Provident Energy Announces 2007 Year-End and Fourth Quarter Results and 2007 Reserves Information
Provident Energy Trust (TSX: PVE.UN) (NYSE: PVX) –
All values are in Canadian dollars and conversions of natural gas volumes to barrels of oil equivalent (boe) are at 6:1 unless otherwise indicated.
“Provident delivered another year of strong financial and operating results in 2007,” said Provident President and Chief Executive Officer, Tom Buchanan. “Our diverse portfolio of assets delivered solid performance in the face of a volatile commodity price environment, stronger Canadian dollar, tighter equity and debt capital markets, and continued challenges related to government policy. We maintained stable distributions of $1.44 ($0.12 per month) for the fourth consecutive year. We strengthened our upstream business substantially in 2007 with the Capitol and Triwest acquisitions in Canada and four asset acquisitions in the U.S. including the $1.5 billion asset acquisition from Quicksilver Resources Inc. The Midstream business unit had another outstanding year, delivering record EBITDA of $226 million.”
Highlights
– Consolidated funds flow from operations increased 8 percent to $468 million ($2.04 per unit) compared to $433 million ($2.20 per unit) in 2006. Consolidated earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) was $545 million in 2007, an increase of 10 percent compared to $496 million in 2006.
– The payout ratio in the fourth quarter of 2007 was strong at 57 percent, down from 64 percent in the fourth quarter of 2006. Full year payout ratio in 2007 was 77 percent, up from 67 percent in 2006.
– Consolidated funds flow from operations in the fourth quarter of 2007 increased 45 percent to $178 million ($0.72 per unit) compared to $123 million ($0.58 per unit) in the fourth quarter of 2006. Consolidated EBITDA in the fourth quarter of 2007 was $196 million, an increase of 39 percent compared to $141 million in the fourth quarter of 2006.
– Consolidated upstream production increased 22 percent to 38,600 barrels of oil equivalent per day (boed) in 2007, up from 31,700 boed in 2006. Canadian oil and gas production increased 10 percent to 26,500 boed in 2007, up from 24,000 boed in 2006, with a balanced production profile of 58 percent natural gas and 42 percent crude oil and natural gas liquids. In the fourth quarter of 2007, consolidated production averaged 48,200 boed compared to 33,800 boed in the fourth quarter of 2006 reflecting the acquisitions made in both Canada and the United States.
– Midstream EBITDA in 2007 was a record $226 million, up from $220 million in 2006, reflecting a favourable price environment and strong operating and marketing performance. In the fourth quarter of 2007, Midstream delivered EBITDA of $89 million, up 20 percent from $74 million in the fourth quarter of 2006.
– Consolidated upstream proved plus probable reserve life index (RLI) increased from 12.4 years to 16.9 years, reflecting the increasing quality of the assets and the sustainability of the Trust. Provident’s Canadian proved plus probable RLI increased 24 percent to 9.7 years. Factoring in the long-life midstream assets, Provident’s economic life on a consolidated basis is now approximately 18.5 years.
– On a consolidated basis, Provident drilled 159 net wells with a 99 percent success rate while in Canada 103 net wells were drilled with a 98 percent success rate. Provident’s drilling activities in 2007 were focused primarily on crude oil.
– Consolidated proved plus probable oil and gas reserves increased 111 percent to 322 million barrels of oil equivalent (boe). Canadian proved plus probable oil and gas reserves increased 37 percent to 101 million boe.
– Consolidated reserve additions including acquisitions and revisions, were 13 times greater than current year production. In Canada, reserve additions were 3.8 times greater than current year production.
– Consolidated finding, development and acquisition (FD&A) costs including revisions and future development capital (FDC) improved to $15.18 per boe of proved plus probable reserves, compared to $22.04 per boe in 2006. The three year average FD&A costs including revisions and FDC were $16.05 per boe of proved plus probable reserves in 2007 compared to $13.26 per boe in 2006.
– 2007 Canadian FD&A costs including revisions and FDC were $23.31 per boe of proved plus probable reserves compared to $23.04 per boe in 2006. The three-year average Canadian FD&A costs including revisions and FDC were $24.48 per boe of proved plus probable reserves in 2007 compared to $23.60 per boe in 2006. These figures reflect the high value oil acquisitions completed in 2007. Canadian finding and development (F&D) costs for proved plus probable additions including revisions and FDC were $24.42 per boe in 2007 compared to $23.99 per boe in 2006. The three-year average Canadian F&D costs for proved plus probable additions including revisions and FDC were $20.82 per boe in 2007 compared to $17.27 per boe in 2006.
Outlook
Provident’s upstream and midstream operations are on track for 2008, as the Trust continues to focus on operational excellence to deliver on our base capital plan and realize additional upside through additional opportunities available in our asset base.
In the Canadian upstream business, the two acquisitions in 2007 (Capitol Energy and Triwest), the Rainbow acquisition in 2006, and Provident’s existing assets provide Provident with approximately 1,000 identified drilling and recompletion opportunities. The program is well underway to drill 92 net wells in 2008, and to undertake a further 74 recompletions and workovers, with a total $134 million capital budget. Provident expects Canadian upstream production to average approximately 26,000 to 28,000 barrels of oil equivalent per day (boed) in 2008. Provident expects drilling and operating costs to ease somewhat in 2008, as activity in the sector levels off and we realize the benefit of the high quality assets acquired.
