LGN Logan Energy Corp

CALGARY, AB, July 13, 2023 /CNW/ - Logan Energy Corp. ("Logan" or the "Company") is pleased to provide this initial update to shareholders and to announce that Logan has commenced operations as a new growth-oriented exploration, development and production company formed through the spin-out (the "Spin-Out") of the early stage Montney assets of Spartan Delta Corp. ("Spartan").

EQUITY FINANCING

Logan is pleased to announce the completion of its previously announced non-brokered private placement for aggregate gross proceeds of approximately $48.5 million (the "Private Placement"). Pursuant to the Private Placement, Logan issued an aggregate of 64.3 million units ("Units") and 74.3 million common shares of Logan ("Logan Shares") at a price of $0.35 per Unit and Logan Share, as applicable.  The Private Placement generated significant demand from investors who provided indications materially in excess of $48.5 million.  Proceeds from the Private Placement will be used to fund Logan's exploration and development activities and for general corporate and working capital purposes.

Each Unit was comprised of one Logan Share and one Logan Share purchase warrant (a "Warrant").  Each Warrant will entitle the holder to purchase one Logan Share at a price of $0.35 for a period of five years.  The Warrants will vest and become exercisable in accordance with the terms set forth in the press release of Spartan dated March 28, 2023.

Pursuant to applicable securities laws, all securities issued pursuant to the Private Placement are subject to a hold period of four months plus one day following the date of issuance of such securities.

CONDITIONAL LISTING APPROVAL

The Logan Shares have been conditionally approved for listing by the TSX Venture Exchange (the "TSXV").  Trading in respect of Logan Shares is expected to commence on or about July 18, 2023, under the symbol "LGN".

LIQUIDITY

With the completion of the Private Placement and assuming that the Logan Share purchase warrants (as further described in the press release of Spartan dated May 10, 2023, the "Transaction Warrants") issued in connection with the Spin-Out are fully exercised, Logan expects to exit July with approximately $109 million of cash on its balance sheet and no bank debt.  Logan reminds shareholders that the Transaction Warrants, which entitle holders to acquire Logan Shares at an exercise price of $0.35 per Logan Share, expire on July 31, 2023.

TRANSACTION WARRANT EXERCISE PROCESS

Registered holders of Transaction Warrants seeking to exercise are required to contact the Company's transfer agent, Odyssey Trust Company, for assistance by email at corptrust@odysseytrust.com.

If you own Transaction Warrants through a financial intermediary such as a bank, broker or trust company, and you wish to exercise such warrants, you should contact your financial intermediary.

As the Transaction Warrants expire on July 31, 2023, it is important to take such action as soon as possible.

OPERATIONS UPDATE AND GUIDANCE

In early July, Logan spud the first well in Simonette of its seven well Montney drilling program for 2023.  The initial 2023 drilling program is designed to deliver growth and test various development strategies across Logan's asset base and the information gathered will set the stage for an aggressive 2024 capital program.  During the second half of 2023, Logan is budgeting to drill 3 (3.0 net) wells in Simonette (2 completed and onstream), 3 (3.0 net) wells in Pouce Coupe and 1 (1.0 net) well in Flatrock (drill only).

Logan's capital expenditures are budgeted to be approximately $75 million over the second half of 2023.  This estimate includes $18 million that has been allocated for land, seismic, infrastructure and contingency.

The Company's capital program is expected to deliver production in excess of 7,000 BOE per day[1] for the month of December 2023 and to average 5,000 BOE per day for the six-month period ended December 31, 2023.  Logan expects to generate approximately $8 million of Adjusted Funds Flow in the second half of 2023 (see "Reader Advisories – Non-GAAP Measures", below) based on average commodity price assumptions of $2.50 per GJ for AECO natural gas, US$70 per barrel for WTI crude oil, and an exchange rate of 1.32 US$/CA$.

Below is a summary of corporate guidance for the second half of 2023:

OUTLOOK

Logan's management team and Board look forward to embarking on this new challenge.  Richard McHardy, Logan's President and Chief Executive Officer, stated: "We are excited to get to work.  We believe Logan's asset base offers scalable production growth, backstopped by significant inventory depth and highly competitive play economics.  Our strategy is simple:  we have assembled a team with a demonstrated track record of success, and we have significant engineering and geological expertise in-house to unlock the value we see in our assets.  We are well capitalized and plan to aggressively grow our assets both organically and through accretive acquisitions, and we believe Logan represents a compelling opportunity for investors interested in growth."

