EX-99.1 10 eh1700424_ex9901.htm EXHIBIT 99.1
EXHIBIT 99.1
Supplementary Oil & Gas Information for
the Fiscal Year Ended December 31, 2016

Supplementary Oil and Gas Information (Unaudited)
 
This supplementary crude oil and natural gas information is provided in accordance with the United States Financial Accounting Standards Board (“FASB”) Topic 932 – “Extractive Activities – Oil and Gas” and where applicable, financial information is prepared in accordance with International Financial Reporting Standards (“IFRS”).
For the years ended December 31, 2016, 2015, 2014, and 2013 the Company filed its reserves information under National Instrument 51-101 – “Standards of Disclosure of Oil and Gas Activities” (“NI 51-101”), which prescribes the standards for the preparation and disclosure of reserves and related information for companies listed in Canada.
There are significant differences to the type of volumes disclosed and the basis from which the volumes are economically determined under the United States Securities and Exchange Commission (“SEC”) requirements and NI 51-101. The SEC requires disclosure of net reserves, after royalties, using 12-month average prices and current costs; whereas NI 51-101 requires gross reserves, before royalties, using forecast pricing and costs. Therefore the difference between the reported numbers under the two disclosure standards can be material.
For the purposes of determining proved crude oil and natural gas reserves for SEC requirements as at December 31, 2016, 2015, 2014, and 2013 the Company used the 12-month average price, defined by the SEC as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. The Company has used the following 12-month average benchmark prices to determine its 2016 reserves for SEC requirements.
 
Crude Oil and NGLs                    
Natural Gas
        
                                           
WTI Cushing        Canadian   Cromer    North Sea    Edmonton   Henry Hub      
BC Westcoast
  
 Oklahoma
  
WCS
  
Light Sweet
  
  LSB
  
Brent
  
C5+
 
Louisiana
  
AECO
  
  Station 2
  
                                   
(US$/bbl)
  
 (C$/bbl)
  
   (C$/bbl)
  
   (C$/bbl)
  
(US$/bbl)
  
(C$/bbl)
  
  (US$/MMBtu)
  
  (C$/MMBtu)
  
   (C$/MMBtu)
  
42.75
  
38.13
  
52.08
  
50.64
  
44.49
  
55.36
  
2.55
  
2.17
  
1.66
  
 
A foreign exchange rate of US$1.00/C$1.3228 was used in the 2016 evaluation, determined on the same basis as the 12-month average price.
 
Net Proved Crude Oil and Natural Gas Reserves
The Company retains Independent Qualified Reserves Evaluators to evaluate the Company’s proved crude oil, bitumen, synthetic crude oil (“SCO”), natural gas, and natural gas liquids (“NGLs”) reserves.
— For the years ended December 31, 2016, 2015, 2014, and 2013, the reports by GLJ Petroleum Consultants Ltd. covered 100% of the Company’s SCO reserves. With the inclusion of non-traditional resources within the definition of “oil and gas producing activities” in the SEC’s modernization of oil and gas reporting rules, effective January 1, 2010 these reserves volumes are included within the Company’s crude oil and natural gas reserves totals.
— For the years ended December 31, 2016, 2015, 2014, and 2013, the reports by Sproule Associates Limited and Sproule International Limited covered 100% of the Company’s crude oil, bitumen, natural gas and NGLs reserves.
Proved crude oil and natural gas reserves, as defined within the SEC’s Regulation S-X, are the estimated quantities of oil and gas that by analysis of geoscience and engineering data demonstrate with reasonable certainty to be economically producible, from a given date forward, from known reservoirs under existing economic conditions, operating methods and government regulations. Developed crude oil and natural gas reserves are reserves of any category that can be expected to be recovered from existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of drilling a new well; and through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. Undeveloped crude oil and natural gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.
Estimates of crude oil and natural gas reserves are subject to uncertainty and will change as additional information regarding producing fields and technology becomes available and as future economic and operating conditions change.
 

