CALGARY, ALBERTA–(Marketwired – May 25, 2017) – Razor Energy Corp. (“Razor” or the “Company”) (TSX VENTURE:RZE) (www.razor-energy.com) is pleased to announce the closing of the previously announced strategic acquisition of light oil assets located in west central Alberta (the “Assets”) for cash consideration of $9.6 million, subject to customary adjustments (the “Acquisition”). The Assets, situated within Razor’s core area, are characterized by low decline, light oil focused production, which is primarily operated with abundant infrastructure to complement Razor’s existing asset portfolio.
The purchase price for the Acquisition was $9.6 million, prior to closing adjustments (the “Purchase Price”). The Purchase Price was funded through a prospectus financing (the “Offering”) through a syndicate of agents co-led by Haywood Securities Inc. and Jett Capital Advisors, LLC, together with Canaccord Genuity Corp., Eight Capital, National Bank Financial Inc., Acumen Capital Finance Partners Limited and Macquarie Capital Markets Canada Ltd. (collectively, the “Agents”) of 5,750,000 subscription receipts of the Company (“Subscription Receipts”) at a price of $3.00 per Subscription Receipt for aggregate gross proceeds of $17.25 million, including the full exercise of the Agents’ over-allotment option, which closed on May 15, 2017.
In accordance with their terms, each Subscription Receipt was exchanged for one common share of the Company (“Common Share”) and one-half of one Common Share purchase warrant (“Warrant”) upon closing of the Acquisition and the aggregate gross proceeds of the Offering were released from escrow. Holders of Subscription Receipts are not required to take any action in order to receive the Common Shares and Warrants to which they are entitled.
The Acquisition is complementary on a geographic, geological and operational basis and in terms of product mix with Razor’s current assets and operations in the Swan Hills areas. On a pro forma basis, using February 2017 field estimated production, the Company anticipates production at or above 3,700 boe/d, of which 85% is light oil and natural gas liquids.
The Acquisition enhances Razor’s existing asset base with similar reactivation and re-entry opportunities, in addition to future drilling upside with proven deliverability of light oil from the Montney formation. The primary fields within the Assets include Kaybob South Triassic Units No. 1 and 2, Kaybob Beaverhill Lake Unit No. 1 and Simonette/Karr Beaverhill Lake Oil Pools.
With 95,679 (33,542 net) acres of land, the majority held by production, Razor foresees ample drilling opportunities comprised of both vertical and horizontal wells. Management has currently identified over 15 net drilling locations including the potential for future horizontal targets. The development of these properties is expected to be part of the 2018 capital program.
|Total purchase price||$||9.6 million|
|Current production (Feb 2017 field)||759 boe/d|
|Annual decline rate||15%|
|Land||95,679 (33,542 net) acres|
|Net locations||15 unbooked|
|Forecast 2017 operating netback(2)||$||10.82/boe|
|Proved developed producing (“PDP”) reserves(3)||1.5 MMboe|
|Total Proved (“TP”) reserves(1)(3)||2.8 MMboe|
|Total proved plus probable (“P+P”) reserves(3)||3.7 MMboe|
|P+P RLI(4)||13 years|
|Reserves Value Before Tax (PV10)(3):|
|PDP reserve value||$||22.5 million|
|TP reserve value||$||36.2 million|
|P+P reserve value||$||44.7 million|
|Run rate cash flow(5)||$||3.3 million|
|Current production (Feb 2017 field)||$||12,652 per boe/d|
|Proved developed producing reserves(3)||$||6.46 per boe|
|Total proved reserves(3)||$||3.48 per boe|
|Total proved plus probable reserves(3)||$||2.62 per boe|
|Purchase price / PDP reserve value||43%|
|Purchase price / TP reserve value||27%|
|Purchase price / P+P reserve value||21%|
|Run rate cash flow(5)||3.20x|
- Subject to normal adjustments for a transaction of this nature and adjustments related to the exercise of certain ROFRs.
