Kelt Exploration (KEL-T) to buy Pouce O&G assets, raise $101.1-million
Nov 6, 2013 - News Release
Kelt Exploration Ltd. has entered into an agreement with a Canadian oil and gas company to acquire certain crude oil and natural gas assets located at Pouce Coupe/Spirit River, in close proximity to the company's core producing areas at Grande Cache and Karr in west-central Alberta. The acquisition has an effective date of October 1, 2013 and is subject to standard industry closing conditions. Closing is expected to occur on or around December 20, 2013.
The consideration to be paid by Kelt is $192.0 million, before closing adjustments, and will be financed by existing cash on hand and proceeds from an equity financing (described in more detail below). The Company has received a commitment letter from its bank, National Bank of Canada, whereby Kelt's available bank credit line will be increased to $100.0 million, upon satisfactory closing of the Pouce Coupe/Spirit River asset acquisition.
Key Attributes of Assets to be Acquired
AI Current net production is estimated to be approximately 4,800 BOE per day - 40% oil and 60% gas (approximately 8% of current production is subject to rights of first refusal).
AI At current index pricing for crude oil of WTI US$95.00 per barrel and for natural gas at AECO $3.25 per GJ, operating netbacks are approximately $23.00 per BOE, providing approximately $40.0 million of annual operating income at current production levels.
AI Petroleum and natural gas reserves to be acquired have been evaluated internally by Kelt effective October 1, 2013:
? Proved developed producing reserves were 10.1 million BOE, with no associated future development costs; ? Total proved reserves were 13.8 million BOE, with $49.2 million in associated future development capital; ? Total proved plus probable reserves were 23.0 million BOE, with $134.9 million in associated future development capital.
AI Long-life reserves with a proved plus probable reserve life index of 13.1 years based on current production.
AI Major infrastructure component with interests in major oil and gas facilities including the following:
? A 20.2% ownership interest in a 140 MMCF per day gas processing plant. ? Varying ownership interests in gas compressors and oil batteries. ? Varying ownership interests in an extensive network of oil and gas gathering pipelines that will be accessible for transportation of oil and gas resulting from future drilling.
AI Current net production includes approximately 750 BOE per day from Unit interests of which approximately 55% is operated.
AI The Pouce Coupe/Spirit River assets include an extensive land position that is a complementary fit geographically to Kelt's existing core areas at Karr and Grande Cache and are located 20 and 40 miles north of Karr and Grande Cache respectively. The acquisition includes 256,345 gross acres (400 gross sections) and 103,303 net acres (161 net sections) of land.
AI The acquisition includes an established field office located in the town of Grande Prairie, Alberta which is expected to become Kelt's main field operating base for all of the Company's operated operations in the newly acquired Pouce Coupe/Spirit River area and in the Company's existing areas at Karr and Grande Cache.
Acquisition Metrics
AI Based on current production and not adjusting for land and infrastructure value, production is being acquired for $40,000 per flowing BOE.
AI Based on proved plus probable reserves and after taking into account future development capital costs, reserves are being acquired for $14.21 per BOE, giving the Company an acquisition recycle ratio of 1.6 times at current commodity prices.
Future Upside Potential
The Company has identified 136 gross (112 net) horizontal drilling locations primarily targeting the Montney, Doig and Charlie Lake formations. This would entail in excess of $860.0 million gross ($725.0 million net) in future capital spending, providing the Company with a significant drilling inventory and opportunity for future growth in the years ahead.
The Montney and Doig drilling inventory is located at Pouce Coupe primarily on 100% working interest lands. Both Montney and Doig development will target natural gas and associated liquids of approximately 15 to 20 barrels per million cubic feet of raw natural gas under shallow cut gas plant recoveries, resulting in high heat content sales gas which receives a premium of approximately 6% over AECO prices.
The Charlie Lake drilling inventory is located at Spirit River on 81% average working interest lands. Charlie Lake development will target crude oil and associated solution gas. Light oil from the Charlie Lake formation is approximately 40Adegree API which receives premium pricing. Other plays of interest include potential crude oil development from the Boundary Lake and Halfway formations on lands with average working interests of approximately 70%.
Equity Financing
In connection with the Pouce Coupe/Spirit River acquisition, Kelt is pleased to announce a brokered and non-brokered equity financing for gross aggregate proceeds of $101.1 million.
Brokered Private Placement
Kelt has entered into an agreement with a syndicate of underwriters led by Peters & Co. Limited, and including CIBC World Markets Inc., FirstEnergy Capital Corp., RBC Capital Markets, National Bank Financial Inc., Scotia Capital Inc., AltaCorp Capital Inc., Cormark Securities Inc., GMP Securities Inc., Dundee Capital Markets and Macquarie Capital Markets Canada Ltd. (collectively the "Underwriters"), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought deal private placement basis, 10.0 million subscription receipts of Kelt at a price of $8.15 per subscription receipt, resulting in gross proceeds of $81.5 million. The gross proceeds from the sale of subscription receipts will be held in escrow pending the completion of the Pouce Coupe/Spirit River acquisition. If all outstanding conditions to the completion of the Pouce Coupe/Spirit River acquisition (other than payment of the purchase price) are met, the net proceeds from the sale of the subscription receipts will be released to Kelt to finance, in part, the purchase price, and each subscription receipt will be exchanged for one Kelt common share for no additional consideration. The financing is expected to close on or around December 3, 2013.
Non-brokered Private Placement
In conjunction with the aforementioned brokered private placement, Kelt has agreed to issue to certain directors, officers and employees of the Company, on a non-brokered basis, an additional 2.4 million subscription receipts at a price of $8.15 per subscription receipt, resulting in additional gross proceeds of $19.6 million. If all outstanding conditions to the completion of the Pouce Coupe/Spirit River acquisition (other than payment of the purchase price) are met, the net proceeds from the sale of the subscription receipts will be released to Kelt to finance, in part, the purchase price, and each subscription receipt will be exchanged for one Kelt common share for no additional consideration. The non-brokered private placement will close concurrently with the closing of the brokered private placement on or around December 3, 2013.
Private Placements
Net proceeds from these private placement equity offerings (collectively, the "Private Placements") will be used to finance, in part, the Pouce Coupe/Spirit River acquisition. This transaction is subject to certain conditions including normal regulatory approvals and specifically, the approval of the Toronto Stock Exchange. The subscription receipts will be offered in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec by way of private placement. The Kelt common shares issued in connection with the Private Placements are subject to a statutory hold period of four months plus one day from the date of completion of the Private Placements, in accordance with applicable securities legislation.
This press release does not constitute an offer to sell or a solicitation of any offer to buy the common shares in the United States. The common shares have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. |
