Anderson has entered into an agreement to sell its Garrington and Ferrier Cardium oil and natural gas properties for $82 million effective August 1, 2013, subject to normal closing adjustments (the “Transaction”). In August, these properties produced approximately 1,000 BOED (65% oil & NGL). Closing of the Transaction is scheduled to occur by the end of October 2013.
Proceeds from the Transaction will initially be used to repay bank debt. On a pro forma basis at September 13, 2013, before closing adjustments, this would leave the Company with approximately $24 million in cash, assuming current drawn bank debt of $57 million and $1 million in transaction costs.
The properties to be sold represent approximately 34% of the Company’s 2013 second quarter BOED production.
Future horizontal oil development drilling opportunities exist on Anderson’s remaining Cardium properties at Willesden Green, West Pembina and Buck Lake and the Company continues to evaluate its Second White Specks acreage. Anderson is currently assessing the best strategy for the use of proceeds from the property sale. When the Transaction closes, the Company will provide another update on the strategic alternatives process. The continued development of the Company’s oil and gas assets is dependent on the ability of the Company to secure sufficient funds through operations, bank facilities and other sources from the strategic alternatives process. Strategic alternatives may include, but are not limited to, continued development of its Cardium oil properties, the sale of additional assets or a drilling joint venture, either in one transaction, or in a series of transactions, the outright sale of the Company, or a merger or other strategic transaction involving Anderson or a third party.
Since the process began in 2012, the Company will have, upon completion of the Transaction:
- sold or agreed to sell over $150 million of assets;
- reduced bank debt from $106.7 million at March 31, 2012 to nil;
- restructured all of its shallow gas and Cardium drilling commitments so that by the end of January 2013, Anderson had completed all of its drilling commitments;
- demonstrated the improved production performance from slick water fracture stimulation; and
- continued to be an industry leader in low capital costs in the Cardium horizontal light oil play.
It is Anderson’s current intention to not disclose developments with respect to the strategic alternatives process unless and until the Board of Directors has approved a specific transaction or otherwise determines that disclosure is necessary in accordance with applicable law. The Company cautions that there are no assurances or guarantees that the process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction or the impact it will have on the Company’s financial position. The Company has not set a definitive schedule to complete the evaluation.
Certain statements in this news release including, without limitation, management’s assessment of future plans and operations; benefits and valuation of the development prospects described herein; the expected proceeds from the Transaction and use thereof; timing of completion of the Transaction; percentage of production from oil and natural gas liquids; potential results of the strategic alternatives review process; disclosure intentions with respect to the strategic alternatives review process; factors on which the continued development of the Company’s oil and gas assets are dependent; commodity price outlook and general economic outlook may constitute “forward-looking information” (within the meaning of applicable securities legislation) and necessarily involve risks and assumptions made by management of the Company including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodity prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; adequate weather to conduct operations; sufficiency of budgeted capital, operating and other costs to carry out planned activities; wells not performing as expected; incorrect assessment of the value of acquisitions and farm-ins; failure to realize the anticipated benefits of acquisitions and farm-ins; inability to complete property dispositions or to complete them at anticipated values; delays resulting from or inability to obtain required regulatory approvals; changes to government regulation; inability to access sufficient capital from internal and external sources; and other factors, many of which are beyond the Company’s control. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as the factors are interdependent, and management’s future course of action would depend on its assessment of all information at the time. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and readers should not place undue reliance on the assumptions and forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Anderson’s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at Anderson’s website (www.andersonenergy.ca).
The forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Disclosure provided herein in respect of barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Brian H. Dau
President & Chief Executive Officer