CALGARY, Feb. 26, 2018 /CNW/ - Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") is pleased to report its year-end 2017 oil and gas reserves evaluation.  During 2017, the Company invested approximately $65 million in capital projects.  Capital was evenly distributed between acquisition and divestiture ("A&D") activities and exploration and development ("E&D") activities.  A&D initiatives throughout the year included the disposition of certain non-core assets; consolidation of working interests; acquiring infrastructure in Journey's core properties; and a significant acquisition in the Company's central Alberta core area.

The central Alberta core area was a key focus of corporate activities in 2017.  The assets acquired were concentrated in a multi-zone area and contained significant ownership in an extensive network of underutilized infrastructure at Gilby.  Subsequent to the year-end Journey acquired control of 102 sections of Duvernay shale exploration rights within the immediate area serviced by this strategic infrastructure.  The lands are contiguous, and prospective for drilling two mile horizontal wells within the oil window of the western shale basin.  Since these rights were acquired subsequent to year-end, there is no value ascribed to Journey's significant Duvernay acreage position in the net asset value calculations herein.

At the end of January, 2018 Journey acquired 12.7 million common shares from a major shareholder for a cost of $21.3 million.  The shares repurchased were subsequently cancelled, thereby reducing Journey's basic shares outstanding by approximately 25%.  Because of this, Journey's net asset value comparison was done on a pro-forma basis including the impact of the share buyback.

Both the share buyback and Duvernay land acquisition was the subject of a press release issued on January 22, 2018.

Highlights:

• Proved and proved plus probable reserves increased by 24% and 26% respectively over 2016.
  
  
• Proved plus probable net asset value (pro-forma after share buyback) of $10.81 per basic share outstanding representing a 4% increase from $10.44 per share in 2016.
  
  
• Proved developed producing reserves accounted for 46% of total proved plus probable reserves while proved reserves accounting for 62%.
  
  
• Journey's proved developed producing net asset value of $3.66 per basic share outstanding represents a significant increase from Journey's current trading price of $1.65/share.
  
  
• Journey's proved plus probable producing net asset value per share of $5.60 per basic was largely unchanged year over year even though commodity prices decreased significantly.
  
  
• Achieved finding, development, and acquisition ("FD&A") costs, including changes in future development capital of:
• $7.90 per boe for proved reserves.
• $6.68 per boe for proved plus probable reserves
  
  
• Journey has achieved strong FD&A recycle ratios.  For the year ended December 31, 2017, we achieved a ratio of:
• 1.6 times for FD&A costs with proved reserves.
• 1.9 times for FD&A costs with proved plus probable reserves.
  
  
• Achieved finding and development costs* ("F&D") costs, including changes in future development capital, of:
• $29.22 per boe for proved reserves.
• $23.73 per boe for proved plus probable reserves.

*Journey's 2017 F&D costs were negatively impacted by revisions due to declining commodity prices and by negative technical revisions, including the reduction of booked reserves in a single property in Journey's central core area after the drilling of an unsuccessful well. Journey management feels that the reduction of these reserves is a one- time event and is not representative of Journey's E&D program moving forward. Journey's 2018 program is focused on continued development of 3 key pools where the company has had previous success. Two wells were drilled in the first quarter and initial test results have   exceeded expectations.

• Proved plus probable reserve life index of 15.1 years, with only $3.47/boe of future development capital booked in the reserve report.
  
  
• Proved developed producing and proved plus probable developed producing reserve life index of 7.7 and 9.9 years respectively, are testaments to Journey's low decline asset base.

COMPANY GROSS WORKING INTEREST OIL AND GAS RESERVES AND NET PRESENT VALUES

The following table provides summary information presented in the GLJ Petroleum Consultants Limited ("GLJ") independent reserves assessment and evaluation effective December 31, 2017, (the "GLJ Report").  GLJ evaluated 100% of Journey's crude oil, natural gas liquids ("NGL") and natural gas reserves.  The evaluation of all of its oil and gas properties was done in accordance with the 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").  Detailed reserve information will be presented in the Company's upcoming Statement of Reserves Data and Other Oil and Gas Information section of the Company's Annual Information Form scheduled to be filed on SEDAR on or before March 31, 2018.

