Osum Announces Higher Reserves and Resources at Orion and Taiga

Calgary, Canada – Osum Oil Sands Corp. (“Osum” or “the Company”) announced today results from an updated assessment as of April 30, 2020 by GLJ Petroleum Consultants (“GLJ”). GLJ was engaged as an independent qualified reserve evaluator to evaluate the reserves and resources of Osum’s two thermal oil projects in the Cold Lake area: Orion and Taiga. The evaluation was prepared in accordance with reserve definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGEH”).

Compared with GLJ’s assessment at December 31, 2019, GLJ assigned or estimated:

  • 158.9 million barrels of total proved (“1P”) reserves, an increase of 17.3 million barrels (12%);
  • 698.3 million barrels of total proved plus probable (“2P”) reserves, an increase of 83.8 million barrels (14%); and
  • 365.2 million barrels of Risked Best Estimate Contingent Resources (subclass development unclarified), an increase of 123.8 million barrels (51%).

The updated evaluation follows the Q1 2020 delineation program for the Company’s Orion leases. The program confirmed the quality and extent of a previously identified Upper Grand Rapids channel-fill reservoir, and identified a thicker pay column in an area of the Clearwater reservoir. In addition, recovery factors at both Orion and Taiga were increased based on Orion well performance to date.

Inclusive of the volumetric increases in reserves, lower forecast commodity prices resulted in valuation decreases compared with GLJ’s previous assessment. At April 30, 2020, 1P PV10 (BT) was $1,035 million, a decrease of $558 million (35%), and 2P PV10 (BT) was $2,494 million, a decrease of $793 million (24%) from GLJ’s evaluation at December 31, 2019.

Steve Spence, Osum’s President and CEO, commented, “Our winter delineation program confirmed our expectations for the Upper Grand Rapids zone. Given its quality, we anticipate its development will underpin our next expansion phase at Orion. Furthermore, performance analogues from Orion continue to bolster our positive view of Phase 1 of Taiga which we expect will follow the full buildout of Orion, assuming market conditions are supportive.”

In the first quarter of 2020, production at Orion averaged 20,024 barrels per day. The Company has regulatory approval to expand production to 25,000 barrels per day at Orion (Phase 2D). Osum also has regulatory approval for 35,000 barrel per day at Taiga, a greenfield development located less than 20 kilometres from Orion.

Assessment Tables: Reserves and Resources

The following table displays gross bitumen reserves and bitumen reserves net of forecast royalties along with the present values of estimated future net revenue using a range of discount rates at April 30, 2020:

Bitumen Reserves (millions bbl) Net Present Value of Future Net Revenue Before Taxes ($millions)
Forecast Prices (1) and Costs
Gross Net 0% 5% 10% 15% 20%
Total Proved (1P) 158.9 126.6 2,800 1,630 1,035 707 512
Total Probable 539.4 431.2 13,362 3,796 1,459 651 298
Total Proved plus Probable (2P) 698.3 557.8 16,162 5,426 2,494 1,358 810

Notes:
1 GLJ Petroleum Consultants Price Forecast, April 1, 2020.

The following tables compare the gross bitumen reserves and resources for Orion and Taiga assets in December 31, 2019 and in April 30, 2020.

Gross Bitumen Total 1P Reserves
(millions bbl)
Gross Bitumen Total 2P Reserves
(millions bbl)
Dec. 31, 2019 Apr. 30, 2020 % Change Dec. 31, 2019 Apr. 30, 2020 % Change
Orion:
UGR1 0 6.0 N/A 2.2 24.9 1,132%
Clearwater 141.6 152.9 8% 163.1 199.6 22%
Orion Total 141.6 158.9 12% 165.3 224.5 36%
Taiga Total 449.3 473.9 5%
Total Cold Lake 141.6 158.9 12% 614.6 698.4 14%

