CALGARY, ALBERTA--(Marketwire - Feb. 16, 2011) -
NOT FOR DISTRIBUTION TO THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA
Birchcliff Energy Ltd. ("Birchcliff")BIR is pleased to provide the following update. All financial amounts referred to in this press release are management's best estimates which have not yet been audited.
Jeff Tonken, President and CEO of Birchcliff stated "Birchcliff's team is very proud of achieving significant reserves and production growth through drilling operations and not by acquisition. Birchcliff has made significant progress in the expansion and development of its Montney/Doig Natural Gas Resource Play and its Worsley Light Oil Resource Play. On the Montney/Doig Natural Gas Resource Play we have built our own gas processing infrastructure and have added significant reserves at very attractive finding costs. With respect to the Montney/Doig Play alone, we now have 158 million boe of proved plus probable reserves booked to 76.1 net sections out of the 263.7 net sections of land we presently hold which provides in excess of 1,000 net potential Montney/Doig horizontal natural gas drilling locations".
2010 Highlights
- Increased proved plus probable reserves to 201.1 million boe, a 28% increase from 157.3 million boe at December 31, 2009 and a 104% increase from 98.5 million boe at December 31, 2008. Birchcliff's proved plus probable reserves are comprised of 18% light oil and NGL's and 82% natural gas.
- 2010 Finding, Development and Acquisition costs on a proved plus probable basis were $4.49 per boe, excluding future development costs and $8.34 per boe, including future development costs.
- Birchcliff added 10.2 boe of proved plus probable reserves for each boe that was produced (1,020% reserve replacement).
- Proved plus probable reserves per share increased by 26.5% at December 31, 2010.
- 2010 average production was 13,079 boe per day, which is a 17% increase over 2009 average production of 11,216 boe per day.
- Birchcliff averaged 16,375 boe per day in the fourth quarter of 2010, a 25% increase over the third quarter of 2010.
- Average daily production for the month of December 2010 was 19,102 boe per day.
- Production per share increased by 10.4% during 2010.
- 2010 cash flow of $100.4 million or $0.81 per share ($0.79 per diluted share).
- 2010 earnings of $5.9 million or $0.05 per share ($0.05 per diluted share) notwithstanding extremely low natural gas prices, compared to a $24 million loss in 2009.
- 2010 operating costs per boe (excluding transportation and marketing costs) were $7.70, down 13.4% from $8.89 per boe in 2009.
- Total capital expenditures for 2010 were $220 million.
- 2010 Year End Debt, including working capital deficiency, was $337.4 million. Total bank debt was $333.5 million against available lines of credit of $375 million.
- Achieved a 2010 operating netback recycle ratio of 5.8 and a cash flow netback recycle ratio of 4.7, in each case based on Finding, Development and Acquisition costs, proved plus probable reserves and excluding future development costs.
- Estimated net asset value at December 31, 2010 is $16.80 per diluted share, an increase of 6.4% over the $15.79 per diluted share at December 31, 2009, notwithstanding the natural gas price forecast for the years 2011 to 2015 used in valuing our reserves decreased by more than 31%. Each net asset value was determined using the net present value of all reserves at a 10% discount rate, deducting total debt, assuming exercise of all options and warrants and without including any additional value for Birchcliff's substantial high working interest, undeveloped land base.
- Birchcliff's reserve life index on a proved plus probable basis at December 31, 2010 was 29.8 years (assuming a production rate of 18,500 boe per day).
- Drilled 48 (40.0 net) Montney/Doig horizontal natural gas wells since November of 2007.
- At December 31, 2010 Birchcliff had increased its potential Montney/Doig horizontal natural gas well drilling locations to 950, up from 700 on December 31, 2009 as a result of land acquisitions, production performance and drilling success.
- Continued expansion of the Worsley Light Oil Resource Play.
- Excellent drilling results including exploration successes and expanded application of horizontal drilling and multi-stage fracture stimulation technology in Birchcliff's resource play areas.
- Both Phases I and II of the Pouce Coupe South Gas Plant ("PCS Gas Plant") commenced processing ahead of schedule and on budget, with a combined design processing capacity of 60 mmcf/day.
- Development of new resource plays in the Peace River Arch including technical work and the acquisition of large contiguous blocks of prospective lands totaling 165,819 gross (163,128 net) undeveloped acres.
