BlackPearl Resources Inc.



Reserves/Resources


Oil and Gas Reserves

The following tables summarize certain information contained in the independent reserves report prepared by Sproule Unconventional Limited ("Sproule") as of December 31, 2014. The report was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR on or before March 31, 2015. It should not be assumed that the net present value of reserves estimated by Sproule represents the fair market value of these reserves.

Summary of Oil and Gas Reserves

(Company interest, before royalties) Heavy Oil Bitumen Total
Crude Oil
Natural
Gas
2014
Total
2013
Total
  (Mbbl) (Mbbl) (Mbbl) (MMcf) (MBoe) (MBoe)
Proved developed producing 7,416 1,309 8,725 299 8,766 8,826
Proved developed non-producing 2,107 0 2,107 43 2,114 2,205
Proved undeveloped 54,835 429 55,264 65 55,275 52,798
Total proved 64,358 1,739 66,097 407 66,165 63,829
Probable 50,947 179,456 230,403 319 230,456 226,777
Total proved plus probable 115,305 181,195 296,500 726 296,621 290,606
Notes:
  1. BOE's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 Mcf: 1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
  2. Based on Sproule's December 31, 2014 forecast prices
  3. Columns may not add due to rounding
Net Present Value of Reserves

0% 5% 10% 15% 20%
($000)
Before Tax          
Proved          
Developed producing 207,776 183,390 164,207 148,784 136,152
Developed non-producing 76,455 58,381 45,453 35,995 28,936
Undeveloped 2,165,100 1,222,461 772,355 530,909 387,691
Total proved 2,449,330 1,464,231 982,015 715,688 552,779
Probable 7,607,464 3,373,789 1,691,518 920,130 525,568
Total proved plus probable 10,056,794 4,838,020 2,673,532 1,635,818 1,078,348
After Tax          
Proved          
Developed producing 207,776 183,390 164,207 148,784 136,152
Developed non-producing 76,455 58,381 45,453 35,995 28,936
Undeveloped 1,697,572 980,743 634,508 445,784 331,721
Total proved 1,981,802 1,222,514 844,168 630,563 496,809
Probable 5,672,610 2,472,061 1,208,087 632,787 341,412
Total proved plus probable 7,654,413 3,694,575 2,052,255 1,263,350 838,221
Notes:
  1. Based on Sproule's December 31, 2014 forecast prices
  2. Columns may not add due to rounding
Estimated Future Development Capital

The following table summarizes the future development capital ("FDC") Sproule estimates is required to bring the proved, and proved plus probable reserves on production.

($ Millions) Total Proved Total Proved + Probable
2015 61.5 62.7
2016 27.3 136.7
2017 22.8 130.6
2018 28.3 96.0
2019 28.1 352.7
Remainder 329.1 1,780.8
Total FDC undiscounted 497.1 2,559.5
Total FDC discounted at 10% 243.1 1,129.2

Reconciliation of Changes in Reserves

The following table summarizes the changes in the Company's share of oil and natural gas reserves (before royalties) from December 31, 2013 to December 31, 2014.

  Oil, Heavy Oil & Bitumen Natural gas BOE
  Proved Probable Total Proved Probable Total Total
  (Mbbls) (Mbbls) (Mbbls) (MMcf) (MMcf) (MMcf) (Mboe)
Balance, Dec 31, 2013 63,804 226,754 290,558 154 137 291 290,606
Production (3,241) 0 (3,241) (904) 0 (904) (3,391)
Extensions 481 397 878 6 0 6 878
Discoveries 0 0 0 0 0 0 0
Technical revisions 5,075 3,241 8,316 1,161 173 1,334 8,538
Improved recovery 0 0 0 0 0 0 0
Acquisitions 0 0 0 0 0 0 0
Dispositions 0 0 0 0 0 0 0
Economic factors (22) 11 (11) (10) 10 0 (11)
Balance, Dec 31, 2014 66,097 230,403 296,500 407 319 726 296,621
Notes:
  1. BOE's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 Mcf: 1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
  2. Columns may not add due to rounding
The pricing assumptions used in the Sproule evaluation are summarized below.

