Insignia Energy Announces its 2011 Year End Crude Oil and Natural Gas Reserves

CALGARY, Feb. 15, 2012 /CNW/ - Insignia Energy Ltd. ("ISN" - TSX) ("Insignia" or the "Company") is pleased to announce the results of its independent reserve evaluation, effective December 31, 2011, of the Company's reserves by GLJ Petroleum Consultants Ltd. ("GLJ").

2011 YEAR-END RESERVE HIGHLIGHTS

  • In 2011, Insignia spent $27 million (unaudited), which represented approximately 1.1 times estimated 2011 cash flow, of which approximately 95 per cent was directed towards drilling, completions and facilities;
  • Proved reserves increased by 20 per cent to 7.4 mmboe;
  • Proved plus probable reserves increased by 5 per cent to 15.4 mmboe;
  • Based on field estimates, Insignia's production averaged approximately 3,500 boe per day and 3,350 boe per day for the fourth quarter and full year 2011, respectively, which equates to an annual average production growth of 15 per cent;
  • Insignia replaced 202 per cent of 2011 average production on a proved reserve basis adding 2.4 mmboe of proved reserves and replaced 162 per cent of 2011 average production on a proved plus probable basis adding 1.9 mmboe of proved plus probable reserves;
  • Finding & Development ("F&D") costs for 2011 were $15.62/boe proved reserves and $8.08/boe proved plus probable reserves including change in future development costs;
  • Achieved a recycle ratio of 3.0 based on an estimated 2011 average operating netback of $23.91/boe and the F&D of $8.08/boe for proved plus probable reserves; and,
  • Based on fourth quarter 2011 average production of approximately 3,500 boe per day, Insignia's reserve life index (RLI) is 5.8 years on a proved basis and 12.0 years on proved plus probable basis.

NET ASSET VALUE ("NAV")(a)

The net present value of the future net revenue attributable to the Company's proved plus probable reserves (before tax and discounted at 10%) was $129.1 million resulting in a net asset value per share of $2.42 per fully diluted common share.

     
 
$Millions, except per share amounts
 
 
December 31, 2011 NAV
GLJ Price Forecast (2012-01)
Proved plus Probable Reserves Discounted at 10% (Before Tax) (b)   129.1
Undeveloped Lands (c)   28.1
Net Debt (Unaudited) (a)   (9.7)
Proceeds from Dilutive Stock Options to NAV   6.7
Net Asset Value   154.2
Shares Outstanding (000's) (d)   63,700
NAV/Share   $2.42

(a) Financial information is based on management prepared financial statements for the year ended December 31, 2011 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) or "net" 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, 2011.  Insignia had a total of 130,595 net undeveloped acres at year end 2011.
(d) Represents total common shares outstanding (basic-58,962,109) plus the dilutive stock options (December 31, 2011- 4,737,500).

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 proved reserves increased by 20 per cent to 7.4 MMboe and total proved plus probable reserves increased by 5 per cent in 2011 to 15.4 MMboe.

Summary of Oil and Gas Reserves as of December 31, 2011

    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   634   546   57   53   15,266   14,380   284   219   3,520   3,215
  Developed Non-Producing   8   7   1   1   2,457   2,208   64   49   483   425
  Undeveloped   194   174   0   0   17,399   15,812   288   222   3,382   3,031
TOTAL PROVED   836   727   58   54   35,122   32,400   637   490   7,384   6,671
PROBABLE   505   424   49   39   40,760   35,857   654   472   8,001   6,911
TOTAL PROVED PLUS PROBABLE   1,340   1,151   107   93   75,882   68,256   1,291   962   15,385   13,582