2010 Fourth Quarter Results
- 2010 fourth quarter average production was a record 16,375 boe per day, with production averaging 19,102 boe per day in the month of December.
- Cash Flow for the quarter was $29.6 million or $0.24 per share and earnings were $2.6 million or $0.02 per share, notwithstanding weak natural gas prices which averaged $3.64/mmbtu AECO spot during the quarter.
- Operating costs were $6.92 per boe continuing the quarter over quarter downward trend.
- Drilling results for the fourth quarter 2010 included the drilling of 11 (10.07 net) wells, including 9 (8.67 net) oil wells and 2 (1.4 net) Montney/Doig horizontal natural gas wells with no dry holes.
- Birchcliff drilled 8 successful 100% owned development oil wells in our Worsley Light Oil Resource Play of which 4 were horizontal wells.
- Birchcliff also drilled its first Halfway horizontal light oil well utilizing multi-stage fracture stimulation technology during the fourth quarter 2010, this well was brought on production in the first quarter of 2011.
- Birchcliff received Energy Resources Conservation Board approval for Phase III of its PCS Gas Plant, subject to normal industry conditions, which will add up to another 60 mmcf per day of processing capacity bringing the total processing capacity to 120 mmcf per day. The decision to proceed with construction of Phase III will be made in the second quarter of 2011 and is primarily subject to the outlook for natural gas prices.
- Continued expansion of Birchcliff's footprint on the Montney/Doig Natural Gas Resource Play in the Pouce Coupe area of North West Alberta with the acquisition of contiguous blocks of high working interest land through private transactions and Alberta Crown land sale purchases.
- Birchcliff's successful land strategy resulted in expanding our undeveloped land base to 500,069 gross (456,952 net) acres up from 398,308 gross (353,150 net) acres at December 31, 2009, with an 91% average working interest.
2011 Budget Highlights
- A 2011 capital budget of $159 million.
- Average annual 2011 production is expected to be approximately 18,500 boe per day, a 41% increase over 2010.
- Continued focus on reduction of field operating costs.
- Birchcliff expects to drill 17 (13.6 net) Montney/Doig horizontal natural gas wells in 2011 bringing the total horizontal wells drilled by Birchcliff since 2007 to 65 (53.6 net), all of which are expected to be on production by year end 2011.
- At Worsley, Birchcliff will continue its full cycle exploration, exploitation and development program, including drilling 15 (15.0 net) oil wells of which 11 (11.0 net) are light oil horizontal wells.
- Further evaluation of new resource plays in the Peace River Arch and development of commercialization strategies, with a focus on oil opportunities.
- Birchcliff expects to fund the vast majority of this capital expenditure program out of cash flow.
Jeff Tonken, President and CEO of Birchcliff said "Birchcliff continues to develop and expand its two proven resource plays, the Montney/Doig Natural Gas Resource Play and the Worsley Light Oil Resource Play."
"These plays are characterized by repeatable and predictable opportunities with scalable development potential in focused areas where we have substantial ownership and control of the necessary infrastructure which results in low finding and development costs and low operating costs. In addition, Birchcliff has a significant amount of undeveloped land (91% average working interest), to which no reserves have been booked that surround or are proximal to our core production. This land base is our engine for growth in the future."
2010 Reserves Evaluation and Finding and Development Costs
Birchcliff has had its reserves evaluated by AJM Petroleum Consultants ("AJM"), an independent qualified reserves evaluator, in accordance with National Instrument 51-101 effective at December 31 in each of the years 2007, 2008, 2009 and 2010. Reserves estimates stated herein for any of those years are extracted from the relevant evaluation prepared by AJM.
In its evaluation report dated February 9, 2011 (the "AJM Evaluation"), AJM has estimated that at December 31, 2010, Birchcliff had 201.1 mmboe of proved plus probable reserves and 114.0 mmboe of proved reserves. Birchcliff's proved plus probable reserves are comprised of 18% light oil and NGL's and 82% natural gas.
