CALGARY, Alberta, Dec. 20, 2017 (GLOBE NEWSWIRE) — Bonterra Energy Corp. (www.bonterraenergy.com) (TSX:BNE) (“Bonterra” or “the Company”) is pleased to announce that it has entered into a definitive agreement for the sale of a two percent non-convertible gross overriding royalty (“GORR”) in the Pembina Cardium pool for cash consideration of $52 million plus the assignment of the purchaser’s working interest in certain PNG rights, Tangibles (wells, pipelines, facilities) and Miscellaneous Interests (contracts, surface agreements and permits) (the “GORR Agreement”). The disposition represents a 14 times multiple of 2018 forecasted cash flow.
GORR Agreement Details
Under the terms of the GORR Agreement, Bonterra will sell a two percent GORR on its Pembina Cardium pool. The Pembina Cardium pool represents approximately 90 percent of total Corporate petroleum and natural gas sales. Total consideration from the acquirer includes $52 million of cash, plus 2.5 net sections of land and approximately 115 BOE per day of associated potential production in the Pembina and Willesden Green Fields. The Company estimates five to seven additional net internally identified drilling locations on the land acquired. The GORR Agreement has a closing date of December 20, 2017 with an effective date of January 1, 2018.
This transaction is immediately accretive to Bonterra and enables the Company to crystalize value from its attractive, long-life and predictable asset base, while strengthening the balance sheet and capturing significant value for its shareholders. This improved liquidity and financial position are expected to enhance the Company’s ability to pursue acquisition opportunities and to continue investing in drilling projects that offer strong returns in the current price environment. The sale of the GORR is not anticipated to materially impact the overall economics of Bonterra’s future cash flows, but does provide an immediate cash injection at very attractive metrics. The Pembina Cardium assets have delivered some of the best operating metrics in the industry and continue to be a core component of Bonterra’s value and long-term growth strategy.
Based on forward strip commodity prices, the assets acquired under the GORR Agreement are anticipated to generate approximately $1 million of potential funds flow annually, supporting the Company’s yield plus growth model. With the $52 million applied to the balance sheet, Bonterra’s debt to funds flow ratio is forecast to improve from approximately 3.7 times to 3.1 times in the near term, and assuming the successful execution of its capital program, is forecast to fall to between 2.5 to 2.1 times at year end 2018, which is more in line with the Company’s peers.
2018 Operational and Financial Budget
In the interests of maintaining a prudent balance between funds flow and capital spending plus dividends, Bonterra also announces that it has set the Company’s 2018 capital expenditures budget at approximately $75 million which will largely be directed to new wells and facility upgrades and focused primarily in the Pembina Cardium area. Given Bonterra’s low corporate production decline rate of approximately 20 percent, the capital budget is anticipated to increase annual production by approximately two to four percent over 2017, with volumes expected to range between 13,200 and 13,500 BOE per day.
After the impact of the GORR Agreement, Bonterra’s 2018 forecasted funds flow is expected to be approximately $125 million, assuming commodity price levels for 2018 averaging US$57/bbl WTI oil, C$1.75/mcf AECO natural gas and an exchange rate of $0.78 $US/$CDN.
The Company’s base capital program will allocate $67 million to drill 31 wells, plus $8 million for facilities and pipelines investment, for a total base budget of $75 million. Assuming $125 million in forecast corporate funds flow, this base capital program is expected to result in funds flow net of development capital expenditures (“Free Funds Flow”) of $50 million. This Free Funds Flow will be used to fund Bonterra’s monthly dividend of $0.10 per share representing approximately $40 million annually. The Company anticipates the remaining $10 million will be available to further reduce outstanding bank debt. Bonterra’s total payout ratio, which represents the annual capital program plus its dividend divided by corporate funds flow, is expected to be 92 percent for 2018.
Bonterra Energy Corp. is a conventional oil and gas corporation with operations in Alberta, Saskatchewan and British Columbia. The shares are listed on The Toronto Stock Exchange under the symbol “BNE”.