Northern Blizzard Resources Inc. Announces Fourth Quarter and Year End 2014 Results, 2014 Reserves, Revised 2015 Guidance and Declares Dividend

CALGARY, March 16, 2015 /CNW/ - Northern Blizzard Resources Inc. ("Northern Blizzard" or the "Company") (TSX: NBZ) announces its operating and financial results for the three months and year ended December 31, 2014 and 2014 year-end reserves.

Northern Blizzard's financial statements, management's discussion and analysis ("MD&A") and annual information form ("AIF") for the year ended December 31, 2014 are available on our website at www.northernblizzard.com and on SEDAR at www.sedar.com.

HIGHLIGHTS

  • Northern Blizzard achieved fourth quarter production of 22,808 boe/d (96% oil), an increase of 12% from the third quarter of 2014. Average production for the year of 20,724 boe/d was within guidance and represents a 10% increase from 2013. The increase in production reflects positive results from the Plover Lake steam-assisted gravity drainage ("SAGD") project, our Viking light oil development at Coleville and additional volumes from drilling in other areas.
  • 2014 proved developed producing reserves increased 11% to 59.8 MMboe compared to 53.9 MMboe at year-end 2013. Proved developed producing reserve additions of 13.4 MMboe replaced 177% of Northern Blizzard's production. Proved developed producing reserves represent 71% of proved reserves and 38% of proved plus probable reserves.
  • The net present value (before income taxes and discounted at 10%) of Northern Blizzard's proved plus probable reserves increased 12% to $2.6 billion at December 31, 2014 compared to year-end 2013.
  • Northern Blizzard's proved plus probable reserve life index remains strong at 18.9 years. The proved plus probable three year average FD&A cost was $19.47/boe and recycle ratio was 1.9x.
  • Funds from operations were $61.4 million ($0.59 per common share) for the fourth quarter of 2014 and $228.7 million ($2.55 per common share) for the year ended December 31, 2014, a 2% increase for both over the respective periods in 2013.
  • During 2014, Northern Blizzard drilled 234 wells, commissioned the Plover Lake SAGD project and observed initial response from the Bakken polymer flood project.
  • Northern Blizzard has a comprehensive hedging program in place to protect prices on crude oil volumes and maintain the stability of cash flows. The Company has WTI hedges in place for 3.0 million barrels (8,222 bbl/d) in 2015 at an average price of C$97.94/bbl and 1.5 million barrels (4,000 bbl/d) in 2016 at an average price of C$77.54/bbl.
  • Northern Blizzard ended 2014 in a strong financial position with over $460.0 million available on its $530.0 million credit facility. Year-end net debt to 2014 funds from operations was 1.8x.

PROACTIVE MEASURES

Northern Blizzard has good liquidity, a well-structured balance sheet, supportive shareholders and high quality, low decline assets that fit with our business model.

The current low oil price environment is a challenge for the oil and gas industry. In response, Northern Blizzard has taken the following proactive measures:

  • Reduced capital expenditures for 2015 by 34% to $86 million from the previous guidance of $130 million
  • Initiated an ongoing comprehensive review of capital, operating and administrative expenditures
  • Added to oil hedge positions for the fourth quarter of 2015 and for 2016

These actions are designed to reduce financial outflows and ensure that Northern Blizzard remains strong and sustainable at low oil prices.

Highlights of the revised 2015 guidance include:

  • Average annual production of 21,600 boe/d
  • Capital expenditures of $86 million
  • Funds from operations of $181 million
  • Year-end net debt to funds from operations of 2.1x

See "Revised 2015 Guidance" below.


FINANCIAL AND OPERATING HIGHLIGHTS





Three months ended
 December 31,

Year ended
 December 31,


2014

2013

2014

2013

Financial  ($000s,except as otherwise noted)





Oil and natural gas sales

168,274

145,545

697,215

561,769

Funds from operations(1)

61,372

60,102

228,673

224,195


Per share – diluted

0.59

0.77

2.55

2.85

Net income (loss)

67,783

6,923

(2,347)

32,116


Per share – basic

0.66

0.09

(0.03)

0.41


Per share – diluted

0.65

0.09

(0.03)

0.24

Net debt(1)

405,677

418,511

405,677

418,511

Dividends declared

24,686

-

38,857

-


Per share

0.240

-

0.379

-

Capital expenditures

54,038

68,846

262,774

262,118

Weighted average shares outstanding (000s)






Basic

102,647

77,617

87,707

77,708


Diluted

104,539

77,935

89,599

78,557

Shares outstanding at period end (000s)

103,387

77,935

103,387

77,935






Operating





Average daily production






Heavy oil (bbl/d)

20,773

18,384

19,153

17,463


Light oil & NGL (bbl/d)