The U.S. upstream business anticipates a 2008 capital program of approximately U.S.$158 million with average production expected to be in the range of 20,900 to 22,800 boed. BreitBurn Energy Partners, L.P. (the “MLP”) has a capital budget of approximately U.S.$120 million and plans to drill 206 net wells in 2008. MLP production is expected to be in the range of 18,300 to 20,000 boed in 2008. BreitBurn Energy Company LP (“BreitBurn”) has a capital budget of up to U.S.$38 million with plans to drill 12 net wells in 2008. BreitBurn production is expected to be in the range of 2,600 to 2,800 boed in 2008.
Provident anticipates a capital program of $43 million for the Midstream business in 2008. Management anticipates that approximately $18 million will be invested in ongoing development of new underground storage caverns at Redwater, and $10 million will go toward further rail yard development. The 2008 sustaining capital budget has been raised to $13 million, and includes planned expenditures on operated and non-operated facilities. Assuming continued strong market conditions, Provident anticipates another successful year in 2008 for the Midstream business.
On February 5, 2008, Provident announced a strategic sales process of its U.S. oil and gas operations. Currently Provident owns approximately 22 percent of the MLP, including units held by the General Partner of which Provident indirectly owns approximately 96 percent. Provident also owns, through a wholly owned subsidiary, approximately 96 percent of BreitBurn. The book value of these investments at December 31, 2007 was approximately $425 million and the related tax basis is estimated to be approximately $100 million. It is Provident’s intention to monetize its U.S. upstream investment, but there is no certainty that this process will result in any changes to Provident’s ownership stakes in its U.S. holdings.
Strategic planning in 2008 will continue to focus on a review of Provident’s Canadian businesses and initiatives to consider the most viable strategic and structural options available with the objectives of capturing and protecting unitholder value going forward. Certain options under consideration include the separation of the upstream and the midstream components of Provident’s Canadian business. Provident cautions that the planning required before implementation will be lengthy and complex. There is no certainty that the planning will result in significant changes in Provident.
Provident’s audited financial statements for the year ended December 31, 2007, annual and fourth quarter MD&A, and complete reserves information were filed today on the System for Electronic Document Analysis and Retrieval (SEDAR) (www.sedar.com), and can also be found on Provident’s website, at www.providentenergy.com, under the heading “investors.”
This press release does not constitute and is not intended to be legal or tax advice to any particular holder or potential holder of Provident units. Holders or potential holders of Provident units are urged to consult their own legal and tax advisors as to their particular income tax consequences of holding Provident units.
Provident Energy Trust is a Calgary-based, open-ended energy income trust that owns and manages an oil and gas production business and a natural gas liquids midstream services and marketing business. Provident’s energy portfolio is located in some of the most stable and predictable producing regions in Western Canada and the United States. Provident provides monthly cash distributions to its unitholders and trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbols PVE.UN and PVX, respectively.
This document contains certain forward-looking statements concerning Provident, as well as other expectations, plans, goals, objectives, information or statements about future events, conditions, results of operations or performance that may constitute “forward-looking statements” or “forward-looking information” under applicable securities legislation. Such statements or information involve substantial known and unknown risks and uncertainties, certain of which are beyond Provident’s control, including the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, pipeline design and construction, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, commodity prices, operating conditions, capital and other expenditures, and project development activities.
Although Provident believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Provident can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Provident and described in the forward-looking statements or information.
The forward-looking statements or information contained in this news release are made as of the date hereof and Provident undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise unless so required by applicable securities laws. The forward-looking statements or information contained in this news release are expressly qualified by this cautionary statement.
Consolidated financial highlights Three months ended Year ended Consolidated December 31, December 31, —————————————————————————- ($ 000s except per unit data) 2007 2006 % Change 2007 2006 % Change —————————————————————————- Revenue (net of royalties and financial derivative instruments) $ 541,884 $548,086 (1) $2,167,276 $2,187,253 (1) —————————————————————————- Funds flow from COGP operations (1) $ 58,667 $ 48,574 21 $ 204,252 $ 185,328 10 Funds flow from USOGP operations (1) 41,787 13,573 208 85,571 62,970 36 Funds flow from Midstream operations (1) 77,109 60,532 27 178,432 184,366 (3) —————————————————————————- Total funds flow from operations (1) $ 177,563 $122,679 45 $ 468,255 $ 432,664 8 —————————————————————————- Per weighted average unit – basic and diluted (2) $ 0.72 $ 0.58 24 $ 2.04 $ 2.20 (7) Distributions to unitholders $ 89,063 $ 75,573 18 $ 333,352 $ 283,465 18 Per unit $ 0.36 $ 0.36 – $ 1.44 $ 1.44 – Percent of funds flow from operations paid out as declared distributions (3) 57% 64% (11) 77% 67% 15 Net income (loss) (4) $ 68,545 $(25,501) – $ 30,434 $ 140,920 (78) Per weighted average unit – basic and diluted (2) $ 0.28 $ (0.12) – $ 0.13 $ 0.72 (82) Capital expenditures $ 93,365 $ 60,911 53 $ 247,122 $ 190,433 30 Capitol Energy acquisition $ (355)$ – – $ 467,495 $ – – Triwest Energy acquisition $ 78,877 $ – – $ 78,877 $ – – USOGP natural gas asset acquisition $1,464,213 $ – – $1,464,213 $ – – Oil and gas property acquisitions, net $ 2,788 $ 8,678 – $ 265,201 $ 481,625 – Weighted average trust units outstanding (000s) – Basic 247,052 209,826 18 229,939 196,627 17 – Diluted (2) 247,052 210,113 18 229,939 196,914 17 —————————————————————————- —————————————————————————- Consolidated —————————————————————————- As at December 31, ($ 000s) 2007 2006 % Change —————————————————————————- Capitalization Long-term debt $ 1,549,272 $ 988,785 57 Unitholders’ equity $ 1,708,665 $ 1,542,974 11 —————————————————————————- (1) Represents cash flow from operations before changes in working capital and site restoration expenditures. (2) Includes dilutive impact of unit options, exchangeable shares and convertible debentures. (3) Calculated as distributions to unitholders divided by funds flow from operations less distributions to non-controlling interests of $35.8 million year-to-date and $22.1 million for the quarter (2006 – $6.5 million and $4.7 million, respectively). (4) Net income (loss) for the year ended December 31, 2007 includes a future income tax charge of $88.4 million relating to the enactment of Bill C-52, Budget Implementation Act 2007 by the Canadian government. Operational highlights Three months ended Year ended Consolidated December 31, December 31, —————————————————————————- 2007 2006 % Change 2007 2006 % Change —————————————————————————- Oil and Gas Production Daily production Light/medium crude oil (bpd) 20,721 13,899 49 17,433 14,114 24 Heavy oil (bpd) 1,769 1,838 (4) 1,921 2,057 (7) Natural gas liquids (bpd) 1,612 1,345 20 1,421 1,419 – Natural gas (mcfpd) 144,678 100,029 45 107,151 84,891 26 —————————————————————————- Oil equivalent (boed)(1) 48,215 33,753 43 38,633 31,739 22 —————————————————————————- Average realized price (before realized financial derivative instruments) Light/medium crude oil ($/bbl) $ 69.70 $ 54.59 28 $ 63.48 $ 60.32 5 Heavy oil ($/bbl) $ 43.36 $ 25.82 68 $ 41.85 $ 36.80 14 Corporate oil blend ($/bbl) $ 67.56 $ 51.23 32 $ 61.29 $ 57.33 7 Natural gas liquids ($/bbl) $ 51.39 $ 47.49 8 $ 51.90 $ 51.98 – Natural gas ($/mcf) $ 6.53 $ 6.71 (3) $ 6.53 $ 6.66 (2) —————————————————————————- Oil equivalent ($/boe)(1) $ 52.59 $ 45.65 15 $ 50.64 $ 49.35 3 —————————————————————————- Field netback (before realized financial derivative instruments) ($/boe) $ 30.22 $ 23.96 26 $ 28.24 $ 27.93 1 Field netback (including realized financial derivative instruments) ($/boe) $ 28.31 $ 25.58 11 $ 27.79 $ 28.09 (1) —————————————————————————- Midstream Midstream NGL sales volumes (bpd) 135,981 115,727 18 120,785 115,354 5 EBITDA (000s) (2) $ 89,423 $ 74,422 20 $ 225,675 $ 219,631 3 —————————————————————————- —————————————————————————- (1) Provident reports oil equivalent production converting natural gas to oil on a 6:1 basis. (2) EBITDA is earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items. See “Reconciliation of non-GAAP measures”.
Oil and Natural Gas Reserves
Provident’s Canadian reserves were evaluated by McDaniel & Associates Consultants Ltd. (McDaniel) and by AJM Petroleum Consultants (AJM) effective December 31, 2007 in accordance with the Canadian Securities Administrators’ National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101). Provident’s United States reserves were evaluated by Netherland, Sewell & Associates, Inc. (NSAI) and by Schlumberger Data and Consulting Services (DCS) effective December 31, 2007 in accordance with NI 51-101. The Canadian and U.S evaluations used the McDaniel price forecast. McDaniel, AJM, NSAI and DCS are independent qualified reserves evaluators appointed pursuant to NI 51-101. Additional information pertaining to NI 51-101 and some of the key reserves definitions are provided at the conclusion of the Reserves section. Additional details on the Trust’s reserves can be found in Form NI 51-101 F1.
To provide clarity, reserves and values are provided by country and on a consolidated basis. For consistency with Provident’s financial reporting U.S. reserves are reported based on 100 percent of the interests of BreitBurn Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P. (the “MLP”) in the U.S. properties. As of December 31, 2007 Provident indirectly held approximately 96 percent of the outstanding partnership interests of BreitBurn with the remaining approximately four percent of the partnership interests held by BreitBurn’s co-founders and co-chief executive officers. As of December 31, 2007 Provident indirectly held approximately 22 percent of the outstanding partnership interests of the MLP with the remaining approximately 78 percent of the partnership interests held by public unitholders and BreitBurn’s co-founders and co-chief executive officers. Provident Consolidated Oil and Natural Gas Reserves
Provident had a very successful year with respect to acquisitions and reserve additions in the drive to continually support the sustainability of the Trust. Acquisitions in Canada and in the U.S. improved the quality of the Trust’s asset base, as evidenced by the increased reserve life index (RLI). Internal development activities in Western Canada, California and Wyoming were successful in replacing 57 percent of total production. The Trust’s reserves increased after production with company interest proved producing reserves growing from 89,851 thousand barrels of oil equivalent1 (Mboe) to 206,063 Mboe, total proved growing from 117,806 Mboe to 253,272 Mboe, and proved plus probable growing from 153,021 Mboe to 322,827 Mboe.
Consolidated Oil and Natural Gas Reserves and Present Values
Provident’s Consolidated oil and natural gas reserves and present value of estimated future cash flows based on forecast prices and costs using the McDaniel price forecast are summarized below. Reserves are presented on a Gross (working interest) and Net basis (refer to the notes under the tables and to the Definitions at the end of the Reserves section for explanations of company share, working interest, gross and net).
