The Paddon Hughes Development Co. Ltd. (“Paddon Hughes”) has retained CB Securities Inc. (“CB Securities”) as its exclusive advisor for the sale of all of its properties in either a property or a corporate transaction.
Paddon Hughes holds many non-operated working interests, freehold and over-riding royalty interests, and non-operated facility interests with third party processing revenues. There is only one operated well that is contract operated. The working interests and royalty interests are in very long life wells, most of which have been producing for many decades and have historically produced very large volumes of oil and gas. Current net production is summarized in the following table.
| Working Interest | Royalty Interest | Total Interest | ||
| Light oil | 52.5 | 4.9 | 57.4 | Bbls/day |
| NGL (~75% Condensate) | 57.4 | 6.6 | 64 | Bbls/day |
| Sales Gas | 803 | 113 | 916 | Mcf/day |
| Total | 243.8 | 30.3 | 274.1 | BOE/day |
| Net Wells | 23.8 | 2.4 | ||
| Average Well Rate | 11.7 | BOE/day | ||
| Average Interest | 4% |
Paddon Hughes revenue and expenses for the past 3 years of actuals plus the next 3 years of GLJ forecast is summarized in the following table.
| Year | 2014A | 2015A | 2016A | 2017FC | 2018FC | 2019FC |
| WI Oil Revenue | 1,922 | 983 | 774 | 908 | 768 | 701 |
| Oil Price (actual rec’d / AB light avg) | 83.53/94.58 | 47.08/57.20 | 43.36/52.95 | 61.05/69.33 | 63.72/72.26 | 66.28/75.00 |
| WI Gas Revenue | 1,253 | 812 | 471 | 704 | 560 | 547 |
| Gas Price (actual rec’d / AECO avg) | 4.63/4.50 | 2.68/2.70 | 2.02/2.19 | 3.39/3.46 | 3.02/3.10 | 3.20/3.27 |
| WI NGL (~75% from Condensate) Revenue | 1,362 | 656 | 419 | 664 | 623 | 600 |
| Facility Processing Income | 698 | 570 | 597 | 331 | 297 | 269 |
| Royalty Income | 541 | 427 | 247 | 423 | 371 | 356 |
| Total Income | 5,776 | 3,448 | 2,507 | 3,030 | 2,619 | 2,473 |
| Royalties | -440 | -231 | -145 | -293 | -252 | -237 |
| Operating Costs for WI well & facilities | -1,974 | -1,913 | -1,354 | -1,119 | -976 | -962 |
| Net Income | 3,363 | 1,305 | 1,008 | 1,618 | 1,391 | 1,274 |
Note that GLJ offset operating costs with some of the facility processing income in its forecasts. Operating costs adjusted for all facility processing income results in ~$10/BOE.
Paddon Hughes maintained more than $1 million of annual income (before G&A) in the low price environments experienced in 2015 and 2016 due to its owned facility third party processing income and its royalty income. The low oil and natural gas prices still generated enough income to offset the operating expenses in the working interest properties during that period. With an overall 10% average decline, it is likely that there will be more higher income years in the future as oil and/or gas prices change.
Paddon Hughes is relatively easy to evaluate. The vast majority of the value is from 4 core geographical areas, specifically the Moose Mountain area, the Twining area, the Crossfield area, and the Sylvan Lake, Medicine River, and Gilby area, in which Paddon Hughes holds their most significant working interests, facility interests, and royalty interests.
In order to help prospective purchasers with the evaluation of Paddon Hughes, a rigorous third party engineering evaluation has been prepared by GLJ Petroleum Consultants effective December 31, 2016.
Additional detailed information on the property is provided in the Offering Circular that is available for review by contacting Darryl Derouin at 403.781.7041 or emailing CB Securities at info@cbsecurities.com.
Interested parties are asked to submit a Non-Binding Bid by Wednesday, June 21st 2017.