Cardinal Energy Ltd. Announces Second Wainwright Acquisition and Equity Financing

CALGARY, ALBERTA–(Marketwired – Sept. 2, 2014) – Cardinal Energy Ltd. (“Cardinal”) (TSX:CJ) is pleased to announce that it has entered into an agreement to acquire approximately 2,500 BOE/day of long life oil production in the Wainwright area of Alberta (the “Acquisition”).

The Acquisition is comprised of 97% crude oil, includes associated infrastructure, is 99.4% operated and has a base decline rate of 7% to 9%.

The Acquisition will be primarily funded with a concurrent $197.5 million bought-deal financing (the “Financing”) and advances under Cardinal’s credit facility.

Wainwright Acquisition

The Acquisition consists of approximately 2,500 BOE/day of long life, medium quality crude oil with an average working interest of 94% and is consistent with Cardinal’s strategy of building a solid production base. The Acquisition also includes operatorship and a high working interest in the associated facilities.

Wainwright is a new core area for Cardinal and the assets to be acquired immediately offset Cardinal’s current producing properties in Wainwright, including the assets acquired on August 22, 2014.

To view the image associated with this press release, please visit the following link: http://media3.marketwire.com/docs/CJ-image.pdf.

Highlighted benefits of the Acquisition are that it:

• is accretive to forecast cash flow from operations on an annualized basis by 38% and cash flow from operations per share by 12% ⁽¹⁾⁽⁵⁾;
• increases our production at closing from approximately 8,500 Boe/d to 11,000 Boe/d;
• decreases our current corporate base decline;
• will reset our current simple payout ratio to approximately 32% after giving effect to the previously announced dividend increase ⁽¹⁾⁽⁵⁾;
• increases our cash flow from operations by $43 million, on an annualized basis⁽⁵⁾; and
• is accretive to total proved reserves per share by 17% and total proved plus probable reserves per share of 13%.

Notes:

In addition, Cardinal sees further development drilling opportunities in a bypass pay zone on the properties which will give it a multi-year year development drilling program which will more than offset the decline on the property. Cardinal estimates that it will now have approximately 35 horizontal drill locations in the area.

Cardinal will fund a portion of the Acquisition with its credit facility and it expects to end the year with approximately $20 million of net debt, assuming the over allotment is exercised. Cardinal’s credit facility, which currently has a borrowing base of $145 million and is set at $125 million, will not be concurrently revised as result of the Acquisition, although the borrowing base of the credit facility could be significantly increased as a result of the high percentage of proved producing reserves to be acquired pursuant to the Acquisition and the previous Wainwright acquisition that closed on August 22, 2014.

Macquarie Capital Markets Canada Ltd. acted as a financial advisor to Cardinal for this transaction.

The Financing

In connection with the Acquisition, Cardinal has entered into an agreement with a syndicate of underwriters co-led by CIBC and RBC Capital Markets (collectively, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought deal basis, 10,000,000 common shares of Cardinal at a price of $19.75 per common share for gross proceeds of approximately $197.5 million (the “Financing”). The Company has also granted the Underwriters an over-allotment option to purchase, on the same terms, up to an additional 1,000,000 Common Shares, exercisable by the Underwriters, in whole or in part, at any time for a period of 30 days on or following closing. The maximum gross proceeds raised under the Financing will be approximately $217.25 million should the over-allotment option be exercised in full.

The common shares will be distributed by way of a short form prospectus in all provinces of Canada and in the United States and certain other jurisdictions as Cardinal and the Underwriters may agree on a private placement basis. Completion of the Acquisition and the Financing are subject to certain conditions including the receipt of all necessary regulatory approvals, including the approval of the Toronto Stock Exchange. Closing of the Financing is expected to occur on September 23, 2014 and closing of the Acquisition is expected to occur on September 30, 2014.

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 U.S. Securities Act of 1933, as amended, or an exemption from such registration. Cardinal has not registered and will not register the common shares under the U.S. Securities Act of 1933, as amended. Cardinal does not intend to engage in a public offering of common shares in the United States.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

About Cardinal Energy Ltd.

Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal’s operations are focused in all season access areas in Alberta.