Provident Consolidated Reserves Summary(a)(b) Using McDaniel Price Forecast Gross Reserves(c) —————————————————————————- Light & Medium Heavy Crude Crude Total Natural Total Oil Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) —————————————————————————- Proved Reserves Producing 73,638 10,882 84,520 4,774 699,075 205,807 Non-Producing 4,247 1,547 5,794 432 60,065 16,236 Undeveloped 13,117 3,003 16,120 930 83,291 30,932 —————————————————————————- Total Proved 91,002 15,432 106,434 6,136 842,431 252,975 Probable 31,583 9,189 40,772 1,721 161,639 69,433 —————————————————————————- TOTAL Proved plus Probable 122,585 24,621 147,206 7,857 1,004,069 322,408 —————————————————————————- —————————————————————————- Net Reserves(d) —————————————————————————- Light & Medium Heavy Crude Crude Total Natural Total Oil Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) —————————————————————————- Proved Reserves Producing 64,520 9,819 74,339 3,854 579,689 174,808 Non-Producing 3,737 1,513 5,250 351 47,443 13,508 Undeveloped 11,138 2,867 14,005 775 69,030 26,285 —————————————————————————- Total Proved 79,395 14,199 93,594 4,981 696,162 214,601 Probable 26,332 8,760 35,092 1,353 135,036 58,951 —————————————————————————- TOTAL Proved plus Probable 105,727 22,959 128,686 6,333 831,198 273,552 —————————————————————————- —————————————————————————- (a) Tables may not add due to rounding. (b) U.S. Reserves are reported based on 100% of the interests of BreitBurn Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P. (the “MLP”) in the U.S. properties. As of December 31, 2007 Provident indirectly held approximately 96% of the outstanding partnership interests of BreitBurn with the remaining approximately 4% of the partnership interests held by BreitBurn’s co-founders and co-chief executive officers. As of December 31, 2007 Provident indirectly held approximately 22% of the outstanding partnership interests of the MLP with the remaining approximately 78% of the partnership interests held by public unitholders and BreitBurn’s co-founders and co-chief executive officers. This is consistent with Provident’s financial reporting. (c) Gross Reserves are Provident’s working interest (operated or non-operated) share before deduction of royalties and without including any royalty interests of Provident. (d) Net Reserves are Provident’s working interest (operated or non-operated) share after deduction of royalty obligations, plus Provident’s royalty interests in reserves. Present Value of Consolidated Reserves Present Value ($000′s) Before Tax Discounted at —————————————————————————- 0% 8% 10% —————————————————————————- Proved Reserves Producing $ 6,251,207 $ 3,128,956 $ 2,818,145 Non-Producing $ 533,094 $ 275,968 $ 244,000 Undeveloped $ 881,581 $ 420,408 $ 364,282 —————————————————————————- Total Proved $ 7,665,882 $ 3,825,332 $ 3,426,427 Probable $ 2,386,511 $ 983,831 $ 835,162 —————————————————————————- TOTAL Proved plus Probable $ 10,052,393 $ 4,809,163 $ 4,261,590 —————————————————————————- —————————————————————————- Present Value ($000′s) Before Tax Discounted at —————————————————————————- 15% 20% —————————————————————————- Proved Reserves Producing $ 2,292,954 $ 1,961,080 Non-Producing $ 187,078 $ 149,900 Undeveloped $ 263,844 $ 197,582 —————————————————————————- Total Proved $ 2,743,876 $ 2,308,562 Probable $ 587,853 $ 438,516 —————————————————————————- TOTAL Proved plus Probable $ 3,331,729 $ 2,747,078 —————————————————————————- —————————————————————————- Present Value ($000′s) After Tax(a) Discounted at —————————————————————————- 0% 8% 10% —————————————————————————- Proved Reserves Producing $ 6,114,740 $ 3,093,166 $ 2,789,489 Non-Producing 541,352 278,757 246,268 Undeveloped 817,687 398,130 346,030 —————————————————————————- Total Proved 7,473,779 3,770,053 3,381,787 Probable 2,146,124 925,739 792,717 —————————————————————————- TOTAL Proved plus Probable $ 9,619,903 $ 4,695,792 $ 4,174,504 —————————————————————————- —————————————————————————- Present Value ($000′s) After Tax(a) Discounted at —————————————————————————- 15% 20% —————————————————————————- Proved Reserves Producing $ 2,274,097 $ 1,946,690 Non-Producing 188,536 150,930 Undeveloped 252,076 189,539 —————————————————————————- Total Proved 2,714,709 2,287,158 Probable 568,019 429,476 —————————————————————————- TOTAL Proved plus Probable $ 3,282,728 $ 2,716,634 —————————————————————————- —————————————————————————- (a) After tax values include U.S. State and Federal Taxes as well as with holding tax on funds that flow back to Provident Energy Ltd. in Canada plus Canadian Federal and Provincial Income taxes beginning January 1, 2011.
COGP Oil and Natural Gas Reserves
McDaniel evaluated all of Provident’s Canadian oil and natural gas reserves, except the Rainbow area assets of northwest Alberta which were evaluated by AJM. Drilling activity made a significant contribution with total proved plus probable drilling and recompletion additions replacing 44 percent of Canadian production. The acquisitions of Capitol Energy Resources Ltd. (Capitol) and Triwest Energy Inc. (Triwest) plus various smaller acquisitions added proved plus probable reserves of 33,292 Mboe. To comply with NI 51-101 requirements that acquisitions be reported as evaluated at the time of the year-end filing the 2007 acquisitions are reported herein as per the McDaniel December 31, 2007 evaluation with actual production added back to develop the actual volumes acquired at the time of acquisition. Over 90 percent of the value of the assets acquired from Capitol is associated with the Dixonville Montney “C” pool in northwest Alberta. This well-delineated homogeneous pool, which produces 30 degree API oil, is being developed using horizontal wells and waterflood technology. All of the production is 100 percent working interest and is operated by Provident. The assets acquired from Triwest are located principally in the Steelman, Crystal Hills and Ingoldsby areas in southeast Saskatchewan. These properties, which produce light crude oil, are also developed using horizontal well technology.
