Marquee Energy Ltd. (“Marquee” or the “Company”) (TSX VENTURE: MQL) is pleased to announce the results of an independent contingent resources evaluation performed by Sproule Associates Limited (“Sproule”) with an effective date of August 31, 2015.
The resource evaluation was prepared in accordance with the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and includes the lands held by Marquee as of August 31, 2015 in the Michichi area of Alberta that have development potential for the presence of hydrocarbons within the Detrital and Banff zones (the “Sproule Resource Assessment”).
All resource data disclosed herein is as set forth in the Sproule Resource Assessment and reflects only Marquee’s working interest share of such resources for the acreage covered by the Sproule Resource Assessment (“Study Area”). The Study Area is limited to the Company’s land holdings in the Michichi area of Alberta from Townships 29 to 33 and Ranges 14 to 19W4M. The Company’s average working interest in lands containing oil in the Banff and Detrital Formations in the Study Area is approximately 84%.
Sproule is an independent qualified reserves evaluator and also estimated Marquee’s proved plus probable reserves in a report with an effective date of December 31, 2014 (the “Sproule Reserves Report”). The estimates in the Sproule Reserves Report do not include Marquee’s acquisitions, dispositions, production, and capital program for 2015. The Sproule Resource Assessment represents contingent resource volumes in excess of the booked reserves estimated in the Sproule Reserves Report.
Highlights
The highlights of the Sproule Resource Assessment include:
- The contingent resource estimates contained in the Sproule Resource Assessment demonstrate that targets in the Detrital and Banff zones in the Study Area have significant value and future development potential over and above the current proved plus probable reserves that have been assigned to those lands in the Sproule Reserves Report.
- Discovered Petroleum Initially in Place (“DPIIP”) of 357.5 million barrels of oil equivalent (“boe”) including 13.2 million barrels of risked best estimate contingent oil resources.
- Best estimate of risked contingent natural gas resource of 41 Bcf (6.8 million boe) and 669,000 barrels of contingent natural gas liquids resource.
- Marquee’s contingent resources have been classified as “development pending”, the highest project maturity sub-class for contingent resources.
- The Sproule Resource Assessment identifies 219 net prospective drilling locations associated with the contingent resources, and including undeveloped acreage to which proved and probable reserves have been attributed in the Sproule Reserves Report, Marquee estimates that it has more than 300 potential drilling locations at Michichi.
“Our strategy of early entry, land acquisition and infrastructure control, coupled with an extensive geoscience and engineering focus, has now been validated with the recognition of the significant light oil resource potential at Michichi,” commented Richard Thompson, President & CEO of Marquee Energy.
Resource Information
The following table summarizes the results of the Sproule Resource Assessment of Marquee’s Michichi assets as of August 31, 2015.
| Summary of the Evaluation of Contingent Resources Of Marquee Energy Ltd.’s |
| Banff and Detrital Holdings in the Michichi Area of Alberta |
| As of Augus 31, 2015 |
| Risked Contingent Resources | ||||||||
| Discovered Petroleum Initially In Place |
Ultimate Reserves7 |
Oil |
Sales Gas |
Natural |
BOE |
Discounted Net Present Value of Future Net Revenue Before Tax |
||
| Oil |
||||||||
| @ | @ | |||||||
| 0% | 10% | |||||||
| (Mbbl) | (Mbbl) | (Mbbl) | (MMscf) | (Mbbl) | (Mboe) | M$ | M$ | |
| Best Estimate (2C) |
357,539 | 9,721 | 13,165 | 40,549 | 669 | 20,592 | $464,529 | $121,239 |
| 1) | Contingent resources are those quantities of petroleum estimated to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. | ||
| 2) | Contingent resources have been risked for chance of commerciality. A 10 percent chance of development risk factor has been applied. | ||
| 3) | Contingent resources have been sub-classified as Development Pending. | ||
| 4) | There is no certainty that it will be commercially viable to produce any portion of the resources. | ||
| 5) | Numbers may not add due to rounding. | ||
| 6) | The resource NPV estimates are economic using the Sproule price forecast at August 31, 2015. Economics were run based on a development schedule beginning in 2019 with ~26 net wells per year ($2.0 MM per well), and values were discounted back to August 31, 2015. | ||
| 7) | Ultimate Reserves includes produced oil volumes and booked oil reserves, as reported in the December 31, 2014 reserves report | ||
Contingencies
Contingencies associated with contingent resource volumes include only commercial factors; there are no technical contingencies. Specific to this project, the key non-technical contingencies are the following:
- Productivity of reservoir in areas with no tests or production;
- Corporate commitment to develop these assets in a timely fashion;
- Access to infrastructure required to deliver increasing volumes to market;
- Topographical/surface restrictions limiting access;
- Economic conditions, including prices, capital costs, and operating costs.
