BlackPearl Resources Inc.



Reserves


Oil and Gas Reserves

The following tables summarize certain information contained in the independent reserves report prepared by Sproule Associates Limited ("Sproule") as of December 31, 2017. 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"). It should not be assumed that the net present value of reserves estimated by Sproule represents the fair market value of these reserves. Additional reserve information as required under NI 51-101 has been included in the Company's Annual Information Form which has been filed on SEDAR or on our website.

Summary of Oil and Gas Reserves

(Company interest, before royalties) Heavy
Crude Oil
Bitumen Natural
Gas
2017
Total
2016
Total
  (Mbbl) (Mbbl) (MMcf) (MBoe) (MBoe)
Proved developed producing 18,378 426 0 18,804 19,125
Proved developed non-producing 13,247 0 5 13,248 3,428
Proved undeveloped 62,321 0 3 62,322 53,840
Total proved 93,946 426 8 94,374 76,393
Probable 68,038 21 7 68,060 235,186
Total proved plus probable 161,984 447 15 162,434 311,579
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, 2017 forecast prices.
  3. Columns may not add due to rounding.

Net Present Value of Reserves

($000s) 0% 5% 10% 15% 20%
Before Tax
Proved          
    Developed producing 455,399 402,162 354,620 314,838 282,110
    Developed non-producing 272,154 239,688 208,828 181,899 159,021
    Undeveloped 1,516,483 868,783 521,732 327,678 213,734
Total proved 2,244,035 1,510,633 1,085,180 824,416 654,865
Probable 3,143,580 1,619,000 932,438 588,985 399,242
Total proved plus probable 5,387,615 3,129,634 2,017,618 1,413,400 1,054,106
After Tax
Proved          
    Developed producing 455,399 402,162 354,620 314,838 282,110
    Developed non-producing 265,751 235,301 205,765 179,725 157,453
    Undeveloped 1,268,764 710,338 415,748 254,094 161,026
Total proved 1,989,914 1,347,801 976,134 748,657 600,589
Probable 2,594,909 1,295,166 725,135 447,556 297,872
Total proved plus probable 4,584,823 2,642,967 1,701,269 1,196,212 898,461
Notes:
  1. Based on Sproule's December 31, 2017 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 total proved and total proved plus probable reserves on production.

($ Millions) Total Proved Total Proved + Probable
2018 59.0 59.1
2019 36.5 86.6
2020 56.3 95.6
2021 29.4 42.0
2022 37.2 25.4
Remainder 537.1 651.4
Total FDC undiscounted 755.5 960.1
Total FDC discounted at 10% 376.6 450.5

Reconciliation of Changes in Reserves

The following table summarizes the changes in Sproule's evaluation of the Company's share of oil and natural gas reserves (before royalties) from December 31, 2016 to December 31, 2017.

  Heavy
Crude Oil
Bitumen Natural
Gas
BOE
(Mbbl) (Mbbl) (MMcf) (MBOE)
Proved
Balance, Dec 31, 2016 75,260 1,057 456 76,393
    Extensions and improved recovery 18,284 0 8 18,285
    Technical revisions 3,931 (452) (247) 3,438
    Economic factors (20) 0 0 (20)
    Production (3,509) (179) (209) (3,723)
Balance, Dec 31, 2017 93,946 426 8 94,374
Probable
Balance, Dec 31, 2016 56,374 178,742 421 235,186
    Extensions and improved recovery 14,904 0 7 14,905
    Technical revisions (3,348) (178,721) (2) (421) (182,139)
    Economic factors 108 0 0 108
    Production 0 0 0 0
Balance, Dec 31, 2017 68,038 21 7 68,061
Proved plus Probable
Balance, Dec 31, 2016 131,634 179,799 877 311,579
    Extensions and improved recovery 33,188 0 15 33,191
    Technical revisions 583 (179,173) (668) (178,700)
    Economic factors 88 0 0 88
    Production (3,509) (179) (209) (3,723)
Balance, Dec 31, 2017 161,984 447 15 162,434
Note:
  1. Columns may not add due to rounding
  2. Includes technical revisions of bitumen associated with the Blackrod SAGD project that were reclassified to contingent resources

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$/Cdn$)
2018 55.00 65.44 51.05 2.85 0.0 0.790
2019 65.00 74.51 59.61 3.11 2.0 0.820
2020 70.00 78.24 64.94 3.65 2.0 0.850
2021 73.00 82.45 68.43 3.80 2.0 0.850
2022 74.46 84.10 69.80 3.95 2.0 0.850
2023 75.95 85.78 71.20 4.05 2.0 0.850
2024 77.47 87.49 72.62 4.15 2.0 0.850
2025 79.02 89.24 74.07 4.25 2.0 0.850
2026 80.60 91.03 75.55 4.36 2.0 0.850
2027 82.21 92.85 77.06 4.46 2.0 0.850
2028 83.85 94.71 78.61 4.57 2.0 0.850
Escalation rate of 2.0% thereafter
Notes:
  1. The pricing assumptions were provided by Sproule.
  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.
 



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