GLJ Petroleum Consultants Ltd., independent reserve evaluators, completed an evaluation of 100% of Compton’s petroleum and natural gas reserves as at December 31, 2010 in accordance with the provisions of National Instrument 51-101. As required by National Instrument 51-101, Compton filed Form 51-101 F1 as part of its Annual Information Form (“AIF”).  The AIF is considered comprehensive.  Certain information has been summarized below regarding the Corporation’s operations.  Compton’s extended disclosure contained in the AIF is available on both the SEDAR website and Compton’s website.

 

Reserves have been reduced largely due to the impact of an updated technical interpretation of reserves by GLJ, the economic impact of lowered price forecasts, and dispositions. The updated technical interpretation by GLJ and low natural gas prices has resulted in significant reserve reductions. Higher natural gas prices, increases in cash flow and further development would be expected to provide positive revisions to Compton’s reserves.

 

Net Asset Value

 

Net asset value was $0.99 per basic common share on a proved basis and $1.62 per basic common share on a proved plus probable basis based on the independently estimated reserve value (discounted at 10% before tax), independently estimated undeveloped land value, outstanding debt as of December 31, 2010 and the number of outstanding shares at that time.

 

2010 Year End Reserves

 

Summary of Estimated Reserve Volumes - Company Working Interest

    2010           2009
    Oil   Nat. Gas   NGL   Total   Proved   Total   Proved
December 31   (MBbl)   (MMcf)   (MBbl)   (MBoe)   %   (MBoe)   %
Proved
    Producing
    Non-Producing
    Undeveloped		  
1,523
252
212		  
224,957
13,884
59,115		  
3,755
221
1,451		  
42,771
2,787
11,516		  
75%
5%
20%		  
74,603
6,403
16,796		  
76%
7%
17%
Total Proved
    Probable		   1,988
631		   297,957
140,316		   5,427
2,587		   57,074
26,604		   100%   95,802
65,713		   100%
Total Proved + Probable   2,619   438,273   8,014   83,678       161,515    

(1)  Forecast prices and costs; numbers may not add due to rounding.

(2)  2009 opening balances have been restated to exclude sulphur.

  • Proved reserves are comprised of 87% natural gas and 13% liquids
  • Proved producing reserves comprise 75% of total proved reserves
  • Total proved reserves account for 69% of the proved plus probable reserves
  • Total proved RLI of 10.6 years and a proved plus probable RLI of 15.5 years, based on production of approximately 14,800 boe/d
  • Primary factors that impacted reserves are the updated interpretation of reserves by GLJ, the economic impact of lowered price forecasts, and dispositions

Net Present Value

  2010
Discount Rate		     2009
Discount Rate
December 31 ($000s)   0%   10%   15%     10%
Proved
    Producing
    Non-producing
    Undeveloped
$
1,073,033
55,190
211,077
$
492,161
27,536
65,832
$
394,387
21,218
38,099 		 
$
915,989
86,224
125,285
Total proved $ 1,339,300   585,530   453,704     1,127,499
    Probable   682,290   165,853   102,438     567,018
Total Proved + Probable $ 2,021,590 $ 751,382 $ 556,142     1,694,516

(1)  Forecast prices and costs; future net revenue before income taxes; numbers may not add due to rounding.

 

The main contributors to the change in valuation were:

  • The change in the commodity price deck:
    • This forms the majority of the revision: if the 2010 year-end reserves were evaluated using the January 1, 2010 commodity price deck, the value reduction would be 28% for proved and 38% for proved plus probable reserves as compared to the reported 48% and 56% respectively
  • The effect of the updated technical interpretation
  • The impact of dispositions

Compton expects an increase in the valuation of its reserves with improvements in commodity prices, additional cash flow and further development. Price forecasts as of December 31, 2010 used in the above evaluation are GLJ’s January 1, 2011 price deck, which is significantly lower than those used in 2009.

 

Reserve Reconciliation - Company Working Interest
  Oil & NGLs   Natural Gas   Total
December 31 Proved
(MBbls)		 Probable
(MBbls)		   Proved
(Bcf)		 Probable
(Bcf))		   Proved
(Mboe)		 Probable
(Mboe))		   Proved +
Probable
(Mboe)
2009
Extensions &
Improved Recovery
Technical revisions
Discoveries
Acquisitions
Dispositions
Economic
Production		 13,045

622
(2,444)
-
-
(2,378)
(482)
(949)		 8,982

(226)
(3,545)
-
-
(1,972)
(21)
-		   497

21
(105)
-
-
(45)
(38)
(32)
 340

(10)
(165)
-
-
(27)
3
-		   95,802

4,066
(19,933)
-
-
(9,827)
(6,753)
(6,281)		 65,713

(1,974)
(31,058)
-
-
(6,464)
(387)
-		   161,515

2,092
(50,991)
-
-
(16,291)
(6,366)
(6,281)
2010 7,415 3,218   298 140   57,074 26,604   83,678

(1)   Forecast prices and costs; numbers may not add due to rounding.     

(2)   2009 opening balances have been restated to exclude sulphur.

 

  • Negative revisions due to economic factors identify previously booked reserves that are uneconomic based on current price forecasts, and are quantified as approximately 7% of the total proved reserves (6,753 Mboe) and 4% of the total proved plus probable reserves (6,366 Mboe)
  • Technical revisions include changes related to potentially recoverable volumes associated with future development projects, which are now marginal based on the current gas price outlook and which Compton currently has no firm development commitment. These volumes are now classified as contingent resources rather than undeveloped reserves pending improvement in gas prices.