From 4th quarter new release.
RESERVES
Despite no drilling in the first five months and less emphasis on
exploration drilling in the final seven months, as production volumes were
restored, Upton added an encouraging 2.4 million barrels of reserves split 1.4
million to proven and 1.0 million to probable.
Year end reserves were 12.9 million barrels; 8.9 million proven and 4.0
million probable. Reserves were adjusted downward due to one million barrels
sold in December. In addition, reserves at Midale were adjusted as the area
saw additional development in 1999. Proven reserves were increased 400
thousand barrels while probable reserves were revised downward by 800 thousand
barrels.
Based on fourth quarter average production of 4,252 barrels per day,
Upton's proven reserve life index is 5.7 years and the proven plus
half-probable is 7.6 years. Upton's 2000 capital spending program will balance
production growth and reserve additions. Increased activity at Tracey
Mountain and twelve exploration wells of the fifty planned, will target
reserve additions. A favourable price outlook helped increase the value of
reserves substantially. Independent engineering (WTI $21 in 2000, $20 in 2001,
escalating following), estimates future net revenues before income taxes,
discounted at 15 percent at $80.4 million for total reserves ($87.5 million at
PV12) and $70.5 million for established reserves ($76.4 million at PV12) up 45
and 38 percent respectively from 1998. Reserve value is now at its highest
level in Upton's history.
OUTLOOK
An aggressive first quarter 2000 drilling plan includes twelve
development and four exploration wells at an average working interest of 84.5
percent for capital expenditures of $8 million. Upton's plan is to continue to
advance production toward its 2000 exit rate target of 5,000 barrels per day
and has initially set targets of a 4,500 barrel per day average production and
at US $20 WTI, $20.1 million cash flow and $1.13 cash flow per share. Both
current production and industry oil price forecasts are ahead of targets.
Upton plans to review its targets following first quarter drilling, however,
with our exceptional leverage to higher oil prices, a sensitivity using US $22
WTI and 4,700 barrel per day average production for 2000 would result in a
cash flow of $25 million and $1.40 per share cash flow.
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