1,028

11

430

15


Natural gas (mcf/d)

6,043

8,207

6,846

7,677


Total (boe/d)

22,808

19,763

20,724

18,758






Average realized price






Heavy oil ($/bbl)(2)

64.68

66.28

77.29

71.15


Light oil & NGL ($/bbl)

66.18

82.89

78.35

89.61


Oil & NGL ($/bbl)

64.75

66.29

77.32

71.17


Natural gas ($/mcf)

3.50

3.49

4.47

3.09


Combined ($/boe)

62.79

63.27

74.53

67.57






Netbacks ($/boe)






Average realized price

62.79

63.27

74.53

67.57


Royalties

(7.64)

(9.60)

(10.33)

(10.62)


Production and operating expenses

(21.02)

(19.14)

(21.04)

(19.07)


Transportation expenses

(2.14)

(2.17)

(1.97)

(2.03)


Operating netback(1)

31.99

32.36

41.19

35.85


Realized gains (losses) on financial derivative contracts

2.78

3.77

(4.13)

2.08


General and administrative expenses

(2.60)

(2.56)

(2.88)

(2.96)


Cash finance costs

(3.43)

(2.22)

(4.68)

(2.56)


Other

0.96

0.40

0.80

0.34


Funds from operations(1)

29.70

31.75

30.30

32.75

Notes:

(1)

Funds from operations, net debt and operating netback do not have any standardized meaning prescribed by International Financial Reporting Standards.  See "Non-IFRS Financial Measures" and "Additional IFRS Measures" in the MD&A for the years ended December 31, 2014 and 2013.

(2)

Average heavy oil prices received are net of blending expenses and include the impact of physical delivery contracts (when applicable).


FINANCIAL REVIEW

Fourth Quarter 2014

  • Production for the fourth quarter of 2014 was 22,808 boe/d (96% oil), a 12% increase over the third quarter of 2014. The increase in production reflects positive results from the Plover Lake SAGD project, our Viking light oil development at Coleville and additional volumes from drilling in other areas.
  • Operating netback for the fourth quarter of 2014 was $31.99/boe, a decrease of 26% from the third quarter of 2014 and 1% from the fourth quarter of 2013. The decrease in the netback was primarily due to lower oil prices in the fourth quarter of 2014. Our average realized oil price in the fourth quarter of 2014 was $64.75/bbl compared to $81.61/bbl in the third quarter of 2014 and $66.29/bbl in the fourth quarter of 2013.
  • Funds from operations in the fourth quarter of 2014 were $61.4 million, representing a 2% increase quarter-over-quarter and a 2% increase from the fourth quarter of 2013. Comparing the fourth quarter of 2014 to the third quarter, the impact of lower operating netbacks was more than offset by higher sales volumes and higher realized gains on financial derivative contracts. Comparing the fourth quarter of 2014 to same period in 2013, the impact of slightly lower operating netbacks and increased finance costs was more than offset by higher sales volumes.
  • During the fourth quarter of 2014, Northern Blizzard declared dividends totalling $24.7 million ($0.24 per common share). Shareholders elected to receive stock dividends valued at $16.8 million and cash dividends of $7.9 million. Average participation in Northern Blizzard's Stock Dividend Program ("SDP") during the fourth quarter was 68%.
  • Northern Blizzard's total payout ratio was 128% for the fourth quarter of 2014. Total payout ratio is calculated as total dividends declared plus capital expenditures divided by funds from operations. Excluding the value of dividends paid in common shares through our SDP, the fourth quarter 2014 total payout ratio was 101%.
  • Net debt at December 31, 2014 was $405.7 million, which was $11.3 million higher than the end of the third quarter of 2014. The increase was due primarily to an unrealized foreign exchange loss on Northern Blizzard's senior unsecured notes caused by a weaker Canadian dollar on December 31, 2014 relative to September 30, 2014.

 

