Pine Cliff Energy Ltd. Enters into a $33.25 Million Agreement to Acquire Carrot Creek/Edson Area Oil and Natural Gas Assets
30 July 2014 - 3:45AM
Marketwired Canada
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED
STATES.
Pine Cliff Energy Ltd. ("Pine Cliff") (TSX VENTURE: PNE) is pleased to announce
that it has entered into a binding agreement (the "Agreement") dated July 29,
2014 to acquire (the "Transaction") oil and natural gas assets in one of its
core areas of Carrot Creek/Edson in the Province of Alberta (the "Assets") for
cash consideration of $33.25 million, prior to any adjustments. The cash
consideration is expected to be financed by a combination of working capital and
debt.
The Transaction will have an effective date of June 1, 2014 and is scheduled to
close on August 7, 2014. The Transaction is conditional upon Pine Cliff's
partner in the area, private company Velvet Energy Ltd. ("Velvet"), completing
its acquisition of the Assets from a third party, which acquisition is expected
to close concurrently with the closing of this Transaction. No assurances can be
given that the acquisition of the Assets by Velvet or the Transaction will be
completed as proposed or at all.
Transaction Highlights
-- The Assets possess a predictable low cost production profile, long
reserve life and a geographically focused asset base contiguous with
Pine Cliff's current Carrot Creek/Edson core area. The Assets are 67%
weighted to natural gas, are approximately 50% operated, high working
interest properties (averaging 72%) and include ownership in key
strategic infrastructure.
-- The Assets have multi-zone potential along with a number of potentially
low risk growth opportunities, including infill drilling. The Assets are
characterized by liquids rich, high productivity wells and favourable
royalties and operating costs.
-- Pine Cliff will be partnering with Velvet, an experienced and active
driller in the area, on future drilling development on the acquired
lands. Subsequent to the closing of the Transaction, Pine Cliff is
expected to have a combined asset base of over 7,000 barrels of oil
equivalent ("boe") per day, weighted 92% towards natural gas.
-- Subsequent to the closing of this Transaction and the closing of the
July 24, 2014 announced acquisition of shallow natural gas assets in
Alberta and Saskatchewan (the "Shallow Gas Acquisition"), expected to
close November 1, 2014, Pine Cliff is expected to have a combined base
asset production of over 12,000 boe per day, weighted approximately 95%
towards natural gas, with a combined decline rate of 15%.
Key attributes of the Assets are as follows:
----------------------------------------------------------------------------
Production (May 2014 average provided 970 boe per day
by vendor)
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Natural Gas Weighting 67%
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Proved Reserves (1) 2.9 Mboe
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Proved and Probable Reserves (1) 4.0 Mboe
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Decline Rate 24%
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Booked Drilling Locations (1) 15 gross (4.2 net)
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Land 22,962 gross acres (14,476 net acres)
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Estimated Funds Flow from Operations $8.1 million (at $4.00/mcf gas)
(12 months following the effective
date) (2)
----------------------------------------------------------------------------
Estimated Funds Flow from Operations $8.8 million (at $4.55/mcf gas)
(12 months following the effective
date) (2)
----------------------------------------------------------------------------
(1) Based on reserves evaluated by an independent third party reserves
evaluator with an effective date of April 1, 2014.
(2) Based on pricing of US$100.00/bbl WTI, CDN$4.00/mcf or CDN $4.55/mcf
AECO, as applicable, and $0.925US $/CDN$FX and using estimated
production at June 1, 2014 of 970 boe per day, a 6% royalty rate and
$10.90 per boe operating costs.
Acquisition Metrics
Based on the purchase price of the Assets of $33.25 million, the acquisition
metrics are as follows:
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Production $34,280 per flowing boe
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Proved Reserves (1) $11.47 per boe
----------------------------------------------------------------------------
Proved and Probable Reserves (1) $8.31 per boe
----------------------------------------------------------------------------
Funds Flow Multiple (2) 4.1 times (at $4.00/mcf gas)
----------------------------------------------------------------------------
Funds Flow Multiple (2) 3.8 times (at $4.55/mcf gas)
----------------------------------------------------------------------------
(1) Based on reserves evaluated by an independent third party reserves
evaluator with an effective date of April 1, 2014.
(2) Based on the estimated funds flow from operations shown above.
Strategic Rationale
Pine Cliff has been actively seeking accretive opportunities to enhance
shareholder value by adding low cost and low decline natural gas production.
