In 2012, Cavalier Energy focused its efforts on recruiting its leadership team and developing the project strategy, including the project size, use of technologies and execution approach. These actions provided the necessary information for the regulatory application and the company's development strategy.
In November 2012, Cavalier Energy submitted regulatory applications for the initial 10,000 Bbl/d phase of the Hoole Grand Rapids development ("Hoole Grand Rapids Phase 1") to the Energy Resources Conservation Board ("ERCB") and Alberta Environment and Sustainable Resource Development ("AESRD"). Cavalier Energy anticipates regulatory approvals to be received in the first half of 2014. Construction of Hoole Grand Rapids Phase 1 is dependent upon the receipt of regulatory approvals, sanctioning by the Board of Directors, and securing funding.
During 2013, Cavalier Energy plans to complete the front end engineering and design work for Hoole Grand Rapids Phase 1 along with geotechnical work and the drilling of additional source water and disposal wells. Estimated costs of these activities totalling $15 million are expected to be funded with drawings on Cavalier Energy's $40 million credit facility.
In January 2013, Cavalier Energy received an updated independent evaluation of the Hoole Project, effective December 31, 2012, from the Company's independent reserves evaluators. The evaluation ascribed 93 million barrels of probable reserves with a net present value (discounted at 10 percent) of $379 million to Hoole Grand Rapids Phase 1, which covers approximately two sections of the Hoole Project. Over and above the aforementioned reserves, the evaluation ascribed 719 million barrels of economic contingent resources (best estimate) with a net present value (discounted at 10 percent) of $1.949 billion to the remaining approximate 54 sections of the Hoole Project (the "Remaining Hoole Leases") within the Grand Rapids formation. The updated estimates and reclassification of Hoole Project volumes from economic contingent resources to probable reserves follows Cavalier Energy's November 2012 regulatory applications.
The reserves assigned to Hoole Grand Rapids Phase 1 are summarized in the Reserves section of this document. Results of the evaluation of the Remaining Hoole Leases are as follows:
NPV of Future Net Economic Revenue(1) Contingent (discountedClassification/Level of Certainty(1) DEBIP(1) Resources(1) at 10%)---------------------------------------------------------------------------- (MMBbl)(2) (MMBbl)(2) ($MM)High Estimate 1,656 903 2,982Best Estimate 1,469 719 1,949Low Estimate 1,167 511 946--------------------------------------------------------------------------------------------------------------------------------------------------------(1) See Oil Sands Resource Notes in the Advisories section of this document.(2) MMBbl means millions of barrels.
Future Exploration Portfolio
Cavalier Energy holds 128,000 acres of mineral rights located on the Grosmont Carbonate Trend. Industry peers have begun to explore this resource and have constructed pilot projects to refine extraction technologies. Cavalier Energy is monitoring industry developments and will develop future plans for its holdings based on the results of these pilot projects.
