Connacher's estimates of its Total Proved ("1P") bitumen ("heavy oil") reserves, as prepared by GLJ Petroleum Consultants Ltd., independent qualified reserves evaluators, ("GLJ"), more than tripled during 2008 to 175.5 million boe, reflecting the impact of its active first quarter core hole program and regulatory approval of its second 10,000 bbl/d steam-assisted gravity drainage ("SAGD") project at Algar.
The estimates are after production of 2.1 million barrels of bitumen (heavy oil) at Great Divide Pod One. The estimates of the company's 1P bitumen (heavy oil) reserves increased 59 percent since mid-year 2008, primarily reflecting the upgrading of Algar reserves from the probable category to proved reserves. After production of approximately 1.1 million boe during 2008, the company's conventional 1P Reserves also increased eight percent to 7.4 million boe.
Total corporate 1P Reserves, combining bitumen and conventional Reserves, increased 205 percent to 183 million barrels during 2008 and increased 56 percent from mid-year 2008. Total corporate 2P Reserves increased 103 percent during 2008 to 379 million boe. Despite the adoption by GLJ of a more conservative price deck in their year-end 2008 evaluation and after the impact of the application of the new Alberta royalty program, the estimate of Connacher's 10 percent pre-tax present value of future net revenue from its 2P Reserves increased by 29 percent from $1.2 billion at year-end 2007 to $1.5 billion as at December 31, 2008.
On a combined basis, the company's Reserve Replacement ratio, calculated by dividing 1P and 2P Reserve additions by 2008 production, was approximately 38 times (38X) for 1P Reserves and 60 times (60X) for 2P Reserves. Finding and development costs will be reported when the company releases its year end 2008 audited financial and operating results, scheduled for March 19, 2009.
Henceforth, in this press release, bitumen and heavy oil are terms used interchangeably. Also, in this press release, unless otherwise stated, reserves refer to reserves of either bitumen or conventional crude oil, natural gas or natural gas liquids or barrels of oil equivalent ("boe") and resources refers to bitumen resources. Future net revenue is calculated after the deduction, from forecast revenue, of forecast royalties, operating expenses, capital expenditures and well abandonment costs, but before corporate overhead or other indirect costs, including interest and income taxes. The 10 percent pre-tax present value of future net revenue is also referred to as "present value" or "present worth" or "PV". Certain amounts cited herein have been rounded for presentation purposes.
The reserve estimates provided herein were prepared by GLJ in a report ("GLJ 2008 Year-End Report") with an effective date of December 31, 2008. The GLJ 2008 Year-End Report was prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and in accordance with National Instrument 51-101 ("NI 51-101").
Comparisons provided herein with respect to Connacher's conventional and bitumen reserves and resources are to estimates contained in a report prepared by GLJ with an effective date of June 30, 2008 ("GLJ Mid-Year 2008 Report") and to estimates in a report prepared by GLJ with an effective date of December 31, 2007 ("GLJ 2007 Year-End Report").
All new reserve estimates are as at December 31, 2008 and include the results of Connacher's drilling program subsequent to the effective date of the GLJ 2008 Mid-Year Report but do not include drilling results in 2009.
Possible reserves were only evaluated with respect to Connacher's bitumen reserves. Connacher's conventional crude oil and natural gas reserves were not evaluated in the possible reserves category.
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