WEBSITE AND CORPORATE PRESENTATION

Logan is pleased to announce the official launch of its corporate website and Logan's corporate presentation as of July 13, 2023 can be accessed on its website at https://www.loganenergycorp.com.

ABOUT LOGAN ENERGY CORP.

Logan is a growth-oriented exploration, development and production company formed through the spin-out of Spartan's early stage Montney assets.  Logan is founded with a strong initial capitalization and three high quality and opportunity rich Montney assets located in the Simonette and Pouce Coupe areas of northwest Alberta and the Flatrock area of northeastern British Columbia. The management team brings proven leadership and a track record of generating excess returns in various business cycles.

READER ADVISORIES

Non-GAAP Measures and Ratios

This press release contains certain financial measures and ratios which do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") or Generally Accepted Accounting Principles ("GAAP"). As these non-GAAP financial measures and ratios are commonly used in the oil and gas industry, Logan believes that their inclusion is useful to investors. The reader is cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.

The non-GAAP measures and ratios used in this press release, represented by the capitalized and defined terms outlined below, are used by Logan as key measures of financial performance and are not intended to represent operating profits nor should they be viewed as an alternative to cash provided by operating activities, net income or other measures of financial performance calculated in accordance with IFRS.

Operating Income and Operating Netback

Operating Income, a non-GAAP financial measure, is a useful supplemental measure that provides an indication of the Company's ability to generate cash from field operations, prior to administrative overhead, financing and other business expenses. "Operating Income" is calculated by Logan as oil and gas sales, net of royalties, plus processing and other revenue, less operating and transportation expenses.

The Company refers to Operating Income expressed per unit of production as an "Operating Netback" which is a non-GAAP financial ratio. Logan considers Operating Netback an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.

Adjusted Funds Flow and Free Funds Flow

Cash provided by operating activities is the most directly comparable measure to Adjusted Funds Flow. "Adjusted Funds Flow" is reconciled to cash provided by operating activities by excluding changes in non-cash working capital, adding back transaction costs on acquisitions (if applicable). Logan utilizes Adjusted Funds Flow as a key performance measure in the Company's annual financial forecasts and public guidance.

The Company refers to Adjusted Funds Flow expressed per unit of production as an "Adjusted Funds Flow Netback".

Capital Expenditures, before A&D

"Capital Expenditures before A&D" is used by Logan to measure its capital investment level compared to the Company's annual budgeted capital expenditures for its organic drilling program. It includes capital expenditures on exploration and evaluation assets and property, plant and equipment, before acquisitions and dispositions. The directly comparable GAAP measure to capital expenditures is cash used in investing activities.

Net Debt (Surplus) and Adjusted Working Capital

References to "Net Debt (Surplus)" includes Adjusted Working Capital plus bank debt (if any) outstanding under Logan's credit facility. Net Debt (Surplus) and Adjusted Working Capital are both non-GAAP financial measures. "Adjusted Working Capital" includes cash and cash equivalents, accounts receivable, prepaid expenses and deposits, and accounts payable and accrued liabilities.

Logan uses Net Debt (Surplus) as a key performance measure to manage the Company's targeted debt levels, however it should not be viewed as an alternative to other measures presented in accordance with IFRS.

References to "Cash Financing Expense (Income)" includes interest and fees on Logan's credit facility, net of interest income on cash deposits, financing costs related to lease liabilities and excludes accretion of decommissioning obligations. Cash Financing Expense (Income) is a non-GAAP financial measure used by Logan in its budget and guidance as it corresponds to the Company's definition of Net Debt (Surplus), however it should not be viewed as an alternative to total financing expenses presented in accordance with IFRS.

Other Measurements

All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.

This press release contains various references to the abbreviation "BOE" which means barrels of oil equivalent. Where amounts are expressed on a BOE basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet (Mcf) per barrel (bbl). The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and is significantly different than the value ratio based on the current price of crude oil and natural gas. This conversion factor is an industry accepted norm and is not based on either energy content or current prices. Such abbreviation may be misleading, particularly if used in isolation.

