News Release
 | Sustainable Growth |
HARVEST OPERATIONS ANNOUNCES YEAR END 2010 RESERVES
Calgary, Alberta – February 28, 2011– Harvest Operations Corp. (“Harvest”) (TSX: HTE.DB.D, HTE.DB.E, HTE.DB.F and HTE.DB.G) today announces a summary of its 2010 year end reserves information. Unless otherwise indicated, all reserves stated herein are gross reserves (before royalty burdens and without including royalty interests), based on forecast prices and costs, except where indicated.
HIGHLIGHTS OFHARVEST’SRESERVES:
Harvest’s gross Proved plus Probable (“P+P”) reserves increased 461% from year end 2009 to 461.3 million barrels of oil equivalent (“mmboe”) including Harvest’s BlackGold oil sands project (“BlackGold”). Gross Proved reserves increased 237% to 237.9 mmboe
P+P Finding Development and Acquisition (“FD&A”) costs for 2010 are $16.47/boe including future development costs and $3.40/boe excluding future development costs.
Through successful drilling, optimization and acquisition activities, P+P reserves, excluding BlackGold, increased to 202.1 mmboe (2009 – 199.5 mmboe);
Excluding BlackGold, Proved Developed Producing reserves continue to represent a high percentage (approximately 83%) of Total Proved reserves while Total Proved reserves represent approximately 71% of Total P+P reserves;
Excluding BlackGold, P+P reserve life index increased from 10.6 in 2009 to approximately 11.2 years based on average 2010 production of 49,397 boe/d, and
The net present value (NPV) (before taxes, discounted at 10%) of Harvest’s P+P reserves increased to $4,888.7 million (2009 - $3,826.6 million). The NPV of total Proved reserves also increased to $3,233.7 million (2009 - $2,905.2 million).
HARVESTRESERVESSUMMARY
Harvest’s reserves for the year ended December 31, 2010 were evaluated in accordance with National Instrument 51-101 (“NI 51-101”) by the independent reserve evaluators McDaniel & Associates Consultants Ltd. (“McDaniel”) who evaluated approximately 20% and GLJ Petroleum Consultants Ltd. (“GLJ”) who evaluated approximately 80%. The complete reserves disclosure as required under NI 51-101, will be contained in Harvest’s 2010 Renewal Annual Information Form, to be filed on SEDAR on or before March 30, 2011.
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The following tables summarize certain information contained in Harvest’s reserves report.
HARVESTRESERVESSUMMARY AS ATDECEMBER31, 2010 – FORECASTPRICES ANDCOSTS
Gross(1)
| | | | | | Light & | | | | | | Associated & | | | | | | Total Oil | | | Total Oil | |
| | | | | | Medium | | | | | | Non- | | | Natural Gas | | | Equivalent(3 | ) | | Equivalent(3 | ) |
| | | Bitumen | | | Crude Oil(5 | ) | | Heavy Crude | | | Associated | | | Liquids | | | 2010 | | | 2009 | |
| Reserves Category | | (mmbbl) | | | (mmbbl) | | | Oil (mmbbl) | | | Gas (Bcf) | | | (mmbbl) | | | (mmboe) | | | (mmboe) | |
| Proved | | | | | | | | | | | | | | | | | | | | | |
| Developed Producing | | 0 | | | 56.2 | | | 30.0 | | | 164.4 | | | 5.8 | | | 119.5 | | | 116.0 | |
| Developed Non-Producing | | 0 | | | 1.0 | | | 1.7 | | | 11.4 | | | 0.4 | | | 4.9 | | | 5.6 | |
| Undeveloped | | 93.6 | | | 11.2 | | | 3.6 | | | 27.0 | | | 0.6 | | | 113.5 | | | 18.7 | |
| Total Proved | | 93.6 | | | 68.4 | | | 35.4 | | | 202.8 | | | 6.8 | | | 237.9 | | | 140.3 | |
| Total Probable | | 165.6 | | | 25.6 | | | 15.9 | | | 80.3 | | | 2.8 | | | 223.3 | | | 59.2 | |
