CALGARY, ALBERTA–(Marketwired – Sept. 6, 2016) – Bonavista Energy Corporation (TSX:BNP) (“Bonavista” or the “Company”) is pleased to announce that it has entered into an agreement to acquire certain liquids rich natural gas weighted properties (the “Acquired Assets”) located within its Deep Basin and West Central Alberta core regions in exchange for properties within its non-core region located in northeastern British Columbia (the “Divested Assets”). This asset exchange has an effective date of January 1, 2016 and is expected to close in the first week of October, 2016. There are no cash proceeds involved in the asset exchange and the completion of the transaction is subject to customary regulatory approvals and other conditions.
The asset exchange is consistent with Bonavista’s strategy to concentrate its portfolio in the Deep Basin and West Central core regions where we have identified capital efficient, scalable development opportunities while establishing a low cost operating structure. Collectively, this concentration strategy has enabled profitable development in this low commodity price environment. The Acquired Assets include access to approximately 330 sections of mineral rights located adjacent to Bonavista’s existing land position in these areas. These assets include 252 (172.8 net) identified horizontal drilling opportunities with exposure to formations such as the Wilrich, Notikewin, Glauconite, Bluesky, Ellerslie and Cardium. In April, 2016, production from the Acquired Assets was 7,700 boe per day (69% natural gas) with a moderate annual decline of 19%. Current production is estimated at 7,200 boe per day.
The Divested Assets are located in the Blueberry area of northeast British Columbia. In April, 2016, production from the Divested Assets was 500 boe per day (79% natural gas).
TD Securities Inc. acted as exclusive financial advisor to Bonavista on the transaction.
To view the maps (West Central Region and Deep Basin Region) accompanying this press release, click on the following link: http://media3.marketwire.com/docs/Bona96.jpg
TRANSACTION BENEFITS TO BONAVISTA:
- Enhances our presence in four key plays we are currently developing with the addition of producing and prospective land in the Wilrich, Notikewin, Glauconite and Bluesky formations. Approximately 149 (104.1 net) horizontal locations have been identified on the Acquired Assets in these four economically competitive formations.
- Proximity of the Acquired Assets to existing Bonavista operations will result in approximately $8 million of capital expenditures in 2016 allocated to enhance operating efficiencies by optimizing production and consolidating infrastructure. These expenditures are forecast to reduce operating expenses on the Acquired Assets by 25% in 2017 when compared to 2016.
- Offers immediate development opportunities with plans to allocate $30 to 35 million of capital spending to complement our core 2017 drilling program. This activity when combined with our optimization efforts is expected to increase the average annual production of the Acquired Assets to 8,500 boe per day in 2017. Based upon forward commodity prices at August 23, 2016, we expect to generate approximately $38 million of net operating income from these assets in 2017.
- Based upon our prior production and funds from operations guidance, the additional funds from operations generated in 2016 from the Acquired Assets will result in a net debt to funds from operations ratio of approximately 2.9:1 (fourth quarter 2016 annualized) using forward commodity pricing as at August 23, 2016.
|Natural gas||Oil and Natural
|ACQUIRED BY BONAVISTA|
|Proved Producing (1,2,3)||76.7||5,438||18,268|
|Total proved (1,2,3)||128.8||10,179||31,638|
|Total proved plus probable (1,2,3)||166.3||12,974||40,695|
|DIVESTED BY BONAVISTA|
|Proved Producing (1,2,3)||4.7||458||1,241|
|Total proved (1,2,3)||12.1||1,540||3,557|
|Total proved plus probable (1,2,3)||39.7||4,517||11,134|
|(1) Reserves are working interest reserves prior to the deduction of royalties.|
|(2) Reserve estimates are based on our internal evaluation effective August 8, 2016 and were prepared by a qualified reserve evaluator in accordance with NI 51-101 and the COGE Handbook.|
|(3) The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.|
This asset exchange significantly concentrates our portfolio in our Deep Basin and West Central core regions. In addition, it strengthens our current inventory of low cost, profitable drilling opportunities by 252 (172.8 net) locations bringing our total corporate inventory in our key plays to 1,416 (1,120.9 net) locations in our key plays. This equates to approximately 15 years of profitable drilling opportunities at anticipated 2017 drilling levels. Ultimately, the synergies created by the proximity of the Acquired Assets to our existing operations will lead to continued improvements in both capital and operating efficiencies and reliable development opportunities for many years to come.