Full Year 2014

  • Northern Blizzard exited 2014 at approximately 23,200 boe/d, a 15% increase over our 2013 exit rate of 20,100 boe/d. Exit rates quoted represent average production for the month of December. Average production for 2014 of 20,724 boe/d was 10% higher than 2013 and within guidance.
  • The operating netback for 2014 was $41.19/boe, a 15% increase from 2013. The increase in the netback was primarily due to higher average realized oil prices. The increase in Northern Blizzard's 2014 realized price was driven primarily by narrower heavy oil differentials and a weaker Canadian dollar compared to 2013.
  • Funds from operations for 2014 were $228.7 million, a 2% increase from 2013. The increase in funds from operations was due to higher sales volumes and operating netbacks and was mostly offset by higher realized losses on financial derivative contracts and increased finance costs.
  • Capital expenditures for 2014 totalled $262.8 million. Drilling, completions and equipping expenditures were the largest component of capital expenditures at $159.0 million with the drilling of 234 (221.5 net) wells. Spending on facilities and pipelines was $91.5 million. Development in 2014 was focused primarily in the Cactus Lake, Plover Lake, Coleville and Winter areas.
  • From the date of our initial public offering ("IPO") on August 8, 2014 to December 31, 2014, Northern Blizzard declared dividends totalling $38.9 million ($0.379 per common share). Shareholders elected to receive stock dividends valued at $26.7 million and cash dividends of $12.2 million.
  • From the date of the IPO, Northern Blizzard's total payout ratio was 142%. Excluding the value of dividends paid in common shares through our SDP, the total payout ratio from the date of the IPO was 117%.
  • Net debt at December 31, 2014 was $12.8 million lower than the end of 2013. The decrease in 2014 was due primarily to net proceeds from the treasury offering of our IPO in August and funds from operations, partially offset by the distribution of capital to shareholders paid in January, capital expenditures and cash dividends paid. Northern Blizzard's net debt to funds from operations ratio (trailing twelve months) decreased to 1.8x at December 31, 2014 from 1.9x at December 31, 2013.
  • At year end, Northern Blizzard had $462.7 million available on its $530 million credit facility.

 

Risk Management

Northern Blizzard has a comprehensive hedging program in place to protect prices on crude oil volumes and maintain the stability of cash flows.  A summary of Northern Blizzard's current hedge position is provided in the table below.

(Cdn$)

Q1

Q2

Q3

Q4

Annual

2015






WTI







Hedged volumes (bbl/d)

12,000

11,000

6,000

4,000

8,222


Average price ($/bbl)

101.07

100.62

100.58

77.54

97.94

WTI differential (WCS & LLK physical)







Hedged volumes (bbl/d)

10,000

11,000

8,000

13,000

10,501


Average price ($/bbl)

(27.46)

(26.89)

(27.96)

(24.67)

(26.54)







2016






WTI







Hedged volumes (bbl/d)

4,000

4,000

4,000

4,000

4,000


Average price ($/bbl)

77.54

77.54

77.54

77.54

77.54

WTI differential (WCS & LLK physical)







Hedged volumes (bbl/d)

6,000

6,000

6,000

6,000

6,000


Average price ($/bbl)

(19.25)

(19.25)

(19.25)

(19.25)

(19.25)

Notes:

(1)

Contracts denominated in US dollars have been converted to Canadian dollar at CAD/USD strip prices as of March 13, 2015.

(2)

The prices and volumes in this table represent averages for several contracts over the respective periods presented.  The average price of a group of contracts is for indicative purposes only and does not have the same settlement profile as the individual contract.  All positions are settled according to the individual contracts disclosed in Note 24 of Northern Blizzard's December 31, 2014 consolidated financial statements.

(3)

Lloydminster Kerrobert ("LLK").

 

During the fourth quarter of 2014, Northern Blizzard realized $5.7 million in gains on financial derivative contracts.  The gains realized on Canadian dollar WTI contracts were due to lower than hedged oil prices and were partially offset by losses on WCS differential contracts due to narrower than hedged heavy oil differentials. 

For the year ended December 31, 2014, Northern Blizzard realized losses of $31.2 million on financial derivative contracts.  The losses were realized on WTI contracts as oil prices during the year were higher than hedged and on WCS differential contracts as heavy oil differentials were narrower than hedged.

Financial Liquidity

At December 31, 2014, we had $67.3 million drawn on our revolving credit facility, $320.5 million of senior unsecured notes outstanding and a working capital deficiency of $18.3 million. We have over $460 million available on our credit facility.

Northern Blizzard has a stock dividend program that enables shareholders to receive dividends in the form of common shares. The Company's significant shareholders, that hold approximately 67% of the outstanding shares, have indicated that they will continue to receive stock dividends.

Northern Blizzard's capital expenditure forecast for 2015 is approximately $86 million. Northern Blizzard anticipates that funds from operations, together with the revolving credit facility, will be sufficient to finance current operations, cash dividends, planned capital expenditures and working capital requirements.

Northern Blizzard's credit facility has two financial covenants that are calculated quarterly. The calculation for each financial covenant is based on specific definitions and cannot be calculated by referring to Northern Blizzard's consolidated financial statements. At December 31, 2014, the Company was in compliance with the financial covenants.




Covenant description

Covenant

Position at December 31, 2014

Senior debt to EBITDA ratio

Less than 3.0

0.3

Interest coverage ratio

Greater than 2.5

7.0

 

OPERATIONS REVIEW

Cactus Lake

Capital expenditures at Cactus Lake for 2014 were $75.4 million.  This included the drilling of 87 (87.0 net) wells and the construction and commissioning of a new polymer mixing facility. We ended 2014 with production of 7,600 boe/d at Cactus Lake, a 20% increase from 2013 exit production.

