February 22, 2019 - 6:00 AM EST
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Razor Energy Corp. Announces 2018 Year-End Reserves and Net Asset Value

CALGARY, Alberta, Feb. 22, 2019 (GLOBE NEWSWIRE) -- Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) is pleased to provide a summary of its 2018 year-end reserves evaluation. 

The highlights and reserves summary below set forth Razor’s gross reserves as at December 31, 2018, as evaluated by Sproule Associates Limited (“Sproule”) in an independent report dated February 19, 2019 (the “Sproule Report”). The figures in the following tables have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and the reserve definitions contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in the Company’s annual information form which will be filed on SEDAR on or before March 31, 2019.

Razor's 2018 annual audited consolidated financial statements have not been completed. Certain financial and operating information included in this news release are based on management's estimates only and are subject to audit and may be subject to change upon completion of the Company’s annual audited consolidated financial statements. See “Reader Advisories – Unaudited Financial Information”.

NEW AND REVISED RESERVES EVALUATION GUIDELINES AND BEST PRACTICES FOR INDUSTRY STAKEHOLDERS

For greater transparency and accuracy of current values and future cash flows, Razor has elected to include all abandonment, decommissioning and reclamation costs (“ADR”) and inactive well costs (“IWC”) in accordance with best-practice recommendations into the Company’s 2018 year-end reserves report.

In 2018, the Calgary Chapter of the Society of Petroleum Evaluation Engineers (“SPEE”) and associated industry professionals updated the COGE Handbook. The updates clarify and streamline existing guidelines and offer additional guidance regarding Canadian reserves evaluations.

With respect to ADR Costs, the SPEE provided increased guidance for sustainable best practices. Acknowledging the social and environmental responsibility of the oil and gas industry, the COGE Handbook supports the premise that ADR costs should always be considered in the evaluation process and each report must clearly describe ADR costs included and excluded from the report.
               
With respect to Operating Costs, the SPEE provided broader guidance for IWC and maintenance capital. There is a material change to COGE Handbook guidance with respect to active and inactive costs. Inactive costs such as mineral leases, shut-ins, suspended and capped well-operating costs, etc. should be included in the evaluation to properly represent the assets being evaluated but forecast separately from active asset costs at the property or corporate level, so economic production entities are not unduly burdened.

HIGHLIGHTS

· Proved Developed Producing (“PDP”) reserves value discounted at 10% (“NPV10”) before tax is $148.7 million, or $6.11 per share net asset value (details below).
  
· For comparison, excluding the impact of total corporate ADR(1) of $28.1 million and IWC(1) of $21.2 million, the PDP at NPV10 would be $198.0 million (11 % increase over year-end 2017).
  
· PDP reserve volumes were 12,193 Mboe (90% oil and liquids), which represents an increase of 2% over year-end 2017.
  
· Total Proved (“1P”) reserves were 15,398 Mboe and Total Proved plus Probable (“2P”) reserves were 20,224 Mboe, which represent an increase of 2% and decrease of 1%, respectively, over year-end 2017.
  
· The Company’s Reserve Life Index(2) is 7.7 years for PDP, 9.7 years for 1P and 12.8 years for 2P reserves based on January 2019 field-reported production of 4,345 boepd.
  
·Razor’s reserves replacement(2) was 116% for PDP, 118% of 1P and 94% of 2P based on total 2018 production of 1,790 MMBoe.


Notes:

(1) Razor’s ADR and IWC programs are compliant with the Alberta Energy Regulator’s rules and regulations, scheduled according to remaining reserves life, inflated at 2% per annum and then discounted at 10%.
  
(2) “Reserve life index” and “Reserve replacement” do not have standardized meanings. See “Reader Advisories - Oil and Gas Metrics” contained in this news release.


