Cequence Energy Ltd. provides year end reserve update

CALGARY, March 4 /CNW/ - Cequence Energy Ltd. ("Cequence" or the "Company") (TSX: "CQE") is pleased to provide the following information on its oil and gas reserves as of December 31, 2009 as evaluated by the Company's independent reserve engineering firm, GLJ Petroleum Consultants Ltd. ("GLJ"). The evaluation of the Company's petroleum and natural gas reserves was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the terms used in this press release have the meanings ascribed in NI 51-101 and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserve definitions.

    
    For the year end December 31, 2009, Cequence's capital program achieved
the following results:

    -   Increased total proved plus probable reserves by 70 percent to
        12.8 mboe and proved reserves by 56 percent to 7.5 mboe;

    -   Replaced 2009 production of 594 mboe by 9.9 times with proved plus
        probable additions and by 5.6 times with proved additions;

    -   Increased the net present value of the Company's proved plus probable
        reserves by 34 percent to $157.7 million using a discount rate of
        10 percent;

    -   Achieved finding, development and acquisition costs including future
        development capital of $13.67 per proved plus probable boe. FD&A
        costs excluding future capital were $8.51 per boe on a proved plus
        probable basis;

    -   Based on an exit production rate of 2,100 boe/d, Cequence has a
        reserve life index of 9.8 years on a proved basis and 16.6 years on a
        proved plus probable basis;

    -   Estimated capital expenditures for the year ended December 31, 2009
        were $49.9 million, excluding asset retirement additions and
        adjustments resulting from the renunciation of flow through shares.
        Capital expenditures are estimated and unaudited as of the date of
        this press release.
    

Net Asset Value

The following net asset value ("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 that vary over time. It should not be assumed that the net present values estimated by GLJ represent the fair market value of the reserves.

    
    NAV December 31, 2009 ($000s)
    -------------------------------------------------------------------------
    Proved plus probable reserves discounted at 10%                $ 157,689
    Undeveloped lands, internal estimate                              31,500
    Working capital, excluding hedge                                   6,210
    Investments                                                       13,738
    Long term debt                                                   (18,054)
    -------------------------------------------------------------------------
    Net asset value                                                $ 191,083
    Basic shares outstanding                                          39,530
    -------------------------------------------------------------------------
    Net asset value per share                                      $    4.83
    -------------------------------------------------------------------------


    Finding and Development Costs
                                                            Proved
                                  Change                     plus      Proved
                                    in     Proved           Probable    plus
                      Capital     Future   Reserve  Proved  Reserve  Probable
                   Expenditures  Capital  Additions  Costs  Additons   Costs
                      ($000s)    ($000s)    mboe     $/boe    mboe     $/boe
    -------------------------------------------------------------------------
    FD&A Costs
    Proved FD&A
     including change
     in future
     capital           49,894     14,001    3,296   $19.39      na        na
    P+P FD&A including
     change in
     future capital    49,894     30,256       Na       na   5,863     13.67

    Proved FD&A
     excluding change
     in future
     capital           49,894         na    3,296   $15.14      na        na
    P+P FD&A excluding
     change in
     future capital    49,894         na       na       na   5,863      8.51

    FD Costs
    Proved FD
     including change
     in future
     capital           24,694     10,951    1,387    25.69      na        na
    P+P FD including
     change in
     future capital    24,694     27,206       na       na   3,059     16.97

    Proved FD
     excluding change
     in future
     capital           24,694         na    1,387    17.80      na        na
    P+P FD excluding
     change in future
     capital           24,694         na       na       na   3,059      8.07
    

Corporate Reserve Information

The following represents selected information obtained from the independent engineering evaluation of GLJ effective December 31, 2009 ("GLJ Report"). The Company intends to file its annual information containing additional reserves and oil and gas information in form NI 51-101 on or about March 18, 2010.

    
    Summary of Oil and Gas Reserves

                               Light and
                            Medium Crude Oil       NGLs        Natural Gas
                           ------------------ --------------- ---------------
                              Gross     Net   Gross     Net   Gross     Net
    Reserves Category         (Mbbl)  (Mbbl)  (Mbbl)  (Mbbl)  (MMcf)  (MMcf)
    ---------------------- ---------- ------- ------- ------- ------- -------
    Proved
      Developed Producing        370     327     204     143  20,290  17,559
      Developed Non-Producing     88      63      89      67   9,187   8,212
      Undeveloped                 11       8      85      61  10,424   9,500
                           ---------- ------- ------- ------- ------- -------
    Total Proved                 469     398     378     270  39,902  35,271
                           ---------- ------- ------- ------- ------- -------
                           ---------- ------- ------- ------- ------- -------
    Probable                     202     170     260     176  28,812  25,064
                           ---------- ------- ------- ------- ------- -------
    Total Proved plus
     Probable                    671     568     638     446  68,714  60,335
                           ---------- ------- ------- ------- ------- -------
                           ---------- ------- ------- ------- ------- -------


    Summary of Net Present Value of Future Net Revenue

                                           Before Future Income Tax
                                        Expenses Discounted at (%/year)
                                 -------------------------------------------
                                     0        5       10       15       20
    Reserves Category              (M$)     (M$)     (M$)     (M$)     (M$)
    ---------------------------- -------- -------- -------- -------- --------
    Proved
      Developed Producing        115,390   89,087   73,501   63,195   55,842
      Developed Non-Producing     42,929   28,410   21,527   17,372   14,541
      Undeveloped                 35,623   16,071    8,186    4,290    2,108
                                 -------- -------- -------- -------- --------
    Total Proved                 193,941  133,569  103,213   84,857   72,491
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------
    Probable                     157,730   84,306   54,476   38,900   29,417
                                 -------- -------- -------- -------- --------
    Total Proved plus Probable   351,671  217,874  157,689  123,757  101,908
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------