Cactus Lake Bakken Polymer Flood

We continue to see encouraging signs from the Bakken polymer flood with initial production response in localized areas across Phases 1 and 2 that is ahead of the anticipated response originally forecasted for mid-2015.

Phase 1 of the Bakken polymer flood included 76 producers and 37 injectors. In 2014, Northern Blizzard completed the Phase 2 expansion of the Bakken polymer flood that added 109 producers and 48 injectors to the existing operation.  The new polymer facility provides the infrastructure capacity for future polymer flood expansion across the remainder of the field.

In 2015, Northern Blizzard plans to commence the Phase 3 Bakken polymer flood expansion, which is expected to be completed in early 2016.  Phase 3 is expected to add 69 producers and 29 injectors. 

Cactus Lake SAGD Project

In 2015, Northern Blizzard will begin development of the first phase of our SAGD project at Cactus Lake.  Similar to our SAGD project at Plover Lake, the Cactus Lake SAGD project will be in a McLaren channel.  A regulatory application for this project was submitted in December 2014.  Work on the Cactus Lake SAGD project in 2015 will focus primarily on facility design, with initial production expected in 2016.

Plover Lake SAGD Project

Capital spending at Plover Lake SAGD for 2014 was $55.0 million, bringing the total project cost to $88 million.  Northern Blizzard began injecting steam in mid-July, and oil production commenced in August 2014.  We realized design capacity rates of 2,400 bbl/d in November 2014 prior to the failure of a minor component in a steam generator. The equipment has since been repaired and steam injection has recommenced. Northern Blizzard is confident production will return to design capacity rates.

Northern Blizzard's 2015 capital program at Plover Lake SAGD includes bringing an additional well pair on stream.  First oil from this expansion is expected during the second quarter of 2015.

Coleville

During 2014, Northern Blizzard drilled its first light oil wells in the Viking play at Coleville. Capital spending during 2014 on the Viking development totalled $49.4 million, with 43 (40.7 net) wells drilled.  Light oil production from the Viking averaged 425 bbl/d in 2014, with a 2014 exit production rate of 1,400 bbl/d. 

Our 2015 capital program at Coleville includes the drilling of 19 wells, the majority of which are planned for the fourth quarter.

Winter

Capital expenditures at Winter for 2014 were $32.3 million.  This included the drilling of 43 (34.1 net) wells and the commissioning of a new dewatering facility in the fourth quarter.  We exited 2014 with production of 4,100 boe/d at Winter, an 18% increase from 2013 exit rates.

In 2015, Northern Blizzard will continue with its infill drilling program and expansion of water handling facilities at Winter.

Wells Drilled

During 2014, Northern Blizzard drilled 234 wells with a 99% success rate. The following table summarizes the drilling program in the three months and year ended December 31, 2014:





Three months ended

December 31, 2014

Year ended

December 31, 2014

Field

Gross

Net

Gross

Net

Cactus Lake(1)

1

1.0

87

87.0

Coleville

8

6.4

43

40.7

Winter

9

8.5

43

34.1

Plover Lake(2)

2

2.0

17

17.0

Court

7

7.0

17

17.0

Cuthbert

-

-

15

15.0

Manitou Lake East

2

2.0

7

7.0

Westhazel

-

-

2

2.0

Hearts Hill

-

-

1

1.0

Other(3)

1

0.2

2

0.7

Total

30

27.1

234

221.5

Notes:

(1)

Total wells drilled at Cactus Lake include 6 (6.0 net) service wells for the year ended December 31, 2014.  No service wells were drilled in the fourth quarter of 2014.

(2)

Total wells drilled at Plover Lake include 12 (12.0 net) service wells for the year ended December 31, 2014.  No service wells were drilled in the fourth quarter of 2014.

(3)

Other wells drilled include 1 (0.2 net) service well for the year ended December 31, 2014, which was drilled in the fourth quarter of 2014.



RESERVES

Independent Reserves Evaluation

Northern Blizzard's reserves were independently evaluated by Ryder Scott Company-Canada ("Ryder Scott") as at December 31, 2014 in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101").  The reserves evaluation was based on forecast pricing and foreign exchange rates as outlined in the notes to the table below entitled "Forecast Prices at December 31, 2014". Finding and development ("F&D") and finding, development and acquisition ("FD&A") costs are reported inclusive of future development costs ("FDC"). Additional reserves disclosure is included in the Company's AIF for the year ended December 31, 2014.

