CALGARY, Aug. 27 /PRNewswire-FirstCall/ -- Compton Petroleum Corporation (TSX - CMT, NYSE - CMZ) previously announced a process to seek a buyer for all of the outstanding shares of the Company. In conjunction with this process, the Company has completed an update to its December 31, 2007 Reserve Report as at August 1, 2008 (Reserve Update). The parameters applied to the preparation of this Reserve Update as well as the summaries thereof are presented in this News Release. Additionally, this News Release includes June 30, 2008 proforma debt information reflecting certain transactions since that date and a review of recent field activities.
Concurrent with this News Release, marketing efforts to conclude a corporate sale will commence. Interested parties are currently being invited to enter into a confidentiality agreement with the Company prior to accessing the Data Room which will open on September 8, 2008.
The Company believes the information contained herein to be of material interest to investors in the context of the corporate sale process.
AUGUST 1, 2008 RESERVE UPDATE
The August 1, 2008 Reserve Update is based upon the December 31, 2007 Reserve Report and was mechanically updated to August 1, 2008. The mechanical update incorporated the production forecasts and operating costs used in the December 31, 2007 Reserve Report giving effect to price forecasts in effect as of April 1, 2008 and the proposed new Alberta Crown Royalty regime. The mechanical update was then edited for the following:
- reserves assigned to wells drilled or recompleted to August 1, 2008 - drilling locations offsetting newly drilled or recompleted wells were reclassified from possible and probable reserves to proved reserves or from possible to probable reserves based upon production or test data, most particularly for the impact of projected horizontal well locations and multi-stage fracs in lieu of projected vertical well locations; the production forecast was adjusted in some cases - reserves associated with new lands added through acquisitions, farm- ins, Crown or freehold purchases - production for the first seven months of 2008 - reserves associated with the four properties sold in the third quarter of 2008 (as more fully described below) - reserves associated with any land expiries over the first seven months of 2008 - the forecasted on-stream dates of projected 2008 wells in the December 31, 2007 Reserve Report were revised to the actual dates or delayed to the currently anticipated on-stream dates; the production forecasts were not changed - the timing of some of the drilling locations and well tie-ins were updated together with estimated future development costs; the production forecasts were not changed - working interests and burdens were altered where appropriate - inconsistencies in gas-oil ratios and NGL yields were corrected where necessary
The August 1, 2008 Reserve Update has been prepared by the Company's professional staff (supervised by a Qualified Reserves Evaluator) using the same methodology used by the Company's independent and internal evaluators in the preparation of the December 31, 2007 Reserve Report. The August 1, 2008 Reserve Update has been prepared in accordance with the regulatory standards set out in National Instrument 51-101 with the exception that the Company has not undertaken a detailed review of all of the properties included in the December 31, 2007 Reserve Report nor adjusted the estimates for actual 2008 performance and updated production costs. The Company has reviewed the 2008 year to date performance of such properties and production costs in the aggregate and believes that there are no material revisions required other than to the extent set out in the summary.
Updated Summary of Estimated Reserve Volumes - Forecast Prices and Costs(1) ------------------------------------------------------------------------- As at August 1, Crude Oil Natural Gas NGLs 2008 Gross Net Gross Net Gross Net (Mbbl) (Mbbl) (Bcf) (Bcf) (Mbbl) (Mbbl) ------------------------------------------------------------------------- Proved Developed producing 4,376 3,465 488 414 9,081 6,035 Developed non-producing 242 193 67 56 1,131 737 Undeveloped 576 411 212 178 2,407 1,543 ------------------------------------------------------------------------- Total proved 5,195 4,070 767 648 12,619 8,315 Probable 4,207 3,052 628 517 10,452 6,699 ------------------------------------------------------------------------- Total proved plus probable 9,402 7,122 1,395 1,165 23,071 15,013 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2007 total proved plus probable 17,427 16,042 1,369 1,120 22,182 15,558 ------------------------------------------------------------------------- ----------------------------------------------------- As at August 1, Sulphur Total 2008 Gross Net Gross Net (Mlt) (Mlt) (Mboe) (Mboe) ----------------------------------------------------- Proved Developed producing 1,930 1,766 96,788 80,248 Developed non-producing 65 54 12,547 10,319 Undeveloped 149 137 38,475 31,717 ----------------------------------------------------- Total proved 2,145 1,957 147,810 122,286 Probable 819 766 120,190 96,748 ----------------------------------------------------- Total proved plus probable 2,964 2,723 268,000 219,035 ----------------------------------------------------- ----------------------------------------------------- 2007 total proved plus probable 3,022 2,563 270,819 220,864 ----------------------------------------------------- (1) Numbers may not add due to rounding. Updated Net Present Value of Reserves - Forecast Prices and Costs ------------------------------------------------------------------------- Future net revenue before income taxes(1) discounted at a rate of ------------------------------------- As at August 1, 2008 0% 8% 10% ------------------------------------------------------------------------- ($000s) Proved Producing $3,295,341 $1,589,571 $1,419,057 Non-producing 498,589 237,575 208,667 Undeveloped 1,198,713 519,822 439,409 ------------------------------------------------------------------------- Total proved 4,992,643 2,346,968 2,067,132 Probable 4,250,176 1,627,341 1,360,018 ------------------------------------------------------------------------- Total proved plus probable $9,242,819 $3,974,310 $3,427,150 ------------------------------------------------------------------------- ------------------------------------------------------------------------- December 31, 2007 proved plus probable $8,074,691 $3,406,461 $2,918,833 ------------------------------------------------------------------------- (1) The Company does not represent that the values shown in the foregoing table are representative of fair market value.