    GLJ employed the following pricing, exchange rate and inflation rate
assumptions as of December 31, 2009 in the GLJ Report in estimating Cequence's
reserves data using following forecast prices and costs:

                 Natural Gas     Light Crude Oil   NGL Mix
             ------------------- ---------------  --------
                        AECO Gas                          Inflation  Exchange
             Henry Hub   Price    WTI   Edmonton  Edmonton   Rates     Rate
             ---------  -------- ------ --------  -------- --------- --------
               ($US/     ($Cdn/  ($US/   ($Cdn/    ($Cdn/             ($US/
    Year       MMBtu)    MMBtu)   bbl)    bbl)      bbl)   %/year     $Cdn)
    -------- ---------  -------- ------ --------  -------- --------- --------
    Forecast

    2010        6.00      5.96    80.00   83.26     84.93     2.0      0.95

    2011        7.00      6.79    83.00   86.42     88.15     2.0      0.95

    2012        7.10      6.89    86.00   89.58     91.37     2.0      0.95

    2013        7.15      6.95    89.00   92.74     94.59     2.0      0.95

    2014        7.35      7.05    92.00   95.90     97.82     2.0      0.95

    2015        7.50      7.16    93.84   97.84     99.79     2.0      0.95

    2016        7.75      7.42    95.72   99.81    101.81     2.0      0.95

    2017        8.25      7.95    97.64  101.83    103.86     2.0      0.95

    2018        8.79      8.52    99.59  103.88    105.96     2.0      0.95

    2019        8.96      8.69   101.58  105.98    108.10     2.0      0.95

    Thereafter escalation rate of 2%


    Reconciliation of Company Gross Reserves by Product Type

    The following table sets forth the changes between the Company's reserve
volume estimates made as at December 31, 2009 and the corresponding estimates
as at December 31, 2008, using forecast prices and costs:

                                            Natural Gas
                        Light and Medium   (associated &
                           Crude Oil       non-associated)        NGLs
                        ----------------- ----------------- -----------------
                                  Gross             Gross             Gross
                                  Proved            Proved            Proved
                          Gross    Plus     Gross    Plus     Gross    Plus
                         Proved  Probable  Proved  Probable  Proved  Probable
    Factors               (Mbbl)  (Mbbl)   (MMcf)   (MMcf)   (Mbbl)   (Mbbl)
    ------------------  -------- -------- -------- -------- -------- --------
    December 31, 2008      451     646     24,561   38,558     251      420
      Extensions &
       Improved Recovery     -       -          -        -       -        -
      Technical Revisions  (81)   (148)      (286)  (2,196)     18       46
      Discoveries            -       -      8,809   20,806      29       60
      Acquisitions         154     228      9,871   14,600     109      143
      Dispositions           -       -          -        -       -        -
      Economic Factors       -       -          -        -       -        -
      Production           (55)    (55)    (3,054)  (3,054)    (30)     (30)
                        -------- -------- -------- -------- -------- --------
    December 31, 2009      469     671     39,902   68,714     378      638
                        -------- -------- -------- -------- -------- --------
                        -------- -------- -------- -------- -------- --------
    

Sinclair Montney Development

Development at Sinclair began shortly after the reorganization of the Company in July 2009. The capital program for 2009 was designed with the goal of establishing the viability of a Montney resource play while at the same time efficiently preserving expiring mineral rights and fulfilling the outstanding flow through commitments inherited through the acquisition of HFG Holdings Inc. The drilling program resulted in two successful horizontal wells in the Basal Doig (Upper Montney) and three vertical wells testing the Lower Montney and Basal Doig. Also, Cequence successfully retained all prospective Lower Montney and Basal Doig mineral rights.

Based on the independent reserve evaluation at December 31, 2009, 1.5 mboe proved and 3.5 mboe proved and probable reserves have been assigned to the Basal Doig resource at Sinclair. Two proved undeveloped wells and three probable wells are included in the reserve report based on the success of the first two horizontal wells. Management estimates that further development at Sinclair will result in the recognition of up to 15 additional Basal Doig locations at Sinclair not recognized in the December 31, 2009 reserve report.

The Sinclair program is still in its initial stages and has continued in the first quarter of 2010. The Company is preparing to complete its first horizontal well in the Lower Montney in March 2010. To date, no reserves have been recognized in the Lower Montney.

Cequence is scheduled to provide an operational update with 2010 guidance and report financial results for the year ended December 31, 2009 on March 18, 2010.

Cequence Energy Ltd. is a Calgary, Alberta-based crude oil and natural gas company with common shares trading on the Toronto Stock Exchange under the symbol "CQE".

Forward Looking Information

Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, information with respect to: operational decisions and the timing thereof, development and exploration plans and the timing thereof; and future production levels. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: field production rates and decline rates; the ability of the Company to secure adequate product transportation; the impact of increasing competition in or near the Company's Doig / Montney plays; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business; Cequence's ability to operate the properties in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

Certain financial and operating information included in this press release for the quarter and year ended December 31,2009, such as exploration and development expenditures, finding, development and acquisition costs 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, 2009 and changes could be material.

Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking information. The material risk factors affecting the Company and its business are contained in the Company's Annual Information Form which is available under the Company's issuer profile on SEDAR at www.sedar.com.

The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward looking information contained in this press release is expressly qualified by this cautionary statement.

Additional Advisories

Boes are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in respect of 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.

The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.

%SEDAR: 00023788E

SOURCE Cequence Energy Ltd.

For further information: For further information: Howard Crone, President and Chief Executive Officer, (403) 806-4040, hcrone@cequence-energy.com; or David Gillis, Vice President Finance and Chief Financial Officer, (403) 806-4041, dgillis@cequence-energy.com


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