The following tables summarize the Company’s proved and proved developed crude oil and natural gas reserves, net of royalties, as at December 31, 2016, 2015, 2014, and 2013:
 
   
North America
                
Crude Oil and NGLs (MMbbl)
  
Synthetic
Crude Oil
    
Bitumen(1)
    
Crude Oil
& NGLs
    
North
America
Total
    
North
Sea
    
Offshore
Africa
    
Total
  
Net Proved Reserves
                                          
Reserves, December 31, 2013
    
1,925
      
1,068
      
380
      
3,373
      
232
      
80
      
3,685
  
Extensions and discoveries
    
–
      
112
      
11
      
123
      
–
      
–
      
123
  
Improved recovery
    
–
      
10
      
29
      
39
      
–
      
–
      
39
  
Purchases of reserves in place
    
–
      
–
      
54
      
54
      
–
      
–
      
54
  
Sales of reserves in place
    
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Production
    
(38
)
    
(76
)
    
(40
)
    
(154
)
    
(6
)
    
(4
)
    
(164
)
Economic revisions due to prices
    
(89
)
    
11
      
–
      
(78
)
    
(9
)
    
1
      
(86
)
Revisions of prior estimates
    
(18
)
    
23
      
47
      
52
      
(6
)
    
–
      
46
  
Reserves, December 31, 2014
    
1,780
      
1,148
      
481
      
3,409
      
211
      
77
      
3,697
  
Extensions and discoveries
    
208
      
25
      
10
      
243
      
–
      
–
      
243
  
Improved recovery
    
–
      
17
      
9
      
26
      
–
      
–
      
26
  
Purchases of reserves in place
    
–
      
9
      
11
      
20
      
–
      
–
      
20
  
Sales of reserves in place
    
–
      
–
      
(7
)
    
(7
)
    
–
      
–
      
(7
)
Production
    
(44
)
    
(84
)
    
(44
)
    
(172
)
    
(8
)
    
(6
)
    
(186
)
Economic revisions due to prices
    
339
      
153
      
5
      
497
      
(51
)
    
2
      
448
  
Revisions of prior estimates
    
–
      
(5
)
    
6
      
1
      
(33
)
    
–
      
(32
)
Reserves, December 31, 2015
    
2,283
      
1,263
      
471
      
4,017
      
119
      
73
      
4,209
  
Extensions and discoveries
    
–
      
46
      
15
      
61
      
–
      
–
      
61
  
Improved recovery
    
–
      
5
      
14
      
19
      
1
      
2
      
22
  
Purchases of reserves in place
    
–
      
3
      
15
      
18
      
–
      
–
      
18
  
Sales of reserves in place
    
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Production
    
(45
)
    
(71
)
    
(43
)
    
(159
)
    
(9
)
    
(8
)
    
(176
)
Economic revisions due to prices
    
108
      
23
      
(19
)
    
112
      
(10
)
    
1
      
103
  
Revisions of prior estimates
    
196
      
32
      
51
      
279
      
(8
)
    
6
      
277
  
Reserves, December 31, 2016
    
2,542
      
1,301
      
504
      
4,347
      
93
      
74
      
4,514
  
Net proved developed reserves
                                                        
December 31, 2013
    
1,621
      
431
      
298
      
2,350
      
59
      
30
      
2,439
  
December 31, 2014
    
1,631
      
401
      
358
      
2,390
      
39
      
21
      
2,450
  
December 31, 2015
    
2,194
      
411
      
341
      
2,946
      
3
      
41
      
2,990
  
December 31, 2016
    
2,527
      
384
      
353
      
3,264
      
12
      
31
      
3,307
  
(1) Bitumen as defined by the SEC, “is petroleum in a solid or semi-solid state in natural deposits with a viscosity greater than 10,000 centipoise measured at original temperature in the deposit and atmospheric pressure, on a gas free basis.” Under this definition, all the Company’s thermal and primary heavy crude oil reserves have been classified as bitumen.