AJM's Evaluation estimates Birchcliff's reserves and pre-tax discounted future net revenues based on forecast prices and costs are set forth in the following table:
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NPV 0% NPV 5% NPV 8% NPV 10%
mmboe (MM$) (MM$) (MM$) (MM$)
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2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
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Proved
Developed
Producing 30.8 20.6 1,007 790 787 607 696 534 647 495
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Total Proved 114.0 90.0 3,361 3,202 2,235 2,055 1,817 1,651 1,600 1,446
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Probable 87.1 67.3 3,102 2,803 1,633 1,441 1,180 1,034 968 845
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Total Proved
plus probable 201.1 157.3 6,463 6,005 3,868 3,496 2,997 2,685 2,568 2,291
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(1)Note: NI 51-101 disclosure requires Birchcliff to provide the following
warning - The estimates of discounted future net revenues disclosed in
this table do not represent fair market values.
(2)Note: AJM relied upon its then current forecast of commodity prices which
can be found at www.ajmpetroleumconsultants.com.
The natural gas price forecast used by AJM in the AJM Evaluation for the years 2011 through 2015 is approximately $2.27 per mcf lower than the forecast used by AJM for the same years in its 2009 reserves evaluation. Notwithstanding the natural gas price forecast for these years decreased by more than 31%, the net present value (at a 10% discount rate) increased by 12% as a result of the additional reserves that are included in the AJM Evaluation.
During 2010, Birchcliff increased its reserves as follows:
- proved plus probable reserves increased by 28% to 201.1 mmboe which is an increase of 43.8 mmboe compared to its proved plus probable reserves at year end 2009 of 157.3 mmboe;
- total proved reserves increased by 27% to 114.0 mmboe compared to its total proved reserves in 2009 of 90.0 mmboe;
- proved developed producing reserves increased by 50% to 30.8 mmboe compared to its proved developed producing reserves in 2009 of 20.6 mmboe; and
- Birchcliff ended 2010 with 30.8 mmboe of proved developed producing reserves after producing 4.8 mmboe and adding 15.0 mmboe of new proved developed producing reserves. These reserve additions are 73% of the 20.6 mmboe of proved developed producing reserves at year end 2009.
Birchcliff increased its proved plus probable reserves per share by 27% from 2009 and its total proved reserves per share by 25% from 2009 using shares outstanding at year end.
During 2010, Birchcliff added 3.1 boe of proved developed producing reserves for each boe that was produced (310% reserve replacement on a proved developed producing basis).
During 2010, Birchcliff added 10.2 boe of proved plus probable reserves for each boe that was produced (1,020% reserve replacement on a total proved plus probable basis).
The net present value (NPV 10%) of total proved plus probable reserves amounted to $2.57 billion, an increase of 12.2% from $2.29 billion in 2009. The net present value of total proved reserves amounted to $1.60 billion, an increase of 10.3% from $1.45 billion in 2009. Each of these net present value amounts is calculated using the pre-tax present value of the reserves estimated by AJM discounted at 10% without including any additional value for Birchcliff's substantial high working interest, undeveloped land base.
Finding and Development Costs
During 2010, Birchcliff's net capital expenditures were $220 million which included approximately $234 million for exploration and development (including $72.3 million for gas plant construction, pipelines, facilities and well equipment) and $1.5 million for administrative assets, less $15.5 million of net dispositions.
The following table sets forth Birchcliff's estimates of its Finding and Development costs per boe ("F&D") based on $234 million of capital and its Finding, Development and Acquisition costs per boe ("FD&A") based on $218.5 million of capital.
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FD&A Costs per boe Excluding Future Three Year
Development Capital 2010 2009 2008 Average
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F&D - Exploration and Development
- Proved $ 9.09 $ 2.57 $ 9.09 $ 6.29
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F&D - Exploration and Development
- Proved plus probable $ 5.49 $ 1.57 $ 4.99 $ 3.71
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Acquisitions - Proved $ 0.62 $ 8.84 $37.11 $ 3.96
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Acquisitions - Proved plus probable $ 0.31 $ 6.32 $21.59 $ 2.09
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FD&A - Total - Proved $ 7.61 $ 2.63 $ 9.40 $ 6.02
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FD&A - Total - Proved plus probable $ 4.49 $ 1.61 $ 5.17 $ 3.53
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FD&A Costs per boe Including Future
Development Capital (1)
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F&D - Exploration and Development
- Proved $13.01 $ 7.12 $20.17 $12.48
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F&D - Exploration and Development
- Proved plus probable $ 9.89 $ 5.36 $13.98 $ 9.24
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Acquisitions - Proved $ 0.62 $ 8.84 $37.11 $ 3.96
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Acquisitions - Proved plus probable $ 0.31 $ 6.32 $21.59 $ 2.09
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FD&A - Total - Proved $11.12 $ 7.13 $20.36 $11.97
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FD&A - Total - Proved plus probable $ 8.34 $ 5.37 $14.06 $ 8.81
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(1) Includes the increase in future development capital for 2010 over 2009
of $100.8 million on a proved basis and $187.2 million on a proved plus
probable basis.
