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FOR: NUVISTA ENERGY LTD.

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

NuVista Energy Ltd.- Operational and 2009 Reserves Update

Feb 22, 2010 - 22:00 ET

CALGARY, ALBERTA--(Marketwire - Feb. 22, 2010) - NuVista Energy Ltd. ("NuVista" or the "Company") is pleased to provide the following operational update on its winter drilling program and 2009 year end reserves information. 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.

The difficult business environment in 2009 created both challenges and opportunities for NuVista. When presented with the opportunity to acquire stable high quality assets at low purchase price metrics, NuVista increased its total 2009 capital program to $310 million, with approximately 73% allocated to acquisitions. In order to accommodate the increased acquisition capital expenditures, while maintaining financial strength in an uncertain commodity price environment, NuVista's exploration and development program was reduced from a planned level of $225 million to approximately $84 million. During this period of lower exploration and development expenditures, NuVista focused on expanding its prospect inventory by evaluating the use of new horizontal drilling and completion technology on its land base.

Over the past few years NuVista's asset base has changed significantly. NuVista's oil properties and long life W5/W6 natural gas properties now represent more than 75% of NuVista's production base, increasing our proved and probable reserve life index to 9.5 years and creating a stable platform for future growth. In addition, approximately 50% of NuVista's production now resides in the deep basin where a significant portion of NuVista's land base, both developed and undeveloped, contains high reserve-in-place oil and natural gas deposits that are currently experiencing dramatic improvements in recovery from the application of new technology. In the fourth quarter of 2009, NuVista embarked on the highest impact drilling program in its history including the testing of a number of repeatable high reserve-in-place plays using horizontal wells with multi-frac completion technology.

NuVista's unaudited fourth quarter results press release is expected to be released on March 8, 2010 and its audited consolidated financial statements are expected to be filed on SEDAR (www.sedar.com) on or before March 31, 2010. 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, 2009, which is also expected to be filed on SEDAR on or before March 31, 2010. NuVista anticipates providing an updated corporate presentation on its website (www.nuvistaenergy.com) on March 9, 2010.

Operational Update

Wapiti Core Area

NuVista is continuing to test recovery concepts in high reserve-in-place formations where NuVista's substantial acreage position and success could have a material impact on its future growth plans. The use of horizontal wells with multi-frac completion technology will be tested in six different formations in the Wapiti core area during 2010. Horizontal wells are planned to be drilled during the first quarter in the Cardium, Dunvegan, Cadomin and Montney formations, with additional follow up wells planned prior to year end. Horizontal wells are also expected to be drilled in the Falher and Nikanassin formations later in 2010.

NuVista completed drilling a horizontal well (100% working interest) into a 20 metre thick Dunvegan D channel sand in January 2010. A multi-stage packer assembly has been run into the horizontal section with a multi-stage frac involving eleven intervals planned prior to the end of February. In addition to this horizontal well, over the past six months, NuVista has drilled and is now completing five vertical Dunvegan wells. A vertical test well into a 20 metre thick Dunvegan E sand flowed over 0.5 mmcf/d, adding the Dunvegan E formation to the list of formations in the area that could benefit from multi-stage frac completion technology. A horizontal well targeting the Dunvegan E sand is planned for later in 2010. NuVista has over 105 net sections of deep basin natural gas charged Dunvegan lands prospective for both vertical and horizontal development.

NuVista has extensive Montney landholdings in Wapiti with approximately 125 net prospective sections with upper Montney porosity in a deep basin gas setting. In the greater Wapiti area, another operator has drilled and completed two Montney horizontal wells. Both wells continue to produce at rates in excess of 2 mmcf/d and the first well has now been on production for a full year. Encouraged by these initial test rates and considering the size of the Montney resource-in-place, NuVista plans to conduct two horizontal well tests on our own Montney lands in 2010. NuVista's Wapiti Montney lands are situated in two large contiguous blocks. The north block will be tested by a 100% working interest horizontal well which is currently drilling and the south block is anticipated to be tested in the third quarter.

