BlackPearl Resources Inc.



Contingent Resources


Oil and Gas Contingent Resources

The following tables summarize certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2015. 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 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 to produce any portion of the contingent resources. For additional reserve and contingent resources information see the Company's Annual Information Form on our website.

An estimate of risked net present value of contingent resources is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of the Company proceeding with the required investment. It includes contingent resources that are considered too uncertain with respect to the chance of development to be classified as reserves. There is uncertainty that the risked net present value of future net revenue will be realized.

Summary of Best Estimate (P50) Contingent Resource Volumes - By Property (1)(2)


      Risked Volumes(4) Unrisked Volumes
Heavy Crude Oil Bitumen Heavy Crude Oil Bitumen
Project Maturity
Subclass (3)
Chance of Development(4) Gross(5) Net Gross(5) Net Gross(5) Net Gross(5) Net
      (Mbbl) (Mbbl) (Mbbl) (Mbbl)
Blackrod (6) Development/
pending
80% 0 0 452,908 358,722 0 0 566,135 448,402
Onion Lake (7) Development/
pending
90% 29,889 23,362 0 0 33,210 25,958 0 0
Mooney (8) Development/
on hold
71% 11,162 8,875 0 0 15,721 12,500 0 0

NPV of Best Estimate (P50) Contingent Resource Volumes - By Property

Project Net Present Values of Future Net Revenue Before Income Taxes
Discounted at (%/year)
0% 5% 10% 15% 20%
($M)
Risked Volumes (4)          
Blackrod 10,805,213 3,300,966 1,071,569 330,343 65,200
Onion Lake 1,087,542 460,899 218,983 114,131 63,520
Mooney 305,484 152,083 79,431 42,886 23,601
Unrisked Volumes          
Blackrod 13,506,517 4,126,208 1,339,461 412,929 81,500
Onion Lake 1,208,380 512,111 243,315 126,812 70,578
Mooney 430,259 214,201 111,874 60,402 33,241

Project Net Present Values of Future Net Revenue After Income Taxes (10)
Discounted at (%/year)
0% 5% 10% 15% 20%
($M)
Risked Volumes (4)  
Blackrod 7,815,272 2,304,132 685,097 161,012 -16,369
Onion Lake 789,321 330,535 153,761 77,504 40,976
Mooney 222,401 109,114 55,736 29,127 15,263
Unrisked Volumes  
Blackrod 9,769,090 2,880,165 856,371 201,265 -20,462
Onion Lake 877,023 367,261 170,845 86,115 45,529
Mooney 313,240 153,682 78,502 41,024 21,497
Notes:
  1. 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.
  2. There are three classifications of 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.
  3. Contingent resources are further classified based on project maturity. The project maturity subclasses include development pending, development on hold, development unclarified and development not viable. All of the Company's contingent resources are classified as either development pending or development on hold:
    1. Development pending is where resolution of the final conditions of development are being actively pursued, indicating there is a high chance of development.
    2. Development on hold is where there is a reasonable chance of development, but there are major non-technical contingencies to be resolved that are usually beyond the control of the operator.
  4. Chance of Development is defined as the probability of a project being commercially viable. Sproule's estimate of unrisked contingent resources have been adjusted for risk based on the chance of development (risked amounts represent unrisked values multiplied by the Chance of Development).
  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 50 to 100% working interest at Onion Lake.
  6. The established recovery technology to be used in phases 3 and 4 of the Blackrod project is the SAGD process, the same process that is being used in the successful pilot that is currently being conducted within the Blackrod reservoir. 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 beyond the phase 2 project area; (c) the absence of corporate commitment related to the final investment decision and endorsement from the Board of Directors of the Company to move forward with commercial development; and (d) the uncertainty of timing of production and development of Phases 3 and 4 of the Blackrod project. For the Blackrod project contingent resources, the estimated timing of first commercial production is 2024 and the estimated capital to reach first commercial production is $1.3 billion (risked and escalated for inflation).
  7. The recovery of the Company's Onion Lake contingent resources will use a combination of production processes: the established modified SAGD process for phase 3 of the Onion Lake thermal EOR project, the same SAGD process that is already utilized commercially in phase 1 of the Onion Lake thermal EOR project; and the established cold heavy oil production with sand (CHOPS) process to extend the primary development area, the same CHOPS process that has already been extensively deployed throughout the field.
    • For phase 3 of the Onion Lake thermal EOR project, the contingencies in the Sproule Report associated with the Company's Onion Lake contingent resources are due to the following: (a) the requirement for more evaluation drilling to define the reservoir characteristics; and (b) the absence of an application by the Company to expand the facility capacities and to extend the SAGD development area beyond phase 1, additionally, the current agreements with the Onion Lake Cree Nation (OLCN) are subject to policies and approvals by Indian Oil and Gas Canada (IOGC) and there is a potential for these agreements to be renegotiated due to changes imposed by IOGC. For the Onion Lake thermal EOR project contingent resources, the estimated timing of first commercial production is 2020, while the estimated capital to reach first commercial production is $61.0 million (risked and escalated for inflation).
    • For the extension of the primary development area, the contingencies in the Sproule Report associated with the Company's Onion Lake contingent resources are due to the following: (a) the requirement for more evaluation drilling to confirm the geological continuity of the reservoir and reduce the distance from proven productivity; and (b) the potential for the current agreements with the Onion Lake Cree Nation (OLCN), which are subject to policies and approvals by Indian Oil and Gas Canada (IOGC), required to be renegotiated due to changes imposed by IOGC. First commercial production for the primary development area has already been achieved and, as a result, estimated capital to reach first commercial production is nil.
  8. The established recovery technology to be used for phases 3 and 4 of the Mooney project is the established ASP flood process, the same process that is already deployed commercially in phase 1 of the Mooney field. 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 confirm the reservoir characteristics needed for the ASP process; (b) the absence of regulatory approvals to expand the ASP development area beyond the phase 1 and phase 2 project areas; (c) the absence of a final investment decision from the Board of Directors of the Company to move forward with the ASP flood expansion to phases 3 and 4 of the Mooney project and (d) the uncertainty of timing of production and development of phases 3 and 4 of the Mooney project. First commercial production for the Mooney ASP flood has already been achieved and, as a result, estimated capital to reach first commercial production at the Mooney ASP flood is nil.
  9. The amounts included in these tables do not include the volume or net present value of the Company's proved plus probable reserves previously assigned by Sproule to these properties.
  10. The after-tax net present value of the Company's contingent resources reflects the tax burden on the properties on a stand-alone basis. It does not consider the business-entity-level tax situation, or tax planning. It does not provide an estimate of the value at the level of the business entity, which may be significantly different. The financial statements and the management's discussion & analysis of the Company should be consulted for information at the level of the business entity.
 



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