Progress Energy’s Town Area Montney Discovered-Petroleum-Initially-In-Place Assessed at 27 Tcf

Sep 12, 2011

Best Estimate Contingent Resource of 8 Tcf

CALGARY, Sept. 12, 2011 /CNW/ – Progress Energy Resources Corp.
(“Progress” or the “Company”) (TSX:PRQ) announced today that
independent evaluators GLJ Petroleum Consultants (“GLJ”) recently
completed an evaluation of the discovered-petroleum-initially-in-place
(“DPIIP”) and Contingent Resources for the Montney formation in the
Town area which represents a portion of the Company’s extensive
northeast British Columbia Foothills land base. The report covers 217
net sections or 139,150 net acres of Progress lands in the Foothills of
northeast British Columbia (the “Evaluated Area”). The Evaluated Area
represents just 22 percent of Progress’ Montney land base in the
Foothills and approximately 17 percent of the Company’s entire Montney
land base. The Town area includes the Company’s properties at Town
South, Town North and Gundy.

All GLJ estimates of DPIIP and Contingent Resource are as at August 31,
2011 and based on GLJ forecast pricing as at July 2011 and have been
prepared in accordance with the Canadian Oil and Gas Evaluation
Handbook.  There is no certainty that it will be commercially viable to
produce any of the resources. The key findings of the report are as
follows:

  • The estimate of DPIIP for the Evaluated Area is 27.3 trillion cubic feet
    (“Tcf”) or approximately 126 billion cubic feet (“Bcf”) per section on
    average;
  • The best estimate of the Contingent Resource for the Evaluated Area was
    8.1 Tcf, with the high case estimate being 10.2 Tcf and the low case
    estimate being 5.4 Tcf;
  • Progress previously reported that included in its 2010 year-end reserve
    evaluation, completed by GLJ with an effective date of December 31,
    2010, were proved plus probable Montney reserves of approximately 0.6
    Tcf gas equivalent;
  • The net present value, reflecting the recovery of capital costs using a
    8% discount rate, of the best estimate of Contingent Resources is $8.6
    billion, equivalent to approximately $37 per share;

“This evaluation further validates the scope and scale of the North
Montney resource,” said Michael Culbert, President and CEO of
Progress.  “The North Montney is quickly becoming recognized as a
premier area within the Montney fairway.  The economics for drilling in
this area are healthy given the strong production rates, sweet gas and
the inclusion of high value natural gas liquids.  As well, our
horizontal wells typically qualify for the British Columbia deep
drilling royalty credit of approximately $2 million per well.”

DPIIP is the quantity of petroleum that is estimated, as of a given
date, to be contained in known accumulations prior to production. DPIIP
is typically broken down into four components including production,
reserves, contingent resource and discovered unrecoverable petroleum
initially in place.  Contingent Resources are those quantities of
petroleum estimated, as of a given date, to be potentially recoverable
from known accumulations using established technology or technology
under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies.
Contingencies may include factors such as economic, legal,
environmental, political and regulatory matters, or a lack of markets.
It is also appropriate to classify as Contingent Resources the
estimated discovered recoverable quantities associated with a project
in the early evaluation stage. The primary contingency which prevents
the classification of the Contingent Resources as reserves is the
current early stage of development.  Additional drilling, completion,
and testing data is generally required before Progress can commit to
their development. As additional drilling takes places, it is expected
that the Contingent Resources will be booked as reserves. Estimates of
DPIIP and Contingent Resources described herein are estimates only; the
actual resources may be higher or lower than those calculated in the
independent evaluation.  There is no certainty that the resources
described in the evaluation will be commercially produced.