NuVista's Wapiti core area vertical drilling program of high impact wells continues to reward the Company. NuVista drilled a successful multi-zone natural gas well (97% working interest) that has been completed in multiple zones, including the Falher C, which has tested at a combined rate of over 7 mmcf/d. This well extends the prospectivity for the Falher C trend encountered in a well drilled by NuVista in the third quarter of 2009 which tested at a combined rate of over 10 mmcf/d from multiple zones. Three additional multi-zone vertical wells are planned in prior to spring break up.

NuVista is also currently drilling its first horizontal natural gas well into the Cadomin formation (70% working interest) and plans to use multi-stage frac completion technology to complete the well. NuVista has identified up to 100 gross (30 net) Cadomin infill drilling locations in the Wapiti area, many of which will have stacked multi-zone zone potential.

NuVista has approximately 85 net sections of contiguous Cardium lands in the Wapiti core area with similar characteristics to oil wells in the Pembina and Pine Creek area that have been successfully completed using horizontal drilling and multi-stage frac completion technology. NuVista has farmed-out five low working interest Cardium sections to a third-party who has committed to begin drilling a Cardium horizontal well prior to spring break up. NuVista plans to drill its first Cardium horizontal well (100% working interest) during the summer and has plans to drill up to three Cardium horizontal wells in the Wapiti core area prior to year end.

NuVista continues to increase its land position in its Wapiti core area and has a multi-year prospect inventory which continues to grow with the ongoing evaluation of its lands by its technical team and the use of new drilling and completion technology. NuVista plans to spend over one third of its corporate exploration and development capital in the Wapiti core area during 2010.

Pembina/Ferrier Core Area

NuVista has approximately 200 gross (125 net) sections of Cardium rights in its Pembina/Ferrier core area. In the Pembina area, NuVista has approximately 70 net sections of Cardium rights. NuVista has high graded its inventory of Cardium lands in the central Pembina area where it has 34 net prospective sections and plans to drill up to 10 (average 75% working interest) Cardium horizontal wells during 2010. Three Cardium horizontal wells are planned prior to spring break-up. Most of the wells drilled during 2010 will be the first wells on sections, potentially leading to follow up development locations for 2011. NuVista has identified up to 100 net potential Cardium locations on its high graded 34 net sections. As the Cardium play fairway is expanded, some portion of the remaining 70 net sections in Pembina/Ferrier may ultimately become prospective for Cardium horizontal drilling.

NuVista participated in its first Cardium horizontal well (30% working interest) in the Pembina area during the fourth quarter of 2009. This well was operated by a third-party and encountered 1,050 metres of Cardium reservoir rock in the horizontal section. The well was completed with an 11 stage frac and is expected to be on production prior to the end of February. The second Cardium horizontal well (46% working interest) in the same region was drilled by NuVista and is currently being completed. Test results are expected on this well by early March. The third Cardium horizontal well (100% working interest) is planned to be drilled late in the first quarter of 2010 depending on weather.

In addition to Cardium potential, NuVista's lands in the Pembina/Ferrier area are also highly prospective for the emerging Notikewin resource play. During 2010, NuVista's primary focus in the Ferrier area will be testing the Notikewin formation using horizontal drilling and multi-stage frac completion technology. NuVista has approximately 190 net sections of Notikewin rights in the Pembina/Ferrier core area of which over 110 are prospective for Notikewin horizontal natural gas drilling. Most of NuVista's Notikewin lands are concentrated in high working interest contiguous blocks and NuVista has planned up to three Notikewin horizontal wells for the second half of 2010.

