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CALGARY, Feb. 8, 2017 /CNW/ - Questerre Energy Corporation
("Questerre" or the "Company") (TSX,OSE:QEC) reported today on the
resource assessment (the "Resource Assessment") of its Utica acreage in the St. Lawrence Lowlands,
Quebec ("Quebec").
The best estimate by the Company's independent reserve engineers
of unrisked Prospective Resources net to Questerre is 5.8 Tcf (965
million barrels of oil equivalent ("boe")). This represents a 30%
increase over the 2010 year-end assessment by Netherland, Sewell
& Associates, Inc. with a best estimate of unrisked Prospective
Resources of 4.4 Tcf (738 million boe) net to Questerre.
Additionally, the Resource Assessment details the best estimate of
unrisked Contingent Resources net to Questerre is 898 Bcf (150
million boe). Contingent Resources were not assigned in 2010 due to
the high uncertainty of economic potential at that time.
Michael Binnion, President and
Chief Executive Officer of Questerre, commented, "After the new
legislation was passed in December, we updated the Resource
Assessment for our natural gas discovery in the Quebec Utica. The
equivalent Ohio Utica in the United
States has seen astonishing success using new
technology. Resources on our acreage have now only been
assigned to the Upper Utica interval which is producing in
Ohio and Pennsylvania, compared to the entire
Utica interval in our previous
assessment. Most importantly, the assessment supports that with the
new technology, our discovery has strong economic potential. We are
currently assessing low population density regions in Quebec that are most suitable for a
pilot."
The updated Resource Assessment assigned Economic Contingent
Resources for approximately 16% of Questerre's acreage based on the
test results from the Company's Utica wells. The test results from these wells
were reported by Questerre in 2008 to 2010. The chance of
commercial development for these Economic Contingent Resources was
based on population density, ability to secure local acceptability
to operate, the ability to apply new technology to environmental
issues and other factors. As a result, our acreage has been
high-graded by individual regional county municipality (RCM) with
chance of commercial development ranging from 10% to 70%.
Mr. Binnion further added, "In the Resource Assessment, only two
out of over thirty RCMs in the St. Lawrence Lowlands are being
considered for pilot projects based on the factors above. These two
RCMs, Lotbiniere and Becancour, have demonstrated well results
within areas of very low population density. Our acreage in these
two RCMs covers 253,000 acres. Of this area, only 36,000 acres or
5% of our total acreage is currently being evaluated for possible
future development and has been assigned contingent resource in the
development on hold category. The net present value of this limited
development area, covering 36,000 acres, discounted at 10% before
tax and risked with a 70% chance of development is estimated at
$311 million."
The Resource Assessment was conducted by GLJ Petroleum
Consultants ("GLJ"), an independent qualified reserves evaluator,
with an effective date of December 31,
2016. It includes an economic assessment of Contingent
Resources based on GLJ's price forecast as of the same date. The
price forecast can be found online at:
https://www.gljpc.com/historical-forecasts. It forecasts a NYMEX
Henry Hub price of US$3.60/MMBtu in
2020 increasing to US$4.48/MMBtu in
2026 and increasing at 2% per annum thereafter. It assesses the
Utica Shale gas potential within the Company's 735,910 gross acres
in the St. Lawrence Lowlands of Quebec. The Resource Assessment was prepared
in accordance with National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities of the Canadian
Securities Administrators ("NI 51-101") and the Canadian Oil and
Gas Evaluation Handbook ("COGE Handbook").
GLJ estimated petroleum initially in-place ("PIIP"), both
discovered and undiscovered, as well as recoverable Contingent and
Prospective Resources over Questerre's acreage. The evaluation
consisted of the Upper Utica which includes the Indian Castle and
Dolgeville members as well as the Flat Creek. The Flat Creek, the
lower most member was only evaluated to estimate undiscovered
petroleum initially-in-place ("UPIIP"). No recoverable resources
were assigned given the lack of test data.
The Resource Assessment is based on the results from several
vertical and horizontal wells on the Company's acreage that have
all encountered pay in the Utica.
Test data from these wells in conjunction with offset development
and studies of the analogous US Utica supports the prospective
commercial development of these resources.