Revisions, excluding economic factors, accounted for a five percent increase in proved developed producing (PDP) reserves and a two percent increase in total proved reserves. The positive revisions are an indication of the high degree of confidence in Provident’s Canadian reserves. Provident’s percentage of PDP reserves has decreased from 62 percent to 51 percent of total proved plus probable reserves since December 2006 due to the acquisition of undeveloped reserves from Capitol, primarily at Dixonville, Alberta and from Triwest in southeast Saskatchewan. Changes in commodity prices had no significant impact on Canadian reserve volumes. After accounting for production of 9,676 Mboe, acquisitions, divestitures, additions and revisions resulted in a 37 percent increase in company share proved plus probable reserves from 74,137 Mboe on December 31, 2006 to 101,239 Mboe (100,820 Mboe WI share) at December 31, 2007.
COGP oil and natural gas reserves and present value of estimated future cash flows based on forecast prices and costs are summarized below. The impact of Federal income tax changes that were enacted during 2007 have been incorporated in the tables showing After Tax values. According to the new tax laws the Trust is expected to be taxable beginning January 1, 2011. Tax pools held by the Trust on its Canadian assets will defer the impact of these changes such that only the value of proved plus probable reserves will be affected.
In October 2007, the Alberta government announced its intention to increase crown royalties effective January 1, 2009. As of December 31, 2007, legislation enabling the Alberta new royalty framework had not been passed. Furthermore, the government had not provided sufficient clarity on a number of issues to allow precise calculation of net reserves and net present value under the new proposed royalties. Therefore, COGP reserves as presented herein are based on the existing royalty regime. High and low sensitivities, which were run to determine the potential impact of the proposed new royalty framework, indicate no impact on company interest reserves but a potential eight to ten percent decrease in before tax net present value (discounted at 10%) of COGP proved plus probable reserves. Details of reserves and values for these sensitivities are provided in Form NI 51-101 F1.
COGP Reserves Summary(a) Using McDaniel Price Forecast Gross Reserves(b) —————————————————————————- Light & Heavy Medium Crude Total Natural Total Crude Oil Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) —————————————————————————- Reserves Producing 19,015 1,142 20,157 2,222 172,128 51,067 Non-Producing 895 273 1,168 48 15,613 3,818 Undeveloped 5,520 423 5,943 114 21,791 9,689 —————————————————————————- Total Proved 25,429 1,838 27,267 2,384 209,532 64,573 Probable 19,932 1,885 21,817 880 81,299 36,247 —————————————————————————- TOTAL Proved plus Probable 45,361 3,723 49,084 3,264 290,832 100,820 —————————————————————————- —————————————————————————- Net Reserves(c) —————————————————————————- Light & Heavy Medium Crude Total Natural Total Crude Oil Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) —————————————————————————- Reserves Producing 16,167 966 17,133 1,646 145,207 42,980 Non-Producing 781 239 1,020 38 12,020 3,061 Undeveloped 4,750 361 5,111 75 17,990 8,184 —————————————————————————- Total Proved 21,697 1,566 23,264 1,759 175,216 54,225 Probable 16,506 1,641 18,147 646 69,163 30,321 —————————————————————————- TOTAL Proved plus Probable 38,204 3,207 41,411 2,405 244,379 84,545 —————————————————————————- —————————————————————————- (a) Tables may not add due to rounding (b) Gross Reserves are Provident’s working interest (operated or non- operated) share before deduction of royalties and without including any royalty interests of Provident. (c) Net Reserves are Provident’s working interest (operated or non-operated) share after deduction of royalty obligations, plus Provident’s royalty interests in reserves. Present Value of COGP Reserves (a)(b) Present Worth Value ($000′s) Before Tax Discounted at —————————————————————————- 0% 8% 10% 15% 20% —————————————————————————- Proved Reserves Producing $1,367,465 $1,032,120 $ 975,009 $ 860,619 $ 774,765 Non-Producing 73,575 62,671 57,748 47,762 40,610 Undeveloped 214,065 118,607 103,567 74,491 53,742 —————————————————————————- Total Proved 1,655,105 1,213,398 1,136,324 982,872 869,117 Probable 1,258,344 511,244 437,219 315,866 243,146 —————————————————————————- TOTAL Proved plus Probable $2,913,449 $1,724,642 $1,573,543 $1,298,738 $1,112,263 —————————————————————————- —————————————————————————- Present Value ($000′s) After Tax(b) Discounted at —————————————————————————- 0% 8% 10% 15% 20% —————————————————————————- Proved Reserves Producing $1,367,465 $1,032,120 $ 975,009 $ 860,619 $ 774,765 Non-Producing 73,575 62,671 57,748 47,762 40,610 Undeveloped 214,065 118,607 103,567 74,491 53,742 —————————————————————————- Total Proved 1,655,105 1,213,398 1,136,324 982,872 869,117 Probable 1,061,182 457,888 396,459 293,738 230,313 —————————————————————————- TOTAL Proved plus Probable $2,716,287 $1,671,286 $1,532,783 $1,276,610 $1,099,430 —————————————————————————- —————————————————————————- (a) Tables may not add due to rounding (b) After tax values include the impact of Canadian Federal and Provincial Income taxes beginning January 1, 2011.
