Paramount Resources Ltd. (TSX:POU) ("Paramount" or the "Company")
is pleased to announce the reorganization of all of the Company's
oil sands and carbonate bitumen interests into a new wholly-owned
subsidiary, Pixar Petroleum Corp. ("Pixar"). The reorganization is
being undertaken to create a focused, self-funding oil sands entity
in order to accelerate the development of Paramount's bitumen
interests. Dr. William Roach has been appointed as Pixar's
President and Chief Executive Officer. In addition, the initial
independent resource estimates for the Saleski and other carbonate
bitumen properties have now been completed and the Company is
pleased to announce the results.
REORGANIZATION
Upon completion of the reorganization in early-December, all of
Paramount's oil sands and carbonate bitumen leases will be owned by
Pixar - including Paramount's Hoole and Saleski leases.
In total, Pixar will own approximately 275 sections of Crown oil
sands leases in the western Athabasca region of Alberta, the
majority of which are 100 percent owned. These leases are
prospective in multiple formations, primarily for thermal in-situ
development, but also have potential for cold production.
To view the map associated with this release, please visit the
following link:
http://media3.marketwire.com/docs/748222_figure_1.pdf
PIXAR'S EXECUTIVE LEADERSHIP TEAM
Mr. James Riddell, Paramount's President and Chief Operating
Officer, has been appointed the Executive Chairman of Pixar.
Dr. William Roach has been appointed President and Chief
Executive Officer of Pixar. From 2004 to 2010, Dr. Roach served on
the Board of Directors and as President and Chief Executive Officer
of UTS Energy Corporation ("UTS"), which at that time was a
publicly listed energy company focused on the exploration,
development and production of oil sands deposits in the Athabasca
Oil Sands Area of northeastern Alberta. During his tenure, the
market capitalization of UTS increased from $50 million to over
$1.75 billion. Prior to UTS, Dr. Roach had a successful 20-year
career directing and managing the design, construction and delivery
of large capital-intensive national and international upstream oil
and gas projects. In the coming year, Dr. Roach will primarily
focus on overseeing the submission of a development application for
Pixar's Hoole oil sands property and building the team necessary to
execute that development.
Mr. Martin Sandell has been appointed Senior Vice President,
Development of Pixar. Mr. Sandell was previously Vice President
Engineering of UTS and has 25 years of experience leading large
diverse oil and gas projects from conception to operation in
Canada, the United Kingdom, the North Sea and the Gulf of
Mexico.
Mr. William Robinson has been appointed Vice President,
Geoscience of Pixar. Prior to joining Pixar, Mr. Robinson oversaw
the exploration and delineation of Paramount's oil sands
assets.
PIXAR'S PROPERTIES
Pixar's properties will include approximately 56 sections of
land at Hoole, which are primarily prospective for bitumen in the
Grand Rapids formation and the carbonate properties, which are
primarily prospective for bitumen in the Grosmont formation. The
carbonate properties will include approximately 15 sections of land
at Saleski and 186 sections of land in other areas (the "Other
Carbonate Leases"), including leases at Orchid, Granor and House.
The new subsidiary will also own approximately 18 additional
sections in the Athabasca Oil Sands Area of northeastern Alberta.
Pixar's near-term plans are expected to focus on the development of
its 100 percent owned oil sands leases at Hoole and the further
delineation of its carbonate bitumen leases at Saleski.
Hoole
The majority of the work necessary for the regulatory
application for commercial development at the Hoole oil sands
property has been completed, together with preliminary front-end
engineering and design, and reservoir modelling and simulation
(which has been verified by core flood experiments). Preparatory
work for project development is continuing, including field
activities focused on optimizing water source and disposal
options.
In July 2011, Paramount received an updated independent
evaluation of its bitumen resources within the Grand Rapids
formation at the Hoole oil sands property. The updated evaluation
was conducted by the Company's independent reserves evaluator,
McDaniel & Associates Consultants Ltd. ("McDaniel"). The table
below summarizes McDaniel's estimates of volumes attributable to
Paramount's 100 percent interest in the economic contingent bitumen
resources in the Grand Rapids formation at Hoole as of April 30,
2011, and estimates of initial and fully developed production from
such interests using a conventional steam assisted gravity drainage
("SAGD") development scenario.