Contingent Resource volumes have been classified as 'development
on hold' or 'development unclarified.' Those areas classified as
development on hold, including Lotbiniere and Becancour, are primarily contingent on the
passage of applicable hydrocarbon and environmental legislation and
regulations as well as local acceptability. Remaining areas
classified as development unclarified have additional contingency
or risk associated with securing social license to operate and are
thereby a lower priority for development. Additional contingencies
include firm development plans, detailed cost estimates and
corporate approvals and sanctioning. There is no certainty that any
portion of the Contingent Resources will be economic to
develop.
Though pilot horizontal development plans have been proposed,
the project evaluation scenario for the Contingent Resources is not
sufficiently defined to make an investment decision to proceed to
development.
The Contingent Resources have been risked for the chance of
commerciality, or commercial development, defined as the product of
the chance of discovery and the chance of development. For
Contingent Resources, the chance of discovery is equal to one. The
chance of development is the estimated probability that once
discovered, a known accumulation will be commercially
developed.
The Contingent Resources have established technology status. The
development utilizes multistage hydraulic fracturing recovery
technologies that are widely used in the development of shale gas
plays including the Montney in
Canada and the Utica formation in Ohio.
Summary tables from the Resource Assessment are included
below.
|
|
|
|
|
Chance of
Commerciality
|
|
Low
|
Best
|
High
|
|
Chance
of
|
Chance
of
|
|
Estimate
|
Estimate
|
Estimate
|
|
Discovery
|
Development
|
Upper
Utica
|
|
|
|
|
|
|
Discovered Petroleum
Initially in-Place(1) (Bcf)
|
12,991
|
15,166
|
17,582
|
|
|
|
Estimated Recovery
Factor for Contingent Resources
|
18%
|
26%
|
37%
|
|
|
|
|
|
|
|
|
|
|
Recoverable Contigent
Resources (Gross Lease) (Bcf)
|
|
|
|
|
|
|
Development on
Hold
|
705
|
1,152
|
1,920
|
|
100%
|
70%
|
Development
Unclarified
|
1,671
|
2,736
|
4,560
|
|
100%
|
15%
|
|
|
|
|
|
|
|
Recoverable
Contingent Resources (Company Share)(2) (Bcf)
|
|
|
|
|
|
|
Development on
Hold
|
166
|
272
|
453
|
|
100%
|
70%
|
Development
Unclarified
|
383
|
626
|
1,044
|
|
100%
|
15%
|
|
|
|
|
|
|
|
Undiscovered
Petroleum Initially in-Place (Bcf)
|
68,975
|
78,855
|
89,658
|
|
|
|
Estimated Recovery
Factor for Prospective Resources
|
19%
|
27%
|
40%
|
|
|
|
|
|
|
|
|
|
|
Recoverable
Prospective Resources (Bcf)
|
|
|
|
|
|
|
Gross
Lease
|
12,991
|
21,258
|
35,430
|
|
|
|
Company
Share
|
3,540
|
5,793
|
9,654
|
|
81%
|
19%
|
|
|
|
|
|
|
|
Lower
Utica
|
|
|
|
|
|
|
Undiscovered
Petroleum Initially in-Place (3) (Bcf)
|
24,526
|
29,896
|
35,635
|
|
|
|
Notes:
- There is no certainty that it will be commercially viable to
produce any portion of the resources.
- Unrisked Company interest volumes.
- 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.
Summary of Risked
Contingent Resources and Risked Net Present Values - Table
I
|
|
|
|
|
Development on
Hold Category of Contingent Resources
|
|
|
|
|
Low
|
Best
|
High
|
|
Estimate
|
Estimate
|
Estimate
|
Becancour Project
Area
|
|
|
|
|
|
|
|
Chance of
Development
|
70%
|
70%
|
70%
|
Company Interest -
Shale Gas (Bcf)
|
63
|
102
|
168
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
215
|
438
|
839
|
10%
|
78
|
150
|
264
|
15%
|
52
|
102
|
181
|
|
|
|
|
Lotbiniere Project
Area
|
|
|
|
|
|
|
|
Chance of
Development
|
70%
|
70%
|
70%
|
Company Interest -
Shale Gas (Bcf)
|
68
|
112
|
184
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
232
|
476
|
913
|
10%
|
84
|
161
|
342
|
15%
|
56
|
110
|
196
|
|
|
|
|
Total - Becancour
and Lotbiniere Project Areas
|
|
|
|
|
|
|
|
Company Interest -
Shale Gas (Bcf)
|
131
|
215
|
352
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
447
|
914
|
1,752
|
10%
|
162
|
311
|
606
|
15%
|
108
|
212
|
377
|
An estimate of risked net present value of future net revenue of
Contingent Resources is preliminary in nature and is provided to
assist the reader in reaching an opinion on the merit and
likelihood of the Company proceeding with the required investment.