Highlights of the 2014 reserve report

  • Proved developed producing reserve additions of 13.4 MMboe replaced 177% of Northern Blizzard's production. This represents an 11% increase in 2014 proved developed producing reserves to 59.8 MMboe compared to 53.9 MMboe at year-end 2013. This shift towards proved developed producing reserves indicates that Northern Blizzard's reserves are improving in quality and risk profile over time. Proved developed producing reserves represent 71% of proved reserves and 38% of proved plus probable reserves at December 31, 2014.
  • The net present value (before income taxes and discounted at 10%) of Northern Blizzard's proved plus probable reserves increased by $286.6 million or 12% to $2.6 billion at December 31, 2014 as compared to 2013. The net present value of proved reserves increased by $26.3 million or 2% to $1.5 billion. These increases were despite an average year-over-year 14% decline in the forecasted WCS price for the 2015 – 2017 period used in the reserve report.
  • A significant contributing factor to higher net present values year-over-year was a decrease in future development costs resulting primarily from a reduction in facilities and drilling cost estimates to more closely reflect actual costs. Overall royalties forecasted also decreased as Northern Blizzard aggressively pursues projects that are eligible for reduced Saskatchewan crown royalties such as horizontal wells, SAGD, and polymer floods.
  • At December 31, 2014, proved plus probable reserves of 158.4 MMboe remained virtually flat compared to year-end 2013 proved plus probable reserves of 159.5 MMboe (less than a 1% decrease). Proved reserves decreased 4% to 84.3 MMboe. This was consistent with our expectation for reserves growth in 2014 as our capital program was focused on developing existing reserves and advancing the long-term polymer and SAGD projects.
  • Northern Blizzard is advancing a number of long-term projects that will add significant value for shareholders. The timing of reserves additions related to these projects does not always correspond to the timing of the required capital expenditure. For example, the polymer flood at Cactus Lake required capital expenditures in 2014 for which reserves were not fully recognized at December 31, 2014.
  • Proved plus probable reserves are comprised of 96% crude oil and 4% natural gas.   
  • Reserve highlights for significant areas:
    • Cactus Lake: Proved plus probable reserves were 63.0 MMboe at December 31, 2014. This includes 14.9 MMboe recognized for the polymer flood projects and 13.5 MMboe of reserves for the planned SAGD project.
    • Plover Lake: Proved plus probable reserves were 23.7 MMboe at December 31, 2014. This includes 6.8 MMboe or proved plus probable reserves related to the Plover Lake SAGD project and 16.5 MMboe of probable reserves for the Pirtuk Main SAGD project.
    • Winter: Proved plus probable reserves were 22.4 MMboe at December 31, 2014, which consist primarily of producing reserves and infill drilling development.
    • Coleville: Proved plus probable reserves were 7.8 MMboe at December 31, 2014. The reserves relate to the light oil Viking development where 43 wells were drilled in 2014.
  • Northern Blizzard's 2014 proved and proved plus probable FD&A costs were $17.69/boe and negative $5.28/boe, respectively. The negative proved plus probable FD&A cost was caused by a decrease in future development cost estimates in the 2014 reserve report, as compared to the 2013 reserve report, that exceeded 2014 actual capital expenditures. The decrease in future development costs resulted primarily from a reduction in facilities expenditures and drilling cost estimates to more closely reflect actual costs.
  • 3-year weighted average proved and proved plus probable FD&A costs were $25.58/boe and $19.47/boe, respectively. Northern Blizzard's 3-year proved plus probable weighted average FD&A recycle ratio, including future development capital, was 1.9x.
  • 5-year weighted average proved and proved plus probable FD&A costs were $20.62/boe and $16.93/boe, respectively. Northern Blizzard's 5-year proved plus probable weighted average FD&A recycle ratio, including future development capital, was 2.1x.
  • Northern Blizzard's proved and proved plus probable reserves life indices remained strong at 10.0 years and 18.9 years, respectively.


Summary of Reserves as at December 31, 2014



Light and






Medium

Total

Natural

Oil


Heavy Oil

Crude Oil

Crude Oil

Gas

Equivalent


(Mbbl)

(Mbbl)

(Mbbl)

(MMcf)

(Mboe)

Gross






Proved







Developed producing

55,442

1,320

56,762

17,938

59,752


Developed non-producing

152

-

152

9

153


Undeveloped

21,475

2,020

23,495

5,130

24,351

Total proved

77,069

3,341

80,410

23,077

84,255

Total probable

68,748

3,086

71,834

13,592

74,099

Total proved plus probable

145,817

6,427

152,244

36,669

158,355

Net






Proved







Developed producing

51,321

1,267

52,588

17,338

55,478


Developed non-producing

137

-

137

8

139


Undeveloped

19,762

1,954

21,716

5,049

22,557

Total proved

71,220

3,221

74,441

22,395

78,174

Total probable

61,040

2,937

63,977

13,254

66,186

Total proved plus probable

132,260

6,158

138,418

35,649

144,360

Notes:

(1)

Based on escalated prices and costs.