USOGP Oil and Natural Gas Reserves
Provident’s U. S. oil and natural gas reserves were evaluated by Netherland, Sewell and Associates, Inc. (NSAI) and by Schlumberger Data and Consulting Services (DCS) effective December 31, 2007 in accordance with NI 51-101. Michigan, Indiana and Kentucky properties that were acquired by BreitBurn Energy Partners L.P. were evaluated by DCS while the remaining properties were evaluated by NSAI. The U.S evaluations used the McDaniel price forecast. NSAI and DCS are qualified reserve evaluators in accordance with NI 51-101.
Provident’s USOGP division had a very successful year with respect to acquisitions. BreitBurn closed four major and two small acquisitions during the year thereby increasing proved plus probable reserves by 148,858 Mboe. The most significant was the acquisition of Michigan, Indiana and Kentucky assets with over 5,000 gross wells which produce gas from the Antrim and New Albany shales and oil and gas from conventional reservoirs. BreitBurn acquired oil producing assets in the Sunniland Trend in southern Florida and oil and gas producing assets in the Texas Permian Basin. BreitBurn also increased its working interests in the Sawtelle and East Coyote fields in California and several other oil fields in California and Wyoming.
Drilling activity in California and Wyoming added proved plus probable reserves of 3,731 Mboe, replacing 84 percent of U.S. production. These additions include reserves added as a result of continuing heavy oil development at the Orcutt Hill field in the Santa Maria Basin of California where steam injection and production have commenced. The North Sunshine field in Wyoming was discovered in 1928 but BreitBurn set a new production record in May 2007. Technical revisions accounted for a seven percent decrease in proved plus probable reserves. These revisions are primarily associated with undeveloped drilling and waterflood reserves in the Los Angeles basin. After accounting for production of 4,425 Mboe and these revisions, acquisitions and additions resulted in the significant growth of company share proved plus probable reserves from 78,885 Mboe as of December 31, 2006 to 221,589 Mboe as of December 31, 2007.
USOGP oil and natural gas reserves and present value of estimated future cash flows based on forecast prices and costs are summarized below.
USOGP Reserves Summary(a)(b) Using McDaniel Price Forecast Gross Reserves —————————————————————————- Light & Heavy Medium Crude Total Natural Total Crude Oil Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) —————————————————————————- Proved Reserves Producing 54,624 9,740 64,364 2,552 526,947 154,741 Non-Producing 3,352 1,274 4,626 384 44,451 12,419 Undeveloped 7,597 2,580 10,178 816 61,500 21,243 —————————————————————————- Total Proved 65,573 13,594 79,167 3,753 632,898 188,402 Probable 11,651 7,304 18,955 841 80,340 33,186 —————————————————————————- TOTAL Proved plus Probable 77,224 20,898 98,122 4,593 713,238 221,589 —————————————————————————- —————————————————————————- Net Reserves —————————————————————————- Light & Heavy Medium Crude Total Natural Total Crude Oil Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) —————————————————————————- Proved Reserves Producing 48,353 8,853 57,207 2,209 434,482 131,829 Non-Producing 2,956 1,274 4,230 314 35,423 10,447 Undeveloped 6,388 2,505 8,894 700 51,041 18,100 —————————————————————————- Total Proved 57,698 12,632 70,330 3,222 520,946 160,376 Probable 9,826 7,119 16,945 707 65,873 28,630 —————————————————————————- TOTAL Proved plus Probable 67,523 19,752 87,275 3,929 586,819 189,007 —————————————————————————- —————————————————————————- (a) Tables may not add due to rounding. (b) U.S. Reserves are reported based on 100% of the interests of BreitBurn Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P. (the “MLP”) in the U.S. properties. As of December 31, 2007 Provident indirectly held approximately 96% of the outstanding partnership interests of BreitBurn with the remaining approximately 4% of the partnership interests held by BreitBurn’s co-founders and co-chief executive officers. As of December 31, 2007 Provident indirectly held approximately 22% of the outstanding partnership interests of the MLP with the remaining approximately 78% of the partnership interests held by public unitholders and BreitBurn’s co-founders and co-chief executive officers. This is consistent with Provident’s financial reporting. Present Value of USOGP Reserves (a)(b) Present Value ($000′s) Before Tax Discounted at —————————————————————————- 0% 8% 10% 15% 20% —————————————————————————- Proved Reserves Producing $4,883,742 $2,096,836 $1,843,136 $1,432,335 $1,186,315 Non-Producing 459,519 213,297 186,251 139,316 109,290 Undeveloped 667,516 301,801 260,716 189,353 143,840 —————————————————————————- Total Proved 6,010,777 2,611,934 2,290,103 1,761,004 1,439,445 Probable 1,128,167 472,587 397,944 271,987 195,370 —————————————————————————- TOTAL Proved plus Probable $7,138,944 $3,084,521 $2,688,047 $2,032,991 $1,634,815 —————————————————————————- —————————————————————————- Present Value ($000′s) After Tax(c) Discounted at —————————————————————————- 0% 8% 10% 15% 20% —————————————————————————- Proved Reserves Producing $4,747,275 $2,061,046 $1,814,480 $1,413,479 $1,171,925 Non-Producing 467,777 216,086 188,519 140,774 110,320 Undeveloped 603,622 279,523 242,464 177,585 135,797 —————————————————————————- Total Proved 5,818,674 2,556,655 2,245,463 1,731,837 1,418,041 Probable 1,084,942 467,851 396,258 274,281 199,163 —————————————————————————- TOTAL Proved plus Probable $6,903,616 $3,024,506 $2,641,720 $2,006,118 $1,617,204 —————————————————————————- —————————————————————————- (a) Tables may not add due to rounding (b) Values in Canadian dollars (c) After tax values include U.S. State and Federal Taxes as well as with holding tax on funds that flow back to Provident Energy Ltd. in Canada.