2
Natural Gas (Bcf)
  
North
America
    
North
Sea
    
Offshore
Africa
    

Total
  
Net Proved Reserves
                        
Reserves, December 31, 2013
    
3,234
      
92
      
37
      
3,363
  
Extensions and discoveries
    
119
      
–
      
–
      
119
  
Improved recovery
    
443
      
–
      
–
      
443
  
Purchases of reserves in place
    
1,229
      
–
      
–
      
1,229
  
Sales of reserves in place
    
–
      
–
      
–
      
–
  
Production
    
(514
)
    
(2
)
    
(6
)
    
(522
)
Economic revisions due to prices
    
576
      
(6
)
    
1
      
571
  
Revisions of prior estimates
    
(70
)
    
–
      
2
      
(68
)
Reserves, December 31, 2014
    
5,017
      
84
      
34
      
5,135
  
Extensions and discoveries
    
237
      
–
      
–
      
237
  
Improved recovery
    
242
      
–
      
–
      
242
  
Purchases of reserves in place
    
344
      
–
      
–
      
344
  
Sales of reserves in place
    
(35
)
    
–
      
–
      
(35
)
Production
    
(587
)
    
(13
)
    
(9
)
    
(609
)
Economic revisions due to prices
    
(935
)
    
(8
)
    
3
      
(940
)
Revisions of prior estimates
    
240
      
(25
)
    
(7
)
    
208
  
Reserves, December 31, 2015
    
4,523
      
38
      
21
      
4,582
  
Extensions and discoveries
    
176
      
–
      
–
      
176
  
Improved recovery
    
166
      
–
      
3
      
169
  
Purchases of reserves in place
    
85
      
–
      
–
      
85
  
Sales of reserves in place
    
(5
)
    
–
      
–
      
(5
)
Production
    
(571
)
    
(14
)
    
(11
)
    
(596
)
Economic revisions due to prices
    
(572
)
    
(10
)
    
1
      
(581
)
Revisions of prior estimates
    
792
      
11
      
11
      
814
  
Reserves, December 31, 2016
    
4,594
      
25
      
25
      
4,644
  
Net proved developed reserves
                                
December 31, 2013
    
2,342
      
72
      
27
      
2,441
  
December 31, 2014
    
3,585
      
64
      
22
      
3,671
  
December 31, 2015
    
2,883
      
26
      
15
      
2,924
  
December 31, 2016
    
2,805
      
18
      
18
      
2,841
  

3

Capitalized Costs Related to Crude Oil and Natural Gas Activities
   
2016
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Proved properties
  
$
88,685
    
$
7,380
    
$
5,132
    
$
101,197
  
Unproved properties
    
2,306
      
–
      
76
      
2,382
  
     
90,991
      
7,380
      
5,208
      
103,579
  
Less: accumulated depletion and depreciation
    
(41,139
)
    
(5,584
)
    
(3,797
)
    
(50,520
)
Net capitalized costs
  
$
49,852
    
$
1,796
    
$
1,411
    
$
53,059
  
 
    2015  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Proved properties
  
$
84,883
    
$
7,414
    
$
5,173
    
$
97,470
  
Unproved properties
    
2,500
      
–
      
86
      
2,586
  
     
87,383
      
7,414
      
5,259
      
100,056
  
Less: accumulated depletion and depreciation
    
(37,641
)
    
(5,264
)
    
(3,659
)
    
(46,564
)
Net capitalized costs
  
$
49,742
    
$
2,150
    
$
1,600
    
$
53,492
  
 
   
2014
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Proved properties
  
$
82,554
    
$
6,182
    
$
3,858
    
$
92,594
  
Unproved properties
    
3,426
      
–
      
131
      
3,557
  
     
85,980
      
6,182
      
3,989
      
96,151
  
Less: accumulated depletion and depreciation
    
(33,750
)
    
(4,049
)
    
(2,890
)
    
(40,689
)
Net capitalized costs
  
$
52,230
    
$
2,133
    
$
1,099
    
$
55,462
  
 
 
4
Costs Incurred in Crude Oil and Natural Gas Activities
 
2016
  
(millions of Canadian dollars)
North
America
  
North
Sea
  
Offshore
Africa
  
Total
  
Property acquisitions
                
Proved
  
$
50
    
$
–
    
$
–
    
$
50
  
Unproved
    
–
      
–
      
–
      
–
  
Exploration
    
17
      
–
      
9
      
26
  
Development
    
4,125
      
186
      
116
      
4,427
  
Costs incurred
  
$
4,192
    
$
186
    
$
125
    
$
4,503
  
 
    2015  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Property acquisitions
                        
Proved
  
$
(556
)
  
$
–
    
$
–
    
$
(556
)
Unproved
    
(446
)
    
