SYS-CON MEDIA Authors: Carmen Gonzalez, Sean Houghton, Glenn Rossman, Ignacio M. Llorente, Xenia von Wedel

News Feed Item

Strategic Oil & Gas Ltd. Announces Year-End Reserves and Provides Operations Update

CALGARY, ALBERTA -- (Marketwired) -- 02/28/14 -- Strategic Oil & Gas Ltd. ("Strategic" or the "Company") (TSX VENTURE:SOG) is pleased to announce its year-end reserves and provide an update on its first quarter drilling program. Strategic achieved a 54 percent increase in proved and probable reserves, for a 480 percent reserve replacement ratio. The Company's latest Muskeg Stack well, 16-34, was flowing at a rate of 596 BOED (89 percent oil) on the final day of the 11 day flow back period.

HIGHLIGHTS


--  Strategic added 5.7 MMBoe of proved and probable reserves in 2013. The
    Company's reserve replacement ratio was 480 percent. 
--  Proved reserves increased 67 percent to 6.7 MMBoe (61 percent oil) from
    4.0 MMBoe at year-end 2012. 
--  Proved and probable reserves increased 4.5 MMBoe (54 percent) from 8.2
    MMBoe at year-end 2012 to 12.7 MMBoe (63 percent oil) at December 31,
    2013 after production of 1.2 MMBoe during 2013. 
--  Pre-tax net asset value of the Company's proved and probable reserves,
    using McDaniel's forecast pricing and discounted at 10 percent,
    increased to $180 million at December 31, 2013 from $139 million at
    December 31, 2012. 
--  Strategic realized finding, development and acquisition costs ("FD&A"),
    including future development capital ("FDC"), of $30.75 per Boe in 2013
    based on capital expenditures of $128.6 million. 
--  Excluding $24.8 million in infrastructure capital spending for upgrades
    to oil facilities and pipelines, the Company's FD&A, including changes
    in FDC, were $26.40 per Boe on a proved and probable basis.

RESERVES

In accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), the Company's oil, natural gas and natural gas liquids ("NGL") reserves were evaluated by an independent engineering firm, McDaniel and Associates Consultants Ltd. ("McDaniel") as at December 31, 2013. Gross reserves included in this release are Strategic's working interest reserves before royalty burdens. Complete NI 51-101 reserves disclosure will be included in Strategic's annual NI 51-101 filings which will be filed prior to March 31, 2014. The Company's aggregate proved and probable reserves are reported in barrels of oil equivalent (Boe). Boe may be misleading, particularly if used in isolation. A Boe conversion ratio for natural gas of 6 Mcf: 1 Boe has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Strategic's reserves at December 31, 2013 are summarized below.


                          Light and                      Natural            
                             Medium     Heavy  Natural       Gas         Oil
                          Crude Oil       Oil      Gas   Liquids  Equivalent
Gross Reserves(1)             (Mbbl)   (Mbbl)   (MMcf)    (Mbbl)      (Mboe)
----------------------------------------------------------------------------
Proved Producing               2,991      104   10,118        63       4,845
Proved Non-Producing             112        0    3,360         0         672
Proved Undeveloped               879        0    1,787         0       1,177
Total Proved                   3,982      104   15,265        63       6,694
----------------------------------------------------------------------------
Total Probable                 3,935       39   11,979        50       6,021
----------------------------------------------------------------------------
Total Proved and Probable      7,918      143   27,244       113      12,715
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Gross reserves are the Company's total working interest share before the
deduction of any royalties and without including any royalty interests of   
the Company. The December 31, 2013 reserves report has been prepared in     
accordance with the definitions, procedures and standards contained in the  
Canadian Oil and Gas Evaluation Handbook and NI 51-101 - Standards of       
Disclosure for Oil and Gas Activities.                                      

Approximately 74 percent of the Company's total reserves are located in the Steen River core area. Proved and probable producing reserves represent 52 percent of total proved and probable reserves, as compared to 55 percent at December 31, 2012.

Proved and probable third party reserve bookings for Muskeg Stack wells are below the Company's type curve generated from internal reservoir engineering estimates. This is typical at the early stages of an emerging resource play. The Company anticipates the difference between these estimates will narrow in future years as additional wells are drilled and more extensive production data becomes available.

