CALGARY, ALBERTA–(Marketwired – Nov. 8, 2016) – Delphi Energy Corp. (TSX:DEE) (“Delphi” or the “Company“) is pleased to announce that it has entered into a non-binding Letter of Intent with an existing working interest industry partner (the “Partner”) to complete a transaction (the “Transaction”) that will accelerate the development of our world-class, liquids-rich Deep Basin natural gas play at Bigstone in Northwest Alberta (“Bigstone Montney”).
“The Transaction will enable Delphi, together with the Partner, to accelerate the development of our vast Montney asset,” said David J. Reid, Delphi’s President and CEO. “The Transaction has the effect of enhancing our financial flexibility and significantly revaluing the overall Bigstone Montney asset, while preserving our joint competitive advantage in this unique and prolific liquids-rich play.”
Transaction consideration is comprised of:
- Joint Drilling Program. Delphi and the Partner will undertake a $40 million (gross) joint drilling program, to be completed before July 15, 2017, of which Delphi will contribute $6 million while retaining a 65 percent working interest, in approximately five to six wells to be drilled at Bigstone Montney. The Partner will contribute $20 million in capital, along with its 35 percent working interest share of $14 million.
- Cash. In addition to the above drilling capital contribution, Delphi will receive $30 million in cash at closing for equalization consideration.
Pursuant to the Transaction, the Partner will increase its working interests, to varying degrees, in the Bigstone Montney assets including interests in partially developed and undeveloped lands (the “Landbase”), production and infrastructure;
- 450 barrels of oil equivalent (“boe”) per day (approximately 5 percent of corporate productive capability).
- Total proved reserves of 2.8 million boe (approximately 12 percent of corporate) and associated future development capital of $24.1 million (before escalation) based on the year end 2015 reserve report prepared for Delphi by GLJ Petroleum Consultants Ltd. dated February 22, 2016 and effective December 31, 2015.
- Total proved plus probable reserves of 7.3 million boe (approximately 16 percent of corporate) and associated future development capital of $59.3 million (before escalation) based on the year end 2015 reserve report prepared for Delphi by GLJ Petroleum Consultants Ltd. dated February 22, 2016 and effective December 31, 2015.
- The Partner will receive a 35 percent working interest in Delphi’s 100 percent-owned sour processing infrastructure.
- Delphi will assign various working interests in its Landbase at Bigstone Montney to the Partner, with the intent on closing, that Delphi will hold 65 percent of the combined interests and the Partner will hold 35 percent of the combined interests;
- Delphi will assign a total of 25.4 net undeveloped sections to the Partner; and
- Delphi will receive a total of 2.25 net undeveloped sections from the Partner.
Operatorship. Delphi will retain operatorship of the Montney capital program, production and facilities.
Key Dates. Execution of a definitive agreement is anticipated by November 30, 2016. The Transaction, which is subject to customary post-closing adjustments, is expected to close on or about December 22, 2016.
The Transaction significantly enhances Delphi’s financial position by enabling the Company to reduce total leverage while accelerating its production and cash flow growth. Bank debt, including letters of credit, at December 31, 2016 is expected to be approximately $48 million to $52 million of Delphi’s $85 million syndicated bank credit facility.
Over the past four years Delphi has invested approximately $325 million to capture 138 gross Bigstone Montney sections, construct 65 million cubic feet per day of 100 percent owned infrastructure and de-risked the play economics with the drilling of 28 successful wells. Delphi will continue to be the largest landowner in the greater Bigstone area.
The Company expects to provide full details and commentary once the Transaction has been finalized.
This news release does not constitute an offer to sell or a solicitation of any offer to buy the securities in the United States. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended and will not be offered or sold in the United States absent an exemption from the registration requirements thereof.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading producer of liquids-rich natural gas. The Company has achieved top decile results through the development of our high quality Montney property, uniquely positioned in the Deep Basin of Bigstone, in northwest Alberta. Delphi continues to outperform key industry players by improving operational efficiencies and growing our dominant Bigstone land position in this world-class play. Delphi is headquartered in Calgary, Alberta and trades on the Toronto Stock Exchange under the symbol DEE.