NPV(6) of
Economic Fully Future
Contingent Initial Developed Net Revenue
Category / Level of Resources Production Production (Discounted
Certainty(1) DEBIP(2) (3)(4) (5) (5) at 10%)
(MBbl) (MBbl) (Bbl/d) (Bbl/d) ($MM)
----------------------------------------------------------------------------
High Estimate 1,821,614 952,544 27,000 105,000 4,336
Best Estimate 1,631,742 762,661 26,000 80,000 2,834
Low Estimate 1,320,406 552,094 25,000 60,000 1,602
----------------------------------------------------------------------------
DEBIP means Discovered Exploitable Bitumen In Place.
MBbl means thousands of barrels.
Bbl/d means barrels per day.
$MM means millions of Canadian dollars.
See the Advisories section at the end of this document for note references.
Saleski
In April 2011, Paramount completed a ten-well delineation
drilling program at the Saleski property. Plans are currently being
developed for the 2011/2012 winter capital program, including
further delineation drilling and seismic surveys.
Paramount has now received an independent evaluation of its
bitumen resources within the Grosmont formation at Saleski and the
Other Carbonate Leases. The table below summarizes the estimated
volumes attributable to Paramount's 100 percent interest in the
carbonate bitumen resources associated with the Saleski property,
evaluated by McDaniel as of October 31, 2011. McDaniel's evaluation
was limited to the Grosmont formation and is based on the resource
being exploited using SAGD. The technology required to economically
produce bitumen from carbonate formations is currently in the
development stage and pilot projects by others in the industry are
ongoing. Currently, there is insufficient economic data available
for McDaniel to apply economic cutoffs or estimate future net
revenue.
Contingent
Resources
(Technology
Category / Level of Under Prospective
Certainty(1) DEBIP(2) UDEBIP(7) Development)(8) Resources(9)
(MBbl) (MBbl) (MBbl) (MBbl)
----------------------------------------------------------------------------
High Estimate 1,184,641 133,904 566,795 62,754
Best Estimate 1,184,641 109,332 380,493 34,006
Low Estimate 1,184,641 89,269 - -
----------------------------------------------------------------------------
DEBIP means Discovered Exploitable Bitumen In Place.
UDEBIP means Undiscovered Exploitable Bitumen In Place.
MBbl means thousands of barrels.
See the Advisories section at the end of this document for note references.
Other Carbonate Leases
The table below summarizes the estimated volumes attributable to
Paramount's 100 percent interest in the carbonate bitumen resources
associated with the Other Carbonate Leases as evaluated by McDaniel
as of October 31, 2011. McDaniel's evaluation was limited to the
Grosmont formation and is based on these resources being exploited
using SAGD. The technology required to economically produce bitumen
from carbonate formations is currently in the development stage and
pilot projects by others in the industry are ongoing. Currently
there is insufficient economic data available for McDaniel to apply
economic cutoffs or estimate future net revenue.
Contingent
Resources
Category / Level of (Technology
Certainty(1) Under Prospective
DEBIP(2) UDEBIP(7) Development)(8) Resources(9)
(MBbl) (MBbl) (MBbl) (MBbl)
----------------------------------------------------------------------------
High Estimate 430,586 5,411,625 183,950 2,211,652
Best Estimate 430,586 4,418,573 111,118 1,073,439
Low Estimate 430,586 3,607,750 - -
----------------------------------------------------------------------------
DEBIP means Discovered Exploitable Bitumen In Place.
UDEBIP means Undiscovered Exploitable Bitumen In Place.
MBbl means thousands of barrels.
See the Advisories section at the end of this document for note references.
Paramount is excited to add an experienced leadership team that
will be able to apply its skills and expertise to develop the
significant oil sands land base the Company has accumulated,
including a near-term development project and a range of future
projects. The creation of Pixar will allow for the accelerated
development of these high impact, capital intensive properties, on
a self-funding basis, which will further unlock the value of these
assets for the benefit of Paramount's shareholders.
ADVISORIES
Notes
1. High Estimate is considered to be an optimistic estimate of the quantity
of resources that will actually be recovered. It is unlikely that the
actual remaining quantities of resources recovered will meet or exceed
the high estimate. Those resources at the high end of the estimate range
have a lower degree of certainty (a 10 percent confidence level) that
the actual quantities recovered will equal or exceed the estimate. Best
Estimate is considered to be the best estimate of the quantity of
resources that will actually be recovered. It is equally likely that the
actual remaining quantities recovered will be greater or less than the
best estimate. Those resources that fall within the best estimate have a
50 percent confidence level that the actual quantities recovered will
equal or exceed the estimate. Low Estimate is considered to be a
conservative estimate of the quantity of resources that will actually be
recovered. It is likely that the actual remaining quantities recovered
will exceed the low estimate. Those resources at the low end of the
estimate range have the highest degree of certainty (a 90 percent
confidence level) that the actual quantities recovered will equal or
exceed the estimate.