Kaybob Core Area

NuVista recently drilled its first Kaybob Montney horizontal well (100% working interest) at its Fir property and completed the well with nine 10 tonne fracs. The well flowed at a rate of approximately 6 mmcf/d during a three day in-line flow test and is now on production. A second Montney horizontal well (100% working interest) was drilled in the first quarter and is now waiting on completion. Up to five additional horizontal wells (100% working interest) are planned for the remainder of 2010. Based upon well spacing of three horizontal wells per section, NuVista has identified 23 gross (19.4 net) potential horizontal well locations at its Fir property. Facilities are being expanded from 7 mmcf/d to 10 mmcf/d by break-up and an additional expansion is being reviewed for the second half of 2010.

NuVista has also drilled three high working interest vertical wells in its Kaybob core area. Two 100% working interest wells flowed at combined rates of 7 mmcf/d and are now on stream at approximately 6 mmcf/d. The third well is on production at over 2 mmcf/d. NuVista is evaluating the drilling of additional vertical wells and one Notikewin horizontal natural gas test well in the Kaybob core area during the second half of 2010.

NuVista participated in three successful Dunvegan delineation oil wells (30% working interest) in its Kaybob core area during the first quarter of 2010. The wells are follow-ups to a third-party well drilled in 2009 that tested at over 200 bbls/day. Further locations are planned for winter 2010/2011.

West Central Saskatchewan Core Area

At Hallam, in West Central Saskatchewan, NuVista drilled and completed four horizontal Birdbear oil wells (76% working interest) in the fourth quarter of 2009 as part of its ongoing pool development. Initial production rates from these wells ranged from 160 bbls/d to 240 bbls/d. 15 additional locations have been identified with four wells planned to be drilled during the first quarter of 2010.

2009 Year End Reserves Evaluation

The independent engineering evaluation of NuVista's corporate reserves effective December 31, 2009, has been completed by GLJ Petroleum Consultants Ltd. ("GLJ") (the "GLJ Report"). NuVista is pleased to disclose that its 2009 capital expenditure program totaling approximately $310 million achieved proved plus probable finding, development and acquisition costs of $11.77/boe (after revisions and including the change in future development costs and Alberta drilling royalty credits).

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. "Company interest" is not a term defined or recognized under 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. Therefore, the "company interest" reserves of NuVista may not be comparable to similar measures presented by other issuers, and investors are cautioned that "company interest" reserves should not be construed as an alternative to "gross" or "net" reserves calculated in accordance with NI 51-101.

Highlights

- Proved plus probable reserves increased by 26% to 97.8 million boe ("mmboe") and total proved reserves increased by 29% to 68.0 mmboe;

- On a proved plus probable basis NuVista replaced more than three times 2009 production;

- Proved plus probable reserves per share increased by 13% to 1.11 boe/share;

- Finding, development and acquisition costs in 2009, after reserve revisions and including the adjustment for the change in future development capital expenditures and Alberta drilling royalty credits, were $14.15/boe on a proved basis and $11.77/boe on a proved plus probable basis;

- Proved developed producing reserves are 56% of total proved plus probable reserves and total proved reserves are 70% of total proved plus probable reserves;

- Proved plus probable future development capital included in the GLJ Report increased by $42.9 million to $163.6 million. The total future development capital of $1.67 per proved plus probable boe of reserves is anticipated to be in the lowest decile within NuVista's peer group. The vast majority of NuVista's scalable high reserve-in-place development opportunities remain unbooked;

- NuVista's reserve life index, based on estimated fourth quarter 2009 production of 28,345 boe/d, was 6.6 years for total proved reserves and 9.5 years for proved plus probable reserves. NuVista's proved plus probable reserve life index at the end of 2009 has increased to 9.5 years from 8.3 years at the end of 2008 and from 5.1 years in 2003, highlighting the growing stability within our asset base; and

- Despite a substantial reduction in year end pricing for natural gas, the proved plus probable net present value before tax at a 10% discount rate increased by $235 million to $1,586 million, implying a favourable return on capital expended in a very challenging pricing environment.