(2)

Gross reserves means Northern Blizzard's working interest reserves before deduction of royalties and without including any royalty interests.

(3)

Net reserves means Northern Blizzard's working interest reserves after deducting royalties and including any royalty interests.

(4)

Figures may not add due to rounding.

 

Reserves Reconciliation – Gross Volumes


Heavy Oil

Light and

Medium

Crude Oil

Total

Crude Oil

Natural

Gas

Oil

Equivalent


(Mbbl)

(Mbbl)

(Mbbl)

(MMcf)

(Mboe)

Proved






December 31, 2013

81,422

2,907

84,329

22,226

88,033

Extensions and improved recovery

529

-

529

97

545

Discoveries

-

-

-

-

-

Economic factors

109

-

109

(692)

(6)

Infill drilling

1,008

15

1,023

19

1,026

Acquisitions

-

-

-

-

-

Technical revisions

962

606

1,568

3,925

2,222

Production

(6,961)

(186)

(7,147)

(2,499)

(7,564)

December 31, 2014

77,069

3,341

80,410

23,077

84,255

Proved plus Probable






December 31, 2013

147,802

6,148

153,950

33,407

159,517

Extensions and improved recovery

804

-

804

169

832

Discoveries

-

-

-

-

-

Economic factors

(686)

-

(686)

(1,197)

(886)

Infill drilling

1,585

15

1,600

239

1,640

Acquisitions

-

-

-

-

-

Technical revisions

3,273

450

3,723

6,550

4,815

Production

(6,961)

(186)

(7,147)

(2,499)

(7,564)

December 31, 2014

145,817

6,427

152,244

36,669

158,355

 

Notes:

(1)

Based escalated prices and costs.

(2)

Gross reserves means Northern Blizzard's working interest reserves before deduction of royalties and without including any royalty interests.

(3)

Figures may not add due to rounding.


Summary of Net Present Values


Discounted at

($ millions)

0%

5%

10%

15%

20%

Before Tax






Proved







Developed producing

1,618

1,281

1,027

855

735


Developed non-producing

4

3

3

2

2


Undeveloped

865

615

450

338

258

Total proved

2,487

1,899

1,480

1,195

995

Total probable

2,919

1,743

1,144

799

582

Total proved plus probable

5,406

3,642

2,625

1,994

1,577

After Tax






Proved







Developed producing

1,449

1,177

959

808

701


Developed non-producing

3

2

2

2

1


Undeveloped

632

441

316

231

171

Total proved

2,084

1,621

1,277

1,041

873

Total probable

2,160

1,259

810

553

394

Total proved plus probable

4,244

2,880

2,087

1,593

1,267

Notes:

(1)

Based on escalated prices and costs.

(2)

Figures may not add due to rounding.


Future Development Costs

($000)

Proved
Reserves

Proved plus
Probable Reserves

2015

53,419

83,601

2016

139,125

256,548

2017

73,636

254,288

2018

39,800

168,979

2019

24,526

112,708

Remainder

31,165

321,464

Total Undiscounted

361,670

1,197,587

 

Reserve Life Index

(years)

2014

2013

2012

2011

2010

Proved

10.0

12.1

12.7

10.0

8.0

Proved plus probable

18.9

21.9

20.1

17.2

14.4

Notes:

(1)

Reserve life index is calculated as reserves divided by annualized fourth quarter production.

 

Finding & Development Costs



2014

2013

2012

 3 Year

Total

 5 Year

Total

Capital Expenditures ($000)(1)








Exploration and development


262,774

229,085

252,907

744,766

1,001,278


Acquisitions (net of dispositions)


-

33,033

-

33,033

976,711


Total


262,774

262,118

252,907

777,799

1,977,989








Change in Future Development Costs ($000)







Proved


(195,777)

99,305

341,896

245,424

361,670


Proved plus probable


(296,555)

524,471

294,678

522,594

1,197,588








Proved Reserve Additions (Mboe)








Exploration and development


3,787

7,103

26,766

37,653

n/a(2)


Acquisitions (net of dispositions)


-

2,339

-

2,339

n/a(2)


Total


3,787

9,442

26,766

39,992

113,451








Proved plus Probable Reserve Additions (Mboe)







Exploration and development


6,402

11,909

29,123

47,434

n/a(2)


Acquisitions (net of dispositions)


-

19,356

-

19,356

n/a(2)