The best estimate of the Contingent Resource for the Evaluated Area is
8.1 Tcf. It is equally likely that the actual remaining quantities
recovered will be greater or less than the best estimate.  If
probabilistic methods are used, there should be at least a 50 percent
probability (P50) that the quantities actually recovered will be equal or exceed the
best estimate. The low case estimate of 5.4 Tcf is considered to be a
conservative estimate of the quantity that will actually be recovered. 
It is likely that the actual remaining quantities will exceed the low
estimate. If probabilistic methods are used, there should be at least a
90 percent probability (P90) that the quantities actually recovered will be equal or exceed the low
estimate. The high case estimate of 10.2 Tcf is considered to be an
optimistic estimate of the quantity that will actually be recovered. 
It is unlikely that the actual remaining quantities recovered will
exceed the high estimate. If probabilistic methods are used, there
should be at least a 10 percent probability (P10) that the quantities actually recovered will be equal or exceed the
high estimate. The remainder of the DPIIP beyond what has been
cumulatively produced, classified as proved plus probable plus possible
reserves, or classified as Contingent Resource is currently considered
to be the unrecoverable portion.

The North Montney – Progress Stronghold

Progress has accumulated the industry’s largest Montney land position at
more than 1,250 net sections, or approximately 825,000 net acres. The
Montney is defined by an over pressured fairway extending almost 600
kilometers from northwest Alberta through northeast British Columbia.
The play has evolved from the southeast to northwest, with Progress
being a first mover in the North Montney, where the Company holds
approximately 975 net sections or 624,000 net acres of largely
contiguous Montney rights. Outside of the Evaluated Area, Progress
holds approximately 760 net sections or 500,000 net acres of additional
North Montney land including approximately 75,000 net acres as part of
the North Montney Joint Venture with PETRONAS, the Malaysian national
oil company.  The economics of the North Montney have been recognized
as top tier amongst all Montney areas, while also comparing favourably
with the best shale plays in all of North America.  As a result of the
robust economics, Progress is directing approximately 75 percent of the
Company’s 2011 capital spending towards the North Montney where
Progress is considered a leading player.  The findings of the resource
report confirm that Progress’ lands contain sufficient resource to
underpin the Company’s 5-year goal of doubling production and reserves.

DPIIP and Contingent Resources           Low Est.       Best Est.       High Est.
DPIIP (gross raw Bcf) (1)           28,372       28,372       28,372
Contingent Res. (gross raw Bcf)           5,622       8,512       10,706
DPIIP (W.I. raw Bcf)           27,251       27,251       27,251
Contingent Res. (W.I. raw Bcf) (2)           5,397       8,148       10,243
Economic Contingent Res. (W.I. Sales Bcf) (3)           4,965       7,496       9,341
Unrecoverable DPIIP (W.I. raw Bcf)           21,658       18,709       16,519

Notes:

(1) DPIIP has been estimated using a zero percent porosity cutoff which
means that all gas bearing pay has been included in the  calculation. 
Using a 3% cutoff, the DPIIP would be 24,820 Bcf (gross raw) and 23,811
Bcf (W.I. raw). The Contingent Resources would be unchanged.

(2) Contingent Resources do not include cumulative production from the
wells in the area of the study or reserves that were booked by GLJ in
the year-end 2010 evaluation.

(3)  Economic Contingent Resources are lower than Contingent Resources
primarily due to gas shrinkage.

BEFORE TAX NET PRESENT VALUE OF CONTINGENT RESOURCES
 
(MM$)                           0%           8%           10%
Low Estimate                           25,350           5,941           4,276
Best Estimate                           44,468           8,569           6,031
High Estimate                           59,147           10,489           7,351

Notes:

(1) The net present values of Contingent Resources have been estimated by
GLJ Petroleum Consultants using July 2011 GLJ pricing and an effective
date of August 31, 2011.

(2) Estimated values disclosed do not represent fair market value

(3)  Net Present Value is the sum of the cash inflows and the cash outflows
of a project, discounted to reflect present values. The net present
value per share reported herein was calculated using the number of
shares outstanding as at June 30th, 2011, equivalent to 230.5MM

About Progress Energy

Progress is a Calgary, Canada-based energy company focused on
exploration, development and production of large, unconventional
natural gas resources in northeast British Columbia and northwest
Alberta. Throughout its history, Progress has a solid track record of
growing reserves, production and the underlying value of the Company
for its shareholders.  Common shares of Progress are listed on the
Toronto Stock Exchange under the symbol PRQ.

