Insignia Energy announces its 2012 year end crude oil and natural gas reserves and first half 2013 capital budget

CALGARY, Feb. 7, 2013 /CNW/ - Insignia Energy Ltd. ("ISN" - TSX) ("Insignia" or the "Company") is pleased to announce the results of its independent reserve evaluation, effective December 31, 2012, of the Company's reserves by GLJ Petroleum Consultants Ltd. ("GLJ").

2012 YEAR-END RESERVE HIGHLIGHTS

  • Finding & Development ("F&D") costs for 2012 were $10.60/boe proved reserves and $8.07/boe proved plus probable reserves, including change in future development costs;
  • Finding, Development & Acquisition/Disposition ("FD&A") costs for 2012 were $4.40/boe proved reserves and $0.42/boe proved plus probable reserves, including change in future development costs;
  • Achieved a F&D recycle ratio of 2.1x based on an estimated 2012 average operating netback of $17.09/boe and the F&D of $8.07/boe for proved plus probable reserves and achieved a FD&A recycle ratio of 40.8x based on an estimated 2012 average operating netback of $17.09/boe and the FD&A cost of $0.42/boe for proved plus probable reserves;
  • Proved reserves decreased by 2.7 per cent to 7.2 mmboe and were essentially flat on a fully diluted per share basis;
  • Proved plus probable reserves decreased by 2.5 per cent to 15.0 mmboe and were essentially flat on a fully diluted per share basis;
  • Based on field estimates, Insignia's production averaged approximately 3,575 boe per day and 3,290 boe per day for the fourth quarter and full year 2012, respectively, which represented a 1.8 percent increase in fourth quarter 2012 production compared to the fourth quarter of 2011 production and a 3.8 percent increase on a fully diluted per share basis;
  • In 2012, Insignia spent $22.1 million (unaudited), which represented approximately 1.3 times estimated 2012 cash flow and, factoring in the $6.0 million of dispositions, represents a ratio of 1.0 times estimated 2012 cash flow; and,
  • Based on fourth quarter 2012 average production, Insignia's reserve life index is 5.5 years on a proved basis and 11.4 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 $110.6 million resulting in a net asset value per share of $1.98 per fully diluted common share.

   
    December 31, 2012 NAV
$Millions, except per share amounts   GLJ Price Forecast (2013-01)
Proved plus Probable Reserves  
  Discounted at 10% (Before Tax) (b)   $110.6
Undeveloped Lands (c)   18.0
Net Debt (Unaudited) (a)   (11.2)
Proceeds from Dilutive Stock Options to NAV   4.3
Net Asset Value   121.7
Shares Outstanding (fully diluted) (000's) (d)   61,464
NAV per Share   $1.98
(a)      Financial information is based on management prepared financial statements for the year ended December 31, 2012 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, 2012.  Insignia had a total of 118,366 net
undeveloped acres at year end 2012.
(d)      Represents total common shares outstanding as of December 31, 2012 (basic-57,858,909) plus the dilutive stock options (December 31, 2012-
3,218,000) and warrants (December 31, 2012 - 387,125).

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.

Summary of Oil and Gas Reserves as of December 31, 2012

  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 674   586   38   35   19,080   18,341   298   234   4,190   3,912
  Developed Non-Producing 8   7   -   -   778   670   17   12   155   131
  Undeveloped -   -   -   -   15,718   14,043   223   164   2,843   2,504
TOTAL PROVED 681   593   38   35   35,576   33,054   538   410   7,187   6,547
                                       
PROBABLE 395   339   31   25   40,493   35,813   644   455   7,819   6,788
TOTAL PROVED PLUS
PROBABLE
1,077   932   69   60   76,069   68,868   1,182   866   15,006   13,336

Net Present Values of Future Net Revenue
As of December 31, 2012, 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   93,793   74,962   63,000   54,733   48,669   93,793   74,962   63,000   54,733   48,669
  Non-Producing   2,425   1,921   1,552   1,274   1,061   2,425   1,921   1,552   1,274   1,061
  Undeveloped   20,040   10,519   4,716   1,034   (1,374)   20,040   10,519   4,716   1,034   (1,374)
TOTAL PROVED   116,258   87,402   69,267   57,041   48,356   116,258   87,402   69,267   57,041   48,356
                                         