AJM's estimates of future development costs are $769.3 million on a proved basis and $1.14 billion on a proved plus probable basis, which includes approximately $57 million for the Phase III expansion of the PCS Gas Plant up to 120 mmcf per day of total capacity.
Reserve Life Index
Birchcliff's proved plus probable reserve life index is 29.8 years and its proved reserve life index is 16.9 years. Each reserve life index is calculated by dividing the aggregate reserves at December 31, 2010 by an average daily production rate of 18,500 boe per day.
Montney/Doig Natural Gas Resource Play Reserve Details
Birchcliff increased by 39% its proved plus probable Montney/Doig reserves attributed to horizontal wells to 158.4 mmboe at December 31, 2010,as compared to approximately 114.1 mmboe at December 31, 2009.
The following tables sets forth reserves data attributable to Birchcliff's horizontal wells on the Montney/Doig Natural Gas Resource Play, the number of horizontal wells to which reserves were attributed and the future capital associated with such reserves:
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Montney/Doig Natural Gas Resource Play Reserves Data
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Natural Gas Total
Natural Gas (Bcf) Liquids (mbbl) (mboe)
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2010 2009 2010 2009 2010 2009
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Proved Developed
Producing 99.3 41.2 658.2 263.7 17,213.6 7,138.7
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Total Proved 494.4 352.3 3,570.6 2,238.8 85,970.0 60,952.0
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Proved plus
probable 910.5 660.0 6,653.2 4,145.4 158,403.2 114,150.6
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Existing Horizontal Wells and
Future Horizontal Well Locations
--------------------------------------- Net Future Capital
Gross Net ($millions)
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2010 2009 2010 2009 2010 2009
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Proved Developed
Producing 48 21 40.0 18.4 0 17.8
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Total Proved 221 167 177.3 132.0 596.7(1) 547.0
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Proved plus probable 321 253 259.0 199.7 938.3(1) 811.4
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(1) Includes Future Plant Capital of approximately $57 million for the
expansion of the PCS Gas Plant to 120 mmcf per day of total capacity.
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Montney/Doig Land and 2010 2009
Horizontal Wells Data Gross Net Gross Net
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Number of sections to which AJM
attributed reserves 91.2 76.1 78.4 63.4
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Number of existing wells and future
horizontal well locations to which
AJM attributed reserves 321 259.0 253 199.7
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Average proved plus probable reserves
attributed by AJM per existing
horizontal well 4.2 Bcfe
----------------------------------------------------------- 3.5 Bcfe (1)
Average proved plus probable reserves
attributed by AJM per future horizontal
well location 3.9 Bcfe
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Average cost per well as forecast by AJM $4.0 million $4.0 million
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Average number of net existing horizontal
wells and future horizontal well
locations per net section to which
reserves were attributed by AJM 3.4 3.1
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(1) Average of the reserves assignments for all existing horizontal wells
and future horizontal well locations to which reserves were attributed
by AJM.
Birchcliff believes that the ultimate recovery from its Montney/Doig horizontal natural gas wells will continue to improve year over year as production declines continue to flatten. In addition, as drilling and completion technologies continue to improve, recovery factors and production rates in this unconventional reservoir should also improve.
Drilling success in a second stratigraphic zone, the Middle/Lower Montney, has resulted in significant reserve assignments by AJM to 49.6 (40.2 net) sections of land. There are now 29.2 (23.1 net) sections to which AJM has assigned reserves in respect of both the Basal Doig/Upper Montney and the Middle/Lower Montney stratigraphic zones.
Birchcliff believes that at December 31, 2010 it had at least 950 net potential future Montney/Doig horizontal natural gas well locations on its lands. These potential locations are comprised of 219 net future horizontal well locations to which reserves have been assigned in the AJM Evaluation, and 731 net potential future horizontal locations on Birchcliff's trend land. These potential locations assume 4 horizontal wells per stratigraphic zone per section.
