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CANADA ENERGY PARTNERS ANNOUNCES INCREASE IN GAS RESOURCES ON PEACE RIVER PROJECT

July 16, 2007

Canada Energy Partners Inc. (the “Company” or “Canada Energy Partners”) is pleased to announce the findings of their annual resource report (the “Sproule Report”) performed by Sproule Associates Limited (“Sproule”) on the Peace River Coalbed Methane (“CBM”) Project (the “Project”).  The Sproule Report indicates the total Discovered Resources for 100% interest in the Project has increased to 2,313 Billion Cubic Feet (“BCF”) (Raw gas, excluding carbon dioxide) from 1,700 BCF (Raw) in the coal and shale formations.  This represents a year-over-year increase in Discovered Resources of 36% due to land acquisitions and larger quantities of coal and gas discovered in more recent drilling activities.  The Sproule Report also upgrades 21 BCF (excluding carbon dioxide) of the 2,313 BCF of Discovered Resources into Contingent Resources.  See Table 1 below.

The Company also collaborated with the Operator of the Peace River CBM Project, to engage U.S. based Netherland Sewell & Associates, Inc. (“Netherland”) to conduct an additional resource evaluation (the “Netherland Report”) of the coal formations.  The Netherland Report indicates the total Discovered Resources to be 1,072 BCF (Raw) for 100% interest in the coal formations only (the Netherland Report did not evaluate Discovered Resource in the shale formations).  The Netherland Report also upgrades 440.8 BCF of the 1,072 BCF of the coal Discovered Resource into Contingent Resources and further upgrades 95.5 BCF of the coal Discovered Resource to Possible Reserves.  See Table 1 below.

The Netherland Report includes a Present Value of Canada Energy Partners’ interest in the above-noted Possible Reserves and Contingent Resources, net of all costs, of estimated future net revenues, before income taxes and discounted by 10% (“PV-10”), of CDN$50.5 million for Possible Reserves and an additional CDN$257.6 million for Contingent Resources.  The Netherland Report was based on net revenues from 256 drilling locations using 160-acre spacing and US$8/MMBTU Henry Hub gas price.  Net revenues were calculated net of estimated development costs, operating costs, royalties, shrinkage and fuel use.  The Netherland Report was prepared under U.S. rules and in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers.  The estimated values disclosed do not represent fair market values.  There are no material differences between the Netherland Report and the requirements of NI 51-101.  See Table 2 below.

The Company’s filing of the annual resource report prepared by Sproule is in accordance with the NI 51-101 rules and in summary form has been filed on SEDAR website (www.sedar.com) on the NI 51-101F1 form.  The full content of the Sproule Report is confidential as it contains proprietary geological and engineering data.  The Company will be updating its resource estimate on at least an annual basis as more data becomes available.

Ben Jones, founder of the Peace River CBM Project and Director of the Company, said, “We are pleased with the results of both resource reports and the Operator’s recently announced decision (see the Company’s July 3, 2007 press release) to move this project to production with the planned 25 well program and installation of gas sales infrastructure.  We believe the Project will have a positive impact on the community of Hudson’s Hope, the regional economy and our shareholders.  Upon receiving the appropriate permits and approvals and the installation of sales infrastructure, we expect this to be the first CBM project in British Columbia to go into commercial production.  To date we have assembled 44,468 acres, drilled 16 test wells, and expended CDN$35 million over the last 5 years.  We believe that the re/_modules/bCMS/content/forms/source/land base we have established is extraordinary and that the implementation of existing and emerging drilling and completion technologies will result in a very profitable and long-lived project.”

Canada Energy Partners was formed in May 2006 for the purpose of exploiting the unconventional gas resources in the Peace River Region of northeast British Columbia.  In less than one year the Company acquired all of the non-operator-owned interests in the Project and currently owns 50% working interest.  The Operator, an experienced CBM producer, owns the other 50% working interest.  The Company, the Operator and its predecessors have assembled 44,468 gross contiguous acres considered to be the most prospective area for coalbed methane in the region.  The Operator recently announced their plans for a 25 production well program and the installation of associated pipelines, treating and compression facilities necessary to initiate gas sales.  Canada Energy Partners will continue working with the Operator towards the planned commercial production on the Project.  Further, Canada Energy Partners will continue exploring for conventional natural gas in the deep rights on the lands covered by the Project.
           
