Novus Energy Reports 2011 Reserves & Production Growth And Provides 2012 Capital Budget Guidance

Announced Date :  Feb 08, 2012


Novus Energy Inc. (Novus Energy) announced a substantial increase to its reserves and production from its successful 2011 capital program. The company also announced its 2012 production and capital budget guidance which demonstrates another year of significant growth. The company's year-end independent reserve evaluation was prepared by Sproule Associates Limited (Sproule) effective December 31, 2011 (the Sproule Report).
2011 Reserve Highlights

• 1P reserves at December 31, 2011 increased by 83% to 8.84 MMboe, up substantially from 4.83 MMboe on December 31, 2010;

• 2P reserves at December 31, 2011 increased by 58% to 14.56 MMboe, up from 9.24 MMboe on December 31, 2010;

• The net present value of proved plus probable reserves, before income tax and discounted at 10%, increased 102% to $331.3m up from $164.2m at December 31, 2010, representing an increase of $167.1m;

• The company's fully diluted net asset value per share increased dramatically to $1.64m.

• Total 1P reserves increased 81% on a per share basis, and 2P reserves increased 56% on a per share basis;

• Oil and natural gas liquids (NGLs) at December 31, 2011 represent 82% of 2P reserves on a boe basis and 82% of total 1P reserves;

• Total 1P reserves at December 31, 2011 represent 61% of total 2P reserves, up from 52% on December 31, 2010;

• Reserve replacement for the year was 839% on 2P reserves basis and 658% based on 1P reserves;

• The company's reserve Life Index at December 31, 2011 was 14 years on a 2P reserces basis and 8.5 years on a proved basis (based on annualized fourth quarter 2011 production);

• Finding, development and acquisition costs, excluding future development capital (FDC), were $12.16/boe for proved plus probable reserves and $15.51/boe for proved reserves. Including FDC, finding, development and acquisition costs were $20.18/boe for 2P and $25.66/boe for 1P reserves;

• In the Dodsland area of Saskatchewan, which encompasses the company's core Viking light oil properties, the 2011 capital program resulted in a 72% increase in 2P reserves. The Dodsland area accounts for 13.3 MMboe of 2P reserves which represent 91% of the company's total 2P reserve volumes.

• Sproule provided Novus with an updated independent Contingent Resource Assessment for the Company's Dodsland Viking light oil assets (the Contingent Resource Assessment), the intent of which was to independently assess the contingent resource potential of the area. The Contingent Resource Assessment, effective as at December 31, 2011, reports a "best estimate" of Discovered Petroleum Initially-In-Place ("DPIIP") on Novus Energy working interest and option lands totaling 644.8MMbbl of light Viking oil, up 15% from November 30, 2010. This estimate consists of 527.9 MMSTB on company owned land and an additional 116.9 MMSTB on lands under option to Novus Energy. 82% of the DPIIP now reside on Novus Energy working interest land up from 68% at November 30, 2010. In the Contingent Resource Assessment, approximately 56% of the net acreage controlled by Novus Energy (56.9 net sections owned and 9.9 net sections under option) was recognized by Sproule as containing DPIIP;

• As part of the Contingent Resource Assessment, Sproule included estimates of recoverable Contingent Resource volumes beyond booked reserves captured in the December 31, 2011 reserve report. The Contingent Resource Assessment reports a "best estimate" of Contingent Resources on Novus Energy working interest and option lands totaling 11.8 MMSTB, which are economic at current prices and costs. This estimate consists of 7.9 MMSTB on company owned land and an additional 3.9 MMSTB on lands under option to Novus Energy;

• Total proved plus probable reserves plus the "best estimate" of recoverable Contingent Resources represent approximately 4% of the DPIIP;

2011 Operational Highlights

• The company began its 2012 drilling program on February 1, and has drilled 2 wells to date.

• The company's average production for 2011 was an estimated 1,971boepd, representing 77% year over year average production volume growth.

• Novus Energy achieved record production of an estimated 2,845boepd in the fourth quarter of 2011 (83% oil and liquids) representing an 81% increase over fourth quarter 2010 production volumes;

•Operating netbacks in the fourth quarter of 2011 for the company's Viking light oil production in Dodsland were estimated to be a record $68.34/boe;

• Novus Energy achieved a recycle ratio of 3.9 times for the current year for proved plus probable reserves based on 2011 finding, development and acquisition costs excluding FDC and a 2011 corporate operating netback of $47.17/boe;

• During 2011, Novus Energy achieved a 100% success rate on its Dodsland area Viking oil drilling campaign. Novus Energy operated the drilling of 52 wells throughout the year, all using horizontal multi stage frac technology;

• Results from the company's Flaxcombe lands in the Dodsland area continue to materially exceed expectations. In 2011, Novus Novus Energy drilled 16 wells in the area with 90 day average rates, excluding associated gas production volumes, of 64 bbls/d.

• Well costs in the Dodsland area continued to decrease in 2011, with costs for drilling and completions averaging approximately $835 thousand, tie-in costs averaging $95 thousand, and on stream costs averaging $930 thousand per well.

• Novus Energy currently controls 119 net sections of Viking rights, and has a risked drilling inventory of 610 net, undrilled Viking oil locations based on eight well per section spacing and the development of only one of the two distinct cycles present on its Flaxcombe lands.

2012 Capital Program

With the continued success the company enjoyed with its large land position in the Dodsland Viking light oil resource play of southwestern Saskatchewan, the 2012 capital expenditure budget of $81m will exclusively be devoted to light oil development drilling activity in the area. This budget will incorporate the drilling of 73 wells (73 net), all of which will be horizontal multi stage frac wells targeting Viking oil in Dodsland. In addition to drilling, the Company is planning to expend capital on facilities, pipelines and battery expansions in the Dodsland area. No capital has been budgeted for acquisitions although the Company continues to evaluate new opportunities within and similar to its existing core area. Novus Energy will have complete control over its 2012 capital program, with 100% of budgeted expenditures for the year being operated by the Company.

Production Volumes

The 2012 capital budget is expected to result in 2012 average production of 3,300boepd (84% oil and liquids) which represents growth of approximately 67% over the estimated 2011 average production rate. The forecasted 2012 exit production rate is 4,500boepd, 85% of which will be oil and liquids.

2012 Capital Program

With the continued success the company enjoyed with its large land position in the Dodsland Viking light oil resource play of southwestern Saskatchewan, the 2012 capital expenditure budget of $81m will exclusively be devoted to light oil development drilling activity in the area. This budget will incorporate the drilling of 73 wells (73 net), all of which will be horizontal multi stage frac wells targeting Viking oil in Dodsland. In addition to drilling, the company is planning to expend capital on facilities, pipelines and battery expansions in the Dodsland area. No capital has been budgeted for acquisitions although the company continues to evaluate new opportunities within and similar to its existing core area. Novus Energy will have complete control over its 2012 capital program, with 100% of budgeted expenditures for the year being operated by the company.

Production Volumes

The 2012 capital budget is expected to result in 2012 average production of 3,300boepd (84% oil and liquids) which represents growth of approximately 67% over the estimated 2011 average production rate. The forecasted 2012 exit production rate is 4,500boepd, 85% of which will be oil and liquids.

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