References to "oil" in this press release include light crude oil, medium crude oil, heavy oil and tight oil combined. NI 51-101 includes condensate within the product type of "natural gas liquids". References to "natural gas liquids" or "NGLs" include pentane, butane, propane and ethane. References to "gas" or "natural gas" relates to conventional natural gas. References to "liquids" includes crude oil, condensate and NGLs.

Assumptions for Guidance

The significant assumptions used in the forecast of Operating Netbacks and Adjusted Funds Flow for the second half of 2023 are summarized below. These key performance measures expressed per BOE are based on the average production guidance for H2 2023 of 5,000 BOE/d.

Share Capital

Common shares of Logan have been conditionally approved for listing on the TSXV and are expected to commence trading on or about July 18, 2023, under the symbol "LGN".

As of the date hereof, there are 311.7 million common shares outstanding. There are no preferred shares or special shares outstanding. The following convertible securities are outstanding as of the date of this press release: 173.2 million Transaction Warrants with an exercise price of $0.35 per Logan Share expiring July 31, 2023; and 64.3 million Warrants with an exercise price of $0.35 per Logan Share with a remaining term of five years.

Forward-Looking and Cautionary Statements

Certain statements contained within this press release constitute forward-looking statements within the meaning of applicable Canadian securities legislation. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "budget", "plan", "endeavor", "continue", "estimate", "evaluate", "expect", "forecast", "monitor", "may", "will", "can", "able", "potential", "target", "intend", "consider", "focus", "identify", "use", "utilize", "manage", "maintain", "remain", "result", "cultivate", "could", "should", "believe" and similar expressions. Logan believes that the expectations reflected in such forward-looking statements are reasonable as of the date hereof, but no assurance can be given that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Without limitation, this press release contains forward-looking statements pertaining to: available cash, including the assumption that 100% of the Transaction Warrants issued in connection with the Spin-Out will be exercised prior to expiry on July 31, 2023, providing Logan with aggregate cash proceeds of $60.6 million (the actual number of Transaction Warrants to be exercised and resulting proceeds may differ materially from this estimate); the Company's 2023 capital budget and 2023 guidance; Logan's anticipated operational results for 2023 and 2024 including, but not limited to, estimated or anticipated production levels, capital expenditures and drilling plans; Logan plans to deliver strong operational performance. All statements other than statements of historical fact may be forward-looking statements.  

The forward-looking statements and information are based on certain key expectations and assumptions made in respect of Logan, including expectations and assumptions concerning the business plan of Logan, the timing of and success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Logan's properties, the successful integration of the recently acquired assets into Logan's operations, the successful application of drilling, completion and seismic technology, prevailing weather conditions, prevailing legislation affecting the oil and gas industry, prevailing commodity prices, price volatility, price differentials and the actual prices received for the Company's products, impact of inflation on costs, royalty regimes and exchange rates, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners and the ability to source and complete acquisitions.

Although Logan 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 Logan can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to, fluctuations in commodity prices, changes in industry regulations and political landscape both domestically and abroad, wars (including Russia's military actions in Ukraine), hostilities, civil insurrections, foreign exchange or interest rates, increased operating and capital costs due to inflationary pressures (actual and anticipated), volatility in the stock market and financial system, impacts of the current COVID-19 pandemic, the retention of key management and employees, risks with respect to unplanned third-party pipeline outages and risks relating to the Alberta wildfires, including in respect of safety, asset integrity and shutting in production. Ongoing military actions between Russia and Ukraine have the potential to threaten the supply of oil and gas from the region. The long-term impacts of the actions between these nations remains uncertain. The foregoing list is not exhaustive.   

Please refer to Logan's listing application dated July 12, 2023 for discussion of additional risk factors relating to Logan, which can be accessed its SEDAR profile on www.sedar.com. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. Logan undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Logans prospective results of operations and production, organic growth, operating costs, Capital Expenditures before A&D, Adjusted Funds Flow, Net Debt (Surplus), Operating Netbacks, share capitalization, and Logan's corporate outlook and guidance for 2023 and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about Logan's proposed business activities in 2023. Logan and its management believe that FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results. Logan disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein. Changes in forecast commodity prices, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in Logan's guidance. The Company's actual results may differ materially from these estimates.

Abbreviations

SOURCE Logan Energy Corp.