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FOR: NUVISTA ENERGY LTD.

TSX SYMBOL: NVA - |  View Quote |  View Chart |  View Financials | 

NuVista Energy Ltd. Provides Operational Update, 2011 Guidance and Announces Equity Financings and 2010 Year End Reserves

Feb 15, 2011 - 08:06 ET

CALGARY, ALBERTA--(Marketwire - Feb. 15, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

NuVista Energy Ltd. (TSX:NVA) ("NuVista" or the "Company") is pleased to provide an operational update and 2011 guidance. In addition, to enhance financial flexibility and to fund an expanded Wapiti Montney capital program, NuVista is also pleased to announce that it has entered into private placement agreements and a "bought deal" agreement with a syndicate of underwriters, for the issuance of an aggregate of 10,500,000 common shares (the "Shares") for aggregate gross proceeds of $99.8 million (the "Offerings").

During 2010, NuVista focused on value creation through the development of its existing asset base. NuVista's 2010 capital program was focused on the evaluation of various resource plays and this has resulted in NuVista now having the largest inventory of drilling opportunities in its history. In 2011, NuVista will continue to focus on evaluating oil and liquids-rich natural gas resource plays, in particular its Wapiti Montney resource play, however a significant portion of the program will be dedicated to high return opportunities where production and cash flow increases can be realized in the near term. While the Wapiti Montney play is still in an early stage of evaluation, it has the potential to create significant long term growth and value for shareholders, even in the current low natural gas price environment. The proceeds from the Offerings will be initially used to reduce bank indebtedness and subsequently used primarily to fund an expanded Wapiti Montney capital program over the next 15 months to further de-risk this play. 

NuVista's annual audit of its consolidated financial statements is not yet complete and accordingly all financial amounts referred to in this press release are unaudited and represent management's best estimates. 

Equity Financings

NuVista is pleased to announce that the Ontario Teachers' Pension Plan ("Teachers'") and Bissett Investment Management, a division of Franklin Templeton Investments Corp. ("Bissett") have each signed a letter of intent to purchase 3,500,000 Shares, by way of a private placement, at a price of $9.50 per Share for aggregate gross proceeds of $66.5 million. TD Securities Inc. will act as sole and exclusive agent on the proposed private placement. NuVista has also entered into a "bought deal" agreement for the issuance of Shares with a syndicate of underwriters led by TD Securities Inc. and including BMO Capital Markets, CIBC, Peters & Co. Limited, RBC Capital Markets, Scotia Capital Inc., FirstEnergy Capital Corp. and Cormark Securities Inc. (collectively, the "Underwriters"), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought deal basis, 3,500,000 Shares at a price of $9.50 per Share for gross proceeds of $33.3 million. 

The Offerings are scheduled to close on or about March 8, 2011 and are subject to customary regulatory approvals including the approval of the Toronto Stock Exchange (the "TSX"). NuVista is pleased with Teachers' and Bissett's strong support of this transaction and NuVista's balanced business plan. Teachers' and Bissett's significant participation in the private placement offerings has reduced the execution risk associated with an offering of this size and assisted NuVista in achieving attractive terms. The Offerings play a key role in increasing NuVista's financial flexibility and execution of its 2011 and 2012 business plans.

This press release is not an offer of the Shares for sale in the United States. The Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such province or other jurisdiction. 

Dividend Termination

As part of NuVista's re-evaluation of its business plan and financial objectives, NuVista's Board of Directors has determined that NuVista will terminate its dividend and use this cash flow to fund its drilling program and growth opportunities. 

President & CEO Search

NuVista's Board of Directors has formed an Executive Committee consisting of Keith A. MacPhail, Clayton H. Woitas and Ronald G. Poelzer to conduct an executive search for a President & CEO. The Executive Committee retained a recruitment firm in December 2010 to assist with this search. Significant progress has been made in the search and the Executive Committee has begun interviewing candidates for this position. At this time, it is premature to predict the timing of the appointment of a President & CEO as this process is ongoing. In the interim, the Board of Directors has a high level of confidence in NuVista's management team to develop and execute NuVista's 2011 business plan and the Executive Committee will continue to assist management with key business decisions.