Trend land is land which Birchcliff believes has a high likelihood of extending the Montney/Doig Natural Gas Resource Play based on technical information including geological and geophysical data.
Worsley Light Oil Resource Play Reserve Details
Birchcliff is pleased to report that the Worsley Light Oil Pool continues to prove itself as a top quality asset. Both the original oil in place and the estimated recoverable reserves for the pool continue to grow. As of December 31, 2010, AJM estimated reserves for the Worsley Light Oil Pool to be 28.2 mmboe proved plus probable, 6.8 mmboe proved developed producing and 18.8 mmboe proved. This continues the growth trend for the Worsley reserves since July 1, 2007 (being the effective date of the acquisition),when recoverable reserves were estimated at 15.1 mmboe proved plus probable and 11.3 mmboe proved.
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History of Reserves Estimated for Worsley Light Oil Pool (mmboe)
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Dec 31, Dec 31, Dec 31, Dec 31, July 1,
2010 2009 2008 2007 2007
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Proved Reserves 18.8 18.3 17.5 15.0 11.3
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Proved + Provable Reserves 28.2 26.3 24.6 21.2 15.1
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New Resource Plays
In Birchcliff's core area of the Peace River Arch, numerous industry competitors have announced significant developments on a number of different resource plays. Throughout 2010 and the beginning of 2011 there has been significant lands posted and acquired in the Peace River Arch area and numerous new wells have been drilled and completed targeting these new resource plays.
Birchcliff continues to spend significant time analyzing and evaluating various new resource plays in the Peace River Arch.
During 2010, Birchcliff has acquired 165,819 gross (163,128 net) acres of undeveloped land and to date in 2011 Birchcliff has acquired 56,160 gross (54,694 net) acres of undeveloped lands that Birchcliff believes are prospective for one or more of these new resource plays. As is consistent with our corporate strategy, Birchcliff has acquired several large contiguous blocks at 100% working interest. Some of these lands are also prospective for the Montney/Doig Natural Gas Resource Play or the Worsley Light Oil Resource Play.
We are early in the development of these new resource plays, however, based on the high level of industry activity and our internal technical evaluation, we are optimistic about their potential ultimate value.
2010 Results
2010 Unaudited Financial & Operating Results
All financial and operating information in this press release for the year ended December 31, 2010 are based on estimated unaudited financial results for the year and are subject to the same limitations as discussed under Forward Looking Statements set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2010 and changes could be material. Birchcliff's audited financial results are scheduled to be released on March 17, 2011.
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Year ended December 31,
($000's, except for share information) 2010 2009
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Petroleum and natural gas revenue 189,978 150,669
Total revenue, net royalties 173,045 135,327
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Cash flow from operations 100,351 67,476
Per share - basic ($) 0.81 0.57
Per share - diluted ($) 0.79 0.56
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Net earnings (loss) 5,902 (24,252)
Per share - basic ($) 0.05 (0.21)
Per share - diluted ($) 0.05 (0.21)
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Capital expenditures 220,034 101,690
Total assets 995,392 837,108
Working capital deficit 3,955 20,291
Revolving credit facilities 333,468 201,230
Total debt 337,423 221,521
Shareholders' equity 577,124 554,561
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Common shares outstanding
End of period - basic 125,129,234 123,815,002
End of period - diluted 137,316,486 134,464,987
Weighted average shares for period - basic 124,629,761 117,993,314
Weighted average shares for period - diluted 127,662,373 119,786,708
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2010 Production
The 2010 average production rate was approximately 13,079 boe per day which represents an increase of approximately 17% over the 2009 average production rate of 11,216 boe per day.
In the fourth quarter of 2010 production averaged 16,375 boe per day, which is a 56% increase over fourth quarter 2009 average production of 10,515 and a 25% increase over the third quarter of 2010.
This record production growth is primarily a result of Phases I and II of the PCS Gas Plant commencing processing in March and November of 2010, respectively.
2010 Cash Flow
2010 cash flow was approximately $100.4 million or $0.81 per share ($0.79 per diluted share).