McDaniel estimates the FDC required to convert undeveloped and non-producing reserves to producing reserves at $97.5 million. This includes 23 Muskeg Stack and 3 Keg River proven and probable undeveloped locations, of which 9 Muskeg Stack and 2 Keg River are booked as proven undeveloped locations. These wells are anticipated to be drilled over the next 2 years. The total booked locations represent less than 10 percent of the Muskeg Stack inventory identified on Company's land holdings in the Steen River area.

A reconciliation of the Company's reserves at December 31, 2013 to the previous year-end is as follows.


Thousand Barrels of Oil                                              Proved 
 Equivalent (Mboe)                Proved         Probable      and Probable 
----------------------------------------------------------------------------
Opening Balance                                                             
 December 31, 2012                 4,017            4,167             8,184 
Discoveries and                                                             
 Extensions                          800            2,967             3,768 
Technical Revisions                1,429           (1,695)             (267)
Acquisitions                       1,641              617             2,258 
Economic Factors                       0              (35)              (35)
Production(1)                     (1,194)               0            (1,194)
----------------------------------------------------------------------------
Closing Balance                                                             
 December 31, 2013                 6,694            6,021            12,715 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Financial information is from Strategic's preliminary unaudited         
consolidated financial statements for the year ended December 31, 2013, and 
is subject to change. See Unaudited Financial Information in this press     
release.                                                                    

Strategic's light and medium oil, natural gas and NGL reserves were evaluated by McDaniel using McDaniel's product price forecasts effective January 1, 2014 prior to provision for financial risk management contracts, income taxes, interest, debt service charges and general and administrative expenses. The following table summarizes the net present value from recognized reserves at December 31, 2013, assuming various discount rates, and incorporating future development costs and abandonment liabilities. It should not be assumed that the discounted future net revenues estimated by McDaniel represent the fair market value of the Company's assets or future production from the assets.


Summary of Before Tax Net Present Value of Future Net Revenue (Forecast     
 Pricing) (1)(2)                                                            
                                                               Discounted at
($ thousands)            Undiscounted          5%            10%         15%
----------------------------------------------------------------------------
Proved Producing              101,375      89,658         80,685      73,652
Proved Non-Producing            7,659       5,956          4,711       3,787
Proved Undeveloped             21,486      15,718         11,442       8,200
----------------------------------------------------------------------------
Total Proved                  130,519     111,332         96,838      85,638
Total Probable                161,174     113,126         83,248      63,540
----------------------------------------------------------------------------
Total Proved and                                                            
 Probable                     291,693     224,458        180,086     149,179
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 (1) Based on McDaniel's January 1, 2014 escalated price forecast.          
(2) Tables may not add due to rounding. There is no assurance that the      
forecast prices and costs assumptions will be attained and variances could  
be material. The recovery and reserve estimates of Strategic's crude oil,   
natural gas liquids and natural gas reserves provided herein are estimates  
only and there is no guarantee that the estimated reserves will be          
recovered. Actual crude oil, natural gas and natural gas liquids reserves   
may be greater than or less than the estimates provided herein.             

Strategic incurred capital expenditures of $129 million in 2013, of which $78 million was spent on drilling, completions and recompletions, $34 million on facilities, pipelines and tie ins, $7 million was spent on land and seismic and $10 million was spent on acquisitions. The following table summarizes Strategic's finding and development ("F&D") costs as well as FD&A costs, both before and after the inclusion of changes in FDC.