2011 Guidance

NuVista's Board of Directors has approved a 2011 capital program of between $160 million and $180 million. The objective of NuVista's 2011 capital program is to balance near-term operating and financial results with the continued evaluation of oil and liquids-rich natural gas resource play opportunities that have the potential to create significant future growth. NuVista's 2011 forecast cash flow of between $160 million and $180 million is based on a forecast 2011 average AECO natural gas price of $4.00/Mcf and average WTI oil price of US$90.00/Bbl. NuVista's 2011 capital program is forecast to result in 2011 average production volumes of between 26,000 boe/d and 27,000 boe/d. While below expected fourth quarter 2010 production volumes, this reflects lower capital spending in the fourth quarter of 2010 and the measured capital program approved by the Board for the first half of 2011. In addition, approximately $35 million of the 2011 capital program, or nearly 20%, will be to advance the development of the company's nearly 140 net sections of Montney rights with the expectation that limited production from this spending will occur in late 2011, at the earliest. While this strategy impacts near-term production volumes, NuVista views its Montney lands with their demonstrated productive capability and liquids-rich natural gas as a key component to future production and reserve growth.

The majority of NuVista's 2011 capital program will be allocated to a "core" capital program of high return oil and liquids-rich natural gas opportunities in its W3M/W4M and Deep Basin Core Regions. NuVista plans to drill follow-up wells to recent successes and allocate a portion of its capital program to the evaluation of new Birdbear heavy oil prospects in West Central Saskatchewan, Cardium oil opportunities in both its Wapiti and Pembina operating areas, and Spirit River/Notikewin liquids-rich natural gas opportunities in its Ferrier operating area. 

2011 "Core" Capital Program

NuVista plans to drill heavy oil wells in West Central Saskatchewan and Eastern Alberta as part of its core 2011 capital program. These heavy oil wells have the most attractive economics of NuVista's opportunity inventory. Based on the strong results from four Zoller Lake Birdbear wells drilled in the fourth quarter of 2010, NuVista plans to drill up to 16 development wells. NuVista also plans to evaluate up to five new prospective Birdbear heavy oil plays that have been identified in West Central Saskatchewan. In Eastern Alberta, NuVista plans to drill follow-up wells to its successful heavy oil well drilled in the fourth quarter of 2010. During the first quarter of 2011, NuVista has drilled and completed three follow-up wells to its West Pembina Cardium oil well in section 31-50-12W5M and a fourth follow-up well is planned for the second half of 2011. NuVista also plans to drill development wells at its Kaybob Montney natural gas property. 

During 2011, NuVista also plans to drill additional evaluation wells at the Cardium oil play in its Wapiti operating area. NuVista plans to drill and complete three Wapiti Cardium oil wells in the first quarter of 2011 and plans to drill a four well program in the second half of 2011 to identify cost efficiencies and further evaluate the economics of this play. NuVista has a large contiguous Cardium land base in its Wapiti operating area and this high resource-in-place formation has fairly homogenous reservoir characteristics. NuVista also plans to drill and test the liquids-rich Notikewin and Spirit River formations in its Ferrier operating area where competitors have had success in offsetting lands.

2011 Wapiti Montney Capital Program

The results from the evaluation of NuVista's liquids-rich Wapiti Montney natural gas resource play in 2010 met NuVista's expectations. The Wapiti Montney play derives the majority of its cash flow from liquids and therefore has significant potential even at current natural gas prices. NuVista drilled its first Montney horizontal well (100%) in its north block of landholdings and completed this well in July 2010. This well was brought on production in August with a 30 day initial production rate of 4.9 million cubic feet per day ("MMcf/d") of raw gas. The raw gas is expected to produce a total of approximately 100 barrels per million cubic feet ("Bbls/MMcf") of liquids if the raw gas were processed through a deep-cut facility. In December 2010, this well produced approximately 2.3 MMcf/d of raw natural gas with free condensate and other natural gas liquids totaling approximately 50 Bbls/MMcf after processing through a shallow-cut facility. NuVista also drilled a Wapiti Montney horizontal well in its south block of landholdings. This well experienced mechanical issues but confirmed existence of liquids-rich natural gas. NuVista has extensive Montney landholdings with approximately 140 net sections.

There has been increased industry drilling activity in the liquids-rich Montney play at Wapiti and nearby Elmworth. Based on the results from NuVista and industry wells, NuVista believes this play has the potential to create significant value for shareholders over the next several years. NuVista's Board of Directors has approved a Wapiti Montney capital program for the next 15 months totaling $70 million. Up to five delineation wells are planned to be drilled and completed prior to spring break-up in 2012 in order to further evaluate the scope and economics of this play. NuVista is planning to drill three delineation wells at its north block and two wells at its south block to further delineate this play and secure crown licenses and leases. In addition, NuVista plans to construct a compressor and dehydration facility at its north block to accommodate increased production volumes. With continued success, NuVista expects to design and investigate alternatives to construct a sour deep-cut facility in order to fully develop this property and maximize economic returns. Approximately $35 million of the approved capital program is expected to be spent in 2011 with the balance of this capital program to be spent in the first half of 2012.