This Transaction is expected to provide these attributes.
The successful completion of the Transaction is currently expected to result in:
-- Increased funds flow from operations on a per share basis;
-- Pine Cliff raising its 2014 production guidance at closing;
-- A significant increase in Pine Cliff's high quality, multi-year drilling
inventory; and
-- Significant free cash flow which is anticipated to enable Pine Cliff the
opportunity to pursue further accretive gas acquisitions and repay debt.
About Pine Cliff
Further information relating to Pine Cliff may be found on www.sedar.com as well
as on Pine Cliff's website at www.pinecliffenergy.com.
Cautionary Statements
Certain statements contained in this release include statements which contain
words such as "anticipate", "could", "should", "expect", "seek", "may",
"intend", "likely", "will", "believe" and similar expressions, statements
relating to matters that are not historical facts, and such statements of our
beliefs, intentions and expectations about development, results and events which
will or may occur in the future, constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and are based on
certain assumptions and analysis made by us derived from our experience and
perceptions. In particular, this press release contains statements regarding the
operational, economic and financial impacts of the Transaction to Pine Cliff,
the potential growth opportunities on the Assets, the manner in which the
purchase price to the Transaction will be financed by Pine Cliff, other
anticipated benefits to Pine Cliff of the Transaction, the closing date of the
Transaction, the sale of the Assets to Velvet and information regarding Pine
Cliff on a pro forma basis assuming completion of the Transaction and the
Shallow Gas Acquisition. The foregoing statements assume the Assets will be sold
to Velvet, all the conditions to completion of the Transaction will be
satisfied, a definitive agreement will be reached between Pine Cliff and the
vendor and other required board and regulatory approvals will be received, that,
other than in connection with closing of the Shallow Gas Acquisition, there will
be no changes to the assets and liabilities of Pine Cliff following the
Transaction and that the anticipated benefits of and rationale for the
Transaction will be achieved. There is no assurance that all of the conditions
to the Transaction, including the acquisition of the Assets by Velvet, will be
met and therefore there is a risk that the Transaction will not be completed in
the form described above or at all. In the event the Transaction does not close
as presently anticipated, Pine Cliff will not realize the anticipated benefits
of the Transaction. As such, many factors could cause the performance or
achievement of Pine Cliff to be materially different from any future results,
performance or achievements that may be expressed or implied by such
forward-looking statements. Because of the risks, uncertainties and assumptions
contained herein, readers should not place undue reliance on these
forward-looking statements.
In addition, statements relating to "reserves" are by their nature
forward-looking information, as they involve the implied assessment, based on
certain estimates and assumptions that the reserves described can be profitably
produced in the future. The recovery and reserves estimates provided herein are
estimates only and there is no guarantee that the estimated reserves will be
recovered. Pine Cliff cautions that its future oil, natural gas and natural gas
liquids production, revenues, cash flows, liquidity, plans for future
operations, expenses, outlook for oil and natural gas prices, timing and amount
of future capital expenditures, and other forward-looking information is subject
to all of the risks and uncertainties normally incident to the exploration for
and development and production and sale of oil and gas.
Actual results, performance or achievements could differ materially from those
expressed in, or implied by, this forward-looking information and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking information will transpire or occur, or if any of them do, what
benefits will be derived there from. Except as required by law, Pine Cliff
disclaims any intention or obligation to update or revise any forward-looking
information, whether as a result of new information, future events or otherwise.
Certain information contained herein is based on information and internal
estimates provided to Pine Cliff by the vendor of the Assets. Although Pine
Cliff believes such information is accurate and reliable, at this time such
information has not been verified by any independent sources and Pine Cliff does
not make any representations as to the accuracy of such estimates.
The forward-looking information contained in this release is expressly qualified
by this cautionary statement.
This news release contains the term boe which has been calculated on the basis
of six thousand cubic feet ("mcf") of gas to one barrel of oil. This conversion
ratio is based on energy equivalence primarily at the burner tip and does not
represent a value equivalency at the wellhead. The term boe may be misleading,
particularly if used in isolation.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Pine Cliff Energy Ltd.
Philip B. Hodge
President and CEO
(403) 269-2289
(403) 265-7488 (FAX)
Pine Cliff Energy Ltd.
George F. Fink
Executive Chairman
(403) 269-2289
(403) 265-7488 (FAX)
info@pinecliffenergy.com
www.pinecliffenergy.com
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