CALGARY, ALBERTA — (Marketwire) — 04/03/12 — Strategic Oil & Gas Ltd. (“Strategic” or the “Corporation”) (TSX VENTURE: SOG) is pleased to announce it has filed on SEDAR its audited financial statements and related Management– Discussion and Analysis (“MD&A”) for the year ended December 31, 2011. Selected financial and operational information is outlined below and should be read in conjunction with Strategic–s audited financial statements and the related MD&A which are available for review at or at .
Financial and Operations Overview
(1) Management uses funds from operation and working capital surplus (deficit) and operating netback to analyze operating performance and leverage. These terms, as presented, do not have any standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures for other entities.
ACCOMPLISHMENTS
OPERATIONAL OVERVIEW
Steen River
Strategic drilled and completed two wells in first half of 2011 and five wells in the second half of 2011.
Maxhamish
RESERVES
In accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”), GLJ petroleum Consultants Ltd. (“GLJ”) evaluated, as at December 31, 2011, materially all of Strategic–s oil, natural gas liquids and natural gas reserves.
HIGHLIGHTS
The following table is a summary, as at December 31, 2011, of Strategic–s petroleum and natural gas reserves as evaluated by GLJ. Recovery and reserves estimates provided herein are forward looking estimates. Actual future reserves may be greater or less then the estimates provided herein.
Summary of Corporation Gross Reserves (1)
(1) Reserves information may not add due to rounding.
Summary of Before Tax Net Present Value of Future Net Revenue (Forecast Pricing) ($000–s) (4) (5)
(1) Gross Corporate reserves are the Corporation–s total working interest share before the deduction of any royalties and without including any royalty interests of the Corporation. The December 31, 2011 reserves report has been prepared in accordance with the definitions, procedures and standards contained in the Canadian Oil and Gas Evaluation Handbook and the Canadian Securities Administrators National Instrument 51-101- Standards of Disclosure for Oil and Gas Activities.
(2) Based on GLJ–s January 1, 2012 escalated price forecast.
(3) Based on GLJ–s January 1, 2011 escalated price forecast.
(4) Tables and other reportings may not add due to rounding. Values are net of abandonment liabilities. The estimated net present value of future net revenue is based on current legislation in place at December 31, 2011. It should not be assumed that the present worth of estimated future cash flow presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of Strategic–s crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.
(5) All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein do not represent fair market value.
CAPITAL EXPENDITURES, FINDING AND DEVELOPMENT COSTS
Strategic incurred capital expenditures of $46.0 million in 2011, of which $37.5 million was spent on exploration and development and $8.49 million was spent on land and seismic. 72% of the total exploration and development capital was spent at Steen River and 27% was spent at Maxhamish.
The Corporation–s 2 year average F,D&A cost is $18.76 per Boe excluding natural gas technical revisions(7).
(1) The aggregate of the exploration and development costs incurred in the most recent financial period and the change during that period in estimated future development costs (FDC) generally will not reflect total finding and development costs related to reserve additions for that period.
(2) Based on gross reserves meaning the total company interest (operated and non-operated) share before deduction of royalties payable to others.
(3) Reserve additions include drilling, improved recovery and technical revisions. Boe conversion ratio for natural gas of 1 Boe:6 Mcf has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead
(4) Determined by dividing the sum of exploration, development, land & seismic costs and, where indicated, changes to FDC by additions to reserves including natural gas technical revisions.
(5) Includes Steen acquisition in 2010. Determined by the summation of 2011 and 2010 exploration, development, land, seismic & aquisition costs and, where indicated, changes to FDC by the additions to the 2011 and 2010 reserves including natural gas technical revisions.
(6) Excludes natural gas technical revisions: Determined by dividing the sum of exploration, development, land & seismic costs and, where indicated, changes to FDC by additions to reserves excluding natural gas technical revisions. F&D costs have been presented excluding natural gas technical revisions because downward technical revision in natural gas reserves have a significant impact on the Corporation–s ongoing reserve replacement costs and including these amounts can result in an inaccurate portrayal of the Corporation–s cost structure.
(7) Excludes natural gas technical revisions: Determined by the summation of 2011 and 2010 exploration, development, land, seismic & aquisition costs and, where indicated, changes to FDC by the additions to the 2011 and 2010 reserves including natural gas technical revisions. F,D&A costs have been presented excluding natural gas technical revisions because downward technical revision in natural gas reserves have a significant impact on the Corporation–s ongoing reserve replacement costs and including these amounts can result in an inaccurate portrayal of the Corporation–s cost structure.