Notes:
1 Upper Grand Rapids Reservoir

Best Estimate Contingent Resources (1, 2) Unrisked (millions bbl) Best Estimate Contingent Resources (1, 2)
Risked (millions bbl)
Dec. 31, 2019 Apr. 30, 2020 % Change Dec. 31, 2019 Apr. 30, 2020 % Change
Orion:
UGR3 10.7 N/A 8.2 N/A
Clearwater 169.6 222.7 31% 129.7 170.3 31%
Orion Total 169.6 233.4 38% 129.7 178.5 38%
Taiga Total 147.0 245.7 67% 111.6 186.7 67%
Total Cold Lake 316.6 479.1 51% 241.4 365.2 51%

Notes:
1 Gross Resource volumes
2 Contingent Resources Project Maturity Subclass is Development Unclarified. Contingencies specific to this project include additional facility capacity, additional delineation, regulatory application approval, detailed development plans and cost estimates, and financing and corporate commitment and approvals.
3 Upper Grand Rapids Reservoir

The table below summarizes the subclass and status of the Contingent Resources at Cold Lake. “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 specific to the projects described in the table below include: additional facility capacity, additional delineation, regulatory application approval, detailed development plans and cost estimates, and financing and corporate commitment and approvals. All contingencies preventing such contingent resources from being classified as reserves are “non-technical” contingencies. Contingent Resources in the Sandy Heterolithic Strata of the Clearwater Orion lease have technology under development status related to the under heat harvesting recovery process.

Project maturity subclasses are sub-classifications of Contingent Resources which help identify a project’s chance of commerciality. Project maturity subclasses (in order of increasing chance of commerciality) are ‘development not viable’, ‘development unclarified’, ‘development on hold’, and ‘development pending’. Projects are assigned a maturity subclass of ‘development unclarified’ if they are still under evaluation or require significant further appraisal to clarify the potential for development, and where the contingencies have not been fully defined.

Project Project Maturity Subclass Project Evaluation Scenario Status Risked Best Estimate Contingent Resource Gross (millions bbl) Project
COC (1)
Project Description Estimated Capital to Reach First Commercial Production (millions$)(2,3) Timing of First Commercial Production
Orion Development Unclarified Pre-development Study 178.5 77% Orion Phase 3 10,000 bbl/d 229 2025
Taiga Development Unclarified Pre-development Study 186.7 76% Taiga SAGD 20,000 bbl/d 453 2028

Notes:
1 COC (“Chance of commerciality”) is equal to the chance of discovery x chance of development. The chance of discovery is 1.0.
2 Capital cost details relate only to costs associated with achieving first commercial production within the phase described in the Project Description. Drill, complete, pump and pad costs to achieve commercial production includes unrisked estimated costs for initial well development. Sustaining capital costs incurred subsequent to achieving commercial production have not been included in total capital to first commercial production. Abandonment and reclamation costs have not been included in total capital to first commercial production.
3 Capital is risked by chance of commerciality.

About Osum

Established in Alberta in 2005, Osum Oil Sands Corp. is a private oil sands producer focused on the responsible application of in situ recovery technologies within Canada’s oil sands and carbonates. Additional information on the company is available at osumcorp.com.

Reserves and Resources

The reserve and resource estimates herein were extracted from the GLJ Report, which was prepared in accordance with resources and reserves definitions, standards and procedures contained in the COGEH. Reserves are classified according to the degree of certainty associated with the estimates. 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. 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. Other criteria that must also be met for the categorization of reserves are provided in the COGEH.

The qualitative certainty levels referred to in the definitions above are applicable to individual reserve entities (which refers to the lowest level at which reserves calculations are performed) and to reported reserves (which refers to the highest-level sum of individual entity estimates for which reserve estimates are prepared). Reported reserves should target the following levels of certainty under a specific set of economic conditions: (a) at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves; and (b) at least a 50 percent probability that the quantities actually recovered will equal or exceed the estimated proved plus probable reserves. A qualitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates will be prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods. Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGEH.

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 sub-classified based on project maturity and/or characterized by their economic status. Best Estimate Contingent (“BEC”) resource 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.

The preparation of an evaluation requires the use of judgement in applying the standards and definitions contained in the COGEH. As the Company’s independent reserve evaluator, GLJ applies those standards and definitions based on its experience and knowledge of industry practice. However, because the application of the standards and definitions contained in the COGEH require the use of judgement there is no assurance that governing securities regulator(s) will not take a different view than GLJ as to some of the determinations in an evaluation.