Net Present Values of Future Net Revenue
As of December 31, 2011, 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   86,033   70,994   61,015   53,895   48,548   86,033   70,994   61,015   53,895   48,548
  Non-Producing   10,067   7,972   6,578   5,596   4,872   10,067   7,972   6,578   5,596   4,872
  Undeveloped   32,840   18,680   9,920   4,248   445   32,840   18,680   9,920   4,248   445
TOTAL PROVED   128,939   97,646   77,512   63,739   53,864   128,939   97,646   77,512   63,739   53,864
TOTAL PROBABLE   132,897   79,680   51,553   35,227   25,089   129,644   78,456   51,063   35,020   24,997
TOTAL PROVED PLUS PROBABLE   261,837   177,326   129,065   98,966   78,954   258,583   176,102   128,574   98,759   78,862
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.
(4) The after-tax net present value of the Insignia's oil and gas properties reflects the tax burden on the properties on a stand-alone basis.  It does not consider the corporate tax situation, or tax planning.  It does not provide an estimate of the value at the level of the corporation, which may be significantly different.  Insignia's financial statements and the management's discussion and analysis should be consulted for information at the level of the corporation.

Summary of Pricing and Inflation Rate Assumptions
Forecast Prices and Costs, GLJ Forecast Effective January 1, 2012
                             
    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                            
2012   97.00   97.96   3.49   107.76   76.41   2.0   0.980
2013   100.00   101.02   4.13   108.09   78.80   2.0   0.980
2014   100.00   101.02   4.59   105.06   78.80   2.0   0.980
2015   100.00   101.02   5.05   105.06   78.80   2.0   0.980
2016   100.00   101.02   5.51   105.06   78.80   2.0   0.980
2017   100.00   101.02   5.97   105.06   78.80   2.0   0.980
2018   101.35   102.40   6.21   106.49   79.87   2.0   0.980
2019   103.38   104.47   6.33   108.65   81.49   2.0   0.980
2020   105.45   106.58   6.46   110.84   83.13   2.0   0.980
2021   107.56   108.73   6.58   113.08   84.81   2.0   0.980
2022+ 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, 2010   1,030   614   1,644   43   54   97   27,377   43,007   70,384
  Discoveries   0   0   0   0   0   0   0   0   0
  Extensions   82   32   114   7   (7)   0   11,777   (3,436)   8,342
  Infill Drilling   0   0   0   0   0   0   0   0   0
  Improved Recovery   0   0   0   0   0   0   790   443   1,233
  Technical Revisions   (77)   (141)   (218)   53   3   55   1,545   1,829   3,374
  Acquisitions   0   0   0   0   0   0   0   0   0
  Dispositions   0   0   0   0   0   0   0   0   0
  Economic Factors   0   (1)   (1)   0   0   0   (1,148)   (1,084)   (2,232)
  Production   (199)   0   (199)   (45)   0   (45)   (5,219)   0   (5,219)
December 31, 2011   836   505   1,340   58   49   107   35,122   40,760   75,882

    NATURAL GAS LIQUIDS   BOE
FACTORS   Proved
(Mbbl)
  Probable
(Mbbl)
  Proved
Plus
Probable
(Mbbl)
  Proved
(Mboe)
  Probable
(Mboe)
  Proved
Plus
Probable
(Mboe)
December 31, 2010   530   648   1,178   6,167   8,483   14,650
Discoveries   0   0   0   0   0   0
Extensions   181   28   209   2,233   (520)   1,713
Infill Drilling   0   0   0   0   0   0
Improved Recovery   46   26   71   177   100   277
Technical Revisions   (33)   (39)   (71)   199   129   328
Acquisitions   0   0   0   0   0   0
Dispositions   0   0   0   0   0   0
Economic Factors   (10)   (9)   (19)   (201)   (191)   (392)
Production   (77)   0   (77)   (1,191)   0   (1,191)
December 31, 2011   637   654   1,291   7,384   8,001   15,385

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

FINDING, DEVELOPMENT & ACQUISITION COSTS

In 2011 Insignia's capital program was dominated by the drilling of 14 (8.3 net) wells primarily 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 2011 Insignia spent $27.0 million on E&D of which $1.0 million was on land and seismic and $25.6 million on drilling, completions and equipping.

