CALGARY, AB, Feb. 1, 2022 /CNW/ - Yangarra Resources Ltd. ("Yangarra" or the "Company") (TSX: YGR) announces financial and operations update and the results of its 2021 year-end oil and gas reserves evaluation.

Financial Update (all numbers are unaudited and approximate)

Fourth quarter production averaged 10,060 boe/d (44% liquids) generating funds flow from operations of $32 million ($0.38 per share).  Capital spending for the fourth quarter of $27 million was higher than previously forecast primarily due to drilling through the Christmas break and additional reclamation and abandonment activities.  The fourth quarter operating netback was $39.62/boe and net debt at December 31, 2021 was $197 million, resulting in an annualized debt to funds flow ratio of 1.5:1 vs 2.1:1 for the quarter ended September 31, 2021.

Operations Update

The Company brought on four wells in late December 2021 and has drilled an additional eight wells (completed six) on the fourteen-well pad in West Ferrier in late January.

Since pioneering the economic development of bioturbated Cardium wells five years ago, the strategic progression of the Company has been as follows:

  • 2016 & 2017 were used to determine where drilling bioturbated wells was economic and to accumulate potential acreage.
  • 2018 & 2019 was spent building out the gathering and compression infrastructure as well as expanding the fluid hauling group to handle planned production growth.
  • During 2020 & 2021 work commenced on ESG initiatives including; identifying baseline carbon intensity, implementing numerous methane and CO2 reduction initiatives, reducing the non producing well ARO to less than $2 million and diversifying the Board of Directors and staff.  Also, during this period, the internal Oilfield Servicing Group ("OFS") (working exclusively for Yangarra) was expanded with the addition of earth moving, road maintenance and rig hauling equipment. 
  • With these important building blocks in place, the Company will focus on debt reduction for 2022, while maintaining a 30-well capital program. 2022 production guidance remains at 12,000 boe/d with funds flow from operations estimated at $130 million assuming CDN$78.00/bbl for Edmonton par and CDN$3.50/GJ for AECO natural gas.

ESG Report

The Company is pleased to announce the publication of its inaugural ESG report. ESG standards have been a core principle of Yangarra's operations for years as evidenced by the Company's low ARO & recent work on reducing emissions. The ESG report will allow stakeholders to benchmark Yangarra's metrics with a peer group and highlights Yangarra's stellar track record. The report can be found on our website at www.yangarra.ca.

Reserve Report Highlights

Summary

Yangarra has been drilling its bioturbated Cardium formation for over five years.   Initial decline profiles were determined without the benefit of production history, as none existed, and were therefore based entirely on initial production rates. As significant production history is now available, the reserve report and in particular the Company's proved developed non-producing reserves is being revised appropriately with the updated production history. To better reflect the accumulated progression of drilling and production in the bioturbated Cardium, the Company is presenting a 5-year average for F&D costs.

The reserve report uses an Edmonton Par price of $81.25/bbl for 2022 vs current pricing for Edmonton par at over $95.00/bbl.

All reserves information contained in this press release are based on the Company's 2021 NI 51-101 oil and gas reserve report dated February 1, 2022, as prepared by Deloitte LLP (The "2021 Reserve Report").

Proved Developed Producing ("PDP") Reserves

  • 19.6 million boe (14% decrease from 2020)
  • Net present value before tax discounted at 10% ("NPV10") of $345 million (9% increase from 2020)
  • Yangarra's trailing 5-year PDP F&D is $17.25/boe
  • PDP net asset value per fully diluted common share ("NAV per FD Share") of $1.63
  • PDP Reserve Life Index ("RLI") based on fourth quarter 2021 production of 5.3 years

Total Proved reserves ("1P")

  • 82.8 million boe (14% decrease from 2020)
  • NPV10 of $1.0 billion (1% decrease from 2020)
  • 1P future development costs of $443 million
  • Yangarra's trailing 5-year 1P F&D is $10.87/boe
  • 1P NAV per FD Share of $8.92
  • RLI based on fourth quarter 2021 production of 22.7 years

Proved plus probable reserves ("2P")

  • 141.2 million boe (10% decrease from 2020)
  • NPV10 of $1.5 billion (1% increase from 2020)
  • 2P Future development costs of $658 million
  • Yangarra's trailing 5-year 2P F&D is $8.06/boe
  • 2P NAV per FD Share of $13.86
  • RLI of 38.7 years

Oil and Gas Reserves

The following tables summarize certain information contained in the 2021 Reserve Report. The 2021 Reserve Report encompasses 100% of Yangarra's oil and gas properties and was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") by Deloitte.

