CALGARY, ALBERTA–(Marketwired – Nov. 22, 2016) – Baytex Energy Corp. (“Baytex”) (TSX:BTE)(NYSE:BTE) is pleased to announce that it has entered into an agreement to acquire heavy oil assets located in the Peace River area of northern Alberta, effective October 1, 2016, for cash consideration of $65 million (the “Acquisition”). The assets are located immediately adjacent to our existing Peace River lands, add approximately 3,000 boe/d of production and more than double our land base in the area. The Acquisition, which is subject to closing adjustments and other conditions typical of transactions of this nature, is expected to close before year-end.
The Acquisition will be funded through a concurrent $100 million bought deal financing.
The Peace River region has been a core asset for Baytex since we commenced operations in the area in 2004. Through our innovative multi-lateral horizontal drilling and production techniques, the area is recognized as having some of the strongest capital efficiencies in the oil and gas industry and, over the years, has contributed significantly to our growth.
The Acquisition is consistent with our strategy to capitalize on opportunities to enhance the quality of our asset base throughout the commodity price cycle. The Acquisition will drive efficiencies and synergies in our operations and will significantly enhance our inventory of drilling locations for future growth. We see the potential to significantly increase crude oil production from the Acquisition over the next two years.
– We are acquiring 415 net sections of long-tenure oil sands leases, which will more than double our land position in the area. Prior to this Acquisition, we held 338 net sections of oil sands leases in the Peace River area. To view a map of the acquired lands along with our existing land position at Peace River, please visit the following link:
– The acquired assets are currently producing approximately 3,000 boe/d (85% heavy oil) and are 100% operated. The Acquisition will increase our production at Peace River by approximately 20%.
– In addition, the Acquisition includes approximately 3,000 boe/d of production that is shut-in due to regulatory requirements and economics. We estimate the total capital required to bring these volumes back on-line to be approximately $30 million. Subject to a favourable crude oil price environment, we expect to incur the majority of these expenditures over the next couple of years.
– We have identified significant growth opportunities on the assets, including 153 net drilling locations which are supported by the viscosity data from over 200 stratigraphic test wells. Our total drilling inventory at Peace River grows by 75% to over 350 net wells.
– The majority of the production is processed through a vast infrastructure network that includes an integrated crude oil pipeline system, centralized oil processing facilities and a blended crude oil sales pipeline. The assets also include an extensive gas gathering and conservation system.
– This unique acquisition provides the potential for efficiencies and synergies that will allow the optimal development of both existing Baytex lands and the acquired acreage.
– The acquired lands hold further significant development potential, including enhanced oil recovery and water flood opportunities.
Summary of the Acquisition
|Purchase price||$65 million (subject to closing adjustments)|
|Land Position||415 net sections|
|Current production||3,000 boe/d (85% heavy oil)|
|Proved developed producing||5.1 mmboe|
|Total proved||15.5 mmboe|
|Proved plus probable||18.4 mmboe|
|Average Crude Oil Quality||10-12 degree API|
|Reserves Life Index (2)||16.8 years|
|Development locations (net)||54||proved|
|71||proved plus probable|
- Reserves represent total working interest reserves before the deduction of royalties and are based on Baytex’s internal evaluation and were prepared by a qualified reserves evaluator in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook effective October 1, 2016.
- Reserves life index is calculated by dividing estimated proved plus probable reserves by estimated current production.
In connection with the Acquisition, Baytex has entered into an agreement with a syndicate of underwriters co-led by Scotia Capital Inc. and RBC Capital Markets (the “Underwriters”), pursuant to which the Underwriters have agreed to purchase, on a bought deal basis, 19,050,000 common shares (“Common Shares”) at a price of $5.25 per share to raise aggregate gross proceeds of approximately $100 million (the “Offering”). The net proceeds will be used to fund the Acquisition, reduce bank indebtedness and fund ongoing capital expenditures. The Offering is subject to customary closing conditions, including receipt of applicable regulatory and stock exchange approvals, and is expected to close on or about December 12, 2016. Completion of the Offering is not conditional on the closing of the Acquisition.
Baytex has also granted the Underwriters an over-allotment option to purchase up to an additional 2,857,500 Common Shares at a price of $5.25 per share, exercisable in whole or in part, at any time and from time to time, for a period of 30 days following closing of the Offering, to cover over-allotments, if any, and for market stabilization purposes. The maximum gross proceeds that will be raised under the Offering will be $115 million should the over-allotment option be exercised in full.
The Offering will be completed by way of a short form prospectus to be filed in all provinces of Canada (except Québec). In addition, the Common Shares will be offered for sale to Qualified Institutional Buyers in the United States pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended, and internationally, as permitted.
This press release is not an offer of the Common Shares for sale in the United States. The Common Shares may not be offered or sold in the United States absent registration under the United States Securities Act of 1933, as amended, or an exemption from such registration. Baytex has not registered and will not register the Common Shares under the United States Securities Act of 1933, as amended. Baytex does not intend to engage in a public offering of shares in the United States.