               
  2011 2010 Three Year Average
2009-2011
  Proved Proved
plus
Probable
Proved Proved
plus
Probable
Proved Proved
plus
Probable
Exploration and Development expenditures ($ thousands) (note 2) 26,992 26,992 31,383 31,383 70,506 70,506
Net Acquisitions/(Dispositions)  ($ thousands)  (note 2) - - (291) (291) 109,968 109,968
Change in future development capital  ($ thousands)            
  - Exploration and Development 10,632 (11,430) 12,692 23,834 23,054 7,073
  - Acquisitions/Dispositions - - - - 25,563 98,765
             
Reserves additions after revisions (Mboe)            
  - Exploration and Development 2,408 1,926 1,769 2,398 4,421 4,451
  - Acquisitions/Dispositions - - (10) (12) 4,917 11,843
  2,408 1,926 1,759 2,386 9,338 16,294
Finding, Development & Acquisition Costs ("FD&A") ($/boe)            
Including Change in Future Development Cost (note 1)            
  Exploration and development 15.62 8.08 24.91 23.02 21.16 17.43
  Acquisitions/Dispositions - - 28.14 23.58 27.57 17.62
  Total FD&A 15.62 8.08 24.89 23.02 24.53 17.57
Excluding Change in Future Development Cost            
  Exploration and development 11.21 14.01 17.74 13.09 15.95 15.84
  Acquisitions/Dispositions - - 28.14 23.58 22.37 9.29
  Total FD&A 11.21 14.01 17.68 13.03 19.33 11.08
             
Reserves Replacement Ratio 202% 162% 174% 236%      
Reserve Life Index based on fourth quarter average production (years) 5.8 12.0 5.1 12.2    

Notes:
1. Calculation includes reserve revisions and changes in future development costs. Insignia also calculates FD&A costs which incorporate both the costs and associated reserve additions related to acquisitions net of any dispositions during the year. 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. 2011 figures include information based on estimated unaudited financial results that may change on the completion of the audited financial statements.  The 2011 and 2010 Exploration and Development expenditures are presented in accordance with International Financial Reporting Standards and the 2009 Exploration and Development expenditures for the purposes of the three year average are presented in accordance with Canadian GAAP applicable at the time.

FUTURE DEVELPOPMENT COSTS USING FORECAST PRICES AND COSTS        
         
Year   Proved Future
Development Costs
  Proved plus Probable
Future Development Costs
    ($ thousands)   ($ thousands)
2012   17,350   18,400
2013   19,431   34,546
2014   10,659   25,856
2015   2,680   22,323
2016   -   4,898
2017 and subsequent   -   11,157
Undiscounted total   50,119   117,181
Discounted @ 10%/yr   43,703   93,345

On Insignia's current properties, management has identified in excess of 150 potential drilling locations which the Company may exploit.  In the 2011 year end reserve report of these 150 potential drilling locations, 14.5 net wells have been included in the proved reserves and 31.0 net wells have been included in the total proved plus probable reserves. Entering 2012, 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, 2011. 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 $28.1 million.

A summary of the Company's land holdings at December 31, 2011 is outlined below:

                         
    Developed   Undeveloped   Total
(acres)   Gross   Net   Gross   Net   Gross   Net
Alberta   87,658   58,487   117,190   90,925   204,848   149,412
British Columbia   4,201   963   23,071   7,687   27,272   8,650
Saskatchewan   20,622   20,211   32,428   31,983   53,050   52,194
Total   112,481   79,661   172,689   130,595   285,170   210,256

CAUTIONARY STATEMENTS

Unaudited financial information

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2011, such as exploration and development expenditures, cash flow, 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, 2011 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, 2011 (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 National Instrument 51-101 ("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 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, 2012.

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; and future oil and natural gas prices.

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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

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.

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