Summary of Oil and Gas Reserves (1)(2)
(Company Share Gross volumes based on forecast price and costs)

Reserves Category









Light and

Medium Oil

(Mbbl)

Natural Gas

Liquids

(Mbbl)

Conventional

Gas

(MMcf)

Shale  

Gas  

(MMcf)

Total BOE

2021

(Mboe)


Total BOE

2020

(Mboe)

Proved Developed Producing

3,972

4,029

68,792

521

19,553


22,754

Proved Developed Non-Producing

143

296

5,092

0

1,288


12,595

Proved Undeveloped

13,768

12,492

208,703

5,315

61,929


61,084

Total Proved

17,883

16,817

282,587

5,835

82,770


96,434

Probable

12,109

12,350

196,865

7,692

58,461


61,127

Total Proved Plus Probable

29,902

29,166

479,453

13,527

141,232


157,561

Notes:

(1)     Total values may not add due to rounding.

(2)     BOEs are derived by converting gas to oil equivalent in the ratio of six thousand cubic feet of gas to one barrel of oil (6 Mcf:1 bbl).

Summary of Net Present Values of Future Net Revenue (Before Tax) (1)(4)
(Based on forecast price and costs)


As At December 31, 2021(2)


As At

December 31, 2020 (3)

Reserves Category

0.0%

(M$)

5.0%

(M$)

10.0%

(M$)

15.0%

(M$)

20.0%

(M$)


10.0%

(M$)

Proved Developed Producing

493,715

404,060

345,074

303,694

273,146


316,329

Proved Developed Non-Producing

26,153

19,487

15,348

12,613

10,705


160,446

Proved Undeveloped

1,242,479

890,609

676,652

536,017

438,033


573,429

Total Proved

1,762,346

1,314,155

1,037,073

852,323

721,883


1,050,203

Probable

1,417,042

762,882

469,039

313,911

222,951


439,246

Total Proved Plus Probable

3,179,388

2,077,037

1,506,113

1,166,235

944,834


1,489,449

Notes:


(1)

Total values may not add due to rounding.

(2)

Forecast pricing used is based on Deloitte published price forecasts effective December 31, 2021. 

(3)

Forecast pricing used is based on Deloitte published price forecasts effective December 31, 2020.

(4)

Cash flows are reduced for future abandonment costs and estimated capital for future development associated with the reserves.

Reserve Definitions:

(a)

"Proved" reserves are those 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.

(b)

"Probable" reserves are those additional reserves that are less certain to be recovered 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 plus probable reserves.

(c)

"Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.

(d)

"Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.

(e)

"Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.

(f)

"Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

Reconciliations of Changes in Reserves

The following table sets out a reconciliation of the changes in the Corporation's reserves as at December 31, 2021 against such reserves at December 31, 2020 based on forecast prices and cost assumptions:


Light and Medium Oil

Natural Gas Liquids


Gross Proved

Gross

Probable

Gross Proved Plus Probable

Gross

Proved

Gross Probable

Gross

Proved Plus Probable


(Mstb)

(Mstb)

(Mstb)

(Mstb)

(Mstb)

(Mstb)

Opening Balance

19,972.4

12,153.9

32,126.4

19,709.0

12,959.3

32,668.2

Production

-882.8

0.0

-882.8

-691.7

0.0

-691.7

Technical Revisions

-3,006.8

-981.6

-3,988.5

-4,233.1

-1,678.0

-5,911.0

Extensions

1,785.5

818.5

2,604.0

2,020.7

1,045.0

3,065.7

Economic Factors

15.0

28.2

43.2

11.7

23.1

34.8

Closing Balance

17,883.4

12,018.9

29,902.3

16,816.5

12,349.5

29,166





Conventional Gas

Shale Gas


Gross

Proved

Gross Probable

Gross

Proved Plus Probable

Gross

Proved

Gross Probable

Gross

Proved Plus Probable


(MMcf)

(MMcf)

(MMcf)

(MMcf)

(MMcf)

(MMcf)

Opening Balance

333,869.6

207,953.4

541,823.0

6,643.0

8,131.8

14,774.8

Production

-11,728.6

0.0

-11,728.6

-65.1

0.0

-65.1

Technical Revisions

-74,175.3

-29,187.3

-103,362.6

-742.7

-439.6

-1,182.2

Extensions

34,417.6

17,697.1

52,114.8

0.0

0.0

0.0

Economic Factors

204.1

401.9

606.0

0.0

0.0

0.0

Closing Balance

282,587.4

196,865.2

479,452.6

5,835.2

7,692.2

13,527.4


 

MBOE




Gross

Proved

Gross Probable

Gross

Proved Plus Probable



(Mboe)

(Mboe)

(Mboe)


