CALGARY, AB, Feb. 8, 2021 /CNW/ - Crew Energy Inc. (TSX: CR) (OTC: CWEGF) of Calgary, Alberta ("Crew" or the "Company") is pleased to provide highlights from our independent corporate reserves evaluation prepared by Sproule Associates Ltd. ("Sproule") with an effective date of December 31, 2020 (the "Sproule Report").

2020 RESERVES HIGHLIGHTS

Highlights of our proved developed producing ("PDP"), total proved ("1P") and total proved plus probable ("2P") reserves from the Sproule Report are provided below. All finding, development and acquisition ("FD&A")^1,2 costs and finding and development ("F&D")^1,2 costs below include changes in future development capital ("FDC") unless otherwise noted.  

In response to low commodity prices caused by a price war between OPEC+ members in the first half of the year coupled with global oil demand destruction related to the COVID-19 pandemic, Crew executed a modest capital program for the majority of 2020. After formulating our two-year asset development initiative, as first outlined in Crew's December 10, 2020 news release, we began executing our plan designed to efficiently calibrate production to match infrastructure and transportation commitments and expand margins. As a result, Crew's net capital expenditures³ for the year after the impact of the strategic infrastructure transactions (as announced Feb. 27 and Nov. 5, 2020) totaled $28.1 million ($86.3 million gross¹), with 48% of the total gross capital invested during Q4/20. Capital was primarily allocated to the drilling of 12.0 net extended reach horizontal ("ERH") wells and the completion of 7.0 net wells at Greater Septimus.

• Record Low PDP F&D and FD&A Costs^1,2: With the funds received from the infrastructure transactions combined with operational improvements and declining capital costs, Crew achieved a record low PDP F&D costs^1,2 of $6.83 per boe and FD&A costs^1,2 of $2.00 per boe in 2020, resulting in recycle ratios^1,2 of 1.77x and 6.05x, respectively. Further, the Company achieved our seventh consecutive year of declining average three-year 2P F&D costs of $2.26 per boe and FD&A costs of $0.92 per boe, with corresponding reductions of 60% and 82%, respectively, from the three-year averages posted in 2019.

• Strong Capital Efficiencies and Recycle Ratios^1,2: The bulk of Crew's Q4/20 development activity occurred at the Company's 9-5 pad, where per well costs averaged 12% below forecasts. Lower costs and improved liquids pricing set the 9-5 pad on track to become the most efficient in our history, with improved completions design, longer ERH wells and faster drill times generating strong capital efficiencies and recycle ratios. 2P F&D costs² for the 9-5 pad totaled $3.05 per boe compared to $4.90 per boe when the wells were originally booked in West Septimus. Improved capital efficiencies supported the reduction of FDC costs by $95 million and $180 million for 1P reserves and 2P reserves, respectively, with decreases of 11% and 10% compared to year-end 2019, respectively, creating negative finding costs when the change in future capital is included.
  
• Significant PDP Reserves Growth: In 2020, Crew added 12.0 MMboe of PDP reserves, prior to accounting for production, representing approximately 19% of 2019 PDP reserves with a reserve replacement ratio of 150%, bringing the total to 67.1 MMboe at year-end after accounting for production, a 6% increase over 2019.
  
• 1P and 2P Reserves Stable Year-Over-Year: Crew's 1P and 2P reserves in 2020 remained stable year-over-year, as reserve additions in both categories offset the negative impact of weaker pricing following the onset of the COVID-19 pandemic. With 8.6 MMboe of 1P reserves added, production was effectively replaced by 106%, resulting in 202.5 MMboe of 1P reserves at year end, while 2P reserves replaced 93% of production and remained at 410.0 MMboe.

2020 RESERVES DETAIL

The detailed reserves data set forth below is based upon the Sproule Report with an effective date of December 31, 2020. The following presentation summarizes the Company's crude oil, natural gas liquids and conventional natural gas reserves and the net present values before income tax of future net revenue for the Company's reserves using forecast prices and costs based on the Sproule Report. The Sproule Report has been 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"). The reserves evaluation was based on Sproule forecast escalated pricing and foreign exchange rates at December 31, 2020 as outlined in the table herein entitled "Price Forecast". 

