Pine Cliff Energy Ltd. Announces 2021 Year-End Reserves and Provides Operations Update and 2022 Guidance

February 8, 2022

Reserve Report Highlights

Pine Cliff's independent reserve report was prepared by McDaniel & Associates Limited ("McDaniel") in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") with the effective date of December 31, 2021.

Highlights of the McDaniel reserve report include:

  • Net present value for proved plus probable ("P+P") reserves of $277.9 million, discounted at 10%, an increase of $179.7 million, or 283% higher than December 31, 2020, primarily as a result of an increase in forecast commodity prices;
  • Pine Cliff replaced its 2021 production by 218% on a P+P basis, or by 14.7 MMBoe (27%) largely as a result of 7.7 MMBoe from acquisitions (14%), 7.9 MMBoe (14%) due to economic factors, 0.5 MMBoe (1%) of extensions and a decrease of 1.4 MMBoe (2%) from negative technical revisions;
  • Seven gross (5.8 net) Pekisko well locations were added to Pine Cliff's booked locations, bringing the total booked locations in its P+P reserves to 31 gross (20.3 net) wells;
  • Remaining P+P reserves of 62.8 MMBoe (84% conventional natural gas and coal bed methane) at December 31, 2021 increased by 8.0 MMBoe (15%) from 54.8 MMBOE (87% conventional natural gas and coal bed methane) at December 31, 2020, mainly as a result of acquisitions and economic factors; and
  • Approximately 78% of total reserve volumes are classified as total proved reserves and approximately 22% are classified as probable reserves.

Pine Cliff's Reserves

McDaniel has used a three consultant average price (McDaniel, GLJ & Sproule) forecast, resulting in a price forecast of $3.56 and $3.21 per MMbtu for AECO natural gas and US$72.83 and US$68.78 per Bbl for WTI oil in 2022 and 2023 respectively.

Summary of Remaining Working Interest Reserves, as of December 31, 2021

  Light,      
  Medium Natural Gas Natural Gas and Coal Oil
  and Heavy Liquids Bed Methane Equivalent
  Oil      
Reserve Category MBbl MBbl MMcf MBOE
Proved        
Developed Producing 1,856.8 3,558.2 243,769.0 46,043.2
Developed Non-Producing 223.9 65.4 3,532.7 878.1
Undeveloped 963.3 229.7 5,990.7 2,191.5
Total Proved 3,044.0 3,853.3 253,292.4 49,112.7
Probable 1,629.1 1,468.1 63,620.6 13,700.7
Total Proved plus Probable 4,673.1 5,321.4 316,913.0 62,813.4

Summary of Net Present Values of Future Net Revenue, Before Income Taxes, as of December 31, 2021

  Discounted at (% per year)
($millions) 0% 5% 10% 15%
Reserve Category        
Proved        
Developed Producing (17.4) 136.4 167.9 167.3
Developed Non-Producing 15.9 12.6 10.1 8.4
Undeveloped 44.6 27.7 18.0 12.1
Total Proved 43.1 176.8 196.0 187.8
Probable 194.3 121.4 81.9 59.0
Total Proved plus Probable 237.4 298.1 277.9 246.8

Reconciliation of Working Interest Gross Reserves by Principal Product Type, as of December 31, 2021

Operations Update

Pine Cliff's fourth quarter 2021 production averaged 19,056 Boe per day, weighted 90% to natural gas. This resulted in the average production for the year being 18,445 Boe per day, at the high end of the Company's 18,000 to 18,500 annual 2021 guidance range.

Pine Cliff conducted a $23.1 million capital program in 2021 (excluding acquisitions and dispositions but including $6.8 million of major maintenance and other optimization capital expenses, $14.7 million in development capital and $1.6 million in abandonment expenditures). Development capital included four gross (3.4 net) Pekisko oil wells (including two gross (1.4 net) that were completed in January 2022), two gross (0.4 net) Ellerslie liquids rich gas wells, one gross (0.2 net) Notikewin gas well and one gross (0.9 net) Basal Quartz natural gas well and various natural gas well recompletions that were conducted during 2021.