[expand title=”Advisories & Contact”]Note Regarding Forward‐Looking Statements and Other Advisories

This press release contains forward-looking statements and forward-looking information (collectively “forward-looking information”) within the meaning of applicable securities laws relating to the Cardinal’s plans and other aspects of Cardinal’s anticipated future operations, management focus, objectives, strategies, financial, operating and production results and business opportunities, including expected 2014 production, product mix, cash flow from operations and netbacks, expected year end net debt levels, Cardinal’s capital expenditure program, drilling and development plans and the timing thereof and sources of funding. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding the Acquisition, the Financing and the benefits to be acquired therefrom including anticipated production, product mix, drilling and reserves potential, decline rates, drilling locations and inventory, reserve life index, netbacks, cash flow from operations and other economics, and the impact of the Acquisition on Cardinal and its financial and operating results and development plans, including, on its production, cash flow from operations, decline rates, simple payout ratio, reserves, transportation and processing opportunities, outstanding bank debt and future borrowing base. This press release also contains forward-looking information relating to the estimated purchase price of the Acquisition, the sources of funding of the Acquisition and the anticipated closing date for the Acquisition and the Financing. Forward-looking information typically uses words such as “anticipate”, “believe”, “project”, “expect”, “goal”, “plan”, “intend” or similar words suggesting future outcomes, statements that actions, events or conditions “may”, “would”, “could” or “will” be taken or occur in the future.
The forward-looking information is based on certain key expectations and assumptions made by Cardinal’s management, including expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating expenses; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labor and services; the impact of increasing competition; ability to market oil and natural gas successfully; Cardinal’s ability to access capital, and obtaining the necessary regulatory approvals, including the approval of the Toronto Stock Exchange and satisfaction of the other conditions to closing the Acquisition and the Financing and on the timeframes contemplated.

Statements relating to “reserves” are also deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Cardinal can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. The Acquisition and the Financing may not be completed on the anticipated terms and time frames or at all and Cardinal’s actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that Cardinal will derive there from. Management has included the above summary of assumptions and risks related to forward-looking information provided in this report in order to provide securityholders with a more complete perspective on Cardinal’s future operations and such information may not be appropriate for other purposes.

This press release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about Cardinal’s prospective results of operations, cash flows, and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this document was made as of the date of this document and was provided for the purpose of describing the anticipated effects of the Financing, the Acquisition on Cardinal’s business operations. Cardinal disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect Cardinal’s operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

These forward-looking statements are made as of the date of this press release and Cardinal disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Non-GAAP Measures

This press release contains the terms “cash flow from operations”, “cash flow from operations per share”, “netbacks”, “simple payout ratio” and “net debt” which do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS” or, alternatively, “GAAP”) and therefore may not be comparable with the calculation of similar measures by other companies.

Cardinal uses cash flow from operations, cash flow from operations per share and simple payout ratio to analyze financial and operating performance. Netback is utilized by Cardinal to better analyze the operating performance of its petroleum and natural gas assets against prior periods and net debt is used to analyze Cardinal’s financial position and leverage. Cardinal feels these benchmarks are key measures of profitability and overall sustainability for the Company. Each of these terms is commonly used in the oil and gas industry. Cash flow from operations, netbacks and simple payout ratio are not intended to represent operating profits nor should they be viewed as an alternative to cash flow provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. “Cash flow from operations” is calculated as cash flows from operating activities adjusted for changes in non-cash working capital and decommissioning expenditures. “Cash flow from operations per share” is calculated using the same weighted average number of shares outstanding used in calculating earnings per share, “Simple payout ratio” represents the ratio of the amount of dividends declared, divided by cash flow from operations. “Netback” is calculated on a per boe basis and is determined by deducting royalties and operating expenses from petroleum and natural gas revenue. The term “net debt” is not recognized under GAAP and is calculated as bank debt plus or minus working capital (adjusted for the fair value of financial instruments).

Advisory Regarding Oil and Gas Information

Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.

This press release contains estimates of the net present value of the future net revenue from the reserves associated with the Acquisition. Such amounts do not represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of the crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise.

Cardinal Energy Ltd.
M. Scott Ratushny
Chief Executive Officer and Chairman
(403) 216-2706

Cardinal Energy Ltd.
Douglas Smith
Chief Financial Officer
(403) 216-2709

Cardinal Energy Ltd.
Suite 1400, 440 – 2nd Avenue S.W.
Calgary, Alberta T2P 5E9
(403) 234-8681
(403) 234-0603 (FAX)
info@cardinalenergy.ca