                                                                            
2013 F&D and FD&A costs                                                     
                                                                            
                                                                            
                                                                            
                                                                   Proved & 
($ thousands                                          Proved        Probable
 (unaudited), except               Proved &        Excluding      Excluding 
 as noted)                Proved    Probable  Infrastructure  Infrastructure
                                                                            
F&D Costs, Excluding                                                        
 FDC                                                                        
Exploration and          118,497     118,497          93,645          93,645
 Development                                                                
 Expenditures(1)                                                            
Reserve Additions,                                                          
 Including Revisions       2,229       3,466           2,229           3,466
 - MBoe                                                                     
F&D Costs - $/Boe          53.16       34.19           42.01           27.02
                                                                            
F&D Costs, Including                                                        
 FDC                                                                        
Exploration and                                                             
 Development             118,497     118,497          93,645          93,645
 Expenditures(1)                                                            
Total Change in FDC       34,569      47,396          34,569          47,396
----------------------------------------------------------------------------
Total F&D Capital,                                                          
 Including Change in     153,066     165,893         128,214         141,041
 FDC                                                                        
Reserve Additions,                                                          
 Including Revisions       2,229       3,466           2,229           3,466
 - MBoe                                                                     
F&D Costs- $/Boe           68.67       47.87           57.52           40.69
                                                                            
FD&A Costs,                                                                 
 Excluding FDC                                                              
Exploration and                                                             
 Development Capital     118,497     118,497          93,645          93,645
 Expenditures(1)                                                            
Net Acquisitions          10,098      10,098          10,098          10,098
----------------------------------------------------------------------------
FD&A Capital                                                                
 Expenditures,                                                              
 Including Net           128,595     128,595         103,743         103,743
 Acquisitions                                                               
Reserve Additions,                                                          
 Including Net             3,870       5,724           3,870           5,724
 Acquisitions - MBoe                                                        
FD&A Costs - $/Boe         33.23       22.47           26.80           18.12
                                                                            
FD&A Costs,                                                                 
 Including FDC                                                              
FD&A Capital                                                                
 Expenditures,                                                              
 Including Net           128,595     128,595         103,743         103,743
 Acquisitions(1)                                                            
Total Change in FDC       34,569      47,396          34,569          47,396
----------------------------------------------------------------------------
Total FD&A Capital,                                                         
 Including Change in     163,164     175,991         138,312         151,139
 FDC                                                                        
Reserve Additions,                                                          
 Including Net             3,870       5,724           3,870           5,724
 Acquisitions - MBoe                                                        
FD&A Costs,                                                                 
 Including FDC -           42.16       30.75           35.74           26.40
 $/Boe                                                                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Financial information is from Strategic's preliminary unaudited         
consolidated financial statements for the year ended December 31, 2013 and  
is subject to change. See Unaudited Financial Information in this press     
release.                                                                    

OPERATIONAL UPDATE

Strategic has had continued drilling success with its first quarter Muskeg stack horizontal focused drilling program, with two of the four planned horizontal Muskeg Stack wells now tied-in and on stream.


--  The Muskeg Stack horizontal well located at 16-34 is a step out well.
    The well was successfully drilled to a lateral length of 1,554 meters
    and completed with a 14 stage frac. The enhanced completion techniques
    have made a significant improvement in the productivity of the
    horizontal Muskeg Stack well. The 16-34 well has been flowing back frac
    fluid, oil, water and gas up a 4.5 inch diameter frac string at rates of
    1,300-1,500 barrels per day making it one of the Company's strongest
    well to date. The well recovered mainly frac fluid during the initial 2
    days of the flow back and has been cleaning up. Over the next 9 days the
    well flowed 3,600 barrels of oil and 2,500 mcf of raw gas and has
    recovered approximately 40% of the frac fluid. At the end of the 11 day
    flow period the well was still cleaning up and was flowing of 530 BOPD
    and 400 mcfd of gas at an oil equivalent rate of 596 BOED (89 percent
    oil). 

--  Muskeg horizontal well 5-33 was drilled to a lateral length of 1,506
    meters and completed with a 10 stage frac. The well averaged 260 BOED
    (94 percent oil) over the first 27 days. The well is producing at a rate
    of 238 BOED (97 percent oil) at the end of the 27 days. Strategic has
    gradually ramped up the pump speed in the well in order to mitigate any
    frac sand flow back.

--  The Company has successfully drilled Muskeg Stack horizontal well 13-24
    with a lateral length of 1,600 m. The well is planned to be completed
    with a 15 stage frac next week. 

--  Strategic is currently drilling its final planned Muskeg Stack well for
    the first quarter at 10-24. The well is planned to have a lateral length
    of 1,600 m and is planned to be completed with a 15 stage frac. The 10-
    24 well is offsetting the 14-13 well, which produced an IP30 of 340 BOED
    from an 875 meter lateral completed with an 8 stage frac.