Opening Balance

96,433.5

61,127.4

157,560.9


Production

-3,540.1

0.0

-3,540.1


Technical Revisions

-19,726.2

-7,597.4

-27,323.6


Extensions

9,542.5

4,813.0

14,355.5


Economic Factors

60.7

118.3

179.0


Closing Balance

82,770.3

58,461.4

141,231.6


Forecast Prices Used in Estimates

The forecast price and market forecasts prepared by Deloitte are based on information available from numerous government agencies, industry publication, oil refineries, natural gas marketers, and industry trends. The prices are Deloitte's best estimate of how the future will look, based on the many uncertainties that exist in both the domestic Canadian and international petroleum industries. Deloitte considers the current monthly trends, the actual and trends for the year to date, and the prior year actual in determining the forecast. The crude oil and natural gas forecasts are based on yearly variable factors weighted to higher percent in current data and reflecting a higher percent to the prior year historical. These forecasts are Deloitte's interpretation of current available information and while they are considered reasonable, changing market conditions or additional information may require alteration from the indicated effective date.

Inflation forecasts and exchange rates, an integral part of the forecast, have also been considered.


Price Inflation Rate

Cost Inflation Rate

Cdn to US Exchange Rate

2022

0.0%

0.0%

0.800

2023

2.0%

2.0%

0.800

2024

2.0%

2.0%

0.800

2025

2.0%

2.0%

0.800

2026 beyond

2.0%

2.0%

0.800

Oil, NGL, and natural gas base case prices, utilized by Deloitte in the Deloitte Reserve Report were as follows:


Oil

Natural Gas

Natural Gas Liquids


Year

WTI

Cushing

(Oklahoma)

Edmonton

City Gate

40° API

Alberta

Reference – Gas

Prices

Alberta

AECO – Gas

Prices

Pentanes +

Condensate

Edmonton

Butanes

Edmonton

Propane

Edmonton


($US/bbl)

($Cdn/bbl)

($Cdn/mcf)

($Cdn/mcf)

($Cdn/bbl)

($Cdn/bbl)

($Cdn/bbl)

Forecast








2022

$69.00

$81.25

$3.25

$3.65

$85.30

$56.90

$44.70

2023

$65.30

$75.25

$2.85

$3.25

$79.00

$45.15

$33.85

2024

$61.40

$70.25

$2.75

$3.15

$73.75

$42.15

$31.65

2025

$62.60

$71.65

$2.80

$3.25

$75.25

$43.00

$32.25

2026

$63.85

$73.05

$2.85

$3.30

$76.75

$43.85

$32.90



Escalation of 2.0% Thereafter


Notes:

  • All prices are in Canadian dollars except WTI which are in U.S. dollars.
  • Edmonton City Gate prices based on light sweet crude posted at major Canadian refineries (40 Deg. API <0.5% Sulphur).
  • Natural Gas Liquid prices are forecasted at Edmonton therefore an additional transportation cost must be included to plant gate sales point.
  • 1 Mcf is equivalent to 1 mmbtu.
  • Alberta gas prices, except AECO, include an average cost of service to the plant gate.

Finding and Development Costs

Yangarra's F&D costs for 2021, 2020 and the five-year average are presented in the tables below. The costs used in the F&D calculation are the capital costs related to: land acquisition and retention; drilling; completions; tangible well site; tie-ins; and facilities, plus the change in estimated future development costs as per the independent reserve report. Acquisition costs are net of any proceeds from dispositions of properties. Due to the timing of capital costs and the subjectivity in the estimation of future costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year. The reserves used in this calculation are Company net reserve additions, including revisions.

Proved Developed Producing Finding & Development Costs ($ millions)


2021

2020

2017 – 2021

Capital expenditures

88.5

51.5

494.8





Reserve additions, net production (Mboe)

58.9

845

28,686





Proved Developed Producing F&D costs – including future capital ($/boe)

1,502.2

60.76

17.25





Proved Recycle Ratio ($32.25/boe annual operating netback)

0.02

0.26


Proved Finding & Development Costs ($ millions)


2021

2020

2017 - 2021

Capital expenditures

88.5

51.5

494.8

Change in future capital

23.5

(9.7)

193.0

Total capital for F&D

108.5

41.8

684.3





Reserve additions, net production (Mboe)

(10,404)

14,452

63,289





Proved F&D costs – including future capital ($/boe)

N/A

2.88

10.87

Proved F&D costs – excluding future capital ($/boe)

N/A

3.55

7.82





Proved Recycle Ratio




   Including future capital

N/A

5.56


   Excluding future capital

N/A

4.51


Proved plus Probable Finding & Development Costs ($ millions)


2021

2020

2017 - 2021

Capital expenditures

88.5

51.5

494.8

Change in future capital

36.4

(28.2)

291.8

Total capital for F&D

121.4

23.3

783.1





Reserve additions, net production (Mboe)

(13,070)

15,534

97,572





Proved plus Probable F&D costs – including future capital ($/boe)