It includes Contingent Resources that are considered too uncertain
with respect to the chance of development to be classified as
reserves. There is no certainty that the estimate or risked net
present value of future net revenue will be realized. Further,
estimated values of future net revenue do not represent fair market
value.
Summary of Risked
Contingent Resources and Risked Net Present Values - Table
II
|
|
|
|
|
Development
Unclarified Category of Contingent Resources
|
|
|
|
|
Low
|
Best
|
High
|
|
Estimate
|
Estimate
|
Estimate
|
|
|
|
|
Development
Unclarified
|
|
|
|
|
|
|
|
La Visitation Project
Area
|
|
|
|
Chance of
Development
|
25%
|
25%
|
25%
|
Company Interest -
Shale Gas (Bcf)
|
34
|
55
|
90
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
122
|
248
|
467
|
10%
|
35
|
67
|
117
|
15%
|
21
|
41
|
72
|
|
|
|
|
St. David Project
Area
|
|
|
|
Chance of
Development
|
10%
|
10%
|
10%
|
Company Interest -
Shale Gas (Bcf)
|
13
|
22
|
36
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
51
|
104
|
194
|
10%
|
12
|
23
|
41
|
15%
|
7
|
13
|
23
|
|
|
|
|
St. Francois-du-Lac
Project Area
|
|
|
|
Chance of
Development
|
10%
|
10%
|
10%
|
Company Interest -
Shale Gas (Bcf)
|
7
|
11
|
18
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
21
|
44
|
86
|
10%
|
6
|
12
|
22
|
15%
|
4
|
8
|
14
|
|
|
|
|
St. Louis Project
Area
|
|
|
|
Chance of
Development
|
10%
|
10%
|
10%
|
Company Interest -
Shale Gas (Bcf)
|
7
|
11
|
18
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
22
|
46
|
89
|
10%
|
5
|
11
|
19
|
15%
|
3
|
6
|
11
|
|
|
|
|
Total - La
Visitation, St. David, St. Francois, St. Louis areas
|
|
|
|
|
|
|
|
Company Interest -
Shale Gas (Bcf)
|
60
|
99
|
161
|
|
|
|
|
Before Tax Present
Value ($ Million) (Risked)
|
|
|
|
0%
|
216
|
442
|
836
|
10%
|
58
|
113
|
199
|
15%
|
35
|
68
|
120
|
The PIIP was determined probabilistically on a permit basis with
estimates of 45 to 145 Bcf per square mile for the Upper Utica.
This compares favorably to analogous US shale plays with estimates
of the Utica in Ohio at between 35 to 85 Bcf per square mile
and 25 to 150 Bcf per square mile for the Marcellus shale in
Pennsylvania. Of the total PIIP
estimated over the Company's acreage, only land within a 3 mile
radius of a successfully tested well was quantified as discovered
gas-in-place. Based on this qualification only 16% of the total
mapped PIIP in the Upper Utica was considered discovered Contingent
Resource.
Development of the Contingent Resources is based on low, best
and high estimate type curves with Expected Ultimate Recoveries
("EUR") of 5.5 Bcf, 9 Bcf and 15 Bcf respectively. The type curve
assumes wells with horizontal legs of approximately 2400 metres and
24 fracture stages. These estimates are based on performance of
analogous wells in the US Utica and Marcellus share, test data of
the Quebec Utica forecast to ultimate recoveries and publically
available type curve information published by other industry
operators. Pad development of approximately 8 wells per pad is
expected to be based on 400m spacing between wells, or 2.7 wells
per square mile. The first commercial production associated with
the development of Contingent Resources is scheduled for 2019 based
on development timing as estimated by the Company.