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

3 Year-Average (1)(2) 2009 (1) (2) 2008 (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 20.05 16.03 14.15 11.77 24.28 18.51
Finding and
development
costs 20.91 18.54 16.57 16.69 24.42 19.53
Acquisition
costs 19.66 14.96 13.27 10.51 24.24 18.14

Finding,
development &
acquisition
recycle ratio
Field netback 1.4x 1.7x 1.6x 1.9x 1.4x 1.9x
Funds from
operations
netback 1.2x 1.5x 1.4x 1.6x 1.3x 1.7x

Before reserve
revisions and
including
changes in
future
development
capital
($/Boe)
Finding,
development
and
acquisition
cost 20.70 15.41 14.85 11.26 25.13 18.36



(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 $10.7 million were recorded during 2009.


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

----------------------------------------------------------------------------
Future Development Capital ($ thousands) Proved Proved Plus Probable
----------------------------------------------------------------------------
December 31, 2008 49,569 120,676
Exploration and development
changes in period (1) 26,979 18,596
Acquisitions 16,778 24,317
----------------------------------------------------------------------------
December 31, 2009 93,326 163,589
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Net of estimated drilling credits of $11.1 million for proved reserves
and $20.9 million for proved plus probable reserves.

 


The following table provides summary reserve information based upon the GLJ Report using the published GLJ January 1, 2010 price forecast set forth below:



Natural Gas Liquids
----------------------------------------------------------------------------
Company Company
Interest Net Interest Net
Reserves Category(1) (MMcf) (MMcf) (MBbls) (MBbls)
----------------------------------------------------------------------------
Proved:
Developed Producing 244,626 207,185 5,915 4,156
Developed Non-Producing 32,123 26,448 949 686
Undeveloped 28,403 24,889 665 522
----------------------------------------------------------------------------
Total Proved 305,152 258,522 7,530 5,364
Probable 133,506 112,206 3,569 2,505
----------------------------------------------------------------------------
Total Proved Plus Probable 438,658 370,728 11,099 7,869
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Oil Total
----------------------------------------------------------------------------
Company Company
Interest Net Interest Net
Reserves Category(1) (MBbls) (MBbls) (Mboe) (Mboe)
----------------------------------------------------------------------------
Proved:
Developed Producing 7,750 6,788 54,436 45,474
Developed Non-Producing 782 662 7,086 5,756
Undeveloped 1,064 943 6,463 5,613
----------------------------------------------------------------------------
Total Proved 9,595 8,392 67,984 56,843
Probable 4,012 3,316 29,832 24,522
----------------------------------------------------------------------------
Total Proved Plus Probable 13,607 11,708 97,816 81,365
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Numbers may not add due to rounding.

 


The following table is a reconciliation of the 2009 year end reserves with the reserves reported in the 2008 year end reserves report:



Total oil
Natural gas Liquids Oil equivalent
----------------------------------------------------------------------------
Reconciliation items(1) (Bcf) (MBbls) (MBbls) (MBoe)
----------------------------------------------------------------------------
Total Proved
Balance, December 31, 2008 230.0 5,819 8,678 52,833
Exploration and development 23.7 838 713 5,505
Revisions (including improved
recovery) 3.7 653 (97) 1,172
Acquisitions 90.3 1,386 1,883 18,317
Dispositions - - - -
Production (42.6) (1,166) (1,581) (9,841)
----------------------------------------------------------------------------
Balance, December 31, 2009 305.2 7,530 9,595 67,984
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Proved plus Probable
Balance, December 31, 2008 340.3 8,676 12,286 77,681
Exploration and development 32.4 1,202 873 7,472
Revisions (including improved
recovery) (7.4) 637 (759) (1,348)
Acquisitions 115.9 1,750 2,788 23,854
Dispositions - - - -
Production (42.6) (1,166) (1,581) (9,841)
----------------------------------------------------------------------------
Balance, December 31, 2009 438.7 11,099 13,607 97,816
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(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, 2009 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 2009 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 1,548 1,198 988 849
Developed Non-Producing 202 139 108 88
Undeveloped 172 133 105 86
----------------------------------------------------------------------------
Total Proved 1,921 1,469 1,201 1,022
Probable 965 566 385 284
----------------------------------------------------------------------------
Total Proved Plus Probable 2,886 2,035 1,586 1,307
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(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, 2010:



Natural
Gas Liquids
----------------------------------------------------------------------------
AECO
Gas WTI
Price Edmonton Edmonton Cushing
($Cdn/ Propane Butane Oklahoma
Year MMbtu) ($Cdn/Bbl) ($Cdn/Bbl) ($US/Bbl)
----------------------------------------------------------------------------
Forecast
2010 5.96 52.46 64.11 80.00
2011 6.79 54.45 66.54 83.00
2012 6.89 56.43 68.98 86.00
2013 6.95 58.42 71.41 89.00
2014 7.05 60.42 73.84 92.00
2015 7.16 61.64 75.33 93.84
2016 7.42 62.88 76.85 95.72
2017 7.95 64.15 78.41 97.64
2018 8.52 65.45 79.99 99.59
2019 8.69 66.77 81.60 101.58
2020 +2%/yr +2%/yr +2%/yr +2%/yr


Oil
----------------------------------------------------------------------------
Edmonton Hardisty Cromer
Par Price Heavy Medium
40 API 12 API 29.3 API Inflation Exchange
($Cdn/ ($Cdn/ ($Cdn/ Rates Rate
Year Bbl) Bbl) Bbl) %/ Year(1) ($US/$Cdn)(2)
----------------------------------------------------------------------------
Forecast
2010 83.26 64.99 76.60 2.0 0.95
2011 86.42 65.24 78.64 2.0 0.95
2012 89.58 65.33 80.62 2.0 0.95
2013 92.74 65.26 82.54 2.0 0.95
2014 95.90 67.52 85.35 2.0 0.95
2015 97.84 68.90 87.07 2.0 0.95
2016 99.81 70.32 88.83 2.0 0.95
2017 101.83 71.76 90.63 2.0 0.95
2018 103.88 73.22 92.46 2.0 0.95
2019 105.98 74.72 94.32 2.0 0.95
2020 +2%/yr +2%/yr +2%/yr 2.0 0.95

(1) Inflation rate for costs.
(2) Exchange rate used to generate the benchmark reference prices in this
table.

 


2010 Outlook

Based on the success of our first quarter drilling program, the extent of our prospect inventory, and increasing stability in commodity prices, in particular for natural gas, NuVista has sufficient opportunities to target the upper end of our previously approved 2010 capital program of $240 million to $280 million. Approximately 75% of 2010 capital expenditures are expected to be spent on internally generated exploration and development activities. Based on a capital program of $280 million, 2010 production is forecast to increase from 28,345 boe/d in the fourth quarter of 2009, to between 32,000 boe/d and 33,000 boe/d by the end of 2010. Production for 2010 is forecast to average between 30,000 boe/d and 31,000 boe/d depending on the timing of exploration and development activities and downtime.

As NuVista continues to implement the largest high impact drilling program in our history, we look forward to continuing to update our shareholders on our drilling results.

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 exploration and development program, the timing of the release and/or filing of NuVista's fourth quarter results, audited financial statements, Annual Information Form and updated corporate presentation, NuVista's drilling, testing and completion plans, the timing thereof and the results therefrom, anticipated drilling and development locations, facility expansion plans, expected future development capital, 2010 capital expenditure program and allocation thereof and estimated 2010 production and NuVista's ongoing 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; 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; 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.
Alex G. Verge
President and Chief Executive Officer
(403) 538-8501

or

NuVista Energy Ltd.
Robert F. Froese
Vice President, Finance and Chief Financial Officer
(403) 538-8530
www.nuvistaenergy.com