Reserves | Capital Markets | Capital Expenditure | Drilling Program - Wells | Capital Expenditure - 2021

Pine Cliff Details 2021 Capex, Production Outlook; Reserve Update

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Pine Cliff Energy Ltd. reported an operations update and to announce its 2020 year-end reserves and 2021 guidance.

2021 Guidance

Pine Cliff’s Board of Directors has approved a 2021 capital budget of $13.0 million that is expected to be fully funded from adjusted funds flow. Pine Cliff intends to spend approximately $5.6 million drilling two (2.0 net) Pekisko oil wells in Central Alberta, $0.7 million drilling one (0.2 net) Ellerslie natural gas well in the Edson area, $5.2 million on major maintenance and optimization capital and $1.5 million on abandonments and reclamation (exclusive of abandonments conducted pursuant to government funded grants). To date, the Company has been approved for approximately $4.0 million in government funded grants for site abandonment and reclamation activities and is awaiting approval of additional grant amounts.

Based on $6.3 million of development capital to be spent in the second half of 2021, and assuming that Pine Cliff makes no acquisitions or does not accelerate its 2021 drilling program to earlier in the year, Pine Cliff expects 2021 annual production volumes to range between 18,000 and 18,500 Boe per day, weighted 91% to natural gas.

Pine Cliff will continue to consider opportunities to enhance shareholders’ long term value which may include asset acquisitions or dispositions, or the early retirement of term debt.

Operations Update

Pine Cliff’s fourth quarter 2020 production averaged 19,130 Boe per day, weighted 91% to natural gas. This resulted in the average production for the year being 19,005 Boe per day, exceeding the Company’s 18,500 to 19,000 annual 2020 guidance range. This production was achieved with the Company only spending $2.3 million on development drilling in 2020. Stable natural gas prices and the ability to produce natural gas into storage uninterrupted during 2020 enabled Pine Cliff to maximize production rates in 2020.

Pine Cliff conducted a $9.0 million capital program in 2020 (excluding acquisitions and dispositions but including $5.2 million of major maintenance and other optimization capital expenses, $2.3 million in development drilling and $1.5 million in abandonment expenditures). Development capital included three gross (0.3 net) Ellerslie liquids rich gas wells and seven gross (7.0 net) natural gas well recompletions that were conducted during the fourth quarter.

Reserve Report Highlights

Pine Cliff’s independent reserve report was prepared by McDaniel & Associates Limited (“McDaniel“) in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101“) with the effective date of December 31, 2020.

Highlights of the McDaniel reserve report include:

• Pine Cliff increased its 2020 proved plus probable (“P+P”) reserves by 4.0 MMBoe (7%) prior to adjusting for 2020 production, largely as a result of 8.0 MMBoe (14%) of positive technical revisions, 1.2 MMBoe (2%) of extensions and a decrease of 5.1 MMBoe (9%) due to economic factors;
• Eight gross (3.8 net) Pekisko well locations were added to Pine Cliff’s booked locations, bringing the total booked locations in its P+P reserves to 38 gross (19.7 net);
• Remaining P+P reserves of 54.8 MMBoe (87% conventional natural gas and coal bed methane) at December 31, 2020 decreased by 3.0 MMBoe (5%) from 57.8 MMBOE (88% conventional natural gas and coal bed methane) at December 31, 2019, mainly as a result of 2020 production and economic factors;
• Approximately 78% of total reserve volumes are classified as total proved reserves and approximately 22% are classified as probable reserves; and
• Net present value for P+P reserves of $98.2 million, discounted at 10%, a decrease of $28.9 million, or 23%, from December 31, 2019, primarily as a result of a decrease in forecast commodity prices.

McDaniel has used a three consultant average price (McDaniel, GLJ & Sproule) forecast, resulting in a price forecast of $2.78 and $2.70 per Mcf for AECO natural gas and US$47.17 and US$50.17 per Bbl for WTI oil in 2021 and 2022 respectively.