Morumbi Books NI-51-101 Reserves at McKinley
November 28 2011 - 5:52PM
Marketwired Canada
Morumbi Oil & Gas Inc. (TSX VENTURE:MOC) ("Morumbi" or the "Company") is pleased
to report that as a result of the completion of operations at our McKinley
Alberta property, the 12-33 vertical well has been assigned National Instrument
51-101 reserves ("NI-51-101") subsequent to being brought on to production in
late March 2011.
Converting the resource base at McKinley to NI-51-101 reserves is the result of
the well having established excellent communication with the prolific Cadotte D
Pool following our 24 tonne gelled water frac in Sept 2010 and the progress to
date in drawing down nearby dump flood water; thereby increasing oil cuts since
it was brought on production in March 2011.
Despite initial setbacks caused by the greater than anticipated size of the dump
flood water and start-up operational problems related to the 3rd party emulsion
system, the Company has been successful in slowly drawing down the nearby dump
flood water and increasing the oil cuts from the 12-33 vertical well. Given the
McKinley 12-33 vertical well is structurally the highest well drilled to date in
the Cadotte D Pool, it is well positioned to tap the significant remaining
recoverable reserves associated with the prolific light oil pool.
Morumbi commissioned Chapman Petroleum Engineering Ltd. ("Chapman") to complete
an independent reserve assessment (the "Chapman Report") of the Company's
McKinley Property, including the results to date, to assess the light oil
remaining in the Cadotte D Pool. The Chapman Report, which is effective July 31,
2011 and is dated November 15,2011 was prepared using Chapman's Forecast Pricing
as of August 1, 2011. The Chapman Report ascribes proved plus probable plus
possible reserves to our McKinley Property of 264,825 barrels of light oil and
85,000 Mscf of associated natural gas for a total of 278,992 BOE's as detailed
in the following table:
Reserves Summary
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Light Oil (STB) Natural Gas (Mscf) BOE Equivalent (BOE)
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Proved 53,199 17,000 56,032
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Probable 106,572 34,000 112,239
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Possible 105,054 34,000 110,721
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Proved + Probable +
Possible 264,825 85,000 278,992
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Notes:
(1) Oil equivalent amounts have been calculated using a conversion rate of six
thousand cubic feet of natural gas to one barrel of oil.
Reserves Values
The estimated future net revenues before taxes associated with Morumbi's
reserves effective July 31, 2011 and based upon the Chapman August 1, 2011
future price forecast is as follows:
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8.0% DCF 10.0% DCF 12.0% DCF
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Proved $1,224,000 $1,158,000 $1,098,000
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Probable $2,812,000 $2,541,000 $2,307,000
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Possible $3,305,000 $2,849,000 $2,470,000
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Proved + Probable +
Possible $7,341,000 $6,548,000 $5,875,000
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Price Forecast
The Chapman August 1, 2011 forecast for the next 5 years is as follows:
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WTI @ Cushing Edmonton Light Natural Gas @ AECO
Year ($U.S. / Bbl) ($Cdn / Bbl) ($Cdn / Mmbtu)
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2012 $100.00 $101.04 $4.71
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2013 $100.00 $101.04 $5.24
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2014 $100.00 $101.04 $5.78
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2015 $100.00 $101.04 $6.42
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2016 $100.00 $101.04 $6.74
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To date, production from the McKinley 12-33 well has increased from a less than
1.0% oil cut when initially brought on production, to current oil cuts in the
range of 12% to 15%. Based upon current fluid rates for the well of 130 to 150
barrels of fluid per day this translates into current oil production of 15 to 20
barrels of oil per day. Continued improvements are expected over time as more of
the dump flood water is removed from the nearby Cadotte D Pool reservoir.
Current oil cuts from the 12-33 well exceed the level currently being realized
in the nearby offset 11-32 horizontal well. This supports the Company's
assessment that our well is capable of tapping into an up dip oil charged
reservoir not available to our nearest offset well which to date has produced
over 475,000 barrels of light oil.
Morumbi is continuing to address various operational problems that have
periodically impacted our McKinley Property and negatively affected our
production performance to date. More specifically we have been focusing on
improving our on stream time which we believe has delayed the process of
effectively drawing down the nearby dump flood water and has delayed McKinley
realizing the full production potential of the 12-33 vertical well.
Steps have been taken in conjunction with the 3rd Party contract operator who is
operating the emulsion system and oil battery that the McKinley well is tied
into, to address operational issues. Management intends to continue to closely
monitor our operations to ensure the Company realizes the full production
potential of our McKinley Property which we believe is at least in part
reflected in the reserve assessment contained in the Chapman Report.
The Company remains confident in the long term production potential of the
McKinley property and its capability to act as a strong base to fund further
growth opportunies. The Company is also pleased to report that these views are
supported in part by the Chapman Report summarized herein. Morumbi has made
available on its website additional information on our McKinley Property as well
as a complete copy of the Chapman Report.
