AEC acquires 280 billion cubic feet equivalent of gas reserves in U.S. Rockies
CALGARY, Jan. 18 /CNW/ - AEC Oil & Gas (USA) Inc., a wholly-owned
subsidiary of Alberta Energy Company Ltd. (AEC), has reached an agreement to
purchase privately owned Ballard Petroleum, LLC of Billings, Montana.
Ballard's key producing properties are in the Mamm Creek field of the
Piceance Basin in north west Colorado. For 2001, daily production is expected
to average about 45 million cubic feet of gas (before royalties). AEC
estimates that Ballard has proven plus one-half probable (established)
reserves of 280 billion cubic feet equivalent of natural gas, which are valued
at approximately C$274 million or C$0.98 per thousand cubic feet equivalent.
Approximately 93 per cent of the purchased reserves are natural gas.
The Ballard acquisition includes approximately 175,000 net undeveloped
acres, valued at C$35 million. Most of these lands offset Mamm Creek. The
purchase also includes a gas pipeline system at Mamm Creek, valued at C$31
million. This results in a purchase price for Ballard of approximately C$340
million (US$225 million), which assumes a planned disposition of certain non-
core oil assets valued at approximately C$45 million. These transactions are
subject to conditions, closing and post closing adjustments.
"We have clear acquisition criteria, and Ballard is an excellent fit. We
buy concentrated, high-working interest, long-life reserves with significant
growth potential," said Gwyn Morgan, AEC President and Chief Executive
Officer. "Based on current commodity futures prices, this acquisition is
expected to add about 50 cents per share in cash flow and 15 cents per share
in earnings in 2001."
"Last year we bought one trillion cubic feet of long-life reserves in
Wyoming. Our Jonah field has fully met expectations and is forecast to produce
180 million cubic feet per day this year. We are now fortifying that growth
with production from a second neighbouring Rocky Mountain basin - Ballard's
Mamm Creek field in the Piceance Basin," Morgan said.
"Mamm Creek is a relatively young natural gas field where AEC can apply
its core competencies in deep, tight gas to grow production and reserves. The
field has considerable growth potential, with more than 500 drilling locations
identified," said Roger Biemans, President of AEC Oil & Gas (USA) Inc.
"Over the next three years, we plan to drill approximately 300 wells to
increase production to about 65 million cubic feet per day by 2003. None of
the Ballard gas production is committed to fixed price contracts and AEC plans
to sell the additional volumes through the well developed transmission systems
out of the Piceance Basin to strong markets in the Pacific Northwest,
California and the U.S. Midwest," Biemans said.
With the Ballard acquisition, AEC's 2001 gas sales forecast range has
been revised upward to between 1.35 and 1.40 billion cubic feet per day. The
purchase is expected to close, subject to certain conditions, in February.
This is a cash transaction funded with available credit lines.
AEC is focused on Growth, Value and Performance as it builds a Global
Super-Independent oil and gas company. This strategy capitalizes on the world
class assets and high-quality, long-life reserves that AEC has established in
its three strong growth platforms - Western Canada, the U.S. Rockies and
Ecuador. Last year, the Company set a target to double production from
existing assets within five years.
As one of North America's largest independent oil and gas producers,
AEC's daily production is expected to exceed 365,000 barrels of oil equivalent
in 2001. The Company is also looking to establish additional growth platforms
through new ventures exploration in Alaska, the Mackenzie River Delta,
Australia, Congo, Texas and Azerbaijan. Midstream natural gas storage and oil
pipelines assets comprise approximately 20 per cent of the Company's asset
base and provide a growing source of cash flow. Currently, AEC's enterprise
value is approximately C$14 billion.
AEC's Common Shares trade on The Toronto Stock Exchange (AEC) and on the
New York Stock Exchange (AOG). A map outlining operational locations and
additional information about this transaction is available on AEC's web site:
www.aec.ca on the investor relations page.
ADVISORY - Certain information regarding the Company set forth in this
document, including management's assessment of the Company's future plans and
operations, may constitute forward-looking statements under applicable
securities law and necessarily involve risks associated with oil and gas
exploration, production, marketing, and transportation such as loss of market,
volatility of prices, currency fluctuations, imprecision of reserves
estimates, environmental risks, competition from other producers and ability
to access sufficient capital from internal and external sources. As a
consequence, actual results may differ materially from those anticipated in
the forward-looking statements.
<<
BALLARD ACQUISITION SUMMARY
Purchase Consideration ($MM) C$ US$
Total Consideration 385 255
Less: Land and Seismic (35) (23)
Less: Gas Pipeline System (31) (21)
Less: Non-Core Dispositions (45) (30)
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Reserves Cost 274 181
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Reserves (Bcfe) Before After
Royalties Royalties
Proven 158 138
Established 281 244
Proven+Probable 403 351
Reserves Cost ($/Mcfe) C$, Before US$, After
Royalties Royalties
Proven 1.74 1.31
Established 0.98 0.74
Proven+Probable 0.68 0.52
Established Production (MMcfe/d) Before After
Royalties Royalties
2001 45 39
2002 55 48
2003 65 57
Netback Calculation 11 Month 11 Month
Strip, C$ Strip, US$
NYMEX - Henry Hub ($/MMbtu) (1) 8.71 5.75
Less: Basis Differential (1.06) (0.70)
Less: Transportation (0.38) (0.25)
------------- -------------
Field Price ($/MMbtu) 7.27 4.80
Times: Heating Content Adjustment x 1.113 1.113
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Field Price ($/Mcf) 8.09 5.34
Add: Liquids Adjustment ($/Mcfe) 0.45 0.30
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Gas-Equivalent Price ($/Mcfe) 8.54 5.64
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Less: 13% Royalties ($/Mcfe) (1.11) (0.73)
Less: 8% Production Taxes ($/Mcfe) (0.59) (0.39)
Less: Operating Cost ($/Mcfe) (0.45) (0.30)
------------- -------------
Field Netback ($/Mcfe) 6.39 4.22
------------- -------------
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Recycle Ratio (times)
Proven 3.7
Established 6.5
(1) NYMEX - Henry Hub prices are at close of business January 17, 2001
Exploration Land
Undeveloped - 175,000 acres
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For further information: Investor contact: Brian Ferguson,
Vice-President, Corporate Communications, and Corporate Secretary,
(403) 266-8113 or Greg Kist, Manager, Corporate Relations, (403) 266-8495,
gregkist@aec.ca; |