Pricing Assumptions

Year WTI
Cushing
40° API
Canadian
Light Sweet
Crude 40°
API
Western
Canadian Select
20.5° API
Alberta
AECO-C
Spot
Inflation rate Exchange rate
  (US$/bbl) (CDN$/bbl) (CDN$/bbl) (CDN$/MMBtu) (%/yr) (US$/Cdn$)
2015 65.00 70.35 60.50 3.32 1.5 0.85
2016 80.00 87.36 75.13 3.71 1.5 0.87
2017 90.00 98.28 84.52 3.90 1.5 0.87
2018 91.35 99.75 85.79 4.47 1.5 0.87
2019 92.72 101.25 87.07 5.05 1.5 0.87
2020 94.11 103.85 89.31 5.13 1.5 0.87
2021 95.52 105.40 90.65 5.22 1.5 0.87
2022 96.96 106.99 92.01 5.31 1.5 0.87
2023 98.41 108.59 93.39 5.40 1.5 0.87
2024 99.89 110.22 94.79 5.49 1.5 0.87
2025 101.38 111.87 96.21 5.58 1.5 0.87
Escalation rate of 1.5% thereafter

Notes:
  1. The pricing assumptions were provided by Sproule Unconventional Limited
  2. None of the Company's future production is subject to a fixed or contractually committed price.
Definitions:
  1. "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
  2. "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
  3. "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
  4. "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
  5. "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
  6. "Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.
  7. The Net Present Value (NPV) is based on Sproule Forecast Pricing and costs. The estimated NPV does not necessarily represent the fair market value of our reserves. There is no assurance that forecast prices and costs assumed in the Sproule evaluations will be attained, and variances could be material.
Contingent Resources

The following table summarizes certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2014. The reports were independently prepared in accordance with definitions, standards and procedures contained in the COGE Handbook.

It should not be assumed that the estimates of recovery, production, and net revenue presented in the tables below represent the fair market value of the Company's contingent resources. There is no assurance that the forecast prices and cost assumptions will be realized and variances could be material. The recovery and production estimates of the Company's contingent resources provided herein are only estimates and there is no guarantee that the estimated contingent resources will be recovered or produced. Actual contingent resources may be greater than or less than the estimates provided here. There are certain contingencies which currently prevent the classification of these contingent resources as reserves. Information on these contingencies is provided in the footnotes to the tables below. There is no certainty that it will be commercially viable for the Company to produce any portion of the contingent resources on any of its properties.

Summary of Best Estimate (P50) Contingent Resource - By Property (1)(3)

Project Gross(2)
Heavy Oil//Bitumen
Net Present Values of Before Tax Future Net Revenue
as of December 31, 2014
Contingent Resources - Best Estimate
Discounted at
    0% 5% 10% 15% 20%
  (Mboe) ($000)
Blackrod 566,135 15,862,704 4,825,694 1,594,391 520,500 131,717
Onion Lake 33,512 1,444,215 611,407 292,335 154,221 87,368
Mooney 16,166 630,072 309,848 160,492 86,374 47,673
Total 615,813 17,936,991 5,746,949 2,047,218 761,095 266,758
Notes:
  1. These volumes are arithmetic sums of multiple estimates of contingent resources, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class as explained.
  2. Contingent Resources are defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as Contingent Resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage.
  3. There are three categories in evaluating contingent resources: Low Estimate, Best Estimate and High Estimate. Best estimate (P50) is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.
  4. The estimates of contingent resources (best estimate) and future net revenue for individual properties may not reflect the same confidence levels as estimates of contingent resources (best estimate) and future net revenues for all properties, due to the effects of aggregation.
  5. "Gross" means the Company's working interest share in the contingent resources of bitumen and heavy oil before deducting royalties. The Company has a 100% working interest at Blackrod and Mooney, and a 79.795 to 100% working interest at Onion Lake.
  6. The amounts included in these tables do not include the volume and value of BlackPearl's proved and probable reserves previously assigned by Sproule to these properties.
  7. The contingencies in the Sproule Report associated with the Company's Blackrod contingent resources are due to the following: (a)the requirement for more evaluation drilling, as required by the regulatory process, to define the reservoir characteristics to assist in the implementation and operation of the SAGD process (b)the absence of submission of an application to expand the commercial SAGD development; and (c)the uncertainty of timing of production and development.
  8. The contingencies in the Sproule Report associated with the Company's Onion Lake contingent resources are due to the following: (a)the absence of approval to extend the SAGD development area (b)the requirement for more evaluation drilling to define the reservoir characteristics of the resource to assist in the implementation and operation of the SAGD recovery process; (c)the uncertainty of company commitment for expansion of the commercial SAGD development; and (d)the uncertainty of timing of production and development.
  9. The contingencies in the Sproule Report associated with the Company's Mooney contingent resources are due to the following: (a) the requirement for more evaluation wells to further define reservoir and fluid characteristics; and (b)the uncertainty of timing of production and development of the entire field.
 



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