About Morumbi
Morumbi Oil & Gas Inc. is a junior oil & gas company with an attractive light
oil property located in northwest Alberta. The McKinley Property is expected
over time to provide a strong base of cash flow to fund further growth in
production as we seek to expand our asset and opportunity base both
internationally and in the Western Canadian Sedimentary Basin. The Company has
also recently made an initial foray into international oil and gas and mineral
exploration opportunities by establishing important relationships and a mineral
opportunity base in Papua New Guinea. Papua New Guinea is an area that Morumbi
believes has a great deal of oil and gas and mineral resource potential that has
yet to be fully exploited especially on the Bougainville. These initial steps we
believe will assist Morumbi in adding value for our shareholders. The Company
trades on the TSX Venture Exchange under the symbol "MOC". For more information
about Morumbi and the Company's McKinley Property as well as our other growth
opportunities and future plans visit our website at www.morumbi.ca.
Information Regarding Disclosure on Oil and Gas Reserves and Information:
BOE means barrels of oil equivalent. It may be misleading, particularly if used
in isolation. A BOE conversion ratio of 6 Mcf : 1 Bbl is based upon an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the well head.
Proved reserves are those additional reserves that can be estimated with a high
degree of certainty to be recoverable. It is likely that the actual remaining
quantities recovered will exceed the estimated proved reserves.
Probable reserves are those additional reserves that are less certain to be
recoverable than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated
proved + probable reserves.
Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves. It is unlikely that the actual remaining
quantities recovered will exceed the sum of the estimated proved plus probable
plus possible reserves.
All evaluations and reviews of the net present value of estimated future net
revenues are stated prior to any provisions for interest costs or general and
administrative costs and after deduction of estimated future capital
expenditures for wells to which reserves have been assigned. It should not be
assumed that the net present value of estimated future net revenues presented in
the tables below represent the fair market value of the reserves. There is no
assurance that the forecast prices and costs utilized in the preparation of the
Chapman Report will be attained and variances from actual prices could be
material. In addition, the recovery and reserve estimates of crude oil, natural
gas liquids and natural gas reserves set out in the Chapman Report are estimates
only and there is no guarantee that the estimated reserves will be recovered.
Actual crude oil, natural gas liquids and natural gas reserves may be greater
than or less than the estimates noted herein.
The estimates in this release have been prepared by an independent qualified
reserves evaluator in the form of a Form 51-101 F1 report (the "Chapman Report")
under the National Instrument 51-101 in accordance with the Canadian Oil and Gas
Evaluation Handbook. The effective date of the estimates was July 31, 2011. The
reserves evaluator has consented in writing to the disclosure of the information
derived from this Chapman Report. A copy of the Company's regulatory NI-51-101
filings have been placed on the SEDAR website (www.SEDAR.com).
ADVISORY REGARDING FORWARD LOOKING INFORMATION:
This press release contains certain statements that may contain forward-looking
information within the meaning of Canadian securities laws. Such forward-looking
information is identified by words such as "estimates", "intends", "expects",
"believes","may", "will" and include, without limitation, statements regarding
the Company's plan of business operations (including plans for developing
assets), projected expenditures and anticipated or forecast operating results.
More particularly and without limitation, this document contains forward looking
statements and information relating to the Company's oil, NGLs and natural gas
production and reserves and reserves values, capital expenditure programs and
oil, NGLs and natural gas commodity prices. The forward looking statements and
information are based upon certain key expectations and assumptions made by the
Company, including expectations and assumptions relating to prevailing commodity
prices and exchange rates, applicable royalty rates and tax laws, future well
production rates, the performance of existing wells, the success of drilling new
wells, the availability of capital to undertake planned activities and the
availability and cost of labour and services.
Although the Company believes that the expectations reflected in such forward
looking statements and information are reasonable it can give no assurance that
such statements will prove to be accurate; actual results and future events
could differ materially from such statements. Factors that could cause actual
results to differ materially include, among others, commodity prices, risks
inherent in the oil & gas industry, financing risks, labour risks, title
disputes, regulatory risks, currency fluctuations, competition, unexpected
decline rates in wells, changes in taxation or royalty regimes and environmental
concerns. Most of these factors are outside the control of the company.
Investors are cautioned not to put undue reliance on forward-looking
information. The forward looking statements and information contained in this
document are made as of the date hereof for the purpose of providing the readers
with the Company's expectations for the coming year. The forward looking
statements and information may not be appropriate for other purposes. Except as
otherwise required by applicable securities statutes or regulation, the company
expressly disclaims any intent or obligation to update publicly forward-looking
information, whether as a result of new information, future events or otherwise.
Trading in the securities of Morumbi Oil & Gas Inc. should be considered highly
speculative. Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.