Total


6,402

31,265

29,123

66,790

187,550

Finding & Development Costs ($/boe)(3)


Proved


17.69

46.23

22.22

26.30

 n/a


Proved plus probable


(5.28)

63.27

18.80

26.72

 n/a








Finding, Development & Acquisition Costs ($/boe)(3)






Proved


17.69

38.28

22.22

25.58

20.62


Proved plus probable


(5.28)

25.16

18.80

19.47

16.93








FD&A Recycle Ratio – Operating Netback(3)(4)






Proved


2.3

0.9

1.4

1.4

1.7


Proved plus probable


nmf(6)

1.4

1.6

1.9

2.1








FD&A Recycle Ratio – Operating Netback (includes hedging)(3)(5)






Proved


2.1

1.0

1.4

1.4

1.7


Proved plus probable


nmf(6)

1.5

1.6

1.8

2.0








FD&A Recycle Ratio – Funds from Operations(3)






Proved


1.7

0.9

1.2

1.2

1.4


Proved plus probable


nmf(6)

1.3

1.4

1.5

1.7
















Notes:

(1)

Capital expenditures represent cash expenditures for property, plant and equipment, intangible assets and property acquisitions.

(2)

Reserves additions for acquisitions completed in 2010 and 2011 were not separately evaluated.

(3)

Includes future development costs

(4)

Operating netback includes realized gains or losses on physical delivery contracts but not financial derivative contracts.

(5)

Operating netback includes realized gains or losses on both physical delivery contracts and financial derivative contracts.

(6)

Not meaningful ("nmf").

 

Forecast Prices in 2014 Reserves Report

The following table summarizes the forecast prices used by Ryder Scott in preparing Northern Blizzard's estimated reserve volumes and net present values of future net revenues in the 2014 reserves report.  Complete disclosure of forecast prices used can be found in the Company's AIF for the year ended December 31, 2014.




Oil


Natural Gas





WCS Stream at

Edmonton



Saskatchewan



Cost

WTI at

Hardisty 20.5

MSW 40°


Alberta AECO-

Provincial


US$/

Escalation

Cushing(1)

API(1)

API(1)


C/NIT 30 Day Spot

Average(2)

Year

CDN$

(%)

(US$/bbl)

($/bbl)

($/bbl)


($/mmbtu)

($/mmbtu)

2015

0.875

1.25

61.88

56.04

66.18


3.19

3.21

2016

0.875

1.25

76.25

69.32

81.99


3.59

3.60

2017

0.875

2.00

83.13

75.32

89.10


3.84

3.85

2018

0.875

2.00

87.56

79.12

93.65


4.10

4.09

2019

0.875

2.00

91.01

82.19

97.31


4.35

4.32

Notes:

(1)

WTI, WCS and Edmonton MSW crude oil prices were based on an average of forecast prices published by Ryder Scott at December 31, 2014, Sproule Associates Limited at December 31, 2014, GLJ Petroleum Consultants Ltd. at January 1, 2015 and McDaniel & Associates Consultants Ltd at January 1, 2015.

(2)

Saskatchewan provincial average gas prices were based on an average of forecast prices published by Ryder Scott at December 31, 2014, GLJ Petroleum Consultants Ltd. at January 1, 2015 and McDaniel & Associates Consultants Ltd at January 1, 2015.

 

DIVIDEND

Northern Blizzard currently pays a monthly dividend of $0.08 per share. Northern Blizzard has a Stock Dividend Program ("SDP") and shareholders holding approximately 68% of the Company's outstanding shares currently participate in the SDP.

The SDP allows shareholders to elect to receive their dividends in the form of common shares in lieu of receiving a cash dividend on the dividend payment date. Participation in the SDP is optional; additional information can be found on Northern Blizzard's website at www.northernblizzard.com or by contacting your financial institution or investment advisor. The availability of the SDP and its terms and conditions are subject to the discretion of Northern Blizzard's Board of Directors.  

Northern Blizzard announces that the Board of Directors has declared a dividend of $0.08 per common share for March 2015. The dividend will be payable on April 15, 2015 to shareholders of record on March 31, 2015. This dividend has been designated as an eligible dividend under the Income Tax Act (Canada).

REVISED 2015 GUIDANCE  

Oil prices have declined since Northern Blizzard issued 2015 guidance in December 2014. As a result, Northern Blizzard is reducing 2015 guidance for capital spending to $86 million, production to 21,600 boe/d and funds from operations to $181 million. Year-end 2015 net debt to funds from operations is 2.1x.

Northern Blizzard operates and controls virtually all of its development program, which provides flexibility regarding capital expenditures.  We have reviewed our 2015 development program and will be focusing capital on projects that make economic sense in the current commodity price environment. We will advance projects requiring longer lead times, such as SAGD and polymer flooding. Further, Northern Blizzard continues to perform a comprehensive review of capital, operating and administrative expenditures with the objective of reducing costs and optimizing efficiencies in 2015.