| Total Proved Plus Probable(4) | | 259.2 | | | 94.0 | | | 51.3 | | | 283.1 | | | 9.6 | | | 461.3 | | | 199.5 | |
Net(2)
| | | | | | Light & | | | | | | Associated & | | | | | | | | | | |
| | | | | | Medium | | | | | | Non- | | | Natural Gas | | | Total Oil | | | Total Oil | |
| | | Bitumen | | | Crude Oil(5 | ) | | Heavy Crude | | | Associated | | | Liquids | | | Equivalent(3 | ) | | Equivalent(3 | ) |
| Reserves Category | | (mmbbl) | | | (mmbbl) | | | Oil (mmbbl) | | | Gas (Bcf) | | | (mmbbl) | | | 2010(mmboe) | | | 2009(mmboe) | |
| Proved | | | | | | | | | | | | | | | | | | | | | |
| Developed Producing | | 0 | | | 50.3 | | | 26.6 | | | 144.9 | | | 4.3 | | | 105.4 | | | 102.5 | |
| Developed Non-Producing | | 0 | | | 0.8 | | | 1.4 | | | 10.1 | | | 0.3 | | | 4.1 | | | 4.6 | |
| Undeveloped | | 77.1 | | | 9.6 | | | 3.0 | | | 22.4 | | | 0.5 | | | 93.9 | | | 15.5 | |
| Total Proved | | 77.1 | | | 60.8 | | | 31.0 | | | 177.4 | | | 5.0 | | | 203.5 | | | 122.5 | |
| Total Probable | | 130.7 | | | 22.6 | | | 13.0 | | | 69.8 | | | 2.1 | | | 180.0 | | | 50.3 | |
| Total Proved Plus Probable(4) | | 207.8 | | | 83.4 | | | 44.0 | | | 247.2 | | | 7.1 | | | 383.5 | | | 172.9 | |
Notes:
| (1) | “Gross” reserves means the total working interest share of Harvest’s remaining recoverable reserves before deductions of royalties payable to others. |
| (2) | “Net” reserves means Harvest’s gross reserves less all royalties payable to others. |
| (3) | Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. Boes may be misleading, particularly if used in isolation. This conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. |
| (4) | Columns may not add due to rounding. |
| (5) | The reserves attributable to Harvest’s Hay River property, which is an area that produces medium gravity crude oil (average 24° API), are subject to a heavy oil royalty regime in British Columbia and would be required, under NI 51-101, to be classified as heavy oil for that reason. We have presented Hay River reserves as medium gravity crude in the following reserve tables as they would otherwise be classified in this fashion were it not for the lower rate royalty regime applied in British Columbia. If the Hay River reserves were included in the heavy crude oil category, it would increase the gross heavy oil reserves and reduce the light/medium oil reserves by the following amounts: PDP: 11.4 mmboe, Proved Undeveloped: 5.8 mmboe, Total Proved: 17.1 mmboe, Probable: 5.6 mmboe and P+P: 22.7 mmboe, and would increase the net heavy oil reserves and reduce the light/medium oil reserves by the following amounts: PDP: 9.9 mmboe, Proved Undeveloped: 4.8 mmboe, Total Proved: 14.8 mmboe, Probable: 4.9 mmboe, and P+P: 19.7 mmboe. |
HARVESTNETPRESENTVALUE OFFUTURENETREVENUE OFRESERVES AS ATDECEMBER31, 2010:
FORECASTPRICES ANDCOSTS
Harvest’s crude oil, natural gas and natural gas liquids reserves were evaluated using McDaniel’s product price forecasts effective January 1, 2011 prior to provision for income taxes, interest, debt service charges and general and administrative expenses. Note that this presentation has been based on a before tax basis. When the tax measures announced on October 31, 2006 and passed into law in 2007 become enacted in 2011, the after tax values may differ from the pre-tax number presented herein. It should not be assumed that estimates of the discounted future net production revenue represent the fair market value of Harvest’s reserves.
