CALGARY, ALBERTA–(Marketwired – Aug. 1, 2017) – Birchcliff Energy Ltd. (“Birchcliff”) (TSX:BIR) is pleased to announce that it has completed a series of asset sales and expects to complete additional asset sales, including the sale of its Worsley Charlie Lake Light Oil Pool, for total disposition proceeds of approximately $142 million (subject to closing adjustments). These asset sales collectively represent forecast 2017 annual average production of approximately 3,600 boe/d (approximately 62% light oil and NGLs) and proved plus probable reserves of 48.2 MMboe at December 31, 2016.
The proceeds from these asset sales have been and are anticipated to be used to initially reduce Birchcliff’s indebtedness under its credit facilities, which will be subsequently redrawn as needed to fund Birchcliff’s capital expenditure program and for general corporate purposes. Birchcliff expects that it will provide updated guidance in its second quarter 2017 press release, which is currently scheduled to be released on August 10, 2017 at 2:00 p.m. (MDT).
“We believe that these asset sales will allow us to become more geographically focused and become even more competitive in our industry. In addition, the proceeds from these asset sales will allow us to reduce our indebtedness, which will improve our balance sheet and increase our financial flexibility. Notwithstanding these assets sales, the borrowing base under our credit facilities will remain at $950 million, which is a testament to the quality of our reserves,” commented Jeff Tonken, President and Chief Executive Officer of Birchcliff. “As a result of these transactions, we expect that our operating, transportation and marketing and interest costs will decrease on a per unit basis, reducing our already low-cost structure.”
Modification to AltaGas Gordondale Processing Arrangement
Birchcliff and AltaGas have modified their take-or-pay agreement effective January 1, 2017 to incent volumes above Birchcliff’s existing take-or-pay commitment at AltaGas’ deep-cut natural gas processing facility located in Gordondale. This modification will significantly decrease the processing fees payable by Birchcliff on volumes over Birchcliff’s existing take-or-pay volumes and is expected to reduce Birchcliff’s unit operating costs until Birchcliff builds its own deep-cut facility.
Details Regarding Asset Sales
Birchcliff has entered into a definitive purchase and sale agreement with a private oil and gas company for the sale of its Worsley Charlie Lake Light Oil Pool located in the Peace River Arch area of Alberta (the “Worsley Assets“) for total consideration of approximately $100 million (subject to closing adjustments), consisting of: (i) cash consideration of $90 million; and (ii) securities of an affiliate of the purchaser with a total value of $10 million (the “Worsley Disposition“). The effective adjustment date of the Worsley Disposition is July 1, 2017. Closing is expected to occur on or about August 31, 2017, subject to the receipt of all necessary regulatory approvals and the satisfaction of other customary closing conditions. The Worsley Assets represent approximately 3,080 boe/d of forecast 2017 annual average production (approximately 69% light oil and NGLs) and proved plus probable reserves of 38.9 MMboe at December 31, 2016.
“Since we first acquired our assets on the Worsley Charlie Lake Light Oil Play in 2007, they have been instrumental in allowing us to create significant value for our shareholders as they provided us with a source of cash flow that we used to develop our Montney/Doig Resource Play. As we have not allocated any significant capital to our Worsley Charlie Lake Light Oil Pool in recent years, we made the decision to sell the assets in order to reduce our indebtedness and concentrate on our premium-quality assets on the Montney/Doig Resource Play,” commented Jeff Tonken, President and Chief Executive Officer of Birchcliff.
During the second quarter of 2017, Birchcliff completed the disposition of various non-core assets for total proceeds of approximately $10 million (prior to closing adjustments). In addition, Birchcliff is currently in the process of negotiating the sale of some of the remaining assets that were marketed for sale for additional proceeds of approximately $32 million (subject to closing adjustments) (the “Additional Disposition“). Completion of the Additional Disposition is subject to the entering into of a definitive purchase and sale agreement and closing will be subject to the satisfaction of customary closing conditions. If completed, it is expected that the Additional Disposition will close in the fourth quarter of 2017.
|boe||barrel of oil equivalent|
|boe/d||barrels of oil equivalent per day|
|Mcf||thousand cubic feet|
|MMboe||million barrels of oil equivalent|
|NGLs||natural gas liquids|