2010 Operational Highlights

NuVista's 2010 drilling program was dedicated primarily to evaluating resource plays with less emphasis on near-term operating and financial results. During 2010, NuVista made significant progress evaluating six resource plays and now has the largest opportunity inventory in its history. Today, NuVista has the flexibility to pursue light oil, heavy oil, liquids-rich gas or dry gas projects depending on the commodity price environment. 

NuVista executed a 2010 capital program of approximately $225 million with the majority of that allocated to exploration and development activities. NuVista participated in 70 (51.2 net) wells of which 56 were operated and 14 were non-operated wells. This drilling program resulted in 38 oil wells, 31 natural gas wells and one dry and abandoned well. In 2010, 41 of the 70 wells drilled were horizontal wells. 

In the fourth quarter of 2010, NuVista drilled 13 (8.1 net) wells resulting in 10 (6.0 net) oil wells and 3 (2.0 net) natural gas wells. At Zoller Lake in West Central Saskatchewan, NuVista drilled 4 (3.0) heavy oil wells and results to date have exceeded expectations. NuVista also drilled 3 (0.8) Wapiti Cardium oil wells; 2 (1.3 net) Pembina Cardium oil wells and 1 (1.0 net) heavy oil well in Eastern Alberta. NuVista drilled 3 (2.0 net) natural gas wells in its Wapiti and Kaybob operating areas.

2010 Year End Reserves Evaluation

Our 2010 independent engineering evaluation, has been completed by GLJ Petroleum Consultants Ltd. ("GLJ") effective December 31, 2010 (the "GLJ Report"). 

Unless otherwise indicated, the reserves information set forth in this press release are "company interest" reserves. "Company interest" means, in relation to NuVista's interest in reserves, its working interest (operating or non-operating) share before deduction of royalties, plus NuVista's royalty interests in production or reserves. Investors are cautioned that "company interest" reserves should not be construed as an alternative to "gross" or "net" reserves calculated in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and does not have a standardized meaning under NI 51-101.

Highlights

  • Proved plus probable reserves increased by 16% to 113.1 million boe ("mmboe") and total proved reserves increased by 9% to 74.0 mmboe; 

  • On a proved plus probable basis NuVista replaced more than two times 2010 production;

  • Proved plus probable reserves per share increased by 15% to 1.27 boe/share; 

  • Finding, development and acquisition costs in 2010, after reserve revisions and including the adjustment for the change in future development capital expenditures and Alberta drilling royalty credits, were $22.04/boe on a proved basis and $18.44/boe on a proved plus probable basis; 

  • Proved developed producing reserves are 48% of total proved plus probable reserves and total proved reserves are 65% of total proved plus probable reserves;

  • Proved plus probable undiscounted future development capital included in the GLJ Report increased by $163.6 million to $410.6 million;

  • NuVista's reserve life index, based on estimated fourth quarter 2010 production was 7.2 years for total proved reserves and 11.0 years for proved plus probable reserves an increase from 9.5 years at the end of 2009; and

  • The proved plus probable future net revenues(3) before tax at a 10% discount rate decreased by $184 million to $1,402 million as the addition of reserves were more than offset by a substantial reduction in year end pricing for natural gas.

The following table outlines NuVista's finding, development and acquisition costs and recycle ratios:

 
 
 
3 Year-Average (1) (2) 2010 (1) (2) 2009 (1) (2)
    Proved plus     Proved plus     Proved plus
Proved   Probable Proved   Probable Proved   Probable
After reserve revisions and including changes in future development capital ($/Boe)  
  Finding, development and acquisition cost 20.41   16.52 22.04   18.44 14.15   11.77
  Finding and development costs 21.72   18.82 22.60   19.00 16.57   16.69
  Acquisition costs 19.56   14.89 15.10   10.66 13.27   10.51
                   
(1) 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 reserve additions for the year.
(2) Drilling credits of $17.6 million were recorded in 2010 and $10.7 million during 2009.
(3) Estimated future net revenue values do not represent fair market value.

The following table summarizes the future development capital included in the GLJ Report:

Future Development Capital ($ thousands, undiscounted) Proved   Proved
Plus
Probable
December 31, 2009 93,326   163,589
Exploration and development changes in period (1) 135,361   246,966
Acquisitions -   -
December 31, 2010 228,687   410,555
       
(1) Net of estimated drilling credits of $8.5 million for proved reserves and $11.5 million for proved plus probable reserves.

