interest in to operate the field in a safe, efficient and effective manner; the ability of Insignia to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Insignia to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Insignia operates; and the ability of Insignia to successfully market its oil and natural gas products.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Insignia's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Insignia or by third party operators of Insignia's properties, increased debt levels or debt service requirements; inaccurate estimation of Insignia's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Insignia's public disclosure documents, (including, without limitation, those risks identified in this news release and Insignia's Annual Information Form).

The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Insignia does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

BOE equivalent

Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

ABOUT INSIGNIA

Insignia is a Calgary, Alberta based oil and gas exploration, development and production company whose shares are traded on The Toronto Stock Exchange under the trading symbol "ISN".

SOURCE Insignia Energy Ltd.

For further information:


Jeff Newcommon
President & CEO
(403) 536-8138
info@insigniaenergy.ca
Website: www.insigniaenergy.ca

Profil de l'entreprise

Insignia Energy Ltd.

Renseignements sur cet organisme


FORFAITS PERSONNALISÉS

Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .

ADHÉSION À CNW

Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.

RENSEIGNEZ-VOUS SUR LES SERVICES DE CNW

Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.