In addition, the Company closed the acquisition of a private company (the "Acquisition") for a cash purchase price of $22.2 million. The Acquisition consolidates Pine Cliff's position in its core Ghost Pine area and the Acquisition is included in the Company's independent reserve report.

2022 Guidance

Pine Cliff's Board of Directors has approved a 2022 capital budget of $25.5 million to be fully funded from adjusted funds flow. Pine Cliff intends to spend approximately $9.6 million drilling four (3.4 net) Pekisko oil wells in Central Alberta, $4.4 million drilling four (1.0 net) Ellerslie natural gas well in the Edson area, $4.0 million for the completion of two (1.4 net) Pekisko oil wells drilled in the fourth quarter of 2021 along with various recompletion projects, $3.6 million on major maintenance and optimization capital and $3.9 million on abandonments and reclamation (exclusive of abandonments conducted pursuant to government funded grants). The Company expects to spend approximately $6.9 million in government funded grants for site abandonment and reclamation activities in 2022.

Based on $18.0 million of development capital to be spent in 2022, and assuming that Pine Cliff makes no acquisitions or does not add to its 2022 capital program, Pine Cliff expects 2022 annual production volumes to range between 20,000 and 21,000 Boe per day, weighted 87% to natural gas.

Pine Cliff will continue to consider opportunities to enhance shareholders' long term value which may include asset acquisitions, the early retirement of term debt and shareholder returns.

About Pine Cliff

Pine Cliff is an oil and natural gas company with a long-term view of creating shareholder value. Pine Cliff's current focus is on acquiring, developing and operating long life assets that are cash flow positive in a low commodity price environment. Further information relating to Pine Cliff may be found on www.sedar.com as well as on Pine Cliff's website at www.pinecliffenergy.com.

For further information, please contact:

Philip B. Hodge - President and CEO
Alan MacDonald - CFO and Corporate Secretary
Telephone: (403) 269-2289
Fax: (403) 265-7488
Email: info@pinecliffenergy.com
Website: www.pinecliffenergy.com

Cautionary Statements, Definitions and Abbreviations

The Company has not released its audited 2021 financial results, and therefore the financial figures provided herein are estimates and are unaudited.

Certain statements contained in this news release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this news release includes, but is not limited to: expected production levels, expected operating cost, royalty and general & administrative expense levels; future capital expenditures, including the amount and nature thereof; future acquisition opportunities including Pine Cliff's ability to execute on those opportunities; future drilling opportunities and Pine Cliff's ability to generate reserves and production from the undrilled locations; oil and natural gas prices and demand; expansion and other development trends of the oil and natural gas industry; business strategy and guidance; expansion and growth of our business and operations; maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; risks; Pine Cliff's ability to generate cash provided from operating activities and adjusted funds flow; future capital spending and other such matters. Because of the risks, uncertainties and assumptions contained herein, readers should not place undue reliance on these forward-looking statements.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Tables may not add due to rounding.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement.

Definitions and abbreviations

Bbl barrel MMbtu millions of British thermal units
CBM coal bed methane Mcf thousand cubic feet
MBbl thousands of barrels MMcf million cubic feet
Boe barrel of oil equivalent MMBoe millions of barrels of oil equivalent
MBoe thousands of barrels of oil equivalent WTI West Texas Intermediate at Cushing Oklahoma

As defined in NI 51-101, proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

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 oil, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

NON-GAAP Measures

This press release uses the term "adjusted funds flow" which is not recognized under International Financial Reporting Standards ("IFRS") and may not be comparable to a similar measure presented by other companies. This measure should not be considered as an alternative to, or more meaningful than the IFRS measure of cash provided from operating activities. The Company uses this measure to evaluate its performance. Adjusted funds flow is a non-IFRS measure that represents the cash provided by operating activities, before adjusting for changes in non-cash working capital, and decommissioning obligations settled.

The TSX does not accept responsibility for the accuracy of this release.

Corporate Logo

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/113197

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