Spartan Energy (SPE-T) June 29, '16 is pleased to announce that it has entered into definitive agreements to acquire an aggregate of 1,650 boe/d (99% oil) of light oil production in southeast Saskatchewan in two separate transactions for a total aggregate purchase price of $71.7 million. The acquisitions are consistent with Spartan's strategy of capitalizing on its strong financial position during the current period of depressed commodity prices by consolidating within its core southeast Saskatchewan focus area. The characteristics of each acquisition are described below.
GREATER CORNING-MANOR ACQUISITION
Spartan is pleased to announce that it has entered into a definitive agreement (the "Acquisition Agreement") with an arm's length oil producer providing for the acquisition by Spartan of approximately 1,500 boe/d (99% light oil and liquids) of low-decline production focused in the Alida, Tilston and Souris Valley fairways of southeast Saskatchewan (the "Corning-Manor Acquisition"). The total consideration for the Corning-Manor Acquisition is approximately $62.2 million, subject to customary closing adjustments. The Corning-Manor Acquisition is expected to be completed on June 30, 2016. The acquisition will be funded through indebtedness drawn on Spartan's existing credit facilities.
The Assets include all required production infrastructure, 1,141 km2 of proprietary 3D seismic and 547 km of proprietary 2D seismic. Spartan estimates the fair value of the acquired seismic to be approximately $7.5 million. Spartan has initially identified 42.5 net open-hole Mississippian drilling locations, all of which deliver economic returns at a US$35 WTI oil price.
The Corning-Manor Acquisition is accretive on key measures, including 9% on forecasted 12 month cash flow and 25% on proved producing reserves, and provides a low decline, stable production base with upside drilling and optimization opportunities. The following tables set forth attributes and metrics in respect of the Corning-Manor Acquisition.
Acquisition Summary
| Purchase Price | $62.2 million | | Current Production | 1,500 boe/d (99% oil) | | Proved Developed Producing Reserves(1) | 4,676 Mboe | | Proved Developed Producing Reserves NPV10(1) | $63.4 million | | Proved plus Probable Reserves(1) | 7,176 Mboe | | Proved plus Probable Reserves NPV10(1) | $91.6 million |
| | | 12 Month Cash Flow(2) | $11 million | | Annual Decline Rate | 12% | | Total Land | 66,776 net acres | | Total Drilling Locations | 42.5 net open-hole locations | | | | Acquisition Metrics | | | | Current Production | $41,467 per boe/d | | Proved Developed Producing Reserves(1) | $13.30 per boe | | Proved plus Probable Reserves(1) | $8.67 per boe | | Proved Developed Producing Reserves NPV10(1) | 0.98x | | Proved plus Probable Reserves NPV10(1) | 0.68x | | 12 Month Cash Flow from Operations(2) | 5.6x | | 12 Month Production Accretion(2) | 14% | | 12 Month Cash Flow Accretion(2) | 9% | | PDP Reserves Accretion(2) | 25% | | 2P Reserves Accretion(2) | 13% |
Notes:
Gross Company Reserves. Reserves were prepared by GLJ Petroleum Consultants ("GLJ") effective December 31, 2015 using the GLJ December 31, 2015 forecast prices and costs in accordance with National Instrument 51-101 - Standards of Disclosure of Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook (the "GLJ Report"). Gross Company Reserves means the company's working interest reserves before the calculation of royalties, and before the consideration of the company's royalty interests. Projected cash flows from operations, cash flow accretion and production accretion based on 12 month forecast production and cash flows using a US$50 WTI oil price and $0.76 Cdn/US FX, assuming cash flow from the applicable asset is reinvested in drilling during the period. WINMORE ACQUISITION
On May 30, 2016, Spartan closed the acquisition of certain assets in its core Winmore area (the "Winmore Acquisition") in southeast Saskatchewan. The assets acquired pursuant to the Winmore Acquisition are producing approximately 150 boe/d and include 16.6 net sections of land. Spartan has identified 29.7 net economic open-hole drilling locations on the acquired assets.
The Winmore area has recently been a key driver of growth for Spartan with wells significantly outperforming Spartan's internal type curves. In addition, the consolidation of working interests in portions of the pool will allow Spartan to accelerate future waterflood projects in the area. Total consideration for the Winmore Acquisition was approximately $9.5 million, comprised of cash in the amount of $2.2 million and 2.3 million common shares of Spartan.
BANK LINE REDETERMINATION
Following the completion of Spartan's borrowing base redetermination, we are pleased to announce that the syndicate of lenders underwriting the Company's credit facilities have determined to renew Spartan's credit facilities at $150 million. The next borrowing base redetermination is scheduled for October 31, 2016.
ACQUISITION SUMMARY
Upon completion of the above mentioned acquisitions, together with the recently completed acquisition of Wyatt Oil & Gas Ltd., Spartan will have successfully closed three acquisitions consolidating positions in our southeast Saskatchewan core area. A summary of the three acquisitions is as follows:
2,980 boe/d of light oil production (87% oil and liquids)
106,572 net acres of land (57 % Crown)
234 net drilling locations
8.7 MMboe of Proved Developed Producing reserves
23.0 MMboe of Proved plus Probable reserves
$23.3mm est. 12 month cash flow
Total purchase price of $148.7 million
No incremental G&A
Spartan has maintained a disciplined approach to acquisitions through the recent downturn. Moving forward, Spartan will continue to seek out acquisition opportunities that deliver high quality assets at an attractive valuation, while at the same time protecting our balance sheet flexibility. Spartan also continues to prudently manage its future abandonment liability obligations, and the 2016 Acquisitions are neutral to Spartan's existing licensee liability rating in Saskatchewan.
OUTLOOK
Through 2015 and the first half of 2016, Spartan's focus has been preserving our balance sheet flexibility by spending within cash flow and to take advantage of acquisition opportunities afforded by the downturn in the commodity cycle. We remained diligent through this time period, focusing on acquiring high quality oil assets at a price that will deliver long term value to our shareholders.
Spartan's strategy for the remainder of 2016 remains unchanged. Following the completion of the 2016 Acquisitions, we will have approximately $101 million drawn on our $150 million credit facility. We continue to believe that the current environment lends itself to preserving capital to deploy on accretive acquisitions, and we intend to continue to preserve our balance sheet strength by maintaining spending within cash flow in 2016. We will maintain flexibility in our capital program and adjust spending based on prevailing commodity prices, while continuing to seek out opportunities to add additional long term value through accretive acquisitions.
READER ADVISORY
BOE Disclosure. The term barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions in the report are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
Spartan Energy Corp.
Richard (Rick) McHardy
President and Chief Executive Officer
Spartan Energy Corp.
Tim Sweeney
Manager, Business Development
Spartan Energy Corp.
Suite 500, 850 - 2nd Street S.W.
Calgary, Alberta T2P 0R8
403.355.2779
(403) 355-8920
info@spartanenergy.ca
www.spartanenergy.ca |
