CALGARY, ALBERTA–(Marketwired – Nov. 3, 2016) – Athabasca Oil Corporation (TSX:ATH) (“Athabasca” or “the Company”) is pleased to announce an upsizing of the previously completed Contingent Bitumen Royalty on its Thermal assets with Burgess Energy Holdings L.L.C. (the “Royalty”) for additional cash consideration of $128.5 million. Including the initial Royalty, Athabasca has now raised total cash proceeds of $257 million through this unique funding structure. The upsizing of the Royalty further supports the significant long-term value of Athabasca’s Hangingstone and other thermal assets, and significantly enhances the financial capability of the Company. The upsized Royalty transaction is expected to close by the end of November.
Throughout 2016, Athabasca has successfully undertaken a series of transactions, including a strategic joint venture with Murphy Oil Company Ltd. in its Light Oil division and the Royalty in its Thermal Oil division. These transactions have allowed Athabasca to reduce its outstanding debt and position the Company to further optimize its capital structure for the future. Following closing of the upsized Royalty transaction, Athabasca’s cash balance will be approximately $700 million (excluding $104 million of restricted cash) with a net cash position of approximately $150 million (adjusted for outstanding debt). Athabasca will also have approximately $213.5 million of further funding available through the capital carry balance with Murphy on its Duvernay joint venture lands. The incremental Royalty proceeds are expected to be directed towards additional debt retirement and position Athabasca to complete its balance sheet refinancing prior to the end of 2016.
The Upsized Contingent Bitumen Royalty
The upsized Royalty will be calculated on a sliding scale ranging from 0% – 12% (previously 0% – 6%) of Athabasca’s realized bitumen price (C$) for each Thermal Oil asset (see table below) with the remaining terms of the Royalty unchanged. The realized bitumen price will continue to be determined net of diluent, transportation and storage costs and has been structured so that the assets will not be encumbered at lower pricing levels. For example, at Hangingstone, oil prices would have to reach approximately US$75/bbl WTI (at nameplate capacity of 12,000 bbl/d) before the first 2% Royalty is triggered. At this pricing level, Hangingstone Project 1 is estimated to have an annual operating netback of approximately $120 million (net of a $4 million upsized Royalty payment). The Royalty is not expected to materially impact economics of future Hangingstone expansion phases or other future Thermal Oil development projects and there are no associated commitments for future development.
|Hangingstone||Other Thermal Assets|
|Below $50/bbl||0%||Below $60/bbl||0%|
|$50/bbl to $69.99/bbl||2%||$75-91||$60/bbl to $79.99/bbl||2%||$78-94|
|$70/bbl to $89.99/bbl||4%||$91-108||$80/bbl to $99.99/bbl||4%||$94-110|
|$90/bbl to $109.99/bbl||6%||$108-124||$100/bbl to $119.99/bbl||6%||$110-126|
|$110/bbl to $129.99/bbl||8%||$124-141||$120/bbl to $139.99/bbl||8%||$126-142|
|$130/bbl to $149.99/bbl||10%||$141-157||$140/bbl to $159.99/bbl||10%||$142-159|
|$150/bbl and above||12%||>$157||$160/bbl and above||12%||>$159|
|* Implied WTI based on a 0.8 US$/C$FX assumption & US$15/bbl heavy differential.|
|Royalties calculated & payable on a monthly basis.|
About Athabasca Oil Corporation
Athabasca Oil Corporation is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. Situated in Alberta’s Western Canadian Sedimentary Basin, the Company has amassed a significant land base of extensive, high quality resources. Athabasca’s common shares trade on the TSX under the symbol “ATH”. For more information, visit www.atha.com.