HOUSTON, TEXAS - December 4, 2012 (Investorideas.com energy newswire) EFL Overseas Inc. (
OTCBB:EFLO)
is pleased to announce the acquisition of additional working interests
in the Kotaneelee gas property and the results of independent reserves
and resources evaluations (NI-51-101 compliant).
ACQUISITION
Effective October 17, 2012, EFLO acquired a 30.664% interest in the
Liard basin gas field and facilities located in the Kotaneelee Area,
Yukon Territory, Canada (the "Assets") from Nahanni Energy Inc. and
certain of its wholly owned subsidiaries ("Nahanni"). The Nahanni
purchase follows EFLO's earlier acquisition of Devon Canada's interest
(generally a working interest of 22.989%, with a working interest of
69.337% in one gas well) in the Assets. Upon closing the Nahanni
purchase, EFLO became the largest interest holder in the Kotaneelee with
a general interest of 53.65% and a working interest of 100% in one gas
well.
"Our acquisition of the additional interest at Kotaneelee provides
us with a controlling position in this exciting project", stated EFLO
Chairman Henry Aldorf. "Increasing our working interest to approx. 54%
allows us to drive forward development plans and offers our shareholders
greater potential upside."
"With the closing of the Nahanni acquisition, we are focused on
actively pursuing additional interests at Kotaneelee and the surrounding
area," added EFLO Chief Executive Officer Keith Macdonald. "The larger
asset base will be helpful as we evaluate our future market
opportunities in the Pacific Rim, North America and the Yukon."
The Assets include 30,542 acres of land, a gas dehydration plant
(capacity: 70 MMcf/d), one water disposal well (capacity: 6,000 bbls/d),
one well temporarily shut-in for plant maintenance and two suspended
gas wells, flarestack, storage tanks, airstrip, roads, gathering
systems, geological
data
, equipment, and other transportation and camp infrastructure.
As consideration for the Assets, EFLO paid Nahanni US$132,600 in
cash (representing closing consideration of Cdn$400,000 less certain
pre-closing liabilities settled by EFLO), and 1,614,767 shares of one of
its subsidiaries, which are exchangeable on a one-for-one basis for
shares of EFLO's common stock (valued at Cdn$4,100,000; US$4,190,610).
In addition, EFLO indemnified Nahanni against its portion of the
abandonment, reclamation and environmental liabilities associated with
the Assets. EFLO intends to undertake an active development and
exploration program, which is expected to defer these potential
liabilities into the future.
EFLO continues to pursue the acquisition of additional working interests in the Assets.
RESERVES
The following reports certain pro forma reserve information, after
giving effect to both the Devon and Nahanni acquisitions, based on an
independent assessments by AJM Deloitte ("AJM") of dated effective June
30, 2012 using forecast prices and costs (the "EFLO AJM Reserve
Reports"). AJM prepared separate reports for the Devon and Nahanni
acquired working interests. The numbers presented below reflect an
aggregation of the two reports. The EFLO AJM Reserve Reports were
prepared in accordance with definitions, standards and procedures
contained in the Canadian Oil and Gas Evaluation Handbook ("COGE
Handbook") and National Instrument 51-101 Standards of Disclosure for
Oil and Gas Activities ("NI 51-101"). In addition reserve information
required under NI 51-101 and effective for the EFLO's fiscal year ended
August 31, 2012 will be included in NI 51-101 forms which will be filed
in connection with EFLO's financial statements as at and for the year
ended August 31, 2012. Such reserve information was filed on Sedar on
November 29, 2012 and gives effect only to the Company's reserves
resulting from the Devon acquisition, as the Nahanni acquisition
occurred subsequent to August 31, 2012. The differences between Devon
related reserves and net present values reported in the June 30 report
and the August 31 report are not material.
Gas prices for the report were based on delivery and sale at
Station 2 in British Columbia. The EFLO AJM Reserve Reports base case
forecast effective June 30, 2012 is as follows: 2012 - $2.00; 2013 -
$2.95; 2014 - $3.55; 2015 - $3.95; 2016 - $4.35; 2017 - $4.80; 2018 -
$5.35; 2019 - $5.80; 2020 - $6.50; and thereafter escalated at 2% per
annum. Prices are in Canadian dollars per Mcf.
SUMMARY OF RESOURCES
The following reports certain pro forma resource information, based
on an independent assessment by AJM dated effective June 30, 2012 using
forecast prices and costs (the "EFLO AJM Resource Report"). The EFLO
AJM Resource Report was prepared in accordance with definitions,
standards and procedures contained in the COGE Handbook and NI 51-101.