Pricing assumptions reflected in the Net Present Value of Reserves are based upon the average of the April 1, 2008 commodity price forecasts of four major Canadian oil and gas reserve evaluation firms and are summarized below.
Summary of Forecast Pricing ------------------------------------------------------------------------- Year(1) Edmonton Par Price $/bbl AECO-C Spot $/MMbtu ------------------------------------------------------------------------- 2008 $97.39 $8.31 ------------------------------------------------------------------------- 2009 $93.67 $8.39 ------------------------------------------------------------------------- 2010 $91.70 $8.28 ------------------------------------------------------------------------- 2011 $88.41 $8.18 ------------------------------------------------------------------------- 2012 $88.02 $8.24 ------------------------------------------------------------------------- 2013 $88.68 $8.44 ------------------------------------------------------------------------- 2014 $89.34 $8.61 ------------------------------------------------------------------------- 2015 $91.00 $8.80 ------------------------------------------------------------------------- 2016 $92.80 $8.98 ------------------------------------------------------------------------- 2017 $94.02 $9.16 ------------------------------------------------------------------------- (1) Pricing is escalated at 2% per annum post 2017. Property Sales
The Company previously announced the sale of four non-core asset packages. Purchase and sale agreements were executed during June and July and three of the four sales transactions have closed; the fourth is scheduled to close on September 8, 2008. Net proceeds, after closing adjustments, are expected to be approximately $210 million and will be applied to reduce syndicated bank debt. Reserves related to these properties are not included in the August 1, 2008 Reserve Update.
Production associated with these four sales is approximately 3,700 boe/d. Excluding these sales, August month end production is expected to be approximately 27,000 boe/d. With the Company's ongoing active field program, as outlined in the Operations section of this News Release, production is expected to increase appreciably over the next few months.
During the past 12 months, Compton has sold the majority of its predominantly oil weighted, non-core properties. These sales represented approximately 7,700 boe/d of production, and gross proceeds received were approximately $488 million. As a result of these sales, Compton's activities are now focused entirely in central Alberta and the Rock Creek / Ellerslie play at Niton / Caroline and in southern Alberta, including the Basal Quartz play at Hooker, the Plains Belly River play, and the thrusted Belly River play in the Foothills.
CORPORATE DEBT
Subsequent to June 30, 2008, the estimated $210 million of proceeds from the property sales and a realized $31 million gain on the recent termination of the foreign exchange contracts related to the US$ denominated Senior Term Notes will have been applied to reduce the Company's syndicated bank debt and are reflected in the following proforma debt schedule.
Long Term Debt ($000s) ------------------------------------------------------------------------- Proforma Adjustments ------------------------------------------------------------------------- Proforma June 30, Property FX June 30, 2008 Sales Sales 2008 ------------------------------------------------------------------------- Senior Term Notes $458,370 $458,370 Associated unrealized risk management gain (21,915) 21,915 - ------------------------------------------------------------------------- $436,455 21,915 $458,370 Syndicated bank debt 470,000 (210,253) (31,080) 228,667 ------------------------------------------------------------------------- Long term debt $906,455 $687,037 ------------------------------------------------------------------------- OPERATIONS
With much improved field conditions during the third quarter of 2008, field activity has increased substantially over Q2 levels. During the first 50 days of the quarter, Compton has drilled a total of 61 wells (47.4 net) as compared to the 34 wells (33 net) drilled during all of the second quarter. The Company has continued the focus of applying horizontal drilling combined with multi-stage frac completions to its Deep Basin and Foothills gas plays with good success. Six horizontal wells have been drilled since June 30, 2008 and an additional five horizontal and five vertical wells are currently drilling. Activities on an area by area basis are discussed below.
Central Alberta Niton/Caroline - Rock Creek natural gas play --------------------------------------------
Compton continues to be very active at Niton and Caroline in central Alberta. Since June 30, 2008, a total of eight wells have been drilled: six at Niton, four of which were horizontal, and two vertical wells at Caroline. To date, the Company has drilled or participated in 21 wells at Niton - two of these wells are oil wells; fourteen are producing natural gas wells, three additional natural gas wells are being tied-in, and two more are currently drilling.