- Operating netback does not have any standard meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable with the calculation of similar measures for other entities. Operating netback equals total petroleum and natural gas sales less royalties and operating costs calculated on a boe basis. Razor considers operating netback as an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices. The estimated operating netback was derived using the Company’s 2017 commodity price forecast of US$52.50/Bbl WTI, $2.50/MCF AECO, and a US/Canadian dollar exchange rate of $0.75 with the average operating netback calculated from the closing date of the Acquisition to December 31, 2017. See “Reader Advisories – Non-IFRS Measures”.Gross Company Reserves. Reserves based on the Kaybob Assets Reserves Report effective December 31, 2016 prepared in accordance with the requirements of the COGE Handbook as required by NI 51-101.
- Gross Company Reserves means Razor’s working interest reserves following completion of the Acquisition before the calculation of royalties, and before the consideration of the Company’s royalty interests.
- The reserve life index (“RLI”) is calculated by dividing total proved plus probable reserves estimated at 3,683 MBoe with estimated current production of the Kaybob Assets of 759 boe/d.
- Run rate cash flow does not have any standard meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Run rate cash flow is based on annualized current production of 759 boe/d multiplied by the operating netback for the Kaybob Assets of $10.82/boe (see Note 2 above).
2017 CAPITAL BUDGET AND REVISED GUIDANCE
Given the volatility in commodity prices and Razor’s ability to grow production through high frequency / low capital intensive projects, Razor expects to take a disciplined and conservative approach to the 2017 budget. The capital budget will be reviewed continuously by management and the board of directors of the Company (the “Board”) for changes in commodity price assumptions and project economics. Razor remains steadfast in its conviction to maintain its financial advantage and build a top-tier junior oil and gas company.
For fiscal 2017, the capital expenditure budget of $13.0 million, which was approved by the Board prior to the Acquisition, remains unchanged. Razor continues to invest in a combination of reactivations, re-entries, optimization activities and waterflood management. These initiatives will be split between Swan Hills and Kaybob areas at management’s discretion. In addition, the budget addresses the Alberta Energy Regulator’s requirement under the Inactive Well Compliance Program including end of life well and facility spending.
With innovative focus and disciplined capital deployment in its Swan Hills and Kaybob areas, the Company is well positioned to execute on its growth strategy while maintaining financial flexibility.
The Company’s 2017 revised financial and operating guidance and assumptions are as follows:
|Average daily production 2017|
|Light oil (bbls/d)||2,581|
|Natural gas (mcf/d)||3,319|
|Oil equivalent (boe/d)||3,850|
|Capital expenditures||$13.0 million|
|Term Loan (maturity January 31, 2021)||$30.0 million|
|Working capital, December 31, 2017||$13.5 million|
|Net debt, December 31, 2017 (“Exit Net Debt”)||$16.5 million|
|Funds flow from operations in 2017 (“2017 FFO”)(1)||$9.5 million|
|Exit Net Debt to 2017 FFO(1)||1.7x|
|Exchange rate (US$/C$)||0.75|
|Light sweet oil differential to WTI (C$/bbl)||($4.00)|
|Average corporate oil quality discount (C$/bbl)||($3.00)|
|AECO gas (C$/mcf)||$2.50|
- “Funds flow from operations” and “net debt” do not have any standardized meaning prescribed by IFRS. See “Reader Advisories – Non-IFRS Measures”.
Razor plans to continue to pursue value-driven acquisitions with a view towards consolidation of land and production within the Company’s existing project areas in addition to complementary shallow, light oil horizons within its Alberta core region. Razor remains focused on adding to its inventory of high quality projects to sustain longer-term growth.
Razor Energy Corp. is a light oil focused company operating predominantly in Alberta. Razor’s full-cycle business plan provides an opportunity to reposition the Company as a disciplined and high-growth junior E&P company. With an experienced management team and a strong, committed Board, growth is anticipated to occur through timely strategic acquisitions and operations. Razor currently trades on TSX Venture Exchange under the ticker “RZE”.