EARNINGS / Hegco Announces Oil & Gas Reserves
ASE SYMBOL: HEG
JULY 2, 1998
EDMOND, OKLAHOMA--HEGCO Canada Inc. is pleased to announce that it
has received an Engineering Report of Oil & Gas Reserves as of May
1, 1998. The report was prepared by Rush-Andrus Engineering, an
independent third part engineering firm located in Edmond,
Oklahoma, and is dated June 15, 1998. A copy of the summary
letter is available upon request.
Four field are included within the engineering report the fields
include: El Grande Prospect; N.E. Garber Prospect; Ponca City
Field Project and the Three Sands Field. All dollar amounts are
stated in U.S. Dollars. The summary of pre-tax cash flow
projections are set forth in the following table:
/T/
SUMMARY OF PRE-TAX CASH FLOW PROJECTIONS
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PRODUCTION
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HEGCO W.I. NET
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MBBL MMCF MBBL MMCF
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Proved Producing 522 0 417 0
Proved Non-Producing 416 546 328 431
Proved Behind Pipe 492 2818 388 2254
Proved Undeveloped 3831 0 3035 0
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Total Proved 5261 3364 4168 2685
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Probable Additional 0 112206 0 94071
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Total Reserves: 5261 15570 4168 96756
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NET CUM. 10 Percent
OPERATING OPERATING CASH PV CUM.CASH
REVENUE EXPENSES FLOW FLOW
M$ M$ M$ M$
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Proved Producing 6388 1842 4093 2699
Proved Non-Producing 5460 2049 2822 1792
Proved Behind Pipe 11001 2636 7206 3201
Proved Undeveloped 46437 12330 24863 14124
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Total Proved 69286 18857 38984 21816
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Probable Additional 211661 5809 182595 115311
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Total Reserves: 280947 24666 221579 137127
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/T/
- Note: Net operating revenue is before severance / AdV taxes.
- Note: The cash flow estimates contained in this table include
the capital costs associated with developing the designated
reserves.
- Note: It is not intended as, nor should it be considered an
indication of Fair Market Value.
The oil reserves are calculated based upon a $13.75 spot price
while the gas reserves are calculated based upon a price of
$2.25/mcf. The value of the reserves will be increased or
decreased depending on the spot price of oil and gas. Hegco's
average price per barrel oil for the first three quarters of
fiscal ending March 31, 1998 has been $17.41 per barrel. The
category Total Reserves includes Probable Additional reserves
which have been risked at a probability of success factor of 0.50.
Within the category Total Proved is a classification of Proved
Undeveloped which have been risked at a probability of success
factor of 0.75. Highlights from the reserve report and
calculation from US dollars to Canadian dollars are set forth
below. The conversion rate from US dollars to Canadian dollars
utilized was 1.4706.
/T/
CUM. CASH CUM. CASH
BARRELS OF MCF FLOW FLOW
CATEGORY OIL OF GAS U.S.DOLLARS CDN DOLLARS
-------- ---------- --------- ----------- -----------
Total Proved
Hegco W.I. 5,261,000 3,364,000 - -
Total Proved
Net 4,168,000 2,685,000 $38,984,000 $57,329,870
Total Reserves
Hegco W.I. 5,261,000 115,570,000 - -
Total Reserves
Net 4,168,000 96,756,000 $221,579,000 $325,854,000
/T/
The Probable Additional category includes reserves in the El
Grande Prospect. The Engineering Report forecast for the gross
reserves developed by reentering/drilling the El Grande well is
limited to drilling and completing 8 Arbuckle and 8 Penters wells
within the confines of the El Grande Prospect. The report also
states, "Interpreted probable areal extent of the El Grande
productive reservoir is between ten gas units (6,400 acres) and
thirty gas units (19,200 acres) with possible additional." Hegco
currently holds interest in thirty-three possible gas units (based
on 640-acre spacing).
Once the El Grande well is completed a updated report will be
obtained to recategorize the reserves associated with the El
Grande well and increase the area for evaluation of reserves.
On behalf of the Board
By: Douglas C. Hewitt
Chairman of the Board
CEO
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