Company Gross Reserves
Based on Forecast Price and Costs as at December 31, 2017

Net Present Values of Future Net Revenue (Based on Forecast Prices and Costs)

The forecast prices and foreign exchange rates used in the GLJ Report are as follows:

FINDING, DEVELOPMENT AND ACQUISITION COSTS

Journey's finding and development ("F&D") and finding, development and acquisition ("FD&A") costs for 2017, 2016 and the three-year average are presented in the tables below.  The capital costs used in the calculations are those costs related to: land acquisition and retention, seismic, drilling, completions, tangible well site, tie-ins, and facilities, plus the change in estimated future development costs ("FDC") as per the independent evaluator's reserve report.  Net acquisition costs are the cash outlays in respect of acquisitions; minus the proceeds from the disposition of properties during the year.  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 FDC's generally will not necessarily reflect total FDC's related to reserve additions for that year.  The reserves used in this calculation are working interest reserve additions, including technical revisions and changes due to economic factors.  The 2017 and the three-year average capital expenditures are unaudited as the 2017 financial results are in the process of being finalized.

FUTURE DEVELOPMENT COSTS

The following table provides the breakdown of future development costs deducted in the estimation of the future net revenue attributable to the proved and proved plus probable reserve categories noted below:

RESERVE LIFE INDEX

The Company's reserve life index ("RLI") is calculated by taking the Company Gross Reserves from the GLJ Report and dividing them by the projected 2018 production as estimated in the GLJ report.

NET ASSET VALUE

The following table provides a calculation of Journey's estimated net asset value ("NAV") and net asset value per share ("NAVPS") as at December 31 based on the estimated future net revenues associated with Journey's reserves as presented in the GLJ Report.  The following numbers were used in the NAV calculation and are pending finalization of the year-end audit: 1) net debt of approximately $103,000 thousand; and 2) funds flow of approximately $9,800, based on production of approximately 10,500 (46% oil and NGL's) for the fourth quarter.

About the Company

Journey is a Canadian exploration and production company focused on oil-weighted operations in western Canada.  Journey's strategy is to grow its production base by drilling on its existing core lands, implementing waterflood projects, and by executing on accretive acquisitions.  Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with waterfloods. Journey is also in the early phases of advancing development of an unconventional shale resource play in the oil window of the Duvernay, in the western shale basin of our central core area.

ADVISORIES

Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on March 26, 2017. Forward-looking information may relate to Journey's future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, and long-term objectives. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective funds flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on current estimates, expectations and projections, which Journey believes to be reasonable as of the current date. No assurance can be given that the expectations set out herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.

Readers are cautioned that the above list of risks and factors are not intended to be exhaustive. Additional information on these and other factors that could affect operating and financial results are, or will be, included in reports filed with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Non-IFRS Measures

The Company uses the following non-IFRS measures in evaluating corporate performance. These terms do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.

Barrel of Oil Equivalents

Where amounts are expressed in a barrel of oil equivalent ("BOE"), or barrel of oil equivalent per day ("BOE/d"), natural gas volumes have been converted to barrels of oil equivalent at six (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term BOE may be misleading particularly if used in isolation. The BOE conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

Oil and Gas Measures and Metrics

All reserve references in this press release are "Company Gross Reserves". Company gross reserves are the Company's total working interest share of reserves before deduction of any royalties and excluding any royalty interests of the Company.

All future net revenues are stated prior to provision of general and administrative expenses, interest, but after the deduction of royalties, operating costs, estimated abandonment and reclamation cost for wells with reserves attributed to them; and estimated future capital expenditures to book those reserves. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein are not representative of fair market value.

The Company uses the following metrics in assessing its performance and comparing itself to other companies in the oil and gas industry. These terms do not have a standardized meaning and therefore may not be comparable with the calculation of similar measures.by other companies:

Select Definitions

No securities regulatory authority has either approved or disapproved of the contents of this press release.

SOURCE Journey Energy Inc.

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