A Rock Creek horizontal well at 4-28-52-17W5 was rig released in July and placed on continuous production on August 14, 2008. The well is currently restricted by available compression to 5 mmcf/d. Initial test rates exceeded 8 mmcf/d. The Company currently has six horizontal and one vertical Rock Creek wells producing to the compressor at 5-26-52-17W5 and a second compressor is being installed to increase capacity from 10 mmcf/d to 20 mmcf/d. Two horizontal wells are currently drilling on sections adjacent to the 4-28 well.
In Township 53-15W5M, Compton has very recently completed a 70% WI well at 16-24. The well is currently flowing approximately 3.3 mmcf/d. Also in Township 53-15W5M, a vertical Rock Creek step-out well has been cased at 4-23 and the Company is proceeding to license two additional horizontal wells in sections 23 and 24.
Also in the Niton area, Compton has spudded its first horizontal well targeting the Ellerslie formation at 12-19-54-13W5 and plans a second Ellerslie horizontal well at 1-21-53-14W5M.
Southern Alberta Hooker - Basal Quartz gas play ------------------------------
At Hooker, the Company has drilled four horizontal wells during 2008, with a fifth currently drilling. All wells have or will be completed using multi-stage frac technology.
The first two wells, 9-17-17-29-W4 and 02/10-30-16-29W4, were placed on production March 10 and April 28, 2008 respectively. Initial production rates were 4.2 mmcf/d in the case of 9-17 and 2.2 mmcf/d in the case of 10-30. Both wells are currently producing approximately 1 mmcf/d and are following the expected production profile typical of natural gas wells drilled into tight reservoirs. These two wells targeted the tighter reservoir on the eastern periphery of the Hooker play where offsetting vertical wells have proven to be marginal producers.
The third horizontal well at 13-34-18-29W4, drilled in the center of the Hooker Basal Quartz channel, was rig released on August 4, 2008, a multi-stage frac is scheduled for late August 2008, and will be tested in line to the Mazeppa gas plant. A fourth well has been drilled during August at 1-18-17-29W4, also on the western edge of the channel, and will be completed in September and a fifth well targeting the eastern edge of the channel is currently drilling.
The applicability of multi-stage frac technology, as demonstrated by the success of these wells, improves the probability of substantially increasing the recoverability of the 1.0 TCF of gas in place in the Hooker Basal Quartz reservoir.
Callum/Cowley - Thrusted Belly River gas play ---------------------------------------------
The Foothills horizontal well, 14-5-7-1W5 at Cowley was brought on-stream on August 9, 2008. This was the first well in the area drilled on 3D seismic and completed using multi-stage frac technology. The well is being tested inline to the Cowley gas plant and is currently equipment restricted to approximately 3 mmcf/d. The Company is very encouraged by the results of this well and is currently licensing four additional wells adjacent to 14-5.
Belly River - shallow gas play ------------------------------
Since June 30, 2008, Compton has continued to actively develop its Belly River gas play in southern Alberta. To date in the third quarter of 2008, the Company has drilled a total of 43 Belly River wells including nine wells in the Ghost Pine area. The majority of these wells are down-space locations near existing infrastructure.
ADVISORIES
Certain information regarding the Company contained herein constitutes forward-looking information and statements and financial outlooks (collectively, "forward looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 Continuous Disclosure Obligations and the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, guidance, or other statements that are not statements of fact, including statements regarding (i) cash flow and capital and operating expenditures, (ii) exploration, drilling, completion, reserves, and production matters, (iii) results of operations, (iv) financial position, and (iv) other risks and uncertainties described from time to time in the reports and filings made by Compton with securities regulatory authorities. Although Compton believes that the assumptions underlying, and expectations reflected in, such forward-looking statements are reasonable, it can give no assurance that such assumptions and expectations will prove to have been correct. There are many factors that could cause forward-looking statements not to be correct, including risks and uncertainties inherent in the Company's business. These risks include, but are not limited to: crude oil and natural gas price volatility, exchange rate fluctuations, availability of services and supplies, operating hazards, access difficulties and mechanical failures, weather related issues, uncertainties in the estimates of reserves and in projection of future rates of production and timing of development expenditures, general economic conditions, and the actions or inactions of third-party operators. The forward-looking statements contained herein are made as of the date of this news release solely for the purpose of generally disclosing Compton's reserves update, status of property sales and corporate sales process, pro forma corporate debt, and recent operations. Compton may, as considered necessary in the circumstances, update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise. Compton cautions readers that the forward-looking statements may not be appropriate for purposes other than their intended purposes. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.
Compton Petroleum Corporation is a Calgary-based public company actively engaged in the exploration, development, and production of natural gas, natural gas liquids, and crude oil in the Western Canada Sedimentary Basin. Compton's shares are listed on the Toronto Stock Exchange under the symbol CMT and on the New York Stock Exchange under the symbol CMZ.