–
      
–
      
(446
)
Exploration
    
87
      
–
      
35
      
122
  
Development
    
2,845
      
13
      
524
      
3,382
  
Costs incurred
  
$
1,930
    
$
13
    
$
559
    
$
2,502
  
 
    2014  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Property acquisitions
                        
Proved
  
$
3,323
    
$
1
    
$
–
    
$
3,324
  
Unproved
    
873
      
–
      
–
      
873
  
Exploration
    
230
      
–
      
87
      
317
  
Development
    
6,263
      
485
      
193
      
6,941
  
Costs incurred
  
$
10,689
    
$
486
    
$
280
    
$
11,455
  
 

 
5

Results of Operations from Crude Oil and Natural Gas Producing Activities

The Company’s results of operations from crude oil and natural gas producing activities for the years ended December 31, 2016, 2015, and 2014 are summarized in the following tables:

   
2016
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Crude oil and natural gas revenue, net of royalties and blending costs
  
$
7,791
    
$
565
    
$
577
    
$
8,933
  
Production
    
(3,478
)
    
(403
)
    
(200
)
    
(4,081
)
Transportation
    
(623
)
    
(48
)
    
(2
)
    
(673
)
Depletion, depreciation and amortization
    
(4,127
)
    
(458
)
    
(262
)
    
(4,847
)
Asset retirement obligation accretion
    
(95
)
    
(35
)
    
(12
)
    
(142
)
Petroleum revenue tax
    
–
      
333
      
–
      
333
  
Income tax
    
143
      
18
      
(22
)
    
139
  
Results of operations
  
$
(389
)
  
$
(28
)
  
$
79
    
$
(338
)
 
   
2015
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Crude oil and natural gas revenue, net of royalties and blending costs
  
$
10,362
    
$
623
    
$
460
    
$
11,445
  
Production
    
(3,935
)
    
(544
)
    
(223
)
    
(4,702
)
Transportation
    
(674
)
    
(61
)
    
(2
)
    
(737
)
Depletion, depreciation and amortization (1)
    
(4,810
)
    
(388
)
    
(273
)
    
(5,471
)
Asset retirement obligation accretion
    
(124
)
    
(39
)
    
(10
)
    
(173
)
Petroleum revenue tax
    
–
      
243
      
–
      
243
  
Income tax
    
(214
)
    
83
      
20
      
(111
)
Results of operations
  
$
605
    
$
(83
)
  
$
(28
)
  
$
494
  
(1) Includes the impact of the derecognition of $96 million of exploration and evaluation assets related to the Company’s withdrawal from Block CI-514 in Côte d’Ivoire, Offshore Africa.
  
 
   
2014
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Crude oil and natural gas revenue, net of royalties and blending costs
  
$
15,385
    
$
696
    
$
460
    
$
16,541
  
Production
    
(4,533
)
    
(496
)
    
(212
)
    
(5,241
)
Transportation
    
(593
)
    
(5
)
    
(1
)
    
(599
)
Depletion, depreciation and amortization
    
(4,497
)
    
(269
)
    
(105
)
    
(4,871
)
Asset retirement obligation accretion
    
(145
)
    
(38
)
    
(10
)
    
(193
)
Petroleum revenue tax
    
–
      
147
      
–
      
147
  
Income tax
    
(1,411
)
    
(22
)
    
(29
)
    
(1,462
)
Results of operations
  
$
4,206
    
$
13
    
$
103
    
$
4,322
  
 
 
6
 
Standardized Measure of Discounted Future Net Cash Flows from Proved Crude Oil and Natural Gas Reserves and Changes Therein
The following standardized measure of discounted future net cash flows from proved crude oil and natural gas reserves has been computed using the 12-month average price, defined by the SEC as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period, costs as at the balance sheet date and year-end statutory income tax rates. A discount factor of 10% has been applied in determining the standardized measure of discounted future net cash flows. The Company does not believe that the standardized measure of discounted future net cash flows will be representative of actual future net cash flows and should not be considered to represent the fair value of the crude oil and natural gas properties. Actual net cash flows will differ from the presented estimated future net cash flows due to several factors including:
— Future production will include production not only from proved properties, but may also include production from probable and possible reserves;
— Future production of crude oil and natural gas from proved properties will differ from reserves estimated;
— Future production rates will vary from those estimated;
— Future prices and costs rather than 12-month average prices and costs as at the balance sheet date will apply;
— Economic factors such as interest rates, income tax rates, regulatory and fiscal environments and operating conditions will change;
— Future estimated income taxes do not take into account the effects of future exploration and evaluation expenditures; and
— Future development and asset retirement obligations will differ from those estimated.
Future net revenues, development, production and asset retirement obligation costs have been based upon the estimates referred to above. The following tables summarize the Company’s future net cash flows relating to proved crude oil and natural gas reserves based on the standardized measure as prescribed in FASB Topic 932 – “Extractive Activities – Oil and Gas”:

   
2016
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Future cash inflows
  
$
206,729
    
$
5,999
    
$
4,129
    
$
216,857
  
Future production costs
    
(92,070
)
    
(3,284
)
    
(1,659
)
    
(97,013
)
Future development costs and asset retirement obligations
    
(42,167
)
    
(3,249
)
    
(1,234
)
    
(46,650
)
Future income taxes
    
(15,396
)
    
280
      
(125
)
    
(15,241
)
Future net cash flows
    
57,096
      
(254
)
    
1,111
      
57,953
  
10% annual discount for timing of future cash flows
    
(33,590
)
    
271
      
(319
)
    
(33,638
)
Standardized measure of future net cash flows
  
$
23,506
    
$
17
    
$
792
    
$
24,315
  
 
   
2015
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Future cash inflows
  
$
225,032
    
$
10,258
    
$
4,936
    
$
240,226
  
Future production costs
    
(100,924
)
    
(5,973
)
    
(2,026
)
    
(108,923
)
Future development costs and asset retirement obligations
    
(47,323
)
    
(5,228
)
    
(1,297
)
    
(53,848
)
Future income taxes
    
(16,173
)
    
791
      
(430
)
    
(15,812
)
Future net cash flows
    
60,612
      
(152
)
    
1,183
      
61,643
  
10% annual discount for timing of future cash flows
    
(34,050
)
    
213
      
(270
)
    
(34,107
)
Standardized measure of future net cash flows
  
$
26,562
    
$
61
    
$
913
    
$
27,536
  


7

   
2014
  
(millions of Canadian dollars)
  
North
America
    
North
Sea
    
Offshore
Africa
    
Total
  
Future cash inflows
  
$
322,100
    
$
24,786
    
$
8,853
    
$
355,739
  
Future production costs
    
(123,055
)
    
(9,708
)
    
(2,171
)
    
(134,934
)
Future development costs and asset retirement obligations
    
(56,651
)
    
(8,515
)
    
(1,863
)
    
(67,029
)
Future income taxes
    
(24,578
)
    
(4,816
)
    
(1,178
)
    
(30,572
)
Future net cash flows
    
117,816
      
1,747
      
3,641
      
123,204
  
10% annual discount for timing of future cash flows
    
(67,899
)
    
(813
)
    
(1,672
)
    
(70,384
)
Standardized measure of future net cash flows
  
$
49,917
    
$
934
    
$
1,969
    
$
52,820
  

The principal sources of change in the standardized measure of discounted future net cash flows are summarized in the following table:

(millions of Canadian dollars)
  
2016
    
2015
    
2014
  
Sales of crude oil and natural gas produced, net of production costs
  
$
(4,159
)
  
$
(5,107
)
  
$
(10,321
)
Net changes in sales prices and production costs
    
(7,305
)
    
(43,489
)
    
8,575
  
Extensions, discoveries and improved recovery
    
700
      
3,201
      
4,428
  
Changes in estimated future development costs
    
1,750
      
5,204
      
(2,821
)
Purchases of proved reserves in place
    
352
      
624
      
4,425
  
Sales of proved reserves in place
    
(2
)
    
(165
)
    
–
  
Revisions of previous reserve estimates
    
3,668
      
5,298
      
(1,306
)
Accretion of discount
    
3,527
      
6,645
      
5,154
  
Changes in production timing and other
    
(2,137
)
    
(3,452
)
    
5,895
  
Net change in income taxes
    
385
      
5,957
      
(1,051
)
Net change
    
(3,221
)
    
(25,284
)
    
12,978
  
Balance – beginning of year
    
27,536
      
52,820
      
39,842
  
Balance – end of year
  
$
24,315
    
$
27,536
    
$
52,820
  

 
 
8