The following table provides summary reserve information based upon the GLJ Report using the published GLJ January 1, 2011 price forecast set forth below:

  Natural Gas Liquids Oil Total
Reserves Category (1) Company
Inter-
est
(MMcf)
Net
(MMcf)
Company
Inter-
est
(MBbls)
Net
(MBbls)
Company
Inter-
est
(MBbls)
Net
(MBbls)
Company
Inter-
est
(Mboe)
  Net
(Mboe)
Proved:                  
  Developed Producing 237,098 202,699 6,176 4,418 8,159 7,119 53,852   45,321
  Developed Non-Producing 27,682 23,913 778 609 497 425 5,889   5,019
  Undeveloped 54,141 48,506 1,803 1,405 3,421 2,930 14,248   12,419
Total Proved 318,921 275,118 8,758 6,432 12,077 10,474 73,989   62,759
Probable 169,984 148,000 5,228 3,800 5,525 4,619 39,083   33,085
Total Proved Plus Probable 488,904 423,118 13,986 10,232 17,602 15,093 113,072   95,844
                   
(1) Numbers may not add due to rounding.

The following table is a reconciliation of the 2010 year end reserves with the reserves reported in the 2009 year end reserves report:

 
Natural
gas
 
Liquids
 
Oil
  Total oil
Equivalent
 
Reconciliation items (1) (Bcf)   (MBbls)   (MBbls)   (MBoe)  
Total Proved    
Balance, December 31, 2009 305.2   7,530   9,595   67,984  
  Exploration and development 46.5   2,039   3,763   13,547  
  Revisions (including improved recovery) 6.7   54   416   1,588  
  Acquisitions 6.1   254   -   1,269  
  Dispositions (0.3 ) (4 ) -   (54 )
  Production (45.2 ) (1,115 ) (1,697 ) (10,347 )
Balance, December 31, 2010 319.0   8,758   12,077   73,988  
Total Proved plus Probable                
  Balance, December 31, 2009 438.7   11,099   13,607   97,816  
  Exploration and development 89.5   3,917   5,896   24,731  
  Revisions (including improved recovery) (2.2 ) (274 ) (205 ) (852 )
  Acquisitions 8.9   388   -   1,878  
  Dispositions (0.8 ) (29 ) -   (155 )
  Production (45.2 ) (1,115 ) (1,697 ) (10,347 )
Balance, December 31, 2010 488.9   13,986   17,602   113,071  
                 
(1) Numbers may not add due to rounding.  

The estimated net present values of future net revenue before income taxes associated with NuVista's reserves effective December 31, 2010 and based on published GLJ future price forecast are summarized in the following table:

The estimated future net revenue contained in the following table does not necessarily represent the fair market value of the reserves. There is no assurance that the forecast price and cost assumptions contained in the GLJ 2010 Report will be attained and variations could be material. The recovery and reserve estimates described herein are estimates only. Actual reserves may be greater or less than those calculated.

    Discount Factor (%/year)
Reserves Category (1) ($ millions)   0%   5%   10%   15%
Proved:                
    Developed Producing   1,291   996   816   696
    Developed Non-Producing   141   91   67   53
    Undeveloped   315   191   124   83
Total Proved   1,748   1,277   1,007   832
Probable   1,101   612   395   278
Total Proved Plus Probable   2,849   1,889   1,402   1,110
                 
(1) Numbers may not add due to rounding.

The following table is a summary of pricing and inflation rate assumptions based on published GLJ forecast prices and costs as at January 1, 2011:

    Natural Gas   Liquids   Oil    
Year   AECO
Gas
Price
($Cdn/
MMbtu)
  Edmon-
ton
Propane
($Cdn/
Bbl)
  Edmon-
ton
Butane
($Cdn/
Bbl)
  WTI
Cush-
ing
Okla-
homa
($US/
Bbl)
  Edmon-
ton
Par Price
40 API
($Cdn/
Bbl)
  Hard-
isty
Heavy
12 API
($Cdn/
Bbl)
  Cromer
Medium
29 API
($Cdn/
Bbl)
  Infla-
tion
Rates
%/ Year
(1)
  Ex-
change
Rate
($US/
$Cdn)
(2)
Forecast    
2011   4.16   54.32   67.26   88.00   86.22   68.79   82.78   2.0   0.98
2012   4.74   56.25   68.75   89.00   89.29   68.33   83.04   2.0   0.98
2013   5.31   57.28   70.01   90.00   90.92   67.03   83.64   2.0   0.98
2014   5.77   58.56   71.58   92.00   92.96   67.84   84.59   2.0   0.98
2015   6.22   60.60   74.07   95.17   96.19   70.23   87.54   2.0   0.98
2016   6.53   62.13   75.94   97.55   98.62   72.03   89.75   2.0   0.98
2017   6.76   63.87   78.07   100.26   101.39   74.08   92.26   2.0   0.98
2018   6.90   65.47   80.02   102.74   103.92   75.95   94.57   2.0   0.98
2019   7.06   67.21   82.15   105.45   106.68   78.00   97.08   2.0   0.98
2020   7.21   68.57   83.80   107.56   108.84   79.59   99.04   2.0   0.98
2021   +2%/yr   +2%/yr   +2%/yr   +2%/yr   +2%/yr   +2%/yr   +2%/yr   2.0   0.98
                                     