All evaluations and summaries of future net revenue are stated prior to provision for interest, debt service charges and general administrative expenses, the input of hedging activities and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs ("ARC") associated with the Company's assets in the reserve report and estimated future capital expenditures associated with reserves. It should not be assumed that the estimates of net present value of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and conventional natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, conventional natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise. In addition to the detailed information disclosed in this news release, more detailed information as prescribed by NI 51-101 will be included in the Company's Annual Information Form (the "AIF") for the year ended December 31, 2020, which will be filed on the Company's profile at www.sedar.com on or before March 31, 2021. 

See "Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures" for additional cautionary language, explanations and discussions and "Forward Looking Information and Statements" for a statement of principal assumptions and risks that may apply.

Corporate Reserves^1,2,5

Reserves Values^1,2,3,4  

The estimated before tax net present value ("NPV") of future net revenues associated with Crew's reserves effective December 31, 2020 and based on the Sproule Report and the published Sproule (December 31, 2020) future price forecast are summarized in the following table:

Price Forecast

Sproule updated pricing for year end 2020 reflects changes to the COGE Handbook that are expected to come into effect in April 2021. The updated guidance recommends a tolerance tied to benchmark strip pricing, suggesting forecasts should not deviate more than 20% from current strip pricing in the first two years of forecasting. For the third year of forecasting, discretion can be incorporated based on the issuer's professional judgement. Beyond the third year, real prices should be adjusted by inflation.

The Sproule December 31, 2020 price forecast is summarized as follows: 

Reserves Reconciliation

The following reconciliation of Crew's gross reserves compares changes in the Company's reserves as at December 31, 2020 based on the Sproule (December 31, 2020) future price forecast relative to the reserves as at December 31, 2019.

Corporate level technical revisions on a boe basis were +8% at the Proved level and +3% at the Proved plus Probable level. Technical revisions were primarily due to reserves reclassification and performance adjustments attributable to the Company's 2020 capital program, annual maintenance of stale or low priority future development bookings, well performance changes and adjustments to timing of future development locations. Other material revisions were attributable to the Company's updated development planning resulting in adjustments to future development bookings, reflective of a continuing shift towards ERH well designs and adjustments to carbon tax modeling. 

Economic factors in the Proved and Proved plus Probable categories were negative 6.9 MMboe and 3.2 MMboe, respectively, due to the impact of updated Sproule pricing to reflect changes to the COGE Handbook.

Future Development Capital

The following table provides a summary of the estimated FDC required to bring Crew's reserves on production. Changes in forecast FDC occur annually due to development activities, acquisition and disposition activities, and changes in capital cost estimates. Crew realized significant FDC reductions from the 2019 year-end Sproule Report on 1P FDC of $95 million and on 2P FDC of $180 million largely due to improved capital efficiencies.

Capital Program Efficiency – Including FDC

Capital Program Efficiency – Excluding FDC

Advisories

Unaudited Financial Information

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2020, including exploration and development expenditures, acquisitions / dispositions, finding and development costs, finding, development and acquisition costs, recycle ratio and operating 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, 2020 and changes could be material. 

Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures

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, 2020, 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, 2021. 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 or subsets thereof, 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. 

This press release contains metrics commonly used in the oil and natural gas industry, such as "recycle ratio", "finding and development costs", "finding, development and acquisition costs", and "reserves replacement". Each of these metrics are determined by Crew as specifically set forth in this news release.  These terms do not have standardized meanings or standardized methods of calculation and therefore may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons.  Such metrics have been included to provide readers with additional information to evaluate the Company's performance however, such metrics are not reliable indicators of future performance and therefore should not be unduly relied upon for investment or other purposes. Recycle Ratio is calculated as operating netback per boe divided by F&D costs on a per boe basis. Reserves Replacement Ratio is calculated as total reserve additions (including acquisitions net of dispositions) divided by annual production. Crew's annual production averaged 21,955 boe per day. Management uses these metrics for its own performance measurements and to provide readers with measures to compare Crew's performance over time. 

Both F&D and FD&A costs take into account reserves revisions during the year on a per boe basis.  The aggregate of the costs incurred in the financial year and changes during that year in estimated FDC may not reflect total F&D costs related to reserves additions for that year.  Finding and development costs both including and excluding acquisitions and dispositions have been presented in this press release because acquisitions and dispositions can have a significant impact on our ongoing reserves replacement costs and excluding these amounts could result in an inaccurate portrayal of our cost structure.