Advisory on Future Oriented Information

This news release contains certain forward-looking information and
statements within the meaning of applicable securities laws.  The use
of any of the words “expect”, “anticipate”, “continue”, “estimate”,
“objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”,
“plans”, “intends”, “strategy” and similar expressions are intended to
identify forward-looking information or statements. In particular, but
without limiting the foregoing, this news release contains
forward-looking information and statements pertaining to the following:
the estimated volumes and value of Progress’ resources; the economics
for drilling in Progress’ North Montney area; anticipated royalty
drilling credits; the allocation of Progress’ anticipated 2011 capital
spending budget; and Progress’ business strategy, priorities and plans.

The forward-looking statements and information are based on certain key
expectations and assumptions made by Progress, including expectations
and assumptions concerning prevailing commodity prices and exchange
rates, applicable credits, royalty rates and tax laws; the performance
of existing wells; the success obtained in drilling new wells; the
accuracy of the estimates of Progress’ resource volumes and values; the
sufficiency of budgeted capital expenditures in carrying out planned
activities; completion of definitive documentation;  receipt of all
required regulatory approvals; and the availability and cost of labour
and services and future operating costs. There are a number of
assumptions associated with the development of the lands and resources
in Progress’ Town area, including the quality of the Montney reservoir,
continued performance from existing wells, future drilling programs and
performance from new wells, the growth of infrastructure, well density
per section, recovery factors and development. Although Progress
believes that the expectations and assumptions on which such
forward-looking statements and information are based are reasonable,
undue reliance should not be placed on the forward looking statements
and information because Progress can give no assurance that they will
prove to be correct.

Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and
gas industry in general such as operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the
uncertainty of reserve and resource estimates; the early stage of
development of the resources in the Evaluated Area; the potential for
variation in the quality of the Montney formation ,the uncertainty of
estimates and projections relating to test rates, reserves, resources,
production, costs and expenses; health, safety and environmental risks;
commodity price and exchange rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to realize
the anticipated benefits of acquisitions; ability to access sufficient
capital from internal and external sources; and changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations.

Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release
in order to provide security holders with a more complete perspective
on the Company’s future operations and such information may not be
appropriate for other purposes. The Company’s actual results,
performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them
do so, what benefits that the Company will derive there from. Readers
are cautioned that the foregoing lists of factors are not exhaustive.
Additional information on these and other factors that could affect the
operations or financial results of Progress are included in reports on
file with applicable securities regulatory authorities and may be
accessed through the SEDAR website (
www.sedar.com). The forward-looking statements and information contained in this
press release are made as of the date hereof and Progress undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws

INFORMATION REGARDING DISCLOSURE ON OIL AND GAS RESOURCES

All amounts in this news release are stated in Canadian dollars unless
otherwise specified. Where applicable, oil has been converted to gas
equivalent (“BcfGE”) by converting oil to gas in the ratio of one
barrel of oil to six thousand cubic feet of gas (1 bbl:6 Mcf).  The
mcfe rate is based on an energy equivalent conversion method primarily
applicable at the burner tip and does not represent a value equivalent
at the wellhead. Use of BcfGE
in isolation may be misleading.

This news release contains references to estimates of petroleum
classified as DPIIP in the Town area in British Columbia which are not,
and should not be confused with, oil and gas reserves. DPIIP is defined
in the Canadian Oil and Gas Evaluation Handbook as the quantity of
hydrocarbons that are estimated to be in place within a known
accumulation prior to production. DPIIP is divided into recoverable and
unrecoverable portions, with the estimated future recoverable portion
classified as reserves and contingent resources and the remainder as at
evaluation date is by definition classified as unrecoverable. There is
no certainty that it will be economically viable to produce any portion
of the resources.

Projects have not been defined to develop the resources in the Evaluated
Area as at the evaluation date. Such projects have historically been
developed over a number of drilling seasons and are subject to annual
budget constraints, Progress’ policy of orderly development on a staged
basis, the timing of the growth of third party infrastructure, the
short and long-term view of Progress on gas prices, the results of
exploration and development activities of Progress and others in the
area and possible infrastructure capacity constraints.

Progress’ belief that it will establish significant additional reserves
over time is a forward looking statement and is based on certain
assumptions and is subject to certain risks, as discussed above under
the heading “Advisory on Future Oriented Information”.