CALGARY, ALBERTA–(Marketwired – Aug. 3, 2016) – Spartan Energy Corp. (“Spartan” or the “Company”) (TSX:SPE) is pleased to announce that it has completed the acquisition of approximately 450 boe/d (93% oil and liquids) of production in southeast Saskatchewan for a cash purchase price of $24 million (the “Acquisition”).
Spartan is also pleased to announce that it has entered into a bought deal financing agreement with a syndicate of underwriters co-led by Peters & Co. Limited, GMP Securities L.P. and TD Securities Inc. (collectively, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought deal basis, 22,100,000 common shares of Spartan (“Shares”) at a price of $3.18 per Share for total gross proceeds of $70,278,000 (the “Offering”). The Underwriters will have an option (the “Underwriters’ Option”) to purchase up to an additional 3,315,000 Shares at a price of $3.18 per Share to cover over-allotments, if any, exercisable in whole or in part at any time until 30 days after the closing date.
The assets acquired pursuant to the Acquisition (the “Assets”) are comprised of approximately 450 boe/d (93% oil and liquids) of low-decline production and 29.2 net sections of land, primarily focused in the Midale fairway of southeast Saskatchewan. The Assets include approximately 21.4 net sections of land complementary to Spartan’s existing acreage at Pinto and Alameda which are prospective for drilling open-hole and fracture stimulated wells in the Midale formation. Spartan has identified 79.5 net frac Midale and open-hole Midale and Frobisher drilling locations on the Assets.
Spartan has entered into an agreement on a “bought-deal” basis with the Underwriters for an offering of 22,100,000 Shares at a price of $3.18 per Share. The Underwriters have been granted the Underwriters’ Option to purchase up to an additional 3,315,000 Shares at a price of $3.18 per Share, exercisable in whole or in part at any time up until 30 days after the closing of the Offering. The net proceeds from the Offering will be used to reduce indebtedness under the Company’s credit facility, which has been drawn on to fund recent acquisitions, and for general corporate purposes.
The Offering will be completed by way of short form prospectus in certain of the provinces of Canada (excluding Québec) and on a private placement basis in the United States pursuant to exemptions from the registration requirements of the U.S securities laws. The Offering is subject to customary conditions including receipt of applicable regulatory approvals and is expected to close on or about August 24, 2016.
UPDATED 2016 CAPITAL BUDGET
Spartan’s 2016 corporate strategy has focused on maintaining balance sheet strength by spending within cash flow and furthering per share production and reserves growth by executing on acquisition opportunities afforded by the downturn in the commodity cycle. Spartan has delivered on this strategy in the first half of the year, executing a cash flow budget while completing four accretive acquisitions within our southeast Saskatchewan core area.
Spartan’s strategy remains unchanged in the second half of the year. Our board of directors has approved a 2016 capital budget of $68 million, which is expected to be approximately cash flow neutral assuming an average WTI oil price of $46.83 over the second half of 2016. We anticipate this spending level will yield average production of approximately 10,700 boe/d (92% oil and liquids) and exit production of approximately 12,500 boe/d (89% oil and liquids), representing debt adjusted per share growth of approximately 8% and 13%, respectively, over 2015. Projected net debt at the end of 2016 is approximately $58 million ($48 million in the event the Underwriters’ Option is exercised in full) with a revolving credit facility of $150 million.
We commenced drilling operations in June following the completion of spring break-up conditions in the field, and we currently have two rigs operating in our southeast Saskatchewan core area. In the first quarter, we drilled 10 (8.5 net) open-hole Mississippian wells and 5 (3.6 net) frac Midale wells, and completed an additional 7 (5.9 net) previously drilled Viking wells. Our capital budget contemplates drilling an additional 46 (38.2 net) open-hole wells and 7 (6.8 net) frac Midale wells. Open-hole wells will primarily target our greater Winmore and Queensdale areas and will focus on infill drilling and pool extensions. Our frac Midale wells will be focused in the Alameda area on lands recently acquired pursuant to the purchase of Wyatt Oil + Gas Inc. Spartan’s capital program remains flexible and we will adjust capital expenditures in the second half of the year depending upon prevailing commodity prices.
|2016 Updated Guidance|
|Annual production||10,700 boe/d (92% oil and liquids)|
|Exit Production||12,500 boe/d|
|Capital expenditures||$68 million|
|Funds from operations||$68 million|
|2016 year-end net debt||$58 million(1)|
|Credit facility limit||$150 million|
|Pricing Assumptions – Second Half of 2016|
|Crude oil (US$WTI)||$46.83/bbl|
|Natural gas (Cdn AECO)||$2.50/Mcf|
|Exchange rate (US/Cdn)||$0.77|
|Cdn. Light Sweet Oil (Cdn$)||$56.30|
(1) $48 million in the event the Underwriters’ Option is exercised in full.
Following the completion of our recent acquisitions and the Offering, Spartan remains well positioned to deliver per share growth in a variable commodity price environment. The majority of our drilling locations remain economic in a depressed price scenario, allowing us to sustain production while using our strong cost of capital and balance sheet flexibility to pursue additional accretive acquisitions. In a rising price environment, the torque to oil prices provided by our light oil production base, together with our deep drilling inventory, provide the ability to deliver significant organic production growth within cash flow.