CALGARY, Alberta, Sept. 01, 2017 (GLOBE NEWSWIRE) — RMP Energy Inc. (“RMP” or the “Company”) (TSX:RMP) is pleased to announce that it has entered into a definitive purchase and sale agreement (the “Agreement“) with Tangle Creek Energy Ltd. (“Tangle Creek“) pursuant to which Tangle Creek will acquire all of RMP’s crude oil and natural gas interests in the Waskahigan/Grizzly, Kaybob, Gilby, Pine Creek areas of West Central Alberta in addition to other minor Alberta properties (collectively the “Assets”) for total consideration of $80.0 million, subject to customary closing adjustments (the “Transaction”). The Company will retain its oil and gas properties and associated interests in its core Elmworth area of operations.
“The Transaction is transformational for the Company. Following the re-constitution of the Company’s Board of Directors in May and the appointment of the new management team in August, this Transaction completes RMP’s reorganization and positions the Company to drive forward with the development of its highly economic, oil-weighted Montney lands at Elmworth,” said Rob Colcleugh, RMP’s CEO. “The Company has now successfully drilled four wells on this acreage and is producing approximately 1,400 boe/d from two of these wells though its 100%-owned battery. With estimated liquidity of approximately $45 million following the Transaction, the Company will now have the financial strength to capitalize on its significant Elmworth land base,” Mr. Colcleugh further commented.
|Pro Forma Company Snapshot|
|Cash and Investments||approximately $45 million|
|Shares Outstanding (non diluted)||156.3 million|
|Current Production(1)||approximately 1,400 boe/d (30% oil and NGLs)|
|Elmworth Montney Land||52,800 net acres (82.5 net sections)|
|Note (1) Based on field estimates for the month of August, 2017.|
The Company’s recently drilled and completed Elmworth 15-23 well represents the first completion directed by the new management team. This well is currently in the process of being tied-in to the Elmworth 2-23 battery. This well is somewhat shorter than the last two (2.0 net) RMP wells at Elmworth due to land constraints, however, it had higher frac intensity with 30 stages at 50 metre spacing and 60 tonnes per stage of proppant. The drilling and completion cost was approximately $4.4 million, which compares favourably to the $6.0 million average cost of the last two wells drilled and completed at Elmworth in the first quarter of 2017. Management will assess the production rates from the 15-23 well throughout the month of September, which will be instructive for future development activity.
The Company currently plans to drill at least two (2.0 net) additional delineation wells this winter, which will continue 39 sections of prospective acreage through the year 2020. Management may add additional wells to the program depending upon information learned from the 15-23 well and ongoing discussions with infrastructure partners. In addition, a number of third-party Montney wells have been drilled or are in the process of being drilled in the vicinity of the Company’s lands which will also provide invaluable information to the Company in the coming months.
At Elmworth, following the completion of the Transaction, the Company will continue to hold a large undeveloped land base consisting of 83 (82.5 net) sections (52,800 net acres) of operated Montney acreage, with substantial resource potential. Future delineation and development of the Company’s Elmworth assets will be focused on extended reach horizontals with increased frac and proppant intensity. These technical improvements coupled with operational efficiencies in spud-to-on-stream cycle times, emulsion management and infrastructure optimization will provide the key to unlocking the vast potential of the Elmworth Montney fairway. The Company’s management team has significant experience using the most current technologies to drive costs out of unconventional resource development programs which has the potential to generate significant value to shareholders.
As part of the RMP shareholder meeting being called to approve the Transaction, the Company will also be seeking approval for a name change of the Company to Iron Bridge Resources Inc.. Ironbridge Gorge is located in Shropshire England and is recognized as one of the birthplaces of the Industrial Revolution. It was here in 1709 that Abraham Darby perfected the technique of producing pig iron in a blast furnace fueled by coke rather than coal allowing for much cheaper production of iron. The name reflects the Company’s focus on innovation and cost efficiency in the unconventional resource revolution.
The consideration to be received by the Company at closing of the Transaction is comprised of: (i) $71.0 million in cash; and (ii) approximately 13.85 million common shares (“Tangle Shares“) of Tangle Creek (having a value of $9.0 million based upon the issue price of Tangle Creek’s most recent equity financing completed in conjunction with the Transaction). Tangle Creek is fully-funded and there is no financing condition to the closing of the Transaction.
“We are pleased to become minority shareholders of Tangle Creek which has a substantial light oil weighted production base in the Kaybob area of West Central Alberta,” stated Rob Colcleugh. “Tangle Creek has the financial resources and management expertise to realize the upside potential that we see at Waskahigan and we believe this has the potential to be an excellent investment for the Company and our shareholders.”
The effective date of the Transaction is June 1, 2017 and closing is expected to occur in October 2017 (the “Closing”), subject to approval of RMP’s shareholders, the receipt of all necessary regulatory approvals and the satisfaction of other customary closing conditions. The Transaction was unanimously approved by both companies’ Boards of Directors.
The Assets comprise a substantial portion of RMP’s production and reserves and, accordingly, the Company will be seeking approval for the Transaction by its shareholders at a special meeting of RMP’s shareholders expected to take place in October 2017 (the “Meeting”). The approval threshold will be two-thirds of the votes cast by RMP’s shareholders voting in person or by proxy at the Meeting. From the date of the Agreement to Closing, RMP has agreed not to solicit or initiate discussions regarding any other business combination or sale of these Assets and has granted Tangle Creek the right to match any superior proposals. The Agreement provides for a $6.0 million mutual non-completion fee in certain circumstances if the Transaction is not completed.
Concurrent with entering into the Agreement, certain shareholders of the Company, including officers and directors, have entered into voting support agreements with Tangle Creek pursuant to which they have agreed to vote all of the common shares of RMP owned or controlled by them in favor of the Transaction (representing over 20% of RMP’s outstanding common shares).
The Assets to be sold under the Transaction include the following:
- Average production of 3,215 boe/d, weighted approximately 70% natural gas (second quarter 2017);
- Annualized operating income of approximately $11 million(1);
- Total proved reserves of 14.9 MMboe(2);
- Total proved plus probable reserves of 23.0 MMboe(2); and,
- Land acreage of 92,450 net acres, along with infrastructure facilities and pipeline interests.
In connection with the Transaction, Tangle Creek will also assume a portion of RMP’s crude oil and natural gas firm transportation commitments relating to the Assets.
(1): Reflects realized second quarter 2017 field operating cash flow adjusted for associated and allocated general and administrative overhead costs.
(2): Reflects “gross” reserves independently-evaluated and assigned by the Company’s independent qualified reserves evaluator, Insite Petroleum Consultants, effective as of December 31, 2016, in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”).
GMP Securities L.P. (“GMP FirstEnergy“) has acted as financial advisor to the Company in respect of the Transaction and has provided an opinion to RMP’s Board of Directors to the effect that the consideration to be received by the Company is fair, from a financial point of view, to RMP.
|bbl or bbls||barrel or barrels||Mcf/d||thousand cubic feet per day|
|Mbbl||thousand barrels||MMcf/d||million cubic feet per day|
|bbls/d||barrels per day||MMcf||Million cubic feet|
|boe||barrels of oil equivalent||Bcf||billion cubic feet|
|MMboe||million barrels of oil equivalent||psi||pounds per square inch|
|boe/d||barrels of oil equivalent per day||kPa||kilopascals|
|NGLs||natural gas liquids||GJ||Gigajoule|
|WTI||West Texas Intermediate||GJ/d||Gigajoules per day|