2. Discovered Exploitable Bitumen In Place is the estimated volume of
bitumen, as of a given date, which is contained in a subsurface
stratigraphic interval of a known accumulation that meets or exceeds
certain reservoir characteristics, such as minimum continuous net pay,
porosity and mass bitumen content. For the Hoole oil sands property, the
presence of these characteristics is considered necessary for the
commercial application of known recovery technologies. For the Saleski
property and the Other Carbonate Leases, these volumes have been
constrained to areas that have a minimum thickness of 10 meters of
substantially clean, continuous predominantly bitumen-saturated
carbonate with log porosity meeting a minimum of 10 percent and bitumen
saturation greater than 50 percent, respectively and with both competent
top and lateral reservoir containment. These carbonate bitumen resources
are constrained to one mile in area around known data points that
penetrate the zone and possess definitive geophysical log data.
Discovered Exploitable Bitumen in Place for the Saleski property and the
Other Carbonate Leases may be assigned outside of the one mile area if
reservoir continuity between offsetting delineation is expected. The
technology required to economically produce bitumen from carbonate
formations is currently in the development stage and has not been proven
on a commercial scale. There is no certainty that it will be
commercially viable to produce any portion of the resources from the
Hoole oil sands property, the Saleski property or the Other Carbonate
Leases.
3. Contingent Resources are those quantities of bitumen estimated, as of a
given date, to be potentially recoverable from known accumulations using
established technology or technology under development, but are
classified as a resource rather than a reserve due to one or more
contingencies, such as the absence of regulatory approvals, detailed
design estimates or near term development plans. There is no certainty
that it will be commercially viable to produce any portion of the
contingent resources. For the Hoole oil sands property, contingencies
which must be overcome to enable the reclassification of bitumen
contingent resources as reserves include the finalization of plans for
the initial development, a regulatory application submission with no
major issues raised, access to capital markets and other sources of
funding and management's intent to proceed evidenced by a development
plan with major capital expenditures. Economic Contingent Resources are
those contingent resources that are economically recoverable based on
specific forecasts of commodity prices and costs (based on McDaniel's
forecast prices and costs as of April 1, 2011).
4. Represents the Company's share of recoverable volumes before deduction
of royalties. In the assessment of contingent resources, McDaniel used a
minimum net pay cut-off of 10 meters in the best estimate case.
5. Initial production means the average daily production rate during the
first year of production. Estimates of production rates assume that
production will commence in 2015 and fully developed production will be
reached in 2016 for the low estimate, 2017 for the best estimate and
2018 for the high estimate.
6. NPV means net present value and represents the Company's share of future
net revenue, before the deduction of income tax from the Economic
Contingent Resources in the Grand Rapids formation within the Hoole oil
sands property. The calculation considers such items as revenues,
royalties, operating costs, abandonment costs and capital expenditures.
Royalties have been calculated based on Alberta's Royalty Framework
applicable to oil sands projects in Alberta. The calculation does not
consider financing costs and general and administrative costs. NPVs were
calculated assuming natural gas is used as a fuel for steam generation.
Revenues and expenditures were calculated based on McDaniel's forecast
prices and costs as of April 1, 2011. The estimated net present values
disclosed in this press release do not represent fair market value.
7. Undiscovered Exploitable Bitumen In Place is the volume of petroleum
estimated, as of a given date, to be contained in accumulations yet to
be discovered. These resources are mapped using known data points
penetrating the zone and possess definitive geophysical log data along
with seismic data and regional mapping. There is no certainty that any
portion of the resources will be discovered. If discovered, there is no
certainty that it will be commercially viable to produce any portion of
the resources.
8. Contingent Resources/Technology Under Development are those quantities
of bitumen estimated, as of a given date, to be potentially recoverable
from known accumulations using established technology or technology
under development, but are classified as a resource rather than a
reserve due to one or more contingencies, such as the absence of
regulatory approvals, detailed design estimates or near term development
plans. There is no certainty that it will be commercially viable to
produce any portion of the contingent resources. For the Saleski
property and the Other Carbonate Leases, because of the lack of
demonstrated commercial SAGD production within carbonate reservoirs, the
recoverable resources assigned are contingent upon successful
application of SAGD to the subject reservoir or a reasonable analog. The
successful implementation of SAGD technology in carbonate reservoirs is
a significant contingency associated with these assignments that
separate them from typical McMurray clastic SAGD contingent and
prospective resources, where the technology has been proven effective.
