Petrolifera has received the estimates of the company's 1P ("Total Proved"), 2P ("Total Proved plus Probable") and 3P (Total Proved plus Probable plus Possible) reserves, as prepared by GLJ Petroleum Consultants of Calgary, Alberta ("GLJ") in a report with an effective date of December 31, 2008 ("GLJ 2008 Report"). The company's reserves declined on a year over year basis, reflecting 2008 production and sales, technical revisions primarily arising from some current complications with the efficiency of the company's waterflood at Puesto Morales Norte in the Neuquén Basin, Argentina, offset positively by modest recognition of reserve additions through exploration and improved recovery in Argentina and by the initial recognition of reserves for the company in Colombia.
The GLJ 2008 Report and the estimates provided herein were 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 Petrolifera's reserves are to estimates contained in a report prepared by GLJ with an effective date of December 31, 2007 ("GLJ 2007 Report"). The GLJ 2008 Report was prepared utilizing the GLJ January 1, 2009 price forecast, effective December 31, 2008 and adjusted to Petrolifera's asset mix and specific pricing circumstances in Argentina and in Colombia. In the GLJ 2008 Report, future net revenue is calculated after deduction 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 pre-tax present value of future net revenue ("present value") is calculated by GLJ using various discount rates; this release will provide undiscounted future net revenue and the 10 percent present value thereof.
Reserve Volumes and Values
The GLJ 2008 Report estimated that, after production of approximately 2.4 million barrels of crude oil and natural gas liquids, Petrolifera's 1P crude oil and natural gas liquids ("NGL") reserves decreased 25 percent to 11.3 million barrels as at December 31, 2008, compared to 15.1 million barrels at December 31, 2007. The decrease primarily reflects production and technical revisions, associated with recovery factors related to waterflood performance and offset by new discoveries of proved reserves, the majority of which are in the proved producing category. As 1P reserves declined, there is no basis for calculating reserve replacement ratios.
Petrolifera's 1P natural gas reserves also declined by almost 6 Bcf or 36 percent to 10.5 Bcf after deduction of record production in 2008 of 1.9 Bcf and the impact of technical revisions, offset by exploration discoveries.
Petrolifera's 2P crude oil and NGL reserves decreased 20 percent to 17.2 million barrels, reflecting the impact of production and waterflood related technical revisions, offset by exploration success and improved recovery at certain wells. At December 31, 2007, 2P crude oil and NGL reserves were 21.5 million barrels.
On an equivalent basis, Petrolifera's 1P reserves totaled 13.0 million boe at year end 2008 compared to 17.8 million boe in 2007, for a decrease of 27 percent. These reserves were forecast to generate $284 million of future net revenue, with an estimated pre-tax 10 percent present value ("10% PV") of $212 million.
On an equivalent basis, Petrolifera's 2P reserves were estimated to total 20.0 million boe at December 31, 2008 compared to 25.6 million boe in 2007 after production of 2.8 million boe and negative technical revisions, partially offset by new discoveries. GLJ estimates these reserves will generate $493 million of future net revenue, with an estimated pre-tax 10% PV of $328 million. The company's calculated reserve life index, calculated by dividing remaining 2P reserves at December 31, 2008 by 2008 total boe production, was approximately 7.1 years.
Petrolifera also commissioned GLJ to provide an estimate of possible reserves, which were last estimated effective December 31, 2007. GLJ estimated the company's 3P crude oil and NGL reserves to be 25.3 million barrels, with 3P natural gas reserves estimated at 24.8 Bcf and 3P equivalent reserves were estimated at 29.5 million boe. These reserves are estimated to generate $830 million of future net revenue with an estimated pre-tax 10% PV of $505 million.
The volume of possible reserves estimated at 9.4 million boe underscores continuing recognition of the development potential for both crude oil and natural gas of the lands reviewed in the GLJ 2007 Report, which included the La Pinta prospect in Colombia and the Puesto Morales/Rinconada concessions in Argentina. These estimates did not include a review of the company's undeveloped exploratory concessions at Vaca Mahuida, Puesto Guevara and Gobernador Ayalla II, all in Argentina nor of Petrolifera's exploratory holdings outside of the La Pinta prospect in Colombia and none of the company's extensive holdings in Peru.
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