Osum Achieves the First Reserve Booking in the Grosmont Carbonates and Records an 821 Million Barrel Increase in Best Estimate Contingent Resource

Posted: Mar. 13, 2013

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Osum Oil Sands Corp. (“Osum” or the “Company”), a private in-situ oil sands developer, is pleased to announce the results of its December 31, 2012 reserve and resource assessment (“GLJ Report”).  GLJ Petroleum Consultants (“GLJ”) was engaged as an independent qualified reserve evaluator to evaluate all of Osum’s project areas in accordance with National Instrument 51-101 (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGEH”) as part of the year-end reserves and resource evaluation.

Assessment Highlights

  • 4.4 billion barrels of  best estimate contingent resources (P50), an increase of 821 million barrels over the prior year
  • 410 million barrels of probable reserves including 51 million barrels assigned to the Saleski Joint Venture project area
  • In excess of 500,000 barrels per day of total long-term sustained production potential

Reserves in the Carbonates

“The booking of reserves at Saleski represents a material milestone on the path to commercializing the Grosmont carbonates,” said Steve Spence, President & CEO of Osum. “This third-party expert recognition of the commerciality of the resource is supported by the positive results that we have seen from the Saleski pilot where commercial level operating results have been repeated over a number of production cycles.”

The assignment of reserves by GLJ is the first reserve booking in the Grosmont carbonates in Alberta and applies to both the Grosmont C and D reservoirs in the initial development area for the 10,700 barrels per day commercial demonstration project. The Grosmont C and D reservoirs extend into Osum’s 100% operated project area at Saleski East while the Grosmont D comprises a significant portion of the contingent resource in the 100% operated Saleski West project area.  Saleski East and West bracket the joint venture lands.

Saleski Projects

At the Saleski Joint Venture project, the 10,700 barrels per day (gross) commercial demonstration project (Phase 1) continues to advance. A project update was filed with the ERCB in 2012 to incorporate a single-well cyclic steam-assisted gravity drainage process and regulatory approval is targeted for mid-2013. Engineering is ongoing and orders for certain long lead equipment have been advanced. Osum is fully funded for its 40% share of the cost to construct the commercial demonstration project. First oil from the project is anticipated in late 2015 assuming a 2013 final investment decision.

Earlier this quarter, the Company submitted an Environmental Impact Assessment (“EIA”) and commercial application for the 60,000 barrels per day 100% operated Sepiko Kesik project at Saleski East. Regulatory approval for the project is targeted for 2014. The Company will monitor progress at the Saleski Joint Venture pilot and commercial demonstration project before making the final decision on ultimate timing of the first phase of Sepiko Kesik. To obtain a copy of the EIA please visit Osum’s website at osum2015.wpengine.com/sepikokesikeia.

At Saleski West and Liege West the Company is nearing completion of a 15 well delineation program with a goal of further expanding the resource in those regions. Liege West has not been delineated to date and therefore this year’s drilling program provides the opportunity to further add to the Company’s resource base and project portfolio.

Taiga

In the Company’s other core area in Cold Lake, regulatory approval for the initial phases of the 45,000 barrel per day Taiga Project was received in October 2012. The Company is in the process of finalizing the execution strategy for Taiga including timing and means of financing the first phase of the project.

Summary of GLJ Report

A detailed pro forma breakdown of Osum’s total reserves, resources, and net asset values as assessed by GLJ as of December 31, 2012 is provided below:

Reserves and Resources
Asset
Proved Reserves
(1P)
(MMbbl)
Proved plus Probable Reserves (2P) (MMbbl)
Proved plus Probable
plus
Possible Reserves (3P)(MMbbl)
Cold Lake
359
525
Saleski JV
51
74
Saleski East
Saleski West
Liege Other
410
599
Resources
Asset
Best Estimate Contingent Resources (MMbbl)
Cold Lake
104
Saleski JV
1,079
Saleski East Saleski West
906
1,470
Liege
570
Other
234
 
4,363
Corporate Total
Low Estimate Contingent
662
Best Estimate Contingent
4,363
High Estimate Contingent
8,050

Net Present Value
Pre-tax (MM$, 8%)
Pre-Tax (MM$, 10%)
2P Reserves
$1,752
$1,116
3P Reserves
$2,658
$1,710
Low Estimate Contingent
$2,365
$1,362
Best Estimate Contingent
$18,000
$11,097
High Estimate Contingent
$42,147
$27,035

 

The reserve and resource estimates herein were extracted from reports prepared by GLJ, an independent professional petroleum engineering firm, in accordance with Canadian Securities Administrators’ National Instrument 51-101 (NI 51-101) and the Canadian Oil and Gas Evaluation Handbook.