The AJM Resource report evanuated the resources on EFLO acreage on
gross terms and did not consider working interest. AJM evaluated the
lands to assess the resource potential for the Middle Devonian Shales
designated as Lower Black Shale (Muskwa/Evie), Middle Shale (Fort
Simpson), and Upper Shale (Kotcho/Exshaw) as well as the potential for
expansion of resource for the Nahanni on the producing East Flank. The
results are summarized as follows, adjusted by management to reflect
EFLO's 53.65% interest in the evaluated lands after giving effect to the
Devon and Nahanni acquisitions.
Summary of Resources on EFL Overseas Lands (1)
Kotaneelee, Yukon Territory
The following represents the total for the low, best and high cases as evaluated for the Shales.
In addition, AJM has evaluated a Nahanni prospect on the West Flank.
NOTICE REGARDING PRESENTATION OF THE COMPANY''S RESERVE AND CONTINGENT RESOURCE INFORMATION
The determination of reserves and resources involves the
preparation of estimates that have an inherent degree of associated
uncertainty. The estimation and classification of reserves and resources
requires the application of professional judgment combined with
geological and engineering knowledge to assess whether or not specific
reserve or resource classification criteria have been satisfied.
Knowledge of concepts including uncertainty and risk, probability,
statistics and deterministic and probabilistic estimation methods is
required to properly use and apply reserve and resource definitions.
Disclosure in this document of reserves and resources is presented
in accordance with Canadian securities laws. The United States
Securities and Exchange Commission (the "SEC") generally permits U.S.
reporting oil and gas companies, in their filings with the SEC, to
disclose only proved, probable and possible reserves and production, net
of royalties and interests of others. The Company uses certain terms in
this document, such as resources or contingent resources that the SEC's
rules would prohibit a U.S. company from including in filings with the
SEC. The SEC generally does not permit U.S. companies to disclose net
present value of future net revenue from reserves based on forecast
prices and costs. Canadian securities laws permit, among other things,
the presentation of certain categories of resources and the disclosure
of production on a gross basis before deducting royalties. Unless noted
otherwise, all disclosures of reserves and resources in this document
are made on a gross basis using forecast price and cost assumptions.
In this news release:
"gross" means:
(a) in relation to the Company's interest in production or reserves, its working interest share before deduction of royalties;
(b) in relation to wells, the total number of wells in which the Company has an interest; and
(c) in relation to properties, the total area of properties in which the Company has an interest.
"net" means:
(a) in relation to the Company's interest in production or
reserves, its working interest share after deduction of royalty
obligations;
(b) in relation to the Company's interest in wells, the number of
wells obtained by aggregating the Company's working interest in each of
its gross wells; and
(c) in relation to the Company's interest in a property, the total
area of properties in which the Company has an interest multiplied by
the working interest owned by the Company.
All evaluations of future revenue are after the deduction of
royalties, development costs, production costs and well abandonment
costs but before consideration of indirect costs such as administrative,
overhead and other miscellaneous expenses.
Disclosure of Reserves
The reserves estimates and related estimates of net present values
presented in this document were prepared to comply with Canadian
reserves disclosure standards and reserves definitions as set out in NI
51-101 and the COGE Handbook prepared jointly by The Society of
Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian
Institute of Mining, Metallurgy & Petroleum (Petroleum Society).
Reserves are estimated remaining quantities of oil and natural gas
and related substances anticipated to be recoverable from known
accumulations, from a given date forward, based on:
- analysis of drilling, geological, geophysical and engineering data;
- the use of established technology; and
- specified economic conditions, which are generally accepted as being reasonable.
Reserves are classified according to the degree of certainty associated with the estimates:
- 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;
- 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; and
- Possible reserves are those additional reserves that are less
certain to be recovered than probable reserves. It is unlikely that the
actual remaining quantities recovered will exceed the sum of the
estimated proved plus probable plus possible reserves.
Each of the reserves categories (proved, probable and possible) may be divided into developed and undeveloped categories:
- 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 (for
example, when compared to the cost of drilling a well) to put the
reserves on production. The developed category may be subdivided into
producing and non-producing.
- 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.
- 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.
- 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.
In multi-well pools it may be appropriate to allocate total pool
reserves between the developed and undeveloped categories or to
subdivide the developed reserves for the pool between developed
producing and developed non-producing. This allocation should be based
on the estimator's assessment as to the reserves that will be recovered
from specific wells, facilities and completion intervals in the pool and
their respective development and production status.