Drilling and completion costs per well were estimated, at
approximately $6.9 million based on
publicly available information by industry operators active in the
US Utica and Marcellus shale. Additionally, pipeline and other
infrastructure costs were estimated at between $0.2 and $0.6 million per well, depending on
pipeline and infrastructure requirements to transport gas to market
from respective contingent resource areas, based on full commercial
development. Realized pricing is based on the NYMEX Henry Hub price
with a premium to reflect the transportation costs to the Dawn hub
in Ontario plus a premium of
between $0.88/Mcf to $1.40/Mcf for transportation costs to
Quebec.
Recovery factors of 18%, 26% and 37% were estimated in the total
low, best and high contingent cases respectively. These values were
in line with other shale plays and supported by the test data
forecast to ultimate recoverable estimates on the Company's tested
wells in the area.
The Upper Utica was considered undiscovered for approximately
84% of the total mapped PIIP. Recovery factors of 19%, 27% and 40%
were applied to the low, best and high estimates resource cases
respectively. In addition to the chance of development risking,
Prospective Resources were also risked for chance of discovery.
There is no certainty that any portion of the Prospective Resources
will be discovered. If discovered, there is no certainty that it
will be commercially viable to produce any portion of the
Prospective Resources.
Significant positive factors relevant to the estimate of the
Company's resources include the importation of all natural gas
consumed in Quebec creating demand
for local production, premium realized pricing due to the
transportation costs associated with importing natural gas for
consumption, production test data from the Company's existing wells
and the development of the analogous Utica shale in the
United States. Significant negative factors include the
limited number of wells on the Company's acreage, lack of a
developed service sector providing uncertainty regarding estimates
of capital and operating costs, developing hydrocarbon regulations
and environmental legislation and the requirement to obtain social
acceptability for oil and gas operations.
While the Company believes it will have sufficient financial
capability to fund its share of costs associated with the
development program in the Resource Assessment, it may not have
access to the necessary capital when required. Conducting the
development program is also dependent on the participation by the
Company's joint venture partners. There is no guarantee that they
will elect to participate in the program to the extent required.
The Company retains the right to conduct activities without the
operators' participation on an independent operations basis whereby
it can fund 100% of the capital costs for certain well operations
and facilities in return for net revenue equal to 400% of its
capital investment before the operators can elect to either remain
in a penalty position or hold a working interest.
A summary of the Contingent Resources on an unrisked basis is
included below.
|
Low
|
Best
|
High
|
|
Estimate
|
Estimate
|
Estimate
|
|
|
|
|
Summary of Unrisked
Contingent Resources and Values
|
|
|
|
|
|
|
|
Development on
Hold
|
|
|
|
|
|
|
|
Shale Gas
(Bcf)
|
|
|
|
Total Company
Interest
|
187
|
306
|
504
|
|
|
|
|
Before Tax Present
Value ($ Million)
|
|
|
|
0%
|
638
|
1,306
|
2,503
|
10%
|
232
|
444
|
866
|
15%
|
154
|
302
|
539
|
|
|
|
|
Development
Unclarified
|
|
|
|
|
|
|
|
Shale Gas
(Bcf)
|
|
|
|
Total Company
Interest
|
403
|
659
|
1072
|
|
|
|
|
Before Tax Present
Value ($ Million)
|
|
|
|
0%
|
1,430
|
2,944
|
5,584
|
10%
|
378
|
734
|
1,305
|
15%
|
218
|
433
|
776
|
Questerre Energy Corporation is leveraging its expertise gained
through early exposure to shale and other non-conventional
reservoirs. The Company has base production and reserves in the
tight oil Bakken/Torquay of
southeast Saskatchewan. It is bringing on production from its
lands in the heart of the high-liquids Montney shale fairway. It is a leader on
social license to operate issues for its Utica shale gas discovery in the St. Lawrence
Lowlands, Quebec. It is pursuing
oil shale projects with the aim of commercially developing these
massive resources.
Questerre is a believer that the future success of the oil and
gas industry depends on a balance of people, the planet and
profits. We are committed to being transparent and are respectful
that the public must be part of making the important choices for
our energy future.
