CALGARY, Alberta, April 17, 2019 (GLOBE NEWSWIRE) — Pine Cliff