Risk
Contingent resource volumes and Net Present Values have been risked with a chance of development based on the likelihood that the contingencies identified in the previous section will be resolved. A risk factor of 10% was applied.
Resource Classification and Categorization
The resources were classified in accordance with the Canadian Oil and Gas Evaluation Handbook (COGEH) that are consistent with NI 51-101 and used by Sproule.
Petroleum Initially in Place on Company-interest lands were classified as discovered accumulations based on geologic interpretation using existing well data.
The reported DPIIP presented in the Sproule Resource Assessment is a best estimate using deterministic methods. The DPIIP includes lands which have reserves assigned in the Sproule Reserves Report.
Contingent volumes in the Sproule Resource Assessment have been sub classified as development pending, based on historic activity levels and the Company’s commitment to developing this project.
Significant positive factors relevant to the estimates include:
- Significant well control and offsetting production
- Repeated commercial success of horizontal wells across a greater areal extent of the
- Company’s holdings
- Production data verifying the sustainability of economic production rates from Banff
- and Detrital horizontal wells
- Corporate commitment to develop the asset over a reasonable time frame
- Facilities access enabling full development of the Banff and Detrital on Company interest lands
Significant negative factors include:
- Distance from existing economic production
- Potential for certain areas to not be economic with current OPEX, CAPEX and product pricing
- Requirement for access to the substantial amount of capital which would be required to develop the resource
- Potential for low commodity prices which could impact the economics of development
Field Development
The development of contingent resources for the Michichi area consists of drilling 28 wells in 2019, 32 wells in 2020, 30 wells in 2021, 32 wells per year from 2022 through 2026, and seven wells in 2027. The contingent oil resource schedule has been timed to begin in 2019, when the reserve inventory has been exhausted. The wells will be developed using horizontal multi-stage frac technology, and will be drilled on 160 acre spacing.
Hydrocarbons produced in this area are expected to be processed by third party facilities and/or existing facilities operated by the Company. As such, facility capital costs have not been estimated in the Sproule Resource Assessment. Third party and existing facilities are expected to have the capacity to accommodate the forecasted contingent resources.
CLICK HERE for more information on Contingent Resources and Resources Other Than Reserves (“ROTR”).
Corporate Update
In recognition of the challenging cash flow environment, Marquee continues to follow a cost reduction strategy in all areas of the Company’s activities including capital expenditures, operating costs and G&A expenditures which recently included: work force reductions in the field and head office; salary freezes and benefit reductions for all staff, a reduction of bank standby fees and suspension of corporate sponsored functions. These measures, coupled with the reductions in capital spending, reductions from its field suppliers and consultants and rationalization and optimization of field operations, will assist Marquee in navigating through this challenging commodity price environment.
Upcoming Conferences
Marquee will present at FirstEnergy’s Energy Growth Conference on November 17, 2015 at the Ritz Carlton Hotel in Toronto. Additional details on Richard Thompson’s presenting time and webcast registration information will be available on Marquee’s website as it becomes availablewww.marquee-energy.com.
ABOUT MARQUEE
Marquee Energy Ltd. is a Calgary based, junior energy company focused on high rate of return oil development and production. Marquee is committed to growing the company through exploitation of existing opportunities and continued consolidation within its core area at Michichi. The Company’s shares are traded on the Toronto Stock Exchange under the trading symbol “MQL.V” and on the OTCQX marketplace under the symbol “MQLXF”. An updated presentation and additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