Birchcliff recorded net income of $5.9 million ($0.05 per share) for 2010 as compared to a net loss of $24.3 million ($0.21 per share) for the year 2009. These earnings are significant for two reasons. Firstly natural gas prices were extremely low, resulting in reduced margins. However, Birchcliff was profitable on a FULL CYCLE BASIS, indicating that our resource plays continue to be economic notwithstanding very low commodity prices.
Operating netback per boe for 2010 was $25.96, an increase of 19% over 2009. Cash flow netback per boe for 2010 was $21.02 which is an increase of 28% over 2009.
Cash flow for the fourth quarter of 2010 was approximately $29.6 million or $0.24 per share and $0.23 per diluted share. This is a 23% increase compared to cash flow for the third quarter of 2010 of $24.0 million or $0.19 per share and an increase of 42% over the fourth quarter 2009 cash flow of $20.9 million or $0.17 per share.
Birchcliff recorded net income of $2.6 million ($0.02 per share) for the fourth quarter of 2010 as compared to a net income of $1.6 million ($0.01 per share) in the fourth quarter of 2009. The increase in net income during the fourth quarter of 2010 was mainly attributable to higher production.
2010 Year End Debt and Capitalization
At December 31,2010, Birchcliff's bank debt was $333.5 million from available credit facilities aggregating $375 million. As such, Birchcliff has significant credit capacity and financial flexibility. At December 31, 2010, Birchcliff's working capital deficiency was $3.9 million and total debt was $337.4 million.
Birchcliff expects that as a result of its significant 2010 reserve additions, its bank credit facilities will be increased during its normal credit review in May 2011.
At December 31, 2010, Birchcliff had 125,129,234 common shares outstanding and 137,316,486 fully diluted common shares.
Recycle Ratios
The following table shows Birchcliff's operating and cash flow netback recycle ratios:
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Operating Netback Cash Flow Netback
Recycle Ratios Recycle Ratio Recycle Ratio
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2010 2009 2010 2009
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Recycle Ratio Excluding Future
Development Capital
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F&D - Exploration and Development
- Proved Plus Probable 4.7 13.9 3.8 10.5
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FD&A - Exploration, Development and
Acquisition - Proved Plus Probable 5.8 13.5 4.7 10.3
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Recycle Ratio Including Future
Development Capital
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F&D - Exploration and Development
- Proved Plus Probable 2.6 4.1 2.1 3.1
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FD&A - Exploration, Development and
Acquisition - Proved Plus Probable 3.1 4.1 2.5 3.1
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The recycle ratios in the above table are calculated in each case by dividing the average operating netback per boe or cash flow netback per boe, as the case may be, by each of F&D and FD&A.
Birchcliff had an estimated average 2010 operating netback of $25.96 per boe and an estimated cash flow netback of $21.02 per boe.
During 2010, the average WTI price of crude oil was $US 79.52 per barrel and the average price of natural gas at AECO was Cdn $4.01 per mmbtu.
2010 Drilling
Birchcliff's 2010 drilling program, which offered a mixture of moderate to high impact development and exploration prospects, focused on our two resource plays, the Montney/Doig Natural Gas Resource Play and the Worsley Light Oil Resource Play. During 2010, Birchcliff drilled 56 (48.24 net) wells, all of which were cased except for 1 (1.0 net) dry hole. These wells included 26 (21.8 net) gas wells, and 29 (25.44 net) oil wells.
In the Pouce Coupe area Birchcliff drilled 23 (18.8 net) Montney/Doig horizontal natural gas wells utilizing multi-stage fracture stimulation technology. Birchcliff also drilled 1 (1.0 net) Montney/Doig vertical exploration well. In the Pouce Coupe area Birchcliff also drilled and completed its first, 100% working interest, Boundary Lake horizontal oil well, utilizing multistage fracture stimulation technology.
Drilling activities at Worsley included 5 (5.0 net) vertical oil wells and 11 (11.0 net) horizontal oil wells on our Worsley Light Oil Resource Play. At Worsley Birchcliff also drilled a 100% working interest Leduc well that discovered a new natural gas pool.
In other areas, Birchcliff drilled a 100% working interest Gething natural gas exploration well at Rycroft. In the Progress area Birchcliff drilled and completed its first, 67% working interest, Halfway horizontal oil well utilizing multistage fracture stimulation technology. Birchcliff was also active in the Progress area drilling 6 (3.54 net) vertical and 4 (3.23 net) horizontal wells on its Doe Creek oil pool.