USOGP Proportionate Information
For consistency with Provident’s financial reporting U.S. reserves are reported based on 100 percent of the interests of BreitBurn Energy Company L.P. (BreitBurn) and of BreitBurn Energy Partners L.P. (the “MLP”) in the U.S. properties. As of December 31, 2007 Provident held approximately 96% of BreitBurn and approximately 4% of the MLP. The following tables provide the proportionate information on the reserves and value of USOGP.
USOGP Reserves and Value Proportionate Information(a)(b) Using McDaniel Price Forecast Gross Reserves ——————————————— Light & Medium Heavy Natural Total Oil Oil NGL Gas Boe (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) ——————————————— MLP ——————————- Proved Producing 40,057 7,608 2,522 523,327 137,408 Non-Producing 3,094 0 384 44,451 10,887 Undeveloped 5,430 646 734 58,289 16,525 —————————————————————————- Total Proved 48,581 8,254 3,641 626,068 164,820 Probable 4,150 1,631 532 70,400 18,046 —————————————————————————- TOTAL Proved plus Probable 52,731 9,884 4,173 696,468 182,866 —————————————————————————- —————————————————————————- Provident’s Interest of MLP(a) ——————————- Proved Producing 8,812 1,674 555 115,132 30,230 Non-Producing 681 0 85 9,779 2,395 Undeveloped 1,195 142 162 12,824 3,635 —————————————————————————- Total Proved 10,688 1,816 801 137,735 36,260 Probable 913 359 117 15,488 3,970 —————————————————————————- TOTAL Proved plus Probable 11,601 2,175 918 153,223 40,231 —————————————————————————- —————————————————————————- BreitBurn ——————————- Proved Producing 14,567 2,132 30 3,620 17,332 Non-Producing 258 1,274 0 0 1,532 Undeveloped 2,167 1,935 82 3,211 4,718 —————————————————————————- Total Proved 16,992 5,341 112 6,831 23,583 Probable 7,501 5,674 309 9,940 15,140 —————————————————————————- TOTAL Proved plus Probable 24,493 11,014 421 16,770 38,722 ——————————————————————————————————————————————————– Provident’s Interest of BreitBurn(b) ——————————- Proved Producing 13,984 2,047 29 3,475 16,639 Non-Producing 248 1,223 0 0 1,471 Undeveloped 2,080 1,857 78 3,082 4,530 —————————————————————————- Total Proved 16,312 5,127 107 6,557 22,639 Probable 7,201 5,447 297 9,542 14,534 —————————————————————————- TOTAL Proved plus Probable 23,513 10,574 404 16,099 37,173 —————————————————————————- —————————————————————————- Provident’s Interest of USOGP ——————————- Proved Producing 22,797 3,721 584 118,607 46,869 Non-Producing 929 1,223 85 9,779 3,866 Undeveloped 3,275 1,999 240 15,906 8,165 —————————————————————————- Total Proved 27,000 6,943 908 144,292 58,900 Probable 8,114 5,805 414 25,030 18,504 —————————————————————————- TOTAL Proved plus Probable 35,114 12,748 1,322 169,322 77,404 —————————————————————————- —————————————————————————- Present Value ($000′s) Before Tax Discounted at ———————————————————– 0% 8% 10% 15% 20% ———————————————————– MLP —————– Proved Producing 4,454,324 1,872,302 1,643,794 1,276,330 1,057,417 Non-Producing 414,479 183,010 158,378 116,154 89,520 Undeveloped 559,411 242,041 208,209 150,382 114,045 —————————————————————————- Total Proved 5,428,215 2,297,354 2,010,380 1,542,866 1,260,982 Probable 637,428 256,203 216,914 151,440 111,688 —————————————————————————- TOTAL Proved plus Probable 6,065,643 2,553,556 2,227,294 1,694,306 1,372,670 —————————————————————————- —————————————————————————- Provident’s Interest of MLP(a) —————– Proved Producing 979,951 411,906 361,635 280,793 232,632 Non-Producing 91,185 40,262 34,843 25,554 19,694 Undeveloped 123,071 53,249 45,806 33,084 25,090 —————————————————————————- Total Proved 1,194,207 505,418 442,284 339,430 277,416 Probable 140,234 56,365 47,721 33,317 24,571 —————————————————————————- TOTAL Proved plus Probable 1,334,441 561,782 490,005 372,747 301,987 —————————————————————————- —————————————————————————- BreitBurn —————– Proved Producing 429,418 224,534 199,343 156,005 128,899 Non-Producing 45,040 30,287 27,874 23,162 19,770 Undeveloped 108,104 59,760 52,507 38,971 29,795 —————————————————————————- Total Proved 582,562 314,580 279,723 218,138 178,463 Probable 490,739 216,385 181,030 120,547 83,682 —————————————————————————- TOTAL Proved plus Probable 1,073,302 530,965 460,754 338,685 262,145 —————————————————————————- —————————————————————————- Provident’s Interest of BreitBurn(b) —————– Proved Producing 412,241 215,553 191,369 149,765 123,743 Non-Producing 43,238 29,075 26,759 22,236 18,979 Undeveloped 103,780 57,369 50,407 37,412 28,603 —————————————————————————- Total Proved 559,260 301,997 268,534 209,412 171,325 Probable 471,110 207,729 173,789 115,725 80,334 —————————————————————————- TOTAL Proved plus Probable 1,030,369 509,726 442,323 325,138 251,659 —————————————————————————- —————————————————————————- Provident’s Interest of USOGP —————– Proved Producing 1,392,193 