Revised 2015 guidance and assumptions are as follows:  


Prior

Revised

Production




Oil & NGL (bbl/d)

21,900

20,500


Natural gas (mcf/d)

6,600

6,800


Total (boe/d)

23,000

21,600

Pricing




WTI (US$/bbl)

65.00

55.00


CAD/USD exchange rate

1.155

1.260


WCS ($/bbl)

56.00

49.75


AECO ($/mcf)

4.00

3.00

Expenses




Average royalty rate (%)

11

10


Operating ($/boe)

19.70

17.75


Transportation ($/boe)

2.15

2.15


Corporate costs ($/boe)

6.50

6.50

Excluding hedging




Funds from operations ($ millions)

165

121


Funds from operations per boe ($/boe)

19.65

15.30

Including hedging




Funds from operations ($ millions)

211

181


Funds from operations per boe ($/boe)

25.15

22.85

Capital expenditures ($ millions)

130

86

 

The guidance provided in the table above is based on a number of material assumptions and factors set out above and under the heading "Forward-Looking Statements" in this news release and in the MD&A.  This financial outlook is included to provide readers with an understanding of the Company's operations for 2015. Readers are cautioned that the information may not be appropriate for other purposes. The actual results of Northern Blizzard's operations will likely vary from the amounts set forth in the table above, and such variations may be material. See "Forward-Looking Statements" in this news release and in the MD&A for a discussion of the risks that could cause actual results to vary. The foregoing guidance has been approved by management as of the date of this news release.

Conference Call Today
9:00am MT (11:00am ET)

Northern Blizzard will host a conference call today, March 16, 2015, starting at 9:00am MT (11:00am ET), to review the Company's fourth quarter and year-end 2014 results. Participants can access the conference call by dialing (403) 532-5601 or toll-free (US & Canada) 1 (855) 353-9183 and entering the passcode 98589.

A recording of the conference call will be available until March 30, 2015 and can be accessed by dialing 1 (855) 201-2300 and entering the conference number 1173584 and passcode 98589. The replay will be available approximately one hour following completion of the call. The conference call will also be available on Northern Blizzard's website at www.northernblizzard.com.

ADVISORIES

BOE Conversion and Other Reserve Advisories

In this news release, natural gas has been converted to boe based on a conversion rate of six thousand cubic feet of natural gas to one barrel (6 mcf : 1 bbl), which represents an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. While it is useful for comparative measures, it may not accurately reflect individual product values and may be misleading if used in isolation.

The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Reserve replacement ratios for a given period are determined by taking the Company's proved or proved plus probable reserve additions for that period divided by the Company's production for the same period.

Recycle ratio is calculated as finding, development and acquisition costs per barrel divided by either operating netback per barrel or cash flow netback per barrel.

The aggregate of the exploration and development costs incurred in the most recent financial year and the change during the year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for the year.

Forward-Looking Statements

This news release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes.

In particular, this news release contains forward-looking statements pertaining to the following:

  • Business plans and strategies;
  • Capital expenditure and drilling programs for 2015;
  • Methods and ability to finance operations, dividends, capital expenditure programs and working capital requirements;
  • Anticipated oil and natural gas production levels in 2015;
  • Timing and success of development and exploitation activities, including first oil from the Plover Lake SAGD expansion and the Cactus Lake SAGD project;
  • Return of Plover Lake SAGD production to design capacity rates;
  • Future oil and natural gas prices;
  • Future costs including operating, transportation and administrative costs and royalty rates;
  • 2015 funds from operations and net earnings;
  • Payment of dividends; and
  • Expectations regarding the Company's ability to add reserves through exploration and development.

In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.

With respect to forward-looking statements contained in this news release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers.  Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, substantial capital requirements, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital,  equipment, new leases, pipeline capacity and skilled personnel, credit risks associated with counterparties, the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate decommissioning costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company's assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Additionally, the payment of dividends is dependent on the satisfaction of the applicable liquidity and solvency tests imposed by the Business Corporations Act (Alberta). The foregoing risks and other risks are described in more detail in the Company's annual information form for the year ended December 31, 2014. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, readers are cautioned that the actual results achieved may vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

SOURCE Northern Blizzard Resources Inc.

For further information: about Northern Blizzard Resources Inc., please visit our website at www.northernblizzard.com or contact: Northern Blizzard Resources Inc., Telephone: 403-930-3000, John Rooney, Chairman & Chief Executive Officer; Michael Makinson, Vice President, Finance & Chief Financial Officer

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