Table 1: Peace River Project, 100% Gross Interest.

 

Sproule Report
Sept 2006 (2) (3)(4) 

 

Sproule Report April 2007 (2) (3)(4) 

 

Netherland Report
July 2007(1) (3) 

 

Possible Reserves

-

BCF

-

BCF

95.4

BCF

Contingent Resources*

-

BCF

21

BCF

440.8

BCF

Possible + Contingent

-

BCF

21

BCF

536.2

BCF

Discovered Resources

1,700(2)

BCF

2,313(2)

BCF

1,072(1)

BCF

Gross Licenced Lands

36,700

Acres

44,468

Acres

44,468

Acres

Table 2: Peace River Project, Canada Energy Partners’ Interest.

 

Sproule Report
Sept 2006 (2) (3)(4) 

 

Sproule Report April 2007 (2) (3)(4)

 

Netherland Report
July 2007(1) (3)

 

Possible Reserves

-

BCF

-

BCF

32.2

BCF

Contingent Resources*

-

BCF

10.5

BCF

145.6

BCF

Possible + Contingent

-

BCF

10.5

BCF

177.8

BCF

Discovered Resources

850(2)

BCF

1,156.5(2)

BCF

536(1)

BCF

 

 

 

 

 

 

 

Gross Licenced Lands

18,350

Acres

22,234

Acres

22,234

Acres

PV-10 Possible Reserves 

-

 

-

 

CDN $50.5

Million

PV-10 Contingent Resources*

-

 

-

 

CDN $257.6

Million

PV-10 Possible + Contingent 

-

 

-

 

CDN $308.1

Million

(1)       Coal only; raw gas including carbon dioxide.  Netherland did not evaluate the shales.
(2)       Sproule evaluated and attributed Discovered Resource for the coal, dirty coal, coaly shale, and shales
(3)       Deep Rights were not evaluated.
(4)       Both Sproule reports exclude carbon dioxide.
*         Amounts representing Contingent Resources are the “best” or mid-range estimates contained in the Reports, compared to the low or high estimates.

Definitions:

“Possible reserves” are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than probable reserves.

“Contingent resources” are defined as those quantities of oil and gas estimated on a given date to be potentially recoverable from known accumulations but are not currently economic. The contingencies that result in the classification of the Gething CBM as a contingent resource include, but are not limited to: permeability to gas, gas saturation and/or content, an appropriate and successful field development plan, corporate commitment, and economic factors.   

“Discovered resources” are those quantities of oil and gas estimated on a given date to be remaining in, plus those quantities already produced from, known accumulations.  Discovered resources are divided into economic and uneconomic categories, with the estimated future recoverable portion classified as reserves and contingent resources, respectively.  The reported Discovered Resource cannot be classified into one of the sub-categories of reserve, contingent resource, or unrecoverable resource at this time because it is not possible to estimate the portion of the discovered resource that could be recoverable and/or unrecoverable due to the lack of commercial tests or production testing in the vicinity of Company interest lands.  There is no certainty that it will be technically or economically viable to produce any portion of the reported Discovered Resources.

On behalf of the Board of Directors of
Canada Energy Partners Inc.

John Proust

John Proust
Director

Canada Energy Partners Inc.
1500 – 885 West Georgia Street,
Vancouver, BC V6C 3E8 Canada
Telephone: 604-909-1154   Fax: 604-488-0319   www.canadaenergypartners.com

The TSX Venture Exchange does not accept responsibility for the adequacy or the accuracy of this release.

Forward-looking statements: This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company’s capability to execute and implement its future plans.  Actual results may differ materially from those projected by management.  For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Act of 1995.

 


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