Under NI 51-101, proved reserves are those reserves which can be estimated with a high degree of certainty to be recoverable.  It is 90 percent likely that actual remaining quantities will exceed estimated proved reserves.  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 proved plus probable reserves.  Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.  There is only a 10 percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Contingent Resources are 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 which 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.  Contingent Resources are further classified in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status.  Resource estimates are described as follows: Best Estimate – This is considered to be the best estimate of the quantity that will actually be recovered from the accumulation.  If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.; High Estimate –  This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate.  If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate. Low estimate – this is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, the term reflects a P90 confidence level.

Contingent resources were assigned in regions with lower core-hole drilling density than the reserve regions and are outside current areas of application for development. These resource estimates are not classified as reserves at this time, pending further reservoir delineation, project application, facility and reservoir design work. Contingent resources entail commercial risk not applicable to reserves, which have not been included in the net present valuation. There is no certainty that it will be commercially viable to produce any portion of the contingent resources. All heavy oil volumes reported herein refer to bitumen. A portion of the recoverable bitumen volumes in the Taiga-Cold Lake and Saleski Joint Venture Properties, where the Company has applied for construction of bitumen recovery schemes, are classified as reserves. The remaining recoverable bitumen volumes are classified as resources, not reserves, pending further delineation, facility design, regulatory application, firm development plans and Company approvals. In the case of the carbonate properties development is also contingent upon successful application of steam assisted gravity drainage (SAGD) or cyclic steam stimulation (CSS) technology in carbonate reservoirs, which is currently under active development including an operational pilot at Saleski Joint Venture. The contingent and prospective resources have been assessed using the same fiscal conditions applicable in the assessment of reserves and, as such, these volumes are considered economically recoverable. There is however, no certainty that it will be commercially viable to produce any of the contingent or prospective resources.

In determining the valuation estimates contained in the reports prepared by GLJ, the following pricing forecast was utilized:

GLJ Forecast Pricing
Forecast
Light and Medium Crude Oil
Exchange Rate
WSC Stream Quality at Hardisty Current
Natural Gas
Inflation Rate
WTI at Cushing Oklahoma
(US$/bbl)
US$/Cdn$
(Cdn$/bbl)
Alberta Spot at Plant
Gate (Cdn$/mmbtu)
%/year
2013
90.00
1.000
70.13
3.19
2%
2014
92.50
1.000
76.15
3.63
2%
2015
95.00
1.000
78.22
4.08
2%
2016
97.50
1.000
80.29
4.53
2%
2017
97.50
1.000
80.29
4.75
2%
2018
97.50
1.000
80.29
5.02
2%
2019
98.54
1.000
81.16
5.12
2%
2020
100.51
1.000
82.79
5.22
2%
2021
102.52
1.000
84.46
5.33
2%
2022
104.57
1.000
86.16
5.44
2%
2023+
+2%/yr
1.000
+2%/yr
+2%/yr
2%

About Osum

Osum is a privately held Alberta based company focused on the application of environmentally responsible in-situ recovery technologies within Canada’s oil sands and carbonates. Additional information on the Company is available at osum2015.wpengine.com.

Cautionary Information and Forward Looking Statements 

Certain statements contained in this press release may contain projections and “forward-looking statements” within the meaning of that phrase under Canadian and U.S. securities laws. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions may be used to identify forward-looking statements. Those statements reflect our current views with respect to future events or conditions, including prospective results of operations, financial position, predictions of future actions or plans or strategies.

Certain material factors and assumptions were applied in drawing our conclusions and making those forward-looking statements. By their nature, those statements reflect management’s current views, beliefs and assumptions and are subject to certain risks, uncertainties, known and unknown, and assumptions, including, without limitation, machinery development or production delays, changing environmental and other regulations, the ability to attract and retain business partners, the ability to exploit hydrocarbon resources with our technology, the need to obtain and maintain proprietary rights over our technology, competition from other technologies, the ability to access the capital required for project development, research, technology development, operations and marketing, the need to generate positive cash flow in the foreseeable future, changes in energy prices and currency levels.

Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying our projections or forward-looking statements prove incorrect, our actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated, or expected. We do not intend and do not assume any obligation to update these forward-looking statements whether as a result of new information, plans, events or otherwise.

Our securities are not traded on any stock exchange and thus, Osum is not subject to regulation by any Canadian stock exchange. Osum is not a reporting issuer in Canada and its securities are not registered under the United States Securities Act of 1933. As a result, we are not presently subject to the reporting, certification or other requirements imposed on Canadian Reporting Issuers or U.S. registered issuers under, among other things, applicable Canadian securities legislation or the U.S. Sarbanes-Oxley Act of 2002 (“SOX”).

This release is provided for information purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the common shares of the Company in any jurisdiction (including the United States) in which such offer, solicitation or sale would be unlawful.

Inquiries:

Christi Millar
Communications Advisor
cmillar@osumcorp.com

 

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