2010 Land
Birchcliff's undeveloped land base at December 31, 2010 consisted of 500,069 gross (456,952 net) undeveloped acres, which is a 91% average working interest. This is a 29% increase over its 2009 year end net undeveloped land base of 353,150 net undeveloped acres. Further, this is a 509% increase over the 75,000 net undeveloped acres it acquired in the significant Peace River Arch area acquisition completed on May 31, 2005.
Birchcliff's land base primarily consists of large contiguous blocks of high working interest acreage located near facilities owned and/or operated by Birchcliff or near third party infrastructure. A significant amount of the land purchased is a direct result of the exploration and development success by Birchcliff in the Peace River Arch. The vast majority of the new land has been purchased without partners at 100% working interest.
2011 Capital Budget
Birchcliff is very pleased to announce its robust 2011 capital budget of $159 million. Birchcliff expects to drill 44 (36.3 net) wells in 2011. Details of the budget are as follows:
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Net
Gross Net Capital
2011 Capital Budget Wells Wells ($millions)
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Drilling & Development
Basal Doig/Upper Montney Horizontal Natural
Gas Wells 9 7.1 37.0
Mid/Lower Montney Horizontal Natural Gas
Wells 8 6.5 36.3
Worsley Charlie Lake Horizontal Oil Wells 11 11.0 28.0
Worsley Charlie Lake Vertical Oil Wells 4 4 5.5
Progress Doe Creek Oil Wells 8 4.2 3.0
Other Oil Wells 3 2.5 6.2
Disposal Well 1 1.0 2.8
Total Drilling & Development 44 36.3 $ 118.8
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Facilities 9.7
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Production Optimization 15.9
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Land, Seismic & Other 14.6
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Total Net Capital $ 159.0
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Birchcliff expects to fund the vast majority of this capital expenditure program out of cash flow.
2011 Production
Current production based on field estimates is approximately 18,300 boe per day.
Birchcliff expects that its 2011 production rate will average approximately 18,500 boe per day which represents annual average production growth of 41% over 2010.
Birchcliff expects to average 17,500 boe per day during the first half of 2011 and 19,500 boe per day during the second half of 2011.
The 2011 production forecast assumes that no unexpected outages occur in the infrastructure that Birchcliff relies on to produce its wells and that existing wells and future wells continue to meet production expectations.
2011 Operations Update
Birchcliff has been very active in the first quarter of 2011 with its focus on Montney/Doig horizontal natural gas wells in Pouce Coupe, horizontal light oil wells in Worsley. In addition we are conducting the technical and scientific work necessary to evaluate the potential of the opportunities on these new plays with a focus on oil opportunities.
Currently Birchcliff has 4 drilling rigs at work. 2 rigs are active at Pouce Coupe drilling Montney/Doig horizontal natural gas wells and 2 rigs are active at Worsley drilling Charlie Lake horizontal oil wells. Drilling results to date include the drilling of 5 (4.4 net) wells, consisting of 3 (3.0 net) successful horizontal Charlie Lake light oil wells at Worsley, and 2 (1.4 net) successful Montney/Doig horizontal natural gas wells in Pouce Coupe.
In the first half of 2011, total capital expenditures are expected to be approximately $75.8 million.
Appointment of New Director
Birchcliff is pleased to announce that Mr. Kenneth N. Cullen C.A. has been appointed today as an additional Director of Birchcliff.
Prior to his retirement in 2006, Mr. Cullen was a partner with Deloitte & Touche LLP for 30 years where he practiced in the Assurance and Advisory group. During that time he worked with many public oil and gas companies.
Based on Mr. Cullen's financial background and his knowledge of the oil and gas industry, he will be an excellent addition to Birchcliff's Board of Directors.
Mr. Cullen was also appointed as a member of the Audit Committee, the Reserves Evaluation Committee and the Compensation Committee of the Board of Directors.
Shareholder Support
We thank Mr. Seymour Schulich who continues to provide his sage advice and support to our executive team. Recently, Mr. Schulich, again, demonstrated his commitment to Birchcliff when he increased his share position to 33 million shares representing 26.3 % of the current issued and outstanding shares.
