His conclusion this time around? Once again, assets that were supposed to provide the benefits of diversification by zigging when other assets zag are no longer living up to expectations. For example, non-U.S. stocks were once viewed as the ideal way to give a portfolio some zip when the U.S. market underperformed – but now they move more or less in lockstep. And hedge funds in particular just don’t cut it any more as a diversification strategy. “Whereas hedge funds were an effective diversifying tool in the late-1990s, there is a very limited diversifying effect today,” Mr. Bernstein said in a note to clients. As of the end of January, hedge funds were 90 per cent correlated with the S&P 500, versus just 35 per cent in 2000, when they were all the rage. However, he does offer a note of hope for investors who don’t like the idea of having all their assets moving up and down in unison: cash, high-grade corporate bonds and long-term U.S. Treasury bonds. “Thus, equity investors should probably look at bonds and cash as powerful diversifying assets in the same way they looked eight years ago at hedge funds and non-US stocks,” he said. For Canadian investors, there is another note of hope: Among sectors, energy stocks now have the lowest correlation with the S&P 500.
Petrolifera Petroleum Reports Increased Reserves and Pre-Tax Present Value for Year Ended December 31, 2007; Proved Crude Oil and Natural Gas Liquids Reserves Up 43 Percent After Record Production in 2007
(4) Volumes, future net revenue and present value of future net revenue do not include undeveloped land values in Argentina, Colombia or Peru.
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CALGARY, Feb. 25 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) announces today that the estimates of the company's 1P ("proved"), 2P ("proved and probable") and 3P (proved, probable and possible) reserves, as prepared by GLJ Petroleum Consultants of Calgary, Alberta ("GLJ") in a report with an effective date of December 31, 2007 ("GLJ 2007 Report"), confirmed the significant positive impact of 2007 drilling activity and the installation of new production facilities, including a waterflood, at its Puesto Morales Norte Field in the Neuquen Basin, Argentina.
The GLJ Report and the estimates provided herein were prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and in accordance with National Instrument 51-101 ("NI 51-101"). Comparisons provided herein with respect to Petrolifera's reserves are to estimates contained in a report prepared by GLJ with an effective date of December 31, 2006 ("GLJ 2006 Report"). The GLJ 2007 Report was prepared utilizing the GLJ January 1, 2008 price forecast, effective December 31, 2007 and adjusted to Petrolifera's asset mix and specific pricing circumstances in Argentina. In the GLJ 2007 Report, future net revenue is calculated after deduction of forecast royalties, operating expenses, capital expenditures and well abandonment costs but before corporate overhead or other indirect costs, including interest and income taxes. The present value of future net revenue ("present value") is calculated by GLJ using various discount rates; this release will provide undiscounted future net revenue and the 10 percent present value thereof.
All references to barrels of oil equivalent ("boe") are calculated on the basis of 6 mcf: 1 bbl. Readers are cautioned that the conversion used in calculating barrels of oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Furthermore, boes may be misleading if used in isolation. Future net revenues disclosed herein do not represent fair market value. Also, estimations of reserves and future net revenue to be discussed in this press release constitute forward-looking information. See "Forward Looking Information" below.
Reserve Volumes and Values
The GLJ 2007 Report estimated that Petrolifera's 1P crude oil and natural gas liquids ("NGL") reserves increased 43 percent to 15.1 million barrels as at December 31, 2007, compared to 10.5 million barrels at December 31, 2006. The increase reflects exploratory success and technical revisions primarily arising from the company's capital spending and drilling program during the year. The increase occurred after record production of 2.9 million barrels of crude oil during the year. On a 1P basis, the company's reserve replacement ratio for crude oil and NGL was 2.6 times. The reserve replacement ratio percent was calculated by dividing the sum of production volumes for the year and changes to estimated reserves volumes during the year by the production volumes.
Petrolifera's 1P natural gas reserves increased 14 percent to 16.3 Bcf after the production of 0.8 Bcf and technical revisions, including provision for flared natural gas volumes, with a reserve replacement ratio of 3.5 times, calculated as indicated above.
Despite the substantial movement of probable reserves to the 1P category, Petrolifera's 2P crude oil and NGL reserves increased 10 percent to 21.5 million barrels, reflecting exploratory success. At December 31, 2007, 2P crude oil and NGL reserves were 21.5 million barrels compared to 19.5 million barrels last year. On a 2P basis, the company's reserve replacement ratio for crude oil and NGL was 1.7 times, calculated as indicated above.
On an equivalent basis, Petrolifera's 1P reserves totaled 17.8 million boe in 2007 compared to 12.9 million boe in 2006, for an increase of 38 percent. These reserves were forecast to generate $456 million of future net revenue, with a 10 percent present value of $314 million, after deduction of $18.6 million of future capital and $2.2 million of well abandonment costs. The 10 percent present value for the 2007 1P estimates represents a 27 percent increase over 2006. Reserve replacement for 1P on a boe basis was 2.6 times.
