CALGARY, ALBERTA–(Marketwired – Dec. 12, 2016) – Delphi Energy Corp. (TSX:DEE) (“Delphi” or the “Company“) is pleased to announce that the Company has executed a definitive agreement with our existing working interest industry partner (our “Partner“), in connection with the transaction summarized in the strategic letter of intent previously announced on November 8, 2016 (the “Transaction“). The Transaction will immediately accelerate the development of Delphi’s world-class, liquids rich Deep Basin natural gas play at Bigstone in Northwest Alberta (“Bigstone Montney“).
David J. Reid, Delphi President and CEO commented, “The Transaction effectively right-sizes Delphi’s pace of capitalization allowing us to accelerate drilling activity and best capture the significant value of our Bigstone inventory for Delphi shareholders.” Mr. Reid added, “The synergy of the combined infrastructure assets not only enhances overall operational efficiencies, but provides for long-term cost savings and other possible growth opportunities that will enhance value for both Delphi and our Partner.”
- Joint Drilling Program. Delphi as operator, with our 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. Our Partner will contribute $20 million in capital, in addition to its 35 percent working interest share of $14 million.
- Cash. Delphi will receive $30 million in cash at closing for our Partner’s equalization into certain working interests in various Bigstone Montney assets (the “Transaction Assets”).
Pursuant to the Transaction, Delphi and our Partner will equalize our combined working interests in the Transaction Assets as such that our Partner will hold a 35 percent working interest in the Transaction Assets, which includes interests in partially developed and undeveloped lands (the “Transaction Lands“), and infrastructure.
Specifically, Delphi will transfer:
- Various working interests in its Transaction Lands to our Partner such that following closing, Delphi will hold 65 percent of the combined interests and the Partner will hold 35 percent of the combined interests, reducing Delphi’s working interest in 138 sections of developed and undeveloped land from an average of 85 percent to approximately 65 percent, and;
- Approximately 450 barrels of oil equivalent (“boe”) per day (approximately five percent of the Company’s corporate productive capability). Delphi retains its original 92.7 percent average working interest in eight sections of fully developed lands representing approximately 95 percent of the Company’s current production and proved producing reserves at Bigstone Montney, and;
- Total proved reserves of approximately 2.8 million boe (approximately twelve percent of Delphi’s corporate proved reserves) with associated future development capital of $24.1 million (before escalation) and total proved plus probable reserves of approximately 7.3 million boe (approximately 16 percent of Delphi’s corporate proved plus probable reserves) with 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, and;
- A 35 percent working interest in the Company’s 100 percent-owned sour processing infrastructure.
Delphi will retain operatorship of the Bigstone Montney capital program, production and facilities comprising the Transaction Assets.
Bigstone equalization of assets accelerates production growth
Delphi’s pace of drilling is estimated to more than triple with 14 gross (9.1 net) wells to be drilled between December 2016 the end of 2017, compared to four gross (3.2 net) wells drilled over the first nine months of 2016. The Company expects to bring on production from a total of 16 gross (10.4 net) wells by the end of 2017. The Company is planning to drill up to eight gross wells this winter, with approximately five to six of these wells funded under the Transaction. Delphi’s interest in the remaining wells will be largely funded within cash flow.
Completion operations at 16-9-60-23W5M (“16-9”) are continuing and the Company’s 14-21-60-23W5M (“14-21”) well is finished drilling with completion operations expected to commence in the next seven to ten days. 14-21 was drilled for a record low cost of approximately $3.5 million. Delphi’s primary drilling rig has moved and commenced drilling a well at 16-21-60-23W5M. A second rig has now arrived in the field at 15-8-60-23W5M and has also commenced drilling. The drilling and completion costs relating to these wells will be included in the carried portion of the joint drilling program that is part of the Transaction.
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 Montney area.
Key Dates. Delphi expects the Transaction to be closed on, or about, December 22, 2016. The Transaction is subject to customary post-closing adjustments.
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.