Outlook
Birchcliff made the following statement in the outlook section of its year end press release dated February 18, 2010:
"Birchcliff's 2010 goal is to convert its long life reserves into production. Birchcliff has the potential to increase production by 80% during the next 12 months to 19,000 boe per day. We also see continued significant production and reserves growth from our existing asset base in 2011 and into the future.
Birchcliff has established two low cost resource plays. The 2009 reserve additions demonstrate that Birchcliff has the ability to add low cost reserves and production on a repeatable basis. We have a reserve life index on a proved plus probable basis of 30.8 years."
Birchcliff is extremely pleased to report to its shareholders that it achieved its 2010 goals. We believe that as a result of hard work, low cost reserve additions,exploration and production success, keeping a close eye on expenses and the completion of our PCS Gas Plant, Birchcliff has established itself as a low cost finder and producer.
Birchcliff is assessing the opportunity to expand its PCS Gas Plant, which will allow us to continue to grow our production, cash flow and reserves. This will also allow us to move a significant amount of reserves into the proved developed producing category which is key in maximizing shareholder value.
We remain focused on our map sheet. We believe in growth by the drill bit which ultimately adds reserves and production at a low cost.
In light of the quality of the asset base and the skills and determination of our employees, we expect to be able to achieve our 2011 production and reserves goals from internal cash flows and existing credit facilities.
We look forward to an excellent year.
Advisory
Unaudited Numbers: Birchcliff's annual audit of its financial statements is not yet complete and accordingly all financial amounts referred to in this press release are management's best estimates which have not yet been audited.
Finding and Development Costs: With respect to disclosure of finding and development costs disclosed above:
(a) The amounts of finding and development and/or acquisition costs contained in the table and disclosure set forth above for each of the years 2008, 2009 and 2010 are calculated by dividing the total of the net amount of the particular costs noted in each line incurred during such year by the amounts of additions to proved reserves and proved plus probable reserves during such year that resulted from the expenditure of such costs.
(b) In calculating the amounts of finding and development and/or acquisition costs for a year, the changes during the year in estimated future development costs and in estimated reserves are based upon the evaluations of Birchcliff's reserves prepared by AJM Petroleum Consultants effective December 31 of such year.
(c) National Instrument 51-101 requires the inclusion of the following warning statement:
The aggregate of the exploration and development costs incurred in the most recent financial year and any change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.
Reserves For Portion of Properties: With respect to the disclosure of reserves contained herein relating to portions of Birchcliff's properties, 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 revenues for all properties due to the effects of aggregation.
BOE Conversions: The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent ("6:1"). A boe conversion ratio of 6:1 is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Forward Looking Statements: This document contains forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") under applicable securities law regarding the business and operations of Birchcliff Energy Ltd. The use of words such as "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and similar expressions are intended to identify forward looking statements. All statements other than statements of historical fact contained here are forward-looking statements. In particular, this document contains statements as to recoverable reserves volumes and associated future net revenues and numbers of future wells that may be drilled are forward looking statements.
The forward looking statements are based upon various assumptions as to future commodity prices, currency exchange rates, inflation rates, future well production rates, well drainage areas, success rates of future well drilling and future costs and availability of labor and services.
With respect to estimates of reserves volumes and associated future net revenues and numbers of future wells to be drilled, a key assumption is the validity of the commodity prices, currency exchange rates, future capital and operating costs and well production rates forecast by AJM in the AJM Evaluation.
With respect to the number of future wells to be drilled and the future production rates, another key assumption is the validity of the geological and other technical interpretations that have been performed by Birchcliff's technical staff which indicate that commercially economic reserves can be recovered from Birchcliff's lands as a result of drilling such future wells.
Undue reliance should not be placed on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Although the Corporation believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
All forward-looking statements necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources.
The forgoing list of risk factors is not exhaustive. Additional information on these and other risks factors that could affect operations or financial results are included in the Corporation's Annual Information Form and in other reports filed with Canadian securities regulatory authorities. The forward-looking statements contained in this document are based on estimates and opinions of management at the time the information is presented. The Corporation is not under any duty to update the forward-looking statements after the date of this document to conform such information to actual results or to changes in the Corporation's plans or expectations, except as otherwise required by applicable securities laws.
Birchcliff is a publicly traded company that trades on the TSX Exchange under the symbol "BIR".
This press release is not for distribution to United States Newswire Services or for dissemination in the United States.The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
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