Advisory Regarding Forward-Looking Statements
This media release contains certain statements which constitute
forward-looking statements or information ("forward-looking
statements") including the volume and estimates value of resources,
future oil and gas prices, future liquidity and financial
capability, future results from operation, future drilling and
completion costs, pipeline and other infrastructure costs, and
expenses and royalty rates, future interest costs and exchange
rates, future development, the anticipated participation in the
development by the Company's partners, exploration and related
capital expenditures, the number of wells to be drilled, the effect
of new technology on the Company's operations, areas of future
development, the effect of hydrocarbon laws and regulation on the
Company and its assets and future development plans. Although
Questerre believes that the expectations reflected in our
forward-looking statements are reasonable, our forward-looking
statements have been based on factors and assumptions concerning
future events which may prove to be inaccurate. Those factors and
assumptions are based upon currently available information
available to Questerre. Such statements are subject to known
and unknown risks, uncertainties and other factors that could
influence actual results or events and cause actual results or
events to differ materially from those stated, anticipated or
implied in the forward-looking statements. As such, readers
are cautioned not to place undue reliance on the forward looking
information, as no assurance can be provided as to future results,
levels of activity or achievements. The risks, uncertainties,
material assumptions and other factors that could affect actual
results are discussed in our Annual Information Form and other
documents available at www.sedar.com. Furthermore, the
forward-looking statements contained in this document are made as
of the date of this document and, except as required by applicable
law, Questerre does not undertake any obligation to publicly update
or to revise any of the included forward-looking statements,
whether as a result of new information, future events or
otherwise. The forward-looking statements contained in this
document are expressly qualified by this cautionary statement.
Resource Definitions
Resources encompasses all petroleum quantities that originally
existed on or within the earth's crust in naturally occurring
accumulations, including Discovered and Undiscovered (recoverable
and unrecoverable) plus quantities already produced. "Total
Resources" is equivalent to "Total Petroleum Initially In-Place".
Resources are classified in the following categories:
Total Petroleum Initially In-Place
("TPIIP") is that quantity of petroleum that is estimated to exist
originally in naturally occurring accumulations. It includes that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations, prior to production, plus those
estimated quantities in accumulations yet to be discovered.
Discovered Petroleum Initially
In-Place ("DPIIP") is that quantity of petroleum that is estimated,
as of a given date, to be contained in known accumulations prior to
production. The recoverable portion of DPIIP includes production,
reserves, and Contingent Resources; the remainder is
unrecoverable.
Contingent Resources are those
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations using established
technology or technology under development but which are not
currently considered to be commercially recoverable due to one or
more contingencies. Economic Contingent Resources (ECR) are those
contingent resources that are currently economically
recoverable.
Undiscovered Petroleum Initially
In Place ("UPIIP") is that quantity of petroleum that is estimated,
on a given date, to be contained in accumulations yet to be
discovered. The recoverable portion of UPIIP is referred to as
Prospective Resources and the remainder is unrecoverable.
Prospective Resources are those
quantities of petroleum 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.
Unrecoverable is that portion of DPIIP and UPIIP quantities
which is estimated, as of a given date, not to be recoverable by
future development projects. A portion of these quantities may
become recoverable in the future as commercial circumstances change
or technological developments occur; the remaining portion may
never be recovered due to the physical/chemical constraints
represented by subsurface interaction of fluids and reservoir
rocks. Uncertainty Ranges are described by the Canadian Oil and Gas
Evaluation Handbook as low, best, and high estimates for reserves
and resources as follows:
Low Estimate: This is considered
to be a conservative estimate of the quantity that will actually be
recovered. It is likely that the actual remaining quantities
recovered will exceed the low estimate. If probabilistic methods
are used, there should be at least a 90 percent probability (P90)
that the quantities actually recovered will equal or exceed the low
estimate.
Best Estimate: This is considered
to be the best estimate of the quantity that will actually be
recovered. It is equally likely that the actual remaining
quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be at
least a 50 percent probability (P50) that the quantities actually
recovered will equal or exceed the best estimate.
High Estimate: This is considered
to be an optimistic estimate of the quantity that will actually be
recovered. It is unlikely that the actual remaining quantities
recovered will exceed the high estimate. If probabilistic methods
are used, there should be at least a 10 percent probability (P10)
that the quantities actually recovered will equal or exceed the
high estimate.
Certain resource estimate volumes disclosed herein are
arithmetic sums of multiple estimates of DPIIP or UPIIP, which
statistical principles indicate may be misleading as to volumes
that may actually be recovered. Readers should give attention to
the estimates of individual classes of resources and appreciate the
differing probabilities of recovery associated with each class as
explained under this Resource Definitions section.
SOURCE Questerre Energy Corporation