Strategic is also pleased to report its Bistcho oil pipeline project is proceeding on time and on budget. The Company expects first oil to flow in the sales line early in the second quarter of 2014. This project is paramount in terms of the Company's strategy to reduce operating and transportation costs by limiting trucking costs and enhancing the profitability of each barrel processed at Marlowe. The plant turnaround at Bistcho is ongoing and the plant is expected to be online next week.

Mr. Gurpreet Sawhney President & CEO of Strategic, states, "Everything is coming together - the team, the facility, the oil sales pipeline and the Muskeg Stack drilling. Strategic has made significant strides and improved its drilling and completion techniques to maximize well performance while managing costs in a new resource play. With over 300 Muskeg Stack locations in our inventory, coupled with high netback light oil production at Steen and a dedicated team, I believe we are continuing to build Strategic into a 'Premier Northern Operator'.

ABOUT STRATEGIC

Strategic is a junior oil and gas company committed to growth by exploiting its light oil assets in Canada. Strategic's common shares trade on the TSX Venture Exchange under the symbol SOG.

ADDITIONAL INFORMATION

Additional information is also available at www.sogoil.com and at www.sedar.com.

Unaudited Financial Information

Certain financial and operating information included in this press release for the year ended December 31, 2013, such as capital expenditures, production, F&D costs and FD&A costs are based on unaudited financial results, and are subject to the same limitations as discussed under "Forward-Looking Information". These estimated amounts may change upon the completion of audited financial statements for the year-ended December 31, 2013 and changes could be material.

Forward-Looking Statements

This news release includes certain information, with management's assessment of Strategic's future plans and operations, and contains forward-looking statements which may include some or all of the following: (i) anticipated production rates; (ii) expected results of capital programs; (iii) expected timelines for production optimization; (iv) net debt levels; (v) anticipated operating costs; and (vi) expected capital projects and associated spending; which are provided to allow investors to better understand the Company's business. By their nature, forward-looking statements are subject to numerous risks and uncertainties; some of which are beyond Strategic's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, changes in environmental tax and royalty legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources, and other risks and uncertainties described under the heading 'Risk Factors' and elsewhere in the Company's Annual Information Form for the year ended December 31, 2012 and other documents filed with Canadian provincial securities authorities and are available to the public at www.sedar.com. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The principal assumptions Strategic has made includes security of land interests; drilling cost stability; finance and debt markets continuing to be receptive to financing the Company, the ability of the Company to monetize non-core assets and industry standard rates of geologic and operational success. Actual results could differ materially from those expressed in, or implied by, these forward-looking statements. Strategic disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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.

Contacts:
Strategic Oil & Gas Ltd.
Gurpreet Sawhney
MBA, MSc., PEng.
President and CEO
403.767.9122 (FAX)
403.767.2949

Strategic Oil & Gas Ltd.
Michael A. Zuk
VP, Business Development
403.781.2989
403.767.9122 (FAX)

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
We are reaching the end of the beginning with WebRTC, and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will w...
"ElasticBox is an enterprise company that makes it very easy for developers and IT ops to collaborate to develop, build and deploy applications on any cloud - private, public or hybrid," stated Monish Sharma, VP of Customer Success at ElasticBox, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The term culture has had a polarizing effect among DevOps supporters. Some propose that culture change is critical for success with DevOps, but are remiss to define culture. Some talk about a DevOps culture but then reference activities that could lead to culture change and there are those that talk about culture change as a set of behaviors that need to be adopted by those in IT. There is no question that businesses successful in adopting a DevOps mindset have seen departmental culture change, ...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Ar...
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, discussed how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
DevOps Summit 2015 New York, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that produce software that is obsolete...
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from ha...
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, a...
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using ...
"SAP had made a big transition into the cloud as we believe it has significant value for our customers, drives innovation and is easy to consume. When you look at the SAP portfolio, SAP HANA is the underlying platform and it powers all of our platforms and all of our analytics," explained Thorsten Leiduck, VP ISVs & Digital Commerce at SAP, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...