Financial & Operational Highlights

2011 was a significant year of growth for Arcan as it continued to revive and transition the nearly 60-year-old Swan Hills reef reservoir into a horizontal multi-stage fractured light oil resource play. On the drilling side, Arcan drilled 32 horizontal multi-stage frac’ed wells in 2011 and ended the year with a total of 55 horizontal wells. Arcan anticipates it will have a total of up to 95 wells by the end of 2012 with more than 400 drilling locations throughout its 171 net sections of Swan Hills acreage.

At the Start of 2010 Arcan had 93 gross (61 net) sections of land, approximately 600 BOE per day and 6.4 MMBOE of reserves worth approximately $123 million (P+P PV 10). By the end of 2010 Arcan had 160 gross (150 net) sections of land, over 2,400 BOE per day and 18.7 MMBOE of reserves worth approximately $428 million (P+P PV 10) in the Swan Hills. In October of 2011, Arcan has 176 gross (171 net) sections of land, over 3,500 BOE per day and 33.4 MMBOE of reserves worth approximately $734 million (P+P PV 10) in the Swan Hills.

Arcan is spearheading the development of the Swan Hills Beaverhill Lake reservoir. With recent well results and re-entries, Arcan has internally calculated a resource of Discovered Petroleum Initially in Place (DPIIP) of over 700 MMBOE net to Arcan. DPIIP only includes discovered petroleum even though there is no certainty that it will be commercially viable to produce any portion of those resources, unlike other industry terms like Total Petroleum Initially-In-Place (TPIIP) which includes discovered and undiscovered reserves that may never be discovered and is being utilized by the industry to characterise many resource plays. In determining DPIIP, Arcan used a rigorous petrophysical evaluation of over 100 data points to identify all pay intervals within the Swan Hill complex and their resulting porosity and net thickness values and advanced modeling software was used to determine the vertical and lateral heterogeneities and extent of the reservoir bodies across the fairway. In-place volumes were calculated using a discrete set of Phi-h contours that were generated with a three percent porosity cut off. Based on waterflood recoveries of up to 40 percent in offsetting areas of the reef, Arcan is of the view that this has the potential to translate into recoveries over 270 MMBOE (95 percent light oil), with Arcan having recorded u recoverable reserves at 33.4 MMBOE of its total 35.2 MMBOE in the $7.17 per share NAV at October 7, 2011.

 

Financial and Operating Summary for the Year Ended December 31, 2010:

For full details as well as historic information please see www.sedar.com

	2009	2010
Production (boe/d)	1,375	2,243
Royalties ($boe)	$14.18	$17.96
Operating Costs ($/boe)	$16.11	$13.57
Operating Netback ($/boe)	$24.10	$36.36
Cash Flow (per/share)	$0.11	$0.32

 

Arcan's issued and outstanding share capital consists of the following (000's):

	Year Ended December 2009	Year Ended December 2010	Nov. 28, 2011
Common shares	47,940,000	87,670,000	88,110,000
Warrants	586,000	-	-
Performance options	750,000	-	-
Stock options	4,4,671,000	8,390,000	8,440,000
Debentures (Mature Feb, 2016)	-	-	$86.25 million
Debentures (Mature Oct, 2018)	-	-	$85.0 million