N/A

1.49

8.06

Proved plus Probable F&D costs – excluding future capital ($/boe)

N/A

3.31

5.07





Proved plus Probable Recycle Ratio




   Including future capital

N/A

10.74


   Excluding future capital

N/A

4.85



Net Asset Value ("NAV")

As at December 31, 2021

PDP

Total Proved

Proved +
Probable





Present Value Reserves, before tax (discounted at 10%)

345.1

1037.1

1,506.1

Total Net Debt ($ million) (unaudited)

(197.0)

(197.0)

(197.0)

Proceeds from the exercise of options (2)

7.1

7.1

7.1

Net Asset Value

155.2

847.2

1,316.2





Fully diluted common shares outstanding (million)

 

94.9

94.9

94.9

Net asset value per share

$1.63

$8.92

$13.86

Notes to table:

(1)

The preceding table shows what is customarily referred to as a "produce out" net asset value calculation under which the current value of Yangarra's reserves would be produced at the Deloitte forecast future prices and costs. The value is a snapshot in time as at December 31, 2021 and is based on various assumptions including commodity prices and foreign exchange rates that vary over time. In this analysis, the present value of the proved and probable reserves is calculated at a before tax 10 percent discount rate.

(2)

The calculation of proceeds from exercise of stock options and the diluted number of common shares outstanding only include stock options that are "in-the-money" based on the closing price of YGR of $1.57 as at December 31, 2021.

(3)

Net debt or adjusted working capital (deficit), which represent current assets less current liabilities, excluding current derivative financial instruments, are used to assess efficiency, liquidity and the general financial strength of the Company. There is no IFRS measure that is reasonably comparable to net debt or adjusted working capital (deficit).

Year End Disclosure

The audited financial statements for the year-ended December 31, 2021 are scheduled to be released on March 3, 2022.

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, 2022.

Reader Advisories:

Unaudited Financial Information and Non-IFRS Measures

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2021, including F&D costs and netbacks are based on estimated unaudited financial results for the quarter and year then ended, and are subject to the same limitations as discussed under Forward Looking Information set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2021 and changes could be material.

Oil and Gas Advisories. Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated. The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe). One ("BCF") equals one billion cubic feet of natural gas. One ("Mmcf") equals one million cubic feet of natural gas.

All reserve references in this press release are "Company share gross reserves". Company share gross reserves are the Company's total working interest reserves (operating or non-operating) before the deduction of any royalty obligation s but including royalty interests payable the Company. It should not be assumed that the present worth of estimated future cash flow presented in the tables above represents the fair market value of the reserves. 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 Yangarra'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.

This press release contains metrics commonly used in the oil and natural gas industry which have been prepared by management, such as "recycle ratio", "operating netback", "finding and development costs", "reserve life index" and "net asset value". These terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies and, therefore, should not be used to make such comparisons.

Management uses these oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare Yangarra's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from metrics presented in this press release, should not be relied upon for investment or other purposes.

All amounts in this news release are stated in Canadian dollars unless otherwise specified. Our oil and gas reserves statement for the year ended December 31, 2019, which will include complete disclosure of our oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be contained within our Annual Information Form which will be available on our SEDAR profile at www.sedar.com on or before March 31, 2022. The recovery and reserve estimates contained herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In relation to the disclosure of estimates for individual properties, such estimates may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation. The Company's belief that it will establish additional reserves over time with conversion of probable undeveloped reserves into proved reserves is a forward-looking statement and is based on certain assumptions and is subject to certain risks, as discussed below under the heading "Forward-Looking Information"

Forward Looking Information. This press release contains forward-looking statements and forward-looking information (collectively "forward-looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of our anticipated future operations, management focus, strategies, financial, operating and production results and business opportunities. Forward-looking information typically uses words such as "anticipate", "believe", "continue", "sustain", "project", "expect", "forecast", "budget", "goal", "guidance", "plan", "objective", "strategy", "target", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future, including statements about our strategy, plans, objectives, priorities and focus, growth plans; our estimations on future costs; volatility of commodity prices, and currency fluctuations. 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 information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; benefits to shareholders of our programs and initiatives, the timing, location and extent of future drilling operations; the expected timing of release of our audited financials and AIF; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; ability to efficiently integrate assets and employees acquired through acquisitions, ability to market oil and natural gas successfully and our ability to access capital.

Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Yangarra can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. Our actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide security holders with a more complete perspective on our future operations and such information may not be appropriate for other purposes.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect our operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

These forward-looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

All reference to $ (funds) are in Canadian dollars unless otherwise stated.

Neither the TSX nor its Regulation Service Provider (as that term is defined in the Policies of the TSX) accepts responsibility for the adequacy and accuracy of this release.  

SOURCE Yangarra Resources Ltd.

Copyright 2022 Canada NewsWire

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