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AGGREGATE SUMMARY OF NETPRESENTVALUE OFFUTURENETREVENUE OFRESERVES AS ATDECEMBER31, 2010:
| | | 0% Disc. | | | 5% Disc. | | | 10% Disc. | | | 15% Disc. | | | 20% Disc. | |
| Reserves Category | | ($millions) | | | ($millions) | | | ($millions) | | | ($millions) | | | ($millions) | |
| Proved | | | | | | | | | | | | | | | |
| Developed Producing | $ | 4,315.45 | | $ | 3,152.61 | | $ | 2,520.54 | | $ | 2,117.93 | | $ | 1,837.45 | |
| Developed Non-Producing | $ | 159.73 | | $ | 110.05 | | $ | 83.64 | | $ | 67.10 | | $ | 55.73 | |
| Undeveloped | $ | 2,597.86 | | $ | 1,234.95 | | $ | 629.51 | | $ | 315.95 | | $ | 133.93 | |
| Total Proved | $ | 7,073.05 | | $ | 4,497.62 | | $ | 3,233.69 | | $ | 2,500.98 | | $ | 2,027.10 | |
| Total Probable | $ | 6,826.41 | | $ | 3,121.94 | | $ | 1,654.98 | | $ | 966.53 | | $ | 599.95 | |
| Total Proved Plus Probable(1) | $ | 13,899.45 | | $ | 7,619.55 | | $ | 4,888.67 | | $ | 3,467.50 | | $ | 2,627.06 | |
Notes:
(1) Columns may not add due to rounding
MCDANIEL& ASSOCIATESCONSULTANTSLTD. JANUARY1, 2011 PRICEFORECAST
A summary of the McDaniel price forecast as at January 1, 2011 that was used in the Harvest reserves evaluation is listed below. A complete listing of the price forecast is available on the McDaniel’s website at the following linkhttp://www.mcdan.com/pricing_forecasts.html.
| | | | Alberta Bow | | | |
| | | Edmonton | River | | | US/CAN |
| | | Light Crude | Hardisty | Alberta | Alberta AECO | Exchange |
| | WTI Crude Oil | Oil | Crude Oil | Heavy Crude | Spot Price | Rate |
| Year | $US/bbl1 | $C/bbl2 | $C/bbl3 | Oil $C/bbl4 | $C/GJ | $US/$CAN |
| 2011 | 85.0 | 84.2 | 72.8 | 66.7 | 4.25 | 0.975 |
| 2012 | 87.7 | 88.4 | 75.0 | 68.7 | 4.90 | 0.975 |
| 2013 | 90.5 | 91.8 | 75.1 | 68.6 | 5.40 | 0.975 |
| 2014 | 93.4 | 94.8 | 77.5 | 70.8 | 5.90 | 0.975 |
| 2015 | 96.3 | 97.7 | 80.0 | 73.0 | 6.35 | 0.975 |
| 2016 | 99.4 | 100.9 | 82.5 | 75.4 | 6.75 | 0.975 |
| 2017 | 101.4 | 102.9 | 84.2 | 76.9 | 7.10 | 0.975 |
| 2018 | 103.4 | 104.9 | 85.9 | 78.4 | 7.40 | 0.975 |
| 2019 | 105.4 | 107.0 | 87.5 | 80.0 | 7.60 | 0.975 |
| 2020 | 107.6 | 109.2 | 89.3 | 81.6 | 7.75 | 0.975 |
| 2021 | 109.7 | 111.3 | 91.1 | 83.2 | 7.85 | 0.975 |
| 2022 | 111.9 | 113.6 | 92.9 | 84.9 | 8.05 | 0.975 |
| 2023 | 114.1 | 115.8 | 94.7 | 86.6 | 8.20 | 0.975 |
| 2024 | 116.4 | 118.1 | 96.7 | 88.3 | 8.40 | 0.975 |
| 2025 | 118.8 | 120.6 | 98.6 | 90.1 | 8.50 | 0.975 |
| | | | | | | |
| Thereafter | +2%/yr | +2%/yr | +2%/yr | +2%/yr | +2%/yr | 0.975 |
Notes:
(1) West Texas Intermediate at Cushing Oklahoma 40 degrees API/0.5% sulphur
(2) Edmonton Light Sweet 40 degrees API, 0.3% sulphur
(3) Bow River at Hardisty Alberta (Heavy stream)
(4) Heavy crude oil 12 degrees API at Hardisty Alberta (after deduction of blending costs to reach pipeline quality)
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HARVEST2010 RECONCILIATIONTABLE– FORECASTPRICES ANDCOSTS
| | | TOTAL BARREL OF OIL EQUIVALENT (boe) | |
| | | Gross Proved | | | Gross Proved Plus Probable | |
| FACTORS | | (mmboe) | | | (mmboe) | |
| December 31, 2009 | | 140.3 | | | 199.5 | |
| Technical Revisions | | 3.8 | | | (3.6 | ) |
| Drilling Extensions | | 4.4 | | | 7.5 | |
| Infill Drilling | | 3.7 | | | 5.0 | |
| Improved Recovery | | 1.0 | | | 0.1 | |