TOTAL PROBABLE   113,351   65,669   41,284   27,383   18,831   113,351   65,669   41,284   27,383   18,831
                                         
TOTAL PROVED PLUS
PROBABLE
  229,609   153,071   110,551   84,424   67,187   229,609   153,071   110,551   84,424   67,187
   
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, the reasonable estimated future well
abandonment costs were deducted.  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, 2013

  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                              
2013   90.00     85.00     3.38     96.63     65.45     2.0       1.000  
2014   92.50     91.50     3.83     97.91     70.46     2.0       1.000  
2015   95.00     94.00     4.28     97.76     72.38     2.0       1.000  
2016   97.50     96.50     4.72     100.36     74.31     2.0       1.000  
2017   97.50     96.50     4.95     100.36     74.31     2.0       1.000  
2018   97.50     96.50     5.22     100.36     74.31     2.0       1.000  
2019   98.54     97.54     5.32     101.44     75.11     2.0       1.000  
2020   100.51     99.51     5.43     103.49     76.62     2.0       1.000  
2021   102.52     101.52     5.54     105.58     78.17     2.0       1.000  
2022   104.57     103.57     5.64     107.71     79.75     2.0       1.000  
2023+ 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, 2011   836     505     1,340     58     49     107     35,122     40,760       75,882  
    Discoveries   -     -     -     -     -     -     -     -       -  
    Extensions   -     39     39     -     -     -     1,925     4,079       6,004  
    Infill Drilling   -     -     -     -     -     -     -     -       -  
    Improved Recovery   -     -     -     -     -     -     155     53       208  
    Technical Revisions   137     (189)     (52)     5     (18)     (13)     5,867     755       6,623  
    Acquisitions   -     -     -     -     -     -     -     -       -  
    Dispositions   -     -     -     -     -     -     -     -       -  
    Economic Factors   (100)     41     (59)     -     -     -     (2,355)     (5,155)       (7,510)  
    Production   (192)     -     (192)     (25)     -     (25)     (5,138)     -       (5,138)  
December 31, 2012   681     395     1,077     38     31     69     35,576     40,493       76,069  

    NATURAL GAS LIQUIDS   BOE
FACTORS   Proved
(Mbbl)
  Probable
(Mbbl)
  Proved
Plus
Probable
(Mbbl)
  Proved
(Mboe)
  Probable
(Mboe)
  Proved
Plus
Probable
(Mboe)
                                       
December 31, 2011   637     654     1,291     7,384     8,001       15,385  
    Discoveries   -     -     -     -     -       -  
    Extensions   64     115     180     385     834       1,219  
    Infill Drilling   -     -     -     -     -       -  
    Improved Recovery   1     1     2     27     9       36  
    Technical Revisions   (25)     (110)     (135)     1,096     (191)       905  
    Acquisitions   -     -     -     -     -       -  
    Dispositions   -     -     -     -     -       -  
    Economic Factors   (54)     (16)     (70)     (547)     (834)       (1,381)  
    Production   (85)     -     (85)     (1,158)     -       (1,158)  
December 31, 2012   538     644     1,182     7,187     7,819       15,006  

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

FINDING, DEVELOPMENT & ACQUISITION COSTS

In 2012, Insignia's capital program was directed toward the drilling of four (3.5 net) wells and the completion of seven (5.5 net) wells in the Company's three core areas.  Exploration and Development Expenditures ("E&D") included opportunistic land purchases in a low natural gas price environment.  In 2012, Insignia spent $22.1 million on E&D of which $2.1 million was on land purchases and $18.9 million on drilling, completions and equipping.

       
  2012 2011 Three Year Average
2010-2012
  Proved Proved
plus
Probable
Proved Proved
plus
Probable
Proved Proved
plus
Probable
Exploration and Development expenditures ($ thousands) (note 2) 22,070 22,070 26,992 26,992 80,558 80,558
Net Acquisitions/(Dispositions)  ($ thousands)  (note 2) (5,962) (5,962) - - (6,230) (6,230)
Change in future development capital  ($ thousands)            
  - Exploration and Development (11,879) (15,782) 10,632 (11,430) 11,445 (3,378)
  - Acquisitions/Dispositions - - - - - -
                    