This press release contains financial and performance metrics that are not defined in IFRS and do not have standardized meanings or standardized methods of calculation, such as "operating netbacks" and "net capital expenditures". As such, these terms may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Such metrics have been included herein to provide readers with additional information to evaluate the Company's performance, however such metrics should not be unduly relied upon. Management uses oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare Crew's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this press release, should not be relied upon for investment or other purposes.

With respect to the use of terms used in this press release identified as Non-IFRS Measures, see Non-IFRS Measures contained in Crew's MD&A for applicable definitions, calculations, rationale for use and, where applicable, reconciliations to the most directly comparable measure under IFRS.

Operating Netbacks

Operating netback equals petroleum and natural gas sales including realized gains and losses on commodity related derivative financial instruments, marketing income, less royalties, net operating costs and transportation costs calculated on a boe basis. Management considers operating netback an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices. The calculation of Crew's netbacks can be seen under "Operating Netbacks" within the Company's most recently filed MD&A.

Net Capital Expenditures

Net capital expenditures equals exploration and development expenditures plus property acquisitions or less property dispositions. 

Reserves Reconciliation by Product Types

Forward-Looking Information and Statements

This news release contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" "forecast" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following:  the ability to execute on its two-year plan on the basis designed as referenced herein; as to our plan to efficiently calibrate production to match infrastructure and transportation commitments and expand margins; estimates of Q4 and annual 2020 operating netbacks, the potential recognition of significant additional reserves under the heading 2020 Reserves Detail; the volumes and estimated value of Crew's oil and gas reserves, the future net value of Crew's reserves, the future development capital and costs, the future ARC, the life of Crew's reserves, the estimated volumes, and product mix of Crew's oil and gas production; production estimates; Crew's commodity risk management programs; future liquidity and financial capacity required to carry out our planned program; future results from operations and operating metrics; expectations regarding superior economics from our ERH program; future development activities (including drilling and completion plans and associated timing and cost estimates) and related production estimates; and methods of funding our capital program.

In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Crew which have been used to develop such statements and information but which may prove to be incorrect. Although Crew believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Crew can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: that Crew will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities consistent with past operations; the quality of the reservoirs in which Crew operates and continued performance from existing wells; the continued and timely development of infrastructure in areas of new production; the accuracy of the estimates of Crew's reserve volumes; certain commodity price and other cost assumptions; continued availability of debt and equity financing and cash flow to fund Crew's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Crew operates; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Crew to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Crew has an interest in to operate the field in a safe, efficient and effective manner; the ability of Crew to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Crew to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Crew operates; and the ability of Crew to successfully market its oil and natural gas products.

In this press release reference is made to the Company's longer range 2022 and beyond internal plan and associated economic model.  Such information reflects internal targets used by management for the purposes of making capital investment decisions and for internal long range planning and budget preparation. Readers are cautioned that events or circumstances could cause capital plans and associated results to differ materially from those predicted and Crew's guidance for 2021 and beyond may not be appropriate for other purposes. Accordingly, undue reliance should not be placed on same.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: the continuing and uncertain impact of COVID-19; changes in commodity prices; changes in the demand for or supply of Crew's products, the early stage of development of some of the evaluated areas and zones the potential for variation in the quality of the Montney formation; interruptions, unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates; climate change regulations, or other regulatory matters; changes in development plans of Crew or by third party operators of Crew's properties, increased debt levels or debt service requirements; inaccurate estimation of Crew's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Crew's public disclosure documents (including, without limitation, those risks identified in this news release and Crew's Annual Information Form).

The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Crew does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE Conversions

Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing the 6:1 conversion ratio may be misleading as an indication of value.

Crew is a growth-oriented oil and natural gas producer, committed to pursuing sustainable per share growth through a balanced mix of financially and socially responsible exploration and development complemented by strategic acquisitions. The Company's operations are primarily focused in the vast Montney resource, situated in northeast British Columbia, and include a large contiguous land base. Greater Septimus along with Groundbirch and the light oil area at Tower in British Columbia offer significant development potential over the long-term. The Company has access to diversified markets with operated infrastructure and access to multiple pipeline egress options. Crew's common shares are listed for trading on the Toronto Stock Exchange ("TSX") under the symbol "CR".

SOURCE Crew Energy Inc.

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