On an equivalent basis, Petrolifera's 2P reserves total 25.6 million boe in 2007 compared to 24.3 million boe in 2006 for an increase of five percent, after production of 3.0 million boe. GLJ estimates these reserves will generate $662 million of future net revenue, with a 10 percent present value of $452 million after deduction of $34.4 million of future capital expenditures and $2.8 million for future well abandonment costs. The 10 percent present value for the 2007 2P estimates represents only a one percent increase over 2006, due primarily to changes in Argentinean pricing and taxation policies during 2007. Reserve replacement for 2P on a boe basis was 1.4 times. The company's calculated reserve life index, calculated by dividing remaining 2P reserves at December 31, 2007 by 2007 total boe production, was 8.5 years.
Petrolifera also commissioned GLJ to provide an estimate of possible reserves, which were last estimated effective December 31, 2005 by another independent reserve evaluator. GLJ estimates the company's 3P crude oil and NGL reserves to be 33.5 million barrels, with natural gas reserves estimated at 33.5 Bcf and equivalent reserves estimated at 39.0 million boe. These reserves are estimated to generate $1 billion of future net revenue with a 10 percent present value of $656 million, after deduction of $72.9 million of future capital expenditures and $3.6 million for future well abandonment costs.
It should be noted that the estimate of Petrolifera's 3P reserves at 39.0 million boe is after the production of approximately 5.3 million boe in 2006 and 2007. This is the first updated estimate of possible reserves since 2005. The volume of possible reserves underscores the recognition of the development potential for both crude oil and natural gas, of the lands reviewed in the GLJ 2007 Report, which however did not include a review of the company's undeveloped exploratory concessions at Vaca Mahuida, Puesto Guevara, Puesto Morales Este and Gobernador Ayalla II, all in Argentina nor of Petrolifera's holdings in Colombia and Peru.
The following tables summarize the information contained in this press release. Tables may not add due to rounding.
<< id="1era" class="ArwC7c ckChnd">
OIL & NGLs (mbbl) NATURAL GAS (mmcf)
Reserve
Category 31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06
------------------------------
% %
GLJ GLJ change GLJ GLJ change
Proved (1P) 15,068 10,522 43 16,281 14,256 14
Probable 6,452 9,012 (28) 7,992 14,544 (45)
------------------------------
Proved plus
Probable (2P) 21,520 19,534 10 24,273 28,800 (16)
Possible 11,940 n/a n/a 9,187 n/a n/a
------------------------------
Proved plus
probable plus
possible (3P) 33,460 n/a n/a 33,460 n/a n/a
------------------------------
------------------------------
BOE's (mboe)
Reserve
Category 31-Dec-07 31-Dec-06
------------------------------
%
GLJ GLJ change
Proved (1P) 17,782 12,898 38
Probable 7,783 11,436 (32)
------------------------------
Proved plus
Probable (2P) 25,566 24,334 5
Possible 13,471 n/a n/a
------------------------------
Proved plus
probable plus
possible (3P) 39,037 n/a n/a
------------------------------
Petrolifera Petroleum Limited
Before Tax Present Value of Future Net Revenue (1)(2)(3)(4)
------------------------------
Before Tax Present Value at 31-Dec-07
Reserve Category Undiscounted Discounted at 10%
------------------------------
$000 $000
Proved (1P) $456,309 $314,273
Probable 205,818 137,780
------------------------------
Proved plus Probable (2P) $662,127 $452,053
Possible 368,947 203,641
------------------------------
Proved plus probable
plus possible (3P) $1,031,074 $655,694
------------------------------
Notes:
1) Proved reserves are those reserves that can be estimated with a high
degree of certainty to be recoverable. There is at least a 90%
probability that the actual remaining quantities recovered will equal
or 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) Possible reserves are those additional reserves that are less certain
to be recovered than probable reserves. There is at least a 10%
probability that the quantities actually recovered will be equal to or
exceed the sum of proved plus probable plus possible reserves.
4) Volumes, future net revenue and present value of future net revenue do
not include undeveloped land values in Argentina, Colombia or Peru.
For further information: Richard A Gusella, Executive Chairman, Petrolifera Petroleum Limited, Phone: (403) 538-6201, Fax: (403) 538-6225, inquiries@petrolifera.ca, www.petrolifera.ca
© 2008 The Globe and Mail
Zigging and zagging just isn’t what it used to be – as anyone who has seen their diversified assets rise and fall together can attest. Richard Bernstein, chief investment strategist at Merrill Lynch, has noticed this trend as well, which is why he periodically takes a look at asset correlations.
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Monday, February 25, 2008
Petrolifera Petroleum Reports Increased Reserves up 43%
All together now
Monday, February 25, 2008
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