CALGARY, ALBERTA–(Marketwired – June 13, 2016) – NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce a number of key steps that have been taken to increase growth, value, and liquidity for the remainder of 2016 and 2017. These include the sale of our W6 Deep Basin Non-Montney Asset, the placement of senior unsecured notes (“Senior Notes”), and the augmentation of our spending plans. These steps, together with recent strengthening of commodity strip prices, allow us to provide a profitable, fully funded growth plan for 2016 and 2017 while maintaining a strong balance sheet.
W6 Deep Basin Non-Montney Asset Sale (“W6 Assets”)
NuVista has entered into a definitive purchase and sale agreement for the divestiture of our W6 Sweet Cretaceous (Non-Montney) natural gas assets in the Wapiti area south of Grande Prairie in exchange for $70 million in cash (before adjustments) together with certain Wapiti area Montney lands. Proceeds from the disposition will initially be used to repay existing bank indebtedness.
The metrics associated with the divested non-Montney assets are summarized as follows:
- The current production is approximately 3,200 Boe/d, comprised of 73% natural gas, 22% NGL’s, and 5% condensate;
- 2017 average production is expected to be 2,500 Boe/d;
- Funds from operations are anticipated to be approximately $3.0 million* for the second half of 2016; and
- Total Proved Producing (PDP) reserves are 7.5 MMBoe and Total Proved Plus Probable reserves are 21.7 MMBoe with FDC of $102 million**.
Closing of the transaction is anticipated to be on June 17, 2016 and is subject to customary closing conditions. RBC Capital Markets acted as exclusive financial advisor to NuVista on this transaction.
|*||Funds from Operations is based on the May 31, 2016 commodity strip prices of $2.10/GJ AECO for the second half of 2016 and $2.60/GJ for 2017. WTI pricing for the same periods is anticipated to be US$50.00/Bbl and US$51.50/Bbl, respectively (“Strip Pricing”). Total cash costs for the W6 Assets for the remainder of 2016 are expected to average approximately $7.80/Boe.|
|**||Reserve estimates above are based on the report prepared in accordance with National Instrument 51-101 by GLJ Petroleum Consultants Ltd., our independent petroleum consultants dated February 18, 2016 and effective December 31, 2015 evaluating our crude oil, natural gas and natural gas reserves, adjusted to account for year to date production.|
Senior Unsecured Debt Financing
NuVista has entered into an agreement to place five-year Senior Notes in the amount of $70 million with Magnetar Capital, a large strategic investor. The coupon rate is 9.875%, and there are no maintenance or financial covenants. The expected proceeds of the placement, net of all costs will be approximately $67 million which will initially be used to repay existing bank indebtedness. Closing of this transaction is anticipated to be on or before June 30, 2016 and is conditional upon closing of the asset sale and the amendments to our credit facility described below. CIBC Capital Markets acted as exclusive financial advisor to NuVista on this transaction.
Borrowing Base Redetermination
NuVista has completed the annual redetermination of our borrowing base with our syndicate of lenders. After adjustments to account for the issuance of the Senior Notes as well as the divestiture of W6 assets, NuVista’s borrowing base will be set at $200 million effective July 1, 2016. After giving effect to these transactions NuVista will have approximately $110 million drawn on our revised $200 million credit facility.
2016 Outlook and Guidance
The strategic steps outlined in this press release will enable NuVista to provide a fully funded growth plan into 2017. Reinvesting a portion of the W6 Asset sale proceeds into drilling additional Montney wells will allow us to maintain a minimal reduction to our 2016 production guidance while increasing 2016 cashflow guidance and overall liquidity. By the end of 2016, we expect the divested production volumes will be completely replaced with higher netback Montney production. NuVista will increase Wapiti Montney drilling activity from the current level of one rig, to two rigs effective immediately. More than 95% of NuVista’s production is expected to come from the Wapiti Montney by the end of this year. For 2016 and 2017, we will maximize growth while maintaining a ratio of debt to funds flow from operations near or below our target maximum of 2x and holding debt relatively flat.
NuVista’s Board of Directors has approved an augmented capital spending budget for 2016 in the range of $165 – $175 million (approximately $100 million, net of the divestiture proceeds). After accounting for the reinvestment and the sale of W6 Non-Montney assets, we anticipate 2016 production to average in the range of 23,500 – 24,500 Boe/d. Our guidance for funds from operations for 2016 is increased to a range of $110 – $120 million at Strip Pricing. The preceding guidance is inclusive of an ongoing three to four week plant outage for maintenance at the SemCams K3 gas plant, and notified TCPL outages which have a combined full year 2016 impact of approximately 500-750 Boe/d. NuVista continues to benefit from the use of plant pipeline interconnections which we have put in place with area midstreamers in order to maximize flow flexibility during outages.
NuVista will continue to focus prudently upon balance sheet strength in 2017. With commodity prices continuing to recover, we anticipate increased value-driven growth and spending flexibility with a reducing debt to cashflow ratio. Our current outlook for 2017 spending is in the range of $140 – $180 million, with the low end of the range based on current Strip Pricing, and the high end based on US$60/Bbl WTI and $3.00/GJ AECO. Based on this range, 2017 production is expected to average 26,000 – 29,000 Boe/d which represents 10-20% growth per share over 2016 guidance. More certainty on our 2017 plans will unfold as we head towards our annual budget cycle in the fall of 2016.
Given our top quality assets and a management team focused upon relentless improvement, NuVista will continue to optimize results in the recovering commodity price environment. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their guidance and support as we build an ever more valuable future for NuVista.
This press release is not an offer of securities for sale in the United States. The securities of NuVista may not be offered or sold in the United States absent registration or an exemption from registration. The securities of NuVista will not be publicly offered in the United States. The securities of NuVista have not been or will not be registered under the U.S. Securities Act or any state security laws.