Perpetual Energy (PMT-T) March Friday 13th 2015 is pleased to announce the signing of a definitive agreement with Tourmaline Oil (TUO-T) to swap its joint interest share in its West Edson asset in West Central Alberta in exchange for 6.75 million TOU common shares ("TOU Shares") having a current market value of approximately $256.5 million based on today's closing price of the TOU Shares on the Toronto Stock Exchange. The transaction includes all joint interest lands Perpetual holds with Tourmaline in West Edson, together with the associated wells and infrastructure (the 'West Edson Property'). Closing is expected to occur on or around April 1, 2015 and is subject to customary closing conditions, including receipt of approval under the Competition Act. Following a thorough independent review process with external financial and legal advisors, the transaction was unanimously approved by an independent committee of the Board of Directors of Perpetual comprised of all of the six independent directors of the Corporation. Upon closing, the TOU Shares will be subject to a minimum statutory hold period of four months in accordance with applicable securities laws.
Based on the Company's third party engineering report prepared by McDaniel and Associates Consultants Ltd. ("McDaniel"), as at December 31, 2014, the disposition includes 7.2 MMboe of recognized proved and probable developed natural gas and natural gas liquids reserves as well as 16.8 MMboe of proved and probable undeveloped reserves. Also included in the transaction are 9,600 net acres of undeveloped lands not currently assigned reserves at year-end 2014. Perpetual's current production from the West Edson Property is approximately 5,750 boe/d.
The Company intends to retain the TOU Shares and systematically manage its obligations, including the redemption of its outstanding convertible debentures (PMT.DB.E) which mature on December 31, 2015. Further, the TOU Shares will be utilized as required to fund the Company's development plans at East Edson as appropriate in the current commodity price environment and provide additional financial flexibility for Perpetual to capture and evaluate other high impact growth opportunities.
The transaction positions Perpetual to capture the upside of the West Edson Property through ownership of the TOU Shares and also provides Perpetual shareholders with the value creation potential inherent in Tourmaline's extensive land and drilling opportunity inventory and strong balance sheet in this period of low commodity prices. At the same time, it materially strengthens Perpetual's present financial situation, augmenting the Company's potential to optimize the shareholder value inherent in its existing diversified portfolio of assets. The TOU Shares also provide greater flexibility to capture and evaluate other new high impact opportunities and pursue strategic initiatives.
Furthermore, the increased liquidity of the TOU Shares relative to the West Edson Property positions Perpetual to manage downside risks associated with the current uncertain and volatile commodity price environment. As only 20 percent of the Company's West Edson Property reserves were proved developed reserves at year-end 2014, Perpetual expects the transaction will enhance Perpetual's borrowing base when re-determined as part of the semi-annual review scheduled to occur on or before April 30, 2015. Considering the TOU Shares as an offset to outstanding debt, this transaction drives material positive progress on one of the Company's 2015 strategic priorities, to reduce debt and manage downside risk, bolstering Perpetual's financial flexibility and optionality to manage its future credit facility, convertible debenture and senior note obligations.
As the market value of the TOU Shares approximates the net present value of the proved and probable reserves assigned to the West Edson Property, discounted at 10 percent, as assessed by McDaniel at year- end 2014, using McDaniel future commodity price assumptions, the Company estimates that the transaction is neutral on a net asset value basis.
Based on the current forward market for natural gas and NGL prices, Perpetual estimates the swap of the West Edson Property for TOU Shares will reduce 2015 estimated funds flow by an estimated $15 to $20 million. At the same time, Perpetual will eliminate future 2015 capital spending of approximately $15 million that would have been invested to maintain production from the West Edson Property at current levels.
Also included in this press release are estimates of the effect on Perpetual's 2015 funds flow of the swap of the West Edson Property for TOU shares including estimated average production of 5,750 boe/d for 2015, capital expenditures, and other assumptions for 2015. To the extent any such estimate constitutes a financial outlook, it was approved by management and the Board of Directors of Perpetual on March 12, 2015 and is included to provide readers with an understanding of Perpetual's anticipated funds flows based on the capital expenditure and other assumptions described herein and readers are catutioned that the information may not be appropriate for other purposes.
Volume Conversions
Barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. In accordance with National Instrument 51-101 ("NI 51-101"), a conversion ratio for natural gas of 6 Mcf:1 bbl has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, utilizing a conversion on a 6 Mcf:1 bbl basis may be misleading as an indicator of value as the value ratio between natural gas and crude oil, based on the current prices of natural gas and crude oil, differ significantly from the energy equivalency of 6 Mcf:1 bbl.
Webcast
Perpetual will be participating in the FirstEnergy East Coast Energy Conference on Friday, March 13, 2015. The Company presentation will be webcast at 10:35 a.m., Eastern Time. Interested parties are invited to take part in the webcast at http://jetslides.tv/lobby/1091.
About Perpetual
Perpetual Energy Inc. is a Canadian energy company with a spectrum of resource-style opportunities spanning heavy oil, NGL and bitumen along with a large base of shallow gas assets. Perpetual's shares and convertible debentures are listed on the Toronto Stock Exchange under the symbol "PMT" and "PMT.DB.E", respectively. Further information with respect to Perpetual can be found at its website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.
SOURCE Perpetual Energy Inc.
 Perpetual Energy Inc.,
Suite 3200, 605 - 5 Avenue SW
Calgary, Alberta,
Canada
T2P 3H5,
Telephone: 403 269-4400,
Fax: 403 269-4444,
Email: info@perpetualenergyinc.com ;
Susan L. Riddell Rose, President and Chief Executive Officer;
Cameron R. Sebastian, Vice President, Finance and Chief Financial Officer |