(1) Inflation rate for costs.
(2) Exchange rate used to generate the benchmark reference prices in this table.

Net Asset Value Per Share, as at December 31, 2010

     
($ thousands) 2010  
Net present value of oil and gas reserves, discounted at 10%, before tax (1) $1,402,478  
Undeveloped land (2) 123,575  
Cash, accounts receivable and prepaids 55,144  
Accounts payable and accrued liabilities (56,233 )
Dividends payable (4,438 )
Long-term debt (438,566 )
Net asset value $ 1,081,960  
Shares outstanding (000's) 88,760  
Net asset value ($/share) $ 12.19  
     
(1) Proved plus probable company interest reserves, as at December 31, 2010, as evaluated by GLJ Petroleum Consultants Ltd.
(2) Undeveloped land value has been calculated based on internal estimates of $250/acre for our Alberta deep basin lands and $100/acre for all other lands.

NuVista's unaudited fourth quarter results press release is expected to be released on March 7, 2011 and its audited consolidated financial statements are expected to be filed on SEDAR (www.sedar.com) on or before March 31, 2011. In addition to the reserves information disclosed in this press release, more detailed reserves information will be included in NuVista's Annual Information Form in addition to the full NI 51-101 disclosure for the year ended December 31, 2010, which is also expected to be filed on SEDAR on or before March 31, 2011. 

INVESTOR INFORMATION

NuVista is an independent Canadian oil and natural gas exploration, development and production company with its common shares trading on the Toronto Stock Exchange under the symbol "NVA".

Advisory Regarding Forward-Looking Information and Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward-looking statements and information concerning: NuVista's planned 2011 capital program, focus, allocation and timing of expenditures, the timing of the release and/or filing of NuVista's fourth quarter and annual results and Annual Information Form; the anticipated potential of NuVista's asset base; the use of proceeds of the Offerings; the timing of the completion of the Offerings; the satisfaction of the conditions of closing of the Offerings in the timing planned; anticipated 2011 cashflow, 2011 average production and product mix; 2011 and 2012 drilling and development plans and locations and the results therefrom; facility construction and expansion and NuVista's ongoing focus, strategy and growth plans.

In addition, please note that 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 resources and reserves described can be profitably produced in the future.

The forward-looking statements and information in this press release are based on certain key expectations and assumptions made by NuVista, including prevailing commodity prices and exchange rates; applicable royalty rates and tax laws; future well production rates; reserve and resource volumes; the performance of existing wells; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services; the satisfaction of the conditions of closing of the Offerings on the timing planned, and the receipt, in a timely manner, of regulatory and other required approvals. Although NuVista believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because NuVista can give no assurance that they will prove to be correct. There is no certainty that NuVista will achieve commercially viable production from its undeveloped lands and prospects.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the oil and gas industry in general such as: operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation of petroleum and natural gas and loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; failure to satisfy conditions to closing of the Offerings; failure to obtain the necessary regulatory and other approvals, including stock exchange approvals and on the timelines planned; risks that conditions to closing of the Offerings are not satisfied; and risk that the Board of Directors determines that it would be in the interests of NuVista to deploy the proceeds from the Offerings to some other purpose; ability to access sufficient capital from internal and external sources; stock market volatility; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of NuVista are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

The forward-looking statements and information contained in this press release are made as of the date hereof and NuVista undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Boe and Other Advisories

The term "boe" or barrels of oil equivalent may be misleading, particularly if used in isolation. A Boe conversion ratio of six thousand cubic feet per barrel (6 Mcf: 1 Bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This press release contains test results for various NuVista wells. Actual production from these wells could differ materially from these test results.



FOR FURTHER INFORMATION PLEASE CONTACT:

NuVista Energy Ltd.
Robert F. Froese
Interim President and CEO; and VP, Finance and CFO
(403) 538-8530
or
NuVista Energy Ltd.
Keith A. MacPhail
Chairman
(403) 213-4315