The qualitative certainty levels referred to in the definitions
above are applicable to individual reserves entities (which refers to
the lowest level at which reserves calculations are performed) and to
reported reserves (which refers to the highest level or the sum of
individual entity estimates for which reserves estimates are presented).
Reported reserves should target the following levels of certainty under
a specific set of economic conditions:
- at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves;
- at least a 50 percent probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved plus
probable reserves; and
- at least a 10 percent probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved plus
probable plus possible reserves.
Additional clarification for the classification of reserves and the
certainty levels associated with reserves estimates is provided in the
COGE Handbook.
Disclosure of Resources
In this news release, the Company also refers to estimates of
"contingent resources". These estimates represent the best estimate of
the contingent resources attributed to the Company's interest, are not
classified or recognized as reserves, and are in addition to the
Company's disclosed reserve volumes.
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. Contingencies may include
factors such as economic, legal, environmental, political, and
regulatory matters, or a lack of markets. It is also appropriate to
classify as contingent resources the estimated discovered recoverable
quantities associated with a project in the early evaluation stage.
There is no certainty that it will be commercially viable to produce any
portion of the contingent resources and the estimated future net
revenues do not necessarily represent the fair market value of such
contingent resources.
The Company's resources classified as contingent resources, rather
than as reserves, are so classified pending the need for further
facility design, preparation of firm development plans and regulatory
applications (including associated reservoir studies and delineation
drilling) and corporate approvals to proceed with development.
When evaluating contingent resources, the following mutually exclusive categories are recommended in the COGE Handbook:
- 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 90 percent
probability 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 that the quantity 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 that the quantities actually recovered will equal or exceed
the high estimate.
FORWARD-LOOKING STATEMENTS
This news release includes forward-looking statements, including
but not limited to estimates of reserves and resources and the present
value of revenues associated with such reserves and resources.
Statements in this news release relating to reserves and resources
involve the implied assessment, based on certain estimates and
assumptions, that the described reserves and resources, as the case may
be, exist in the quantities predicted or estimated, and can be
profitably produced in the future. There is no assurance that the
forecast price and cost assumptions contained in the AJM reports will be
realized and variances could be material. Other assumptions and
qualifications relating to project schedules, costs and other matters
are inherent in these estimates.
In addition, all statements other than statements of historical
facts, included in this news release that address activities, events, or
developments that the Company believes or anticipates will or may occur
in the future are forward-looking statements, including but not limited
to the Company's intent to pursue the acquisition of additional
interest in the Kotaneelee property, the Company's planned exploration
activities and the existence of potential opportunities in the Pacific
Rim, North America and the Yukon. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors, which
may cause the actual results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include general
economic and business conditions, the ability to acquire and develop
specific projects and reach commercially acceptable terms with
counterparties, the ability to secure government and other third party
approval, potential third party claims, the ability to fund operations,
and other factors over which the Company has little or no control. The
Company does not intend to update publicly any forward-looking
statements, except as may be required by law. There can be no assurance
that EFLO will be successful in completing the acquisition of additional
interest(s) in the Kotaneelee properties or executing its planned
exploration and development activities.
The contents of this news release should be considered in
conjunction with the warnings and cautionary statement contained in the
Company's public filings, which are accessible on SEDAR at
www.sedar.com.
Definitions
In this news release: (i) Mcf means thousand cubic feet; (ii) Mcf/d
means thousand cubic feet per day; (iii) MMcf means million cubic feet;
(iv) MMcf/d means million cubic feet per day; (v) bbls means barrels;
(vi) Mbbls means thousand barrels; (vii) MMbbls means million barrels;
(viii) bbls/d means barrels per day; (ix) Bcf means billion cubic feet;
(x) Mboe means thousand barrels of oil equivalent; (xi) MMboe means
million barrels of oil equivalent; (xii) boe means barrels of oil
equivalent; and (xiii) boe/d means barrels of oil equivalent per day.
Boe means barrel of oil equivalent on the basis of 1 boe to 6,000
cubic feet of natural gas. References to boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 1 boe for
6,000 cubic feet to natural gas is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
Contact:
EFL Overseas Inc.
Keith Macdonald
1 (403) 246-8443
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* Silver Equivalency based on a Ag:Au ratio of 50:1. All numbers are uncut and rounded.