In addition to the technical contingency, additional contingencies
applicable to the carbonate resources include being in the early
evaluation stage, the economic viability of development and the absence
of regulatory approvals. The economic status of these resources are
undetermined.
9. Prospective Resources are those quantities of bitumen estimated, as of a
given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects. Prospective
resources have both an associated chance of discovery and a chance of
development. Prospective Resources have not been, and may never be,
discovered.
Forward-looking Information
Certain statements in this document constitute forward-looking
information under applicable securities legislation.
Forward-looking information typically contains statements with
words such as "anticipate", "believe", "estimate", "expect",
"plan", "intend", "propose", or similar words suggesting future
outcomes or an outlook. Forward looking information in this
document includes, but is not limited to:
-- the planned reorganization and the scope and timing thereof;
-- estimated resources and the discounted net present value of future net
revenues from such resources (including the forecast prices and costs
and the timing of expected production volumes and future development
capital);
-- expected production volumes from Hoole and the timing thereof;
-- exploration and development plans for oil sands leases and the timing
thereof;
-- the ability of Pixar to be self-funding;
-- the scope and timing of regulatory applications; and
-- business strategies and objectives;
Such forward-looking information is based on a number of
assumptions which may prove to be incorrect. The following
assumptions have been made, in addition to any other assumptions
identified in this document:
-- future crude oil, bitumen, natural gas and NGLs prices and general
economic and business conditions;
-- the ability to obtain required capital to finance exploration,
development and operations;
-- the ability to obtain equipment, services, supplies and personnel in a
timely manner to carry out activities;
-- the ability to market oil successfully to current and new customers;
-- estimates of input and labour costs for an oil sands project;
-- the ability to secure adequate product processing transportation and
storage;
-- the ability to obtain drilling success consistent with expectations;
-- the timely receipt of required regulatory approvals;
-- estimated timelines being met in respect of the development of the oil
sands properties;
-- access to capital markets and other sources of funding; and
-- currency exchange and interest rates.
Although Paramount believes that the expectations reflected in
such forward looking information is reasonable, undue reliance
should not be placed on it as Paramount can give no assurance that
such expectations will prove to be correct. Forward-looking
information is based on current expectations, estimates and
projections that involve a number of risks and uncertainties which
could cause actual results to differ materially from those
anticipated by Paramount and described in the forward looking
information. These risks and uncertainties include, but are not
limited to:
-- fluctuations in crude oil, bitumen, natural gas and NGLs prices, foreign
currency exchange rates and interest rates;
-- the uncertainty of estimates and projections relating to future revenue,
future production, costs and expenses and the timing thereof;
-- the ability to secure adequate product processing, transportation and
storage;
-- the uncertainty of exploration, development and drilling;
-- operational risks in exploring for, developing and producing crude oil
and natural gas, and the timing thereof;
-- the ability to obtain equipment, services, supplies and personnel in a
timely manner;
-- potential disruption or unexpected technical difficulties in designing,
developing or operating new or existing facilities;
-- risks and uncertainties involving the geology of oil and gas deposits;
-- the uncertainty of resource estimates;
-- the ability to generate sufficient cash flow from operations and other
sources of financing at an acceptable cost to meet current and future
obligations, including costs of anticipated projects;
-- changes to the status or interpretation of laws, regulations or
policies;
-- changes in environmental laws including emission reduction obligations;
-- the receipt and timing of governmental or regulatory approvals;
-- changes in general business and economic conditions;
-- uncertainty regarding aboriginal land claims and co-existing with local
populations;
-- the effects of weather;
-- the ability to fund exploration, development and operational activities
and meet current and future obligations;
-- the timing and cost of future abandonment and reclamation activities;
-- cleanup costs or business interruptions due environmental damage and
contamination;
-- the ability to enter into or continue leases;
-- existing and potential lawsuits and regulatory actions; and
-- other risks and uncertainties described elsewhere in this document and
in Paramount's other filings with Canadian securities authorities,
including its Annual Information Form.
The foregoing list of risks is not exhaustive. Additional
information concerning these and other factors which could impact
Paramount are included in Paramount's most recent Annual
Information Form. The forward-looking information contained in this
document is made as of the date hereof and, except as required by
applicable securities law, Paramount 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.
Contacts: Paramount Resources Ltd. J.H.T. (Jim) Riddell
President and Chief Operating Officer (403) 290-3600 (403) 262-7994
(FAX) Paramount Resources Ltd. B.K. (Bernie) Lee Chief Financial
Officer (403) 290-3600 (403) 262-7994 (FAX)
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