The following is a summary of Trilogy’s 2016 year end reserves and reserves value, as evaluated and reported by the independent engineering firm McDaniel & Associates Consultants Ltd. (McDaniel”). The reserves report has been prepared in accordance with National Instrument 51-101 definitions, standards and procedures.
- Total proved reserves and total proved plus probable reserves at the end of 2016 were 101.3 MMBoe and 177.4 MMBoe respectively
- NPV10 for total proved reserves and for total proved plus probable reserves at the end of 2016 was valued at $936 million and $1,696 million respectively based on McDaniel’s December 31, 2016 pricing forecast
- Finding and development costs including future development capital were $12.66/Boe for total proved reserves and $8.09/Boe for total proved plus probable reserves
- Reserves life index increased to 22.2 years for total proved plus probable reserves in 2016 as compared to 15.6 years in 2015
- Replaced 180 percent of 2016 produced reserves when compared to total proved reserves additions and 344 percent when compared to total proved plus probable reserves addition
Trilogy has dedicated substantial resources and capital to further its knowledge base for the Montney and Duvernay plays over the past number of years. Over the past year, industry has made significant progress in improving drilling and completion techniques and reducing the associated costs. These advancements have enabled Trilogy the opportunity to generate and refine several production type curves for its land base, as well as other estimates, including estimates for recoverable reserves, liquid ratios, infrastructure requirements and operating costs related to these plays. Accordingly, the continued advancements in Trilogy’s Montney and Duvernay resource plays have contributed to further de-risking the plays and have afforded Trilogy the opportunity to book additional proved and probable undeveloped reserves in the Kaybob area.
The results of the 2016 year end reserves report are summarized in the table below:
(i) Reserve values were determined by McDaniel as of December 31, 2016, using the forward-pricing assumptions in effect by the firm as at that date.
(ii) McDaniel evaluated 100 percent of Trilogy’s reserves.
(iii) No value has been assigned to tangible assets other than those associated with proved producing reserves.
While Trilogy plans to develop the proved undeveloped and the probable undeveloped reserves over the next five years, the fruition of such plans depends heavily upon numerous unforeseen factors, many of which are outside of the control of the Company. These factors include, but are not limited to, fluctuations in commodity prices which can affect the funding for these projects, causing them to be accelerated, deferred or cancelled. Changing technical and production factors can also affect the timely development of these projects.
The following table summarizes the future development capital Trilogy has included in its 2016 reserves evaluation for the next 5 years.
For 2016, total proved reserves were revised upward by 8.6 MMBoe and total proved plus probable reserves were essentially flat year over year. The majority of the positive technical revisions were due to adjustments made to the Presley Montney gas wells, and positive reserve adjustments to the Duvernay shale gas wells and the associated natural gas liquids.
Lower commodity price forecasts at the end of 2016 resulted in negative adjustments of 0.99 MMBoe of total proved reserves and 1.38 MMBoe of total proved plus probable reserves due to economic factors.
The following table below summarizes the reserves reconciliation for 2016.
(i) Columns and rows may not add due to rounding
In the 2016 year end reserves, McDaniel used the following price forecast for the evaluation which was developed by them.
Finding and Development Costs
Since inception, Trilogy has successfully exploited many of the opportunities afforded by its land base. Its success rate reflects the high quality of the Company’s prospect inventory, its undeveloped land base and its producing asset base as well as the technical expertise of Trilogy’s staff. The reserve potential of these lands, both developed and undeveloped, is expected to continue to provide Trilogy with low cost reserve additions in the future.
In 2016, Trilogy spent approximately $74.2 million and booked approximately 5.6 MMBoe and 7.2 MMBoe for total proved and for total proved plus probable reserves respectively for this capital. Based on the capital spent during the year, Trilogy’s finding and development costs for the total proved reserves is $13.07/Boe and for the total proved plus probable reserves is $10.31/Boe.
Finding and development costs including future development capital for 2016 are reported to be $12.65/Boe for total proved reserves and $8.09/Boe for total proved plus probable reserves.
Finding and development costs for the past 3 years are shown in the table below.
When calculated over the three-year period ended December 31, 2016, F&D costs were $20.76/Boe for total proved reserves and $15.45/Boe for total proved plus probable reserves. Calculating finding and development costs over a longer period reduces the effect of spending capital in one year and booking reserves in the following year and reduces the impact of technical revisions.