In determining the valuation estimates contained in the GLJ Report, the following GLJ pricing forecast as at April 1, 2020 was utilized:

Year Western
Canadian
Select
(C$/bbl)
WTI at
Cushing
(US$/bbl)
Diluent
(Condensate)
(C$/bbl)
AECO Gas
(C$/mmbtu)
Exchange
Rate
(US$/C$)
Q2-Q4 2020 20.34 30.00 37.47 1.95 0.720
2021 34.25 41.00 52.05 2.25 0.730
2022 43.54 47.50 61.56 2.35 0.735
2023 50.68 52.50 68.92 2.45 0.740
2024 57.72 57.50 75.84 2.55 0.745
2025 59.93 58.95 77.27 2.65 0.750
2026 61.51 60.13 78.84 2.70 0.750
2027 63.11 61.33 80.44 2.76 0.750
2028 64.75 62.56 82.08 2.81 0.750
2029 66.41 63.81 83.75 2.87 0.750
2030+ +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr 0.750

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. Forward-looking information is provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward looking information may include, without limitation, statements regarding the anticipated timing of, production from, and reserves to be developed in the Company’s next expansion phase at Orion, present values of estimated future net revenues, statements regarding the potential recovery of Contingent Resources, the opinions or beliefs of management, prospects, opportunities, priorities, targets, goals, ongoing objectives, milestones, strategies and outlook of Osum, and includes statements about, among other things, future developments, future operations, strengths and strategy of Osum. Generally, forward looking information can be identified by the use of forward looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. These statements should not be read as guarantees of future performance or results. These statements are based upon certain material factors, assumptions and analyses that were applied in drawing a conclusion or making a forecast or projection, including Osum’s experience and perceptions of historical trends, current conditions and expected future developments, as well as other factors that are believed to be reasonable in the circumstances.

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, many of which are beyond the control of Osum, and may cause actual outcomes to differ materially from those discussed in the forward-looking statements, including, without limitation, assumptions about expected cash flows, expected production levels or conditions, and expected economic life of the Orion Project, retaining a high quality, experienced management and operating team, production delays, changing environmental and other regulations, the ability to attract and retain business partners, the ability to exploit hydrocarbon resources with available technology, the need to obtain and maintain proprietary rights over aspects of the technology, competition from other technologies, the ability to access the capital required for project development, research, technology development, operations and marketing, financial position, predictions of future actions or plans or strategies, changes in energy prices and currency levels.

Many factors could cause 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 the projections or forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated, projected or expected. Accordingly, readers should not place undue reliance on the forward-looking information. Osum does not intend and does not assume any obligation to update these forward-looking statements whether as a result of new information, plans, events or otherwise.

All reserve and resource references in this press release are “Company share reserves and resource”. Company share reserves and resource are the Company’s total working interest reserves and resource before the deduction of any royalties and including any royalty interests of the Company. It should not be assumed that the present worth of estimated future cash flow presented in the tables above represents the fair market value of the reserves. Estimated values of future net revenue disclosed herein do not represent fair market value. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve and resource estimates of Osum’s bitumen reserves and resource provided herein are estimates only and there is no guarantee that the estimated reserves and resource will be recovered. Actual bitumen reserves and resource may be greater than or less than the estimates provided herein. All future net revenues are estimated using forecast prices, arising from the anticipated development and production of Osum’s reserves and resource, net of the associated royalties, operating costs, development costs, and abandonment and reclamation costs and are stated prior to provision for interest and general and administrative expenses. Future net revenues have been presented on a before tax basis.

The Company’s 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 (as such term is defined in applicable Canadian securities legislation) anywhere in Canada and its securities are not registered under the United States Securities Act of 1933. As a result, the Company is not presently subject to the reporting, certification or other requirements imposed on reporting issuers in Canada or U.S. securities legislation, including U.S. registered issuers under, among other things, applicable Canadian securities legislation or the U.S. Sarbanes-Oxley Act of 2002. This release is provided solely for information purposes 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 in any jurisdiction (including the United States) in which such offer, solicitation or sale would be unlawful.

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