CALGARY, May 17, 2019 /CNW/ - OBSIDIAN ENERGY LTD.
(TSX – OBE, NYSE – OBE.BC) ("Obsidian Energy", the
"Company", "we", "us" or "our") is
pleased to announce it has signed a purchase and sale agreement
(the "Agreement") to sell its 55% working interest in the
Peace River Oil Partnership ("PROP") for total consideration
of approximately $97 million, before
normal closing adjustments. Total consideration includes
$85.8 million in cash and cash
equivalents, with the remainder comprised of purchasers' shares and
the present value of additional liabilities. The Agreement is
subject to financing and the terms of the partnership agreement
which provides for a 30-day right of first refusal with an
additional 15-day tag-along right to our partner. The effective
date of the transaction is February 1,
2019 with an anticipated closing date on or about
July 31, 2019. All figures are in
Canadian dollars unless otherwise stated.
Strategic Rationale
Consistent with our previously announced strategy, this
transaction divests a significant non-core, lower netback asset,
reduces our overall corporate operating costs and allows the
Company to focus on our Cardium assets. Along with the sale of
PROP, the Company will be divesting other non-producing assets in
the area, which reduces our total decommissioning liabilities.
Proceeds will be used to strengthen our balance sheet by paying
down debt, with additional consideration going towards growing our
fast-cycle primary oil development program. Transaction metrics are
outlined below:
Transaction
Metrics
|
Transaction
Value
|
$97
million
|
Production
(1)
|
4,160
boe/d
|
Implied Production
Multiple
|
$23,300/boe
|
Net Operating Income
("NOI") (2)(3)
|
$15.0
million
|
Implied NOI
Multiple
|
6.5x
|
|
|
(1)
|
Production is based
on the estimated next twelve months
|
(2)
|
NOI is based on May
15th strip pricing for the estimated next twelve
months
|
(3)
|
The term NOI is a
non-GAAP measure. Please refer to the "Non-GAAP Measures
Advisory" section below for further details.
|
Advisors
Scotiabank acted as financial advisor to Obsidian Energy with
respect to this transaction.
Oil and Gas Information Advisory
Barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion ratio of six
thousand cubic feet of natural gas to one barrel of crude oil is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency conversion
ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading
as an indication of value.
Non-GAAP Measures Advisory
NOI does not have a standardized meaning prescribed by IFRS and
therefore is considered a non-GAAP measure; accordingly, it may not
be comparable to similar measures provided by other issuers. NOI is
the production amount of revenue less royalties, operating
expenses, and transportation expenses.
Forward-Looking Statements
Certain statements contained in this document constitute
forward-looking statements or information (collectively
"forward-looking statements"). Forward-looking statements are
typically identified by words such as "anticipate", "continue",
"estimate", "expect", "forecast", "budget", "may", "will",
"project", "could", "plan", "intend", "should", "believe",
"outlook", "objective", "aim", "potential", "target" and similar
words suggesting future events or future performance. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated
and can be profitably produced in the future. In particular, this
document contains forward-looking statements pertaining to, without
limitation, the following: the sale of our working interest in PROP
and other non-producing assets in the area and the components of
such a sale; the anticipated reduction to our
total decommissioning liability; the use of proceeds; that the
sale will allow us to focus on our Cardium assets; and the
anticipated closing date for the transaction.
The key metrics for the Company set forth in this release may be
considered to be future-oriented financial information or a
financial outlook for the purposes of applicable Canadian
securities laws. Financial outlook and future-oriented financial
information contained in this release are based on assumptions
about future events based on management's assessment of the
relevant information currently available. In particular, this
release contains projected operational and financial information
for 2019 and beyond for the Company. The future-oriented financial
information and financial outlooks contained in this presentation
have been approved by management as of the date of this release.
Readers are cautioned that any such financial outlook and
future-oriented financial information contained herein should not
be used for purposes other than those for which it is disclosed
herein.
With respect to forward-looking statements contained in this
document, we have made assumptions regarding, among other things
that we do not dispose of any material producing properties other
than stated herein; the impact of the Alberta Government
curtailment; our ability to execute our long-term plan and in our
other disclosure documents and the impact that the successful
execution of such plan will have on our Company and our
shareholders; that the current commodity price and foreign exchange
environment will continue or improve; future capital expenditure
levels; future crude oil, natural gas liquids and natural gas
prices and differentials between light, medium and heavy oil prices
and Canadian, WTI and world oil and natural gas prices; future
crude oil, natural gas liquids and natural gas production levels;
future exchange rates and interest rates; future debt levels; our
ability to execute our capital programs as planned without
significant adverse impacts from various factors beyond our
control, including weather, infrastructure access and delays in
obtaining regulatory approvals and third party consents; our
ability to obtain equipment in a timely manner to carry out
development activities and the costs thereof; our ability to market
our oil and natural gas successfully to current and new customers;
our ability to obtain financing on acceptable terms, including our
ability to renew or replace our syndicated bank facility and our
ability to finance the repayment of our senior notes on maturity;
and our ability to add production and reserves through our
development and exploitation activities.
Although we believe that the expectations reflected in the
forward-looking statements contained in this document, and the
assumptions on which such forward-looking statements are made, are
reasonable, there can be no assurance that such expectations will
prove to be correct. Readers are cautioned not to place undue
reliance on forward-looking statements included in this document,
as there can be no assurance that the plans, intentions or
expectations upon which the forward-looking statements are based
will occur. By their nature, forward-looking statements involve
numerous assumptions, known and unknown risks and uncertainties
that contribute to the possibility that the forward-looking
statements contained herein will not be correct, which may cause
our actual performance and financial results in future periods to
differ materially from any estimates or projections of future
performance or results expressed or implied by such forward-looking
statements. These risks and uncertainties include, among other
things: the possibility of non-completion of the transaction or
delayed completion of the transaction due to financing risk by the
purchaser; the possibility that approvals are not obtained for the
transaction from regulators or partners on a timely basis or at
all; the possibility that we will not be able to continue to
successfully execute our long-term plan in part or in full, and the
possibility that some or all of the benefits that we anticipate
will accrue to our Company and our securityholders as a result of
the successful execution of such plans do not materialize; the
possibility that we are unable to execute some or all of our
ongoing asset disposition program on favourable terms or at all;
general economic and political conditions in Canada, the U.S.
and globally, and in particular, the effect that those conditions
have on commodity prices and our access to capital; industry
conditions, including fluctuations in the price of crude oil,
natural gas liquids and natural gas, price differentials for crude
oil and natural gas produced in Canada as compared to
other markets, and transportation restrictions, including pipeline
and railway capacity constraints; fluctuations in foreign exchange
or interest rates; unanticipated operating events or environmental
events that can reduce production or cause production to be shut-in
or delayed (including extreme cold during winter months, wild fires
and flooding); and the other factors described under "Risk Factors"
in our Annual Information Form and described in our public filings,
available in Canada at www.sedar.com and
in the United States at www.sec.gov. Readers are
cautioned that this list of risk factors should not be construed as
exhaustive.
The forward-looking statements contained in this document speak
only as of the date of this document. Except as expressly required
by applicable securities laws, we do not undertake any obligation
to publicly update any forward-looking statements. The
forward-looking statements contained in this document are expressly
qualified by this cautionary statement.
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SOURCE Obsidian Energy Ltd.