Sayer Energy Advisors (“Sayer”) has been engaged to assist Return Energy Inc. and its wholly-owned subsidiary, Winslow Resources Inc., (“Return” or the “Company”) (TSX-V: RTN) with a strategic alternatives process. The Company is open to reviewing all alternatives, with potential outcomes to this process including, but not limited to, a sale or merger of the Company or other form of business combination; a sale or joint venture involving all or a portion of the assets; a recapitalization of the Company or other form of strategic investment; or the purchase of assets.
Return is a debt-free, highly-focused company, mainly holding high working interest assets in a concentrated area of the Peace River Arch and in northern Alberta. In total, the Company holds approximately 43,500 net acres of land, of which 17,000 acres are undeveloped.
Return’s main producing property is its operated oil and natural gas property at Rycroft, Alberta, where over the last two years the Company has laid the groundwork for a multi-well horizontal drilling opportunity in the Triassic Upper Charlie Lake dolomitic siltstone, in addition to a multi-well drilling opportunity in the underlying Braeburn dolomite.
Recent production net to the Company has averaged approximately 275 boe/d (recent net sales estimated from field reports were 1.36 MMcf/d of natural gas and 48 bbl/d of oil and natural gas liquids). The Company operates most of its production, which is mainly long-life natural gas and light sweet oil with low decline. The bulk of the Company’s upside is targeting light sweet oil.
Return had estimated total tax pools totaling over $18.7 million as of December 31, 2018, including approximately $12.8 million in non-capital losses, $2.6 million in COGPE, $2.0 million in CDE and $1.4 million in CCA. The Company had positive working capital of approximately $1.0 million as of April 1, 2019.
Return’s lands and wells are operated by Winslow. Winslow’s LMR as of April 6, 2019 was 1.23, with deemed assets of approximately $6.3 million and deemed liabilities of $5.1 million.
Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Return’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2018 using Sproule’s December 31, 2018 forecast pricing.
Sproule estimates that, as of December 31, 2018, the Company’s properties contained remaining proved plus probable reserves of approximately 903,000 barrels of oil and natural gas liquids and 8.7 Bcf of natural gas (2.4 million boe), with an estimated net present value of approximately $17.0 million using forecast pricing at a 10% discount.
Summary information relating to this divestiture is attached to this correspondence. More specific information is available at www.sayeradvisors.com. A package of more detailed confidential information will be sent to any party executing a Confidentiality Agreement (copy attached).
Return’s management is available through Sayer for technical presentations relating to the Rycroft project and to discuss any other matters relating to the Company’s strategic alternatives process.
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Proposals relating to this strategic alternatives process will be accepted until 12:00 pm on Thursday, May 16, 2019.
For further information please feel free to contact: Ryan Ferguson Young, Tom Pavic, Ben Rye, Grazina Palmer or myself at 403.266.6133.
Alan W. Tambosso, P.Eng. P.Geol.
SAYER ENERGY ADVISORS
1620, 540 – 5th Avenue SW
Calgary, Alberta T2P 0M2
P: 403.266.6133 C: 403.650.8061 F: 403.266.4467