Reserves additions after revisions (Mboe)            
  - Exploration and Development 961 779 2,408 1,926 5,167 6,732
  - Acquisitions/Dispositions - - - - (10) (12)
       961 779 2,408 1,926 5,157 6,720
F&D and FD&A ($/boe)
 
Including Change in Future Development Cost (note 1)
   Exploration and development 10.60 8.07 15.62 8.08 17.80 11.46
   Dispositions - - - - 602.88 505.12
   Total FD&A 4.40 0.42 15.62 8.08 16.63 10.56
Excluding Change in Future Development Cost
   Exploration and development 22.97 28.33 11.21 14.01 15.59 11.97
   Dispositions - - - - 602.88 505.12
   Total FD&A 16.76 20.68 11.21 14.01 14.41 11.06
             
Operating Netback per boe (note 3) 17.09 17.09 23.91 23.91 19.49 19.49
Recycle Ratio - F&D (including FDC) (note 3) 1.6 2.1 1.5 3.0 1.1 1.3
Recycle Ratio - FD&A (including FDC) (note 3) 3.9 40.8 1.5 3.0 1.2 1.4
Reserves Replacement Ratio 83% 67% 202% 162% 153% 152%
Reserve Life Index based on fourth quarter average production (years) 5.5 11.4 5.8 12.0 - -

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. 2012 figures include information based on estimated unaudited financial results that may change on the completion of the audited financial
statements.  The 2012 and 2011 Exploration and Development expenditures are presented in accordance with International Financial Reporting
Standards and the 2010 Exploration and Development expenditures for the purposes of the three year average are presented in accordance with
Canadian GAAP applicable at the time.
  3. Recycle ratio is calculated as operating netback divided by F&D/FD&A costs.  Operating netback is calculated as revenue minus royalties,
operating expenses, transportation expenses and net of any realized gains or losses on financial contracts.

FUTURE DEVELOPMENT COSTS USING FORECAST PRICES AND COSTS

Year   Proved Future
Development Costs
  Proved plus Probable
Future Development Costs
    ($ thousands)   ($ thousands)
2013   5,400     12,404  
2014   13,056     20,883  
2015   17,635     23,000  
2016   2,149     20,562  
2017   0     24,544  
2018 and subsequent   0     6  
Undiscounted total   38,240     101,399  
Discounted @ 10%/yr   31,901     78,768  

On Insignia's current properties, management has identified in excess of 200 potential net drilling locations which the Company may exploit.  In the 2012 year end reserve report of these 200 potential net drilling locations, 9.0 net wells have been included in the proved reserves and 25.4 net wells (13% of the potential drilling locations) have been included in the total proved plus probable reserves. Entering 2013, 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, 2012. 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 $18 million ($152 per acre).

A summary of the Company's land holdings at December 31, 2012 is outlined below:

       
  Developed Undeveloped Total
(acres) Gross Net Gross Net Gross Net
Alberta 81,115 53,043 110,510 87,185 191,625 140,228
British Columbia 4,726 1,050 21,846 7,483 26,572 8,533
Saskatchewan 20,622 20,211 24,143 23,698 44,765 43,909
Total 106,463 74,304 156,499 118,366 262,962 192,670

FIRST HALF 2013 CAPITAL BUDGET
In the first half of 2013, the Board of Directors of Insignia have approved a capital budget of $7.5 million which is intended to be directed to the drilling, completion and tie-in of one (1.0 net) Mannville liquids rich natural gas well at Caroline and one (0.2 net) horizontal Cardium oil well at Pembina and one (1.0 net) recompletion of a vertical Montney well at Pouce Coupe.

NORMAL COURSE ISSUER BID ("NCIB")
On March 16, 2012 the Company had announced a NCIB to purchase the Company's common shares on the TSX.  As of December 31, 2012 the Company had purchased 1,103,200 common shares at an average price of $0.79 per common share for a total cost of $0.9 million.  As a result of the NCIB the Company had 57,858,909 common shares outstanding as of December 31, 2012.

CAUTIONARY STATEMENTS

Unaudited financial information

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2012, 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, 2012 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, 2012 (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 revenue 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, 2013.

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") applicable to public companies at the relevant time, which for certainty, for financial years beginning on or after January 1, 2011 is International Financial Reporting Standards applicable to public accountable enterprises, 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 F&D/FD&A costs 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: capital expenditures; 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 statements, 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 operating 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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