CALGARY, ALBERTA–(Marketwired – Dec. 18, 2013) –
Alexander Energy Ltd. (“Alexander” or the “Company“) (TSX VENTURE:ALX) is pleased to announce that it has entered into a definitive purchase and sale agreement to acquire (the “Acquisition“) a high quality, low decline, crude oil producing asset located in southeast Saskatchewan (the “Assets“) from an arm’s length oil and gas producer. The Assets include over 370 boe/d of primarily light oil production (with a historical annual decline of approximately 9 to 10 percent) producing from the Frobisher and Midale formations. The purchase price for the Assets is $32.5 million, subject to normal adjustments based on a December 1, 2013 effective date.
The closing of the Acquisition is subject to customary conditions and is expected to close on or about February 3, 2014.
Concurrent with the Acquisition, the Company is pleased to announce a brokered and non-brokered equity financing for gross aggregate proceeds of $52.5 million (described in more detail below).
The Acquisition consists of operated, low decline crude oil property located in the Workman area of southeast Saskatchewan. The Assets include a 100% interest in the Workman Frobisher Voluntary Unit No.1 and a 76.24% interest in the Workman Voluntary Unit No.3 (collectively the “Workman Units“). In addition to the Workman Units, the Assets include three operated Midale pools, two Frobisher pools and 19,746 gross (16,283 net) acres of land at an average working interest of 82%.
Management estimates that there is more than 110 million barrels of original oil in place (“OOIP“) in the operated pools with a current recovery factor of approximately 18%. The current recovery factors in these pools vary from 7% to 21%. Analogous pools have recovered 30 to 40% of OOIP.
Management of the Company has identified significant potential with respect to the Assets from infill and pool extension horizontal drilling and waterflood optimization. Analogous pools have been drilled with 5 horizontal wells per quarter section (150 metre spacing) and as high as 9 wells per quarter section (75 metre spacing). The operated Workman Units have been drilled at 2 vertical wells per quarter section (80 acres spacing). The Company has identified 52 gross (40 net) low risk horizontal drilling locations (at 200 metre spacing) of which 13 gross (10 net) locations are currently booked. In addition, the Company has identified 57 gross (44 net) contingent drilling locations.
Highlights in respect of the Acquisition include the following attributes:
- Purchase Price: The purchase price for the Acquisition is $32.5 million, subject to normal closing adjustments with a December 1, 2013 effective date. The purchase price will be paid in cash at closing.
- Long Life Oil Reserves: The Acquisition adds Total Proved (TP) reserves of 2.23 million boe (96% crude oil) and Proved plus Probable (P+P) reserves of 2.72 million boe (95% crude oil) as independently evaluated by Sproule Associates Limited effective December 31, 2012, in accordance with National Instrument 51- 101 – Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. Net of internally assigned land value of $0.5 million, transaction metrics equate to $14.35 for TP reserves and $11.76 for P+P reserves. Based on current production, the Assets have a long reserve life index of more than 20 years (P+P).
- Light Oil Production: Current production relating to the Acquisition is approximately 370 boe/d, comprised of more than 95% liquids (33 API oil). Net of internally assigned land value of $0.5 million, transaction metrics equate to approximately $86,486 per flowing barrel of production.
- High Netbacks: Operating netback for the Assets is approximately $42 per boe, based upon an Edmonton light benchmark pricing assumption of Cdn. $90.00 per barrel, resulting in a recycle ratio (on a P+P basis) of approximately 3.6 times in relation to the Acquisition.
- Annual Cash Flow: Annualized cash flow from the Assets, based upon an Edmonton light benchmark pricing assumption of Cdn. $90.00 per barrel and using current production levels, is estimated to be approximately $5.7 million.
- Producing Infrastructure: Ownership of key producing infrastructure, including oil batteries, pipelines and waterflood facilities.
- Upside: The Company has identified 52 gross (40 net) low risk horizontal drilling locations on the lands comprising the Assets, of which 13 gross (10 net) locations are currently booked. In addition, the Company has identified 57 gross (44 net) contingent drilling locations.
- Operatorship and High Working Interest: Included in the Assets is 19,746 gross (16,283 net) acres of land with an average working interest of 82%.
The Acquisition is accretive to the Company on a per share basis on all key metrics.
Concurrent with the Acquisition, the Company is pleased to announce a brokered and non-brokered equity financing for aggregate gross proceeds of $52.5 million.
Brokered Private Placement
Concurrent with the Acquisition, the Company has entered into an agreement with a syndicate of underwriters, co-led by Peters & Co. Limited and Clarus Securities Inc., and including GMP Securities Ltd., TD Securities Inc., Dundee Securities Ltd., AltaCorp Capital Inc., Desjardins Securities Inc. and Scotia Capital Inc. (collectively, the “Underwriters“), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought deal private placement basis, an aggregate of 102,050,000 Special Warrants at a price of $0.49 per Special Warrant for gross proceeds of approximately $50.0 million (the “Brokered Financing“).
Each Special Warrant will entitle the holder thereof to receive, for no additional consideration or action on the part of the holder, one Common Share on the earlier of the date that is: (a) four months and a day following the closing of the Brokered Financing, and (b) the day on which a receipt is issued for a final prospectus by the securities regulatory authorities in each of the provinces where the Special Warrants are sold (such provinces to exclude the Province of Québec) qualifying the distribution of the Common Shares issuable upon the exercise of the Special Warrants; provided that if a receipt is not issued on or before February 28, 2014, each Special Warrant will entitle the holder thereof to receive, for no additional consideration or action on the part of the holder, 1.1 Common Shares. The Company shall use its reasonable commercial efforts to obtain such receipt as soon as practicable. Until the receipt is issued for such prospectus, the Special Warrants will be subject to a four month hold period under applicable Canadian securities laws.
Non-brokered Private Placement
Contemporaneous with the completion of the Brokered Financing, the Company announces that it shall issue 5,100,000 Common Shares to certain directors, officers and employees of the Company, at a price of $0.49 per Common Share for aggregate proceeds of approximately $2.5 million (the “Non-brokered Financing” and, collectively with the Brokered Financing, the “Financings“).
Closing and Use of Proceeds
Closing is expected to occur on or about January 14, 2014, and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the approval of the TSX Venture Exchange to the listing of the Common Shares underlying the Special Warrants. The securities to be issued under the Financings will be offered by way of private placement exemptions in all the provinces of Canada other than Quebec, offshore, including in the United Kingdom pursuant to applicable exemptions, and in the United States on a private placement basis pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended.
Subscribers under the Financings will not be entitled to participate in the previously announced Rights Offering.
The net proceeds of the Financings will be used to fund the Company’songoing