2018 CAPITAL EXPENDITURES

Razor spent $15.9 million on exploration, development and acquisition activities in 2018, including reactivations and drilling ($12.0 million) and acquisitions ($3.9 million). This total excludes facilities and pipeline maintenance ($9.0 million) and one-time capital expenditures associated with non-reserve-adding projects ($12.6 million total), comprised of self-generated natural gas power ($9.5 million), an oilfield information technology upgrade ($1.8 million) at South Swan Hills Unit and corporate/energy services related costs ($1.3 million).

2018 INDEPENDENT RESERVES EVALUATION

Incorporating the significant changes recommended by the SPEE noted above (ADR and IWC), Sproule, qualified reserves evaluators, carried out its independent reserve evaluation effective December 31, 2018, which was prepared in accordance with definitions, standards and procedures contained in the COGE Handbook and in NI 51-101. The reserves evaluation was based on Sproule forecast pricing and foreign exchange rates as at December 31, 2018 as outlined herein.

Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without the inclusion of any royalty interest) unless otherwise noted.

RESERVES SUMMARY

Summary of Gross Oil and Gas Reserves as of December 31, 2018(1), (2), (3), (4)

     
 Light and Medium
Crude Oil
Conventional
Natural Gas
Natural Gas LiquidsBarrels of Oil
Equivalent
 GrossGrossGrossGross
 (Mbbl)(MMcf)(Mbbl)(Mboe)
Proved    
Developed Producing8,3637,6822,55012,194
Developed Non-Producing1,1369483411,634
Undeveloped1,3824241161,569
Total Proved10,8819,0543,00815,397
Probable3,4102,8449424,826
Total Proved plus Probable14,29111,8973,95020,223
     

Net Present Value of Future Net Revenues Before Income Taxes Discounted at (% per Year) (M$)

      
 0%5%10%15%20%
Proved     
Developed Producing156,661169,270148,671128,361112,178
Developed Non-Producing41,36530,16923,18318,48415,145
Undeveloped47,60034,80425,87919,55314,957
Total Proved245,626234,242197,733166,398142,280
Probable151,28789,50958,85441,54130,793
Total Proved plus Probable396,913323,751256,587207,939173,073
      

Notes:

(1) The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding.
  
(2) Gross reserves means the total working interest (operating or non-operating) share of remaining recoverable reserves owned by Razor before deductions of royalties payable to others and without including any royalty interests owned by Razor.
  
(3)Based on Sproule's December 31, 2018 escalated price forecast. See “Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs”.
  
(4) The net present value of future net revenue attributable to the Company's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, well abandonment, decommissioning and reclamation costs, and inactive well costs.  It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Company's reserves estimated by Sproule represent the fair market value of those reserves.  Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Company's oil, NGL and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.
  


NET ASSET VALUE
(1)

Net Asset Value, including estimated December 31, 2018 cash and working capital was:

   
 NPV10 (M$)Net Asset Value
per share(1,2,3)
Proved Developed Producing148,671$6.11
Total Proved197,733$9.34
Proved Plus Probable
209,047$10.09
   

Notes:

(1) The estimated Net Asset Values are based on the estimated net present value of all future net revenue from Razor’s reserves (net of ADR and IWC costs), before tax, as estimated by Sproule as at December 31, 2018. All Net Asset Values cited in this press release are the resulting NPV per reserves category per basic share less net debt of $55.8 million at December 31, 2018.  See “Reader Advisories - Oil and Gas Metrics” and “Reader Advisories - Non-IFRS Measures” contained in this news release.
  
(2)Basic shares outstanding of approximately 15.2 million at December 31, 2018. There are no dilutive instruments currently outstanding.
  
(3) All 2018 financial amounts are unaudited.  See “Reader Advisories – Unaudited Financial Information”.


Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs

The forecast cost and price assumptions assume increases in wellhead selling prices and include inflation with respect to future operating and capital costs.  Crude oil and natural gas benchmark reference pricing, inflation and exchange rates utilized by Sproule as at December 31, 2018 were as follows:

      
YearExchange Rate
(CAD/USD)
WTI Cushing
Oklahoma 40 API
(USD/bbl)
Canadian Light
Sweet 40 API
(CAD/bbl)
Hardisty Bow
River

25 API
(CAD/bbl)
Natural Gas
AECO

(CAD/mmbtu)
      
20190.7763.0075.2760.971.95
20200.8067.0077.8963.872.44
20210.8070.0082.2568.273.00
20220.8071.4084.7970.373.21
20230.8072.8387.3972.543.30
20240.8074.2889.1473.993.39
20250.8075.7790.9275.473.49
20260.8077.2992.7476.983.58
  2027++2.0%/yr.+2.0%/yr.+2.0%/yr.+2.0%/yr.+2.0%/yr.
      


Reconciliation of Company Gross Reserves by Principal Product Type
(1), (2)

The following table sets forth the reconciliation of the Company’s reserves at Forecast Prices and Costs:


    
 Light and Medium Crude Oil
 Natural Gas Liquids
FactorsGross
Proved
Developed
Producing
(Mbbl)
 Gross
Proved
(Mbbl)
 Gross Proved +
Probable (Mbbl)
 Gross Proved
Developed
Producing
(Mbbl)
 Gross Proved
(Mbbl)
 Gross Proved
+ Probable

(Mbbl)
 
             
December 31, 20178,141 10,188 14,024 2,533 3,327 4,303 
Acquisitions678 868 1,058 68 91 111 
Category Change796 11 8 402 (1)(3)
Disposition- - - - - - 
Extensions/Infill Drilling12 85 93 2 28 33 
Economic Factors67 89 120 14 19 26 
Technical Revision(125)859 219 (29)(6)(64)
Working Interest Adj.
(53
)(67
)(78)(32
)(41
)(49
)
Production(1,153)(1,153)(1,153)(408)(408)(408)
December 31, 20188,363 10,880 14,291 2,550 3,009 3,949 
             



    
 Conventional Natural Gas
 Barrels of Oil Equivalent
FactorsGross
Proved
Developed
Producing
(Mmcf)
 Gross
Proved
(Mmcf)
 Gross Proved +
Probable
(Mmcf)
 Gross Proved
Developed
Producing
(Mboe)
 Gross Proved
(Mboe)
 Gross Proved
+ Probable

(Mboe)
 
             
December 31, 20177,412 9,343 12,001 11,909 15,072 20,327 
Acquisitions342 488 601 803 1,040 1,269 
Category Change1,005 223 263 1,366 47 49 
Disposition- - - - - - 
Extensions/Infill Drilling12 (57)(74)16 106 114 
Economic Factors(21)(8)(32)78 107 141 
Technical Revision422 564 679 (84)946 268 
Working Interest Adj.(114)(138)(162)(104)(131)(154)
Production(1,376)(1,376)(1,376)(1,790)(1,790)(1,790)
December 31, 20187,681 9,054 11,900 12,193 15,397 20,223 
             

Notes:

(1)   The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding.
  
(2)Conventional Natural Gas includes associated and non-associated gas.


Future Development Costs

The following table sets forth development costs deducted in the estimation of Razor’s future net revenue attributable to the reserve categories noted below:

  
 Forecast Prices and Costs (M$)
YearProved ReservesProved plus Probable
   
20191,5851,990
202012,52124,561
202128,61934,096
2022--
Thereafter--
Total Undiscounted42,72560,647
Total Discounted at 10%35,92951,482
   

The future development costs are estimates of capital expenditures required in the future for Razor to convert proved developed non-producing reserves and probable reserves to proved developed producing reserves.  The undiscounted future development costs are $42.7 million for proved reserves and $60.6 million for proved plus probable reserves (in each case based on forecast prices and costs).

SPECIAL SHAREHOLDER MEETING

The Company also announces that a special meeting of shareholders of the Company (the “Meeting”) will be held on Monday, April 1, 2019 at 1:00 p.m. at the offices of McCarthy Tetrault LLP, the Company’s legal counsel, Suite 4000, 421 - 7th Avenue S.W., Calgary, Alberta. At the Meeting, shareholders will be asked to approve a special resolution to amend the articles of the Company to create a new class of an unlimited number of preferred shares, issuable in series.