627,459 553,004 430,557 356,374 Non-Producing 134,424 69,338 61,602 47,790 38,674 Undeveloped 226,850 110,618 96,213 70,496 53,693 —————————————————————————- Total Proved 1,753,467 807,415 710,818 548,843 448,741 Probable 611,344 264,094 221,510 149,042 104,906 —————————————————————————- TOTAL Proved plus Probable 2,364,811 1,071,509 932,328 697,885 553,647 —————————————————————————- —————————————————————————- (a) Provident interest in MLP = 22% (b) Provident interest in BreitBurn = 96% Consolidated Proportionate Information Provident’s interest share of total United States and Canada reserves and value as of December 31, 2007 is shown in the following table. United States and Canada Reserves and Value Provident Interest using McDaniel Price Forecast Gross Reserves ——————————————— Light & Medium Heavy Natural Total Oil Oil NGL Gas Boe Proved (Mbbl) (Mbbl) (Mbbl) (MMcf) (Mboe) ——————————————— Producing 41,812 4,862 2,806 290,735 97,936 Non-Producing 1,823 1,496 132 25,392 7,683 Undeveloped 8,795 2,422 354 37,697 17,854 —————————————————————————- Total Proved 52,429 8,781 3,292 353,825 123,472 Probable 28,046 7,690 1,294 106,329 54,751 —————————————————————————- TOTAL Proved plus Probable 80,475 16,471 4,585 460,154 178,224 —————————————————————————- —————————————————————————- Present Value ($000′s) Before Tax Discounted at ———————————————————– Proved 0% 8% 10% 15% 20% Producing 2,759,658 1,659,579 1,528,013 1,291,176 1,131,139 Non-Producing 207,998 132,009 119,350 95,552 79,283 Undeveloped 440,915 229,225 199,779 144,987 107,435 —————————————————————————- Total Proved 3,408,571 2,020,813 1,847,142 1,531,715 1,317,857 Probable 1,869,688 775,338 658,729 464,908 348,052 —————————————————————————- TOTAL Proved plus Probable 5,278,260 2,796,151 2,505,871 1,996,623 1,665,909 —————————————————————————- —————————————————————————-
Provident Consolidated Reconciliation Summaries
The following reconciliation tables summarize Provident’s consolidated reserve activity for each reserve category for the year ended December 31, 2007 on the basis of company share reserves. Working interest reserves as of December 31, 2007 are provided at the bottom of each table to tie back to the volumes provided in the previous tables.
Provident Consolidated Reconciliation Summary (d) Proved Developed Producing Light & Medium Heavy Total Company Share Crude Crude Crude (WI+RI)(a)(c) Oil Oil Oil Gas NGL Total Mbbl Mbbl Mbbl MMcf Mbbl Mboe —————————————————————————- —————————————————————————- Balance at December 31, 2006 49,133 6,738 55,871 188,738 2,524 89,851 Production (6,068) (996) (7,064) (39,110) (518) (14,101) Drilling Activity Exploration Discoveries 132 0 132 0 0 132 Drilling Extensions 491 0 491 6,663 34 1,635 Recompletion 149 693 843 2,504 17 1,277 Transfer 1,808 0 1,808 4,113 15 2,509 Acquisition 26,510 3,802 30,311 533,180 2,573 121,748 Divestiture (22) 0 (22) (146) (1) (47) Economic Factors 733 369 1,102 (1,439) (0) 862 Technical Revisions 805 284 1,090 5,710 156 2,197 —————————————————————————- Balance at December 31, 2007 73,671 10,890 84,562 700,214 4,800 206,063 —————————————————————————- —————————————————————————- WI Share (b) Balance at December 31, 2007 73,638 10,882 84,520 699,075 4,774 205,807 —————————————————————————- —————————————————————————- Provident Consolidated Reconciliation Summary (d) Total Proved Light & Medium Heavy Total Company Share Crude Crude Crude (WI +RI) (a)(c) Oil Oil Oil Gas NGL Total Mbbl Mbbl Mbbl MMcf Mbbl Mboe —————————————————————————- —————————————————————————- Balance at December 31, 2006 63,076 11,958 75,034 236,464 3,362 117,806 Production (6,068) (996) (7,064) (39,110) (518) (14,101) Drilling Activity Exploration Discoveries 132 0 132 0 0 132 Drilling Extensions 1,901 0 1,901 9,923 40 3,595 Recompletion 169 734 903 2,492 18 1,337 Transfer 981 0 981 1,900 6 1,303 Acquisition 36,547 3,802 40,349 641,842 3,692 151,015 Divestiture (22) 0 (22) (146) (1) (47) Economic Factors 929 339 1,268 (1,318) 8 1,056 Technical Revisions (6,611) (396) (7,007) (8,270) (440) (8,825) —————————————————————————- Balance at December 31, 2007 91,035 15,440 106,475 843,776 6,167 253,272 —————————————————————————- —————————————————————————- WI Share (b) Balance at December 31, 2007 91,002 15,432 106,434 842,431 6,136 252,975 —————————————————————————- —————————————————————————- Provident Consolidated Reconciliation Summary (d) Total Proved plus Probable Light & Medium Heavy Total Company Share Crude Crude Crude (WI +RI) (a)(c) Oil Oil Oil Gas NGL Total Mbbl Mbbl Mbbl MMcf Mbbl Mboe —————————————————————————- —————————————————————————- Balance at December 31, 2006 74,824 19,238 94,062 325,665 4,681 153,021 Production (6,068) (996) (7,064) (39,110) (518) (14,101) Drilling Activity Exploration Discoveries 132 0 132