OUTLOOK
During 2011, Strategic made great strides in establishing itself as an efficient light oil operator in Northern Alberta. Significantly increased production of light oil resulting from 4Q11 and 1Q12 activities at Steen River will generate substantial cash flow allowing the company to continue development of its operated property at Steen River as well as continued participation at its non-operated Maxhamish property. Strategic continues to evaluate and assemble an inventory of exploration and acquisition prospects that will be accretive to the Corporation–s oil focussed asset base.
For 2012 the Corporation has an approved capital budget of $60 million that is expected to provide a significant growth in crude oil production in 2012. The capital program includes an anticipated $35 million focused on the crude oil program at Steen River, and the remainder of the capital program will target optimizing the Corporation–s assets with production optimization as well as investment in land and seismic. The Corporation–s drilling plan includes an estimated 20 (17net) wells and is expected to provide 2012 average production of 2,400 Boe/d and generate funds flow of approximately $34-38 million.
Steen River, Northwest Alberta
Strategic has drilled nine wells in 1Q12. Two of the nine wells drilled in Q1 2012 are on production with both wells producing at rates over 300 Boe/d. The remaining seven wells have been drilled and cased. Eight of the nine wells drilled in 2012 will be on production by April 2012. The remaining one well will be tied in August 2012. Strategic intends to resume drilling activities in 3Q12 and expects to drill up to five additional wells before the end of 2012. Additional work at Steen will include the acquisition of follow up 2D and 3D seismic data, the extension of an all-weather road infrastructure and the expansion of oil processing facility.
Maxhamish
At Maxhamish, plans for continuing with further drilling are proceeding. During 2011 an all-weather road and drilling pad were constructed to allow for all weather access and additional drilling. By January 2012 the third and fourth wells were successfully drilled and stimulated and are now producing oil. The pace of development at Maxhamish is dependent upon Strategic–s operating partner, Legacy Oil & Gas Inc. Strategic continues to work closely with Legacy to advance the project. Strategic expects to participate in the drilling program at Maxhamish beginning July 2012.
Amber
In 2011 Strategic acquired a large land position in an emerging oil play in Northern Alberta. Strategic has identified multiple prospective oil zones underlying its lands. Extensive road and pipeline infrastructure exists in the Amber area. Strategic plans to drill two exploratory horizontal wells with drilling activity commencing in Q3, 2012.
Summary
Strategic is in a unique position for a junior oil and gas company:
About Strategic
Strategic is a well-capitalized junior oil and gas company committed to growth by exploiting its light oil assets in Maxhamish, northeast BC and Steen River in northwest Alberta. Strategic–s is primarily focused on implementing development plans for its light oil properties, while continuing to review other high impact light oil resource plays. Strategic–s common shares trade on the TSX Venture Exchange under the symbol SOG.
Complete financial statements, with accompanying management discussion and analysis are available for review at . Further information with respect to the Corporation can be found on its website at .
FORWARD LOOKING INFORMATION: Certain information set forth in this document, including management–s assessment of future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control. Those risks include, without limitation, the effect of general economic conditions, risks associated with oil and gas exploration, development, production, marketing and transportation, loss of markets, industry conditions and competition, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, non-operated properties, environmental risks, competition from other industry participants, the ability to access qualified personnel and oilfield services, decisions by regulators, and the ability to access sufficient capital from internal and external sources. Readers are cautioned not to place undue reliance on the forward-looking statements as the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and actual results, performance or achievements could materially differ from those expressed or implied in such forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by forward looking statements will transpire or occur, or if any of them do so, what benefit Strategic will derive there from. The Company does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.
BOE PRESENTATION: Barrel (“bbl”) of oil equivalent (“Boe”) amounts may be misleading particularly if used in isolation. All Boe conversions in this report are calculated using a conversion of six thousand cubic feet of natural gas to one equivalent barrel of oil (6 mcf=1 bbl) and is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Strategic Oil & Gas Ltd.
Arn Schoch
CEO & Chairman
403.767-2950 or Cell: 403.870.1245
403.767-9122 (FAX)
Strategic Oil & Gas Ltd.
Gurpreet Sawhney, MBA, MSc, PEng.
President
403.767-2949
403.767-9122 (FAX)
Strategic Oil & Gas Ltd.
1800, 510 5th Street SW
Calgary, AB T2P 3S2