| Acquisitions/Divestitures | | 102.6 | | | 270.7 | |
| Production | | (17.9 | ) | | (17.9 | ) |
| December 31, 2010(1) | | 237.9 | | | 461.3 | |
Note:
(1) Columns may not add due to rounding.
Corporate Profile
Harvest, a wholly-owned subsidiary of KNOC, is a significant operator in Canada’s energy industry with an integrated structure with upstream (exploration, development and production of crude oil and natural gas) and downstream (refining and marketing of distillate, gasoline and fuel oil) segments. Our upstream oil and gas production is weighted approximately 70% to crude oil and liquids and 30% to natural gas, and is complemented by our long-life refining and marketing business. Harvest's outstanding debentures are traded on the TSX under the symbols "HTE.DB.D", "HTE.DB.E", "HTE.DB.F" and "HTE.DB.G".
KNOC is a state owned oil and gas company engaged in the exploration and production of oil and gas along with storing petroleum resources. KNOC will fully establish itself as a global government-run petroleum company by applying ethical, sustainable, and environment-friendly management and by taking corporate social responsibility seriously at all times. For more information on KNOC, please visit their website atwww.knoc.co.kr/ENG/main.jsp.
Advisory
Certain information in this press release, including management’s assessment of future plans and operations, contains forward-looking information that involves risks and uncertainties. Such risks and uncertainties include, but are not limited to, risks associated with: imprecision of reserve estimates; conventional oil and natural gas operations; the volatility in commodity prices, interest rates and currency exchange rates; realizing the value of acquisitions; general economic, market and business conditions; changes in environmental legislation and regulations; the availability of sufficient capital from internal and external sources; and, such other risks and uncertainties described from time to time in Harvest’s regulatory reports and filings made with securities regulators.
Forward-looking statements in this press release may include, but are not limited to, statements made throughout with reference to production volumes, refinery throughput volumes, royalty rates, operating costs, commodity prices, administrative costs, price risk management activities, acquisitions and dispositions, capital spending, reserve estimates, access to credit facilities, income taxes, cash from operating activities, and regulatory changes. For this purpose, any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements often contain terms such as “may”, “will”, “should”, “anticipate”, “expects” and similar expressions.
Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Harvest assumes no obligation to update forward-looking statements should circumstances or management’s estimates or opinions change. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
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Investor & Media Contacts:
John Zahary, President & CEO
Jeremy Dietz, Investor Relations
Corporate Head Office:
Harvest Operations
2100, 330 – 5th Avenue S.W.
Calgary, AB Canada T2P 0L4
Phone: (403) 265-1178
Toll Free Investor Mailbox: (866) 666-1178
Email: information@harvestenergy.ca
Website: www.harvestenergy.ca