Razor believes that the capacity to issue preferred shares will provide the Company with increased flexibility in its capital structure and in raising future capital. The creation of the preferred shares would permit management of the Company to negotiate with potential investors regarding the rights and preferences of a series of preferred shares that may be issued to meet market conditions and financing opportunities as they arise, without the expense and delay in connection with calling a shareholders’ meeting to approve specific terms of any series of preferred shares.

A management information circular and related meeting materials will be mailed to the Company’s registered shareholders and will be available under the Company’s profile on SEDAR at www.sedar.com.

ABOUT RAZOR

Razor is a publicly-traded junior oil and gas development and production company headquartered in Calgary, Alberta, concentrated on acquiring, and subsequently enhancing, producing oil and gas properties primarily in Alberta. The Company is led by experienced management and a strong, committed Board of Directors, with a long-term vision of growth and distributions to shareholders, focused on efficiency and cost control in all areas of the business. Razor currently trades on TSX Venture Exchange under the ticker “RZE”.

For additional information please contact:

Doug Bailey
President and Chief Executive Officer
ORKevin Braun
Chief Financial Officer
   
Razor Energy Corp.
800, 500-5th Ave SW
Calgary, Alberta T2P 3L5
Telephone: (403) 262-0242
www.razor-energy.com
 Alliance Capital Partners
Gordon Aldcorn
www.alliancecapitalpartners.ca
403-618-6507

READER ADVISORIES

Forward-Looking Statements. Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, “project” or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include but is not limited to: Razor’s business strategy, objectives, strength and focus; the ability of the Company to achieve drilling success consistent with management’s expectations; future development costs associated with oil and gas reserves; the Meeting; and potential future issuances of preferred shares of the Company. Statements relating to “reserves” are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Razor, including expectations and assumptions concerning the success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Razor's properties, the successful application of drilling, completion and seismic technology, prevailing weather and break-up conditions, commodity prices, price volatility, price differentials and the actual prices received for the Company’s products, royalty regimes and exchange rates, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners and Razor’s ability to acquire additional assets.

Although Razor believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Razor can give no assurance that they will prove to be correct. Since forward-looking statements 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, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), constraint in the availability of services, commodity price and exchange rate fluctuations, regulatory and political risks, adverse weather or break-up conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. These and other risks are set out in more detail in Razor’s annual information form which is available on SEDAR at www.sedar.com.

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

This press release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about Razor’s prospective results of operations, production, net debt, net asset value and cash flow, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this document was made as of the date of this document and was provided for the purpose of providing further information about Razor’s future business operations. Razor disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein.

Oil and Gas Metrics. This press release contains a number of oil and gas metrics, including “future development costs”, “net asset value”, “reserves life index” and “reserve replacement” which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods. Future development costs are calculated as the sum of development capital plus the change in future development costs for the period. Net asset value for each reserves category is based on present value of future net revenues discounted at 10% before tax, net of net debt as at December 31, 2018, divided by the number of Razor shares outstanding as at December 31, 2018. Reserves life index is calculated as total Company share reserves divided by annual production. Reserve replacement is calculated by dividing reserve volume additions by annual production and expressed as a percentage.

Boe Disclosure. The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet 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. All BOE conversions in the report are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.

Unaudited Financial Information.  Certain financial and operating information included in this press release for the year ended December 31, 2018, including net asset value and net debt are based on estimated unaudited financial results for the year then ended, and are subject to the same limitations as discussed under Forward Looking Information set out above. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2018 and changes could be material.

Non-IFRS Measures. This press release contains the term “net debt”, which does not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable with the calculation of similar measures by other companies. Net debt is calculated as long-term debt less working capital (or plus working capital deficiency), with working capital excluding mark-to-market risk management contracts. Management believes net debt is a useful supplemental measure of the total amount of current and long term debt of the Company.

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 news release.

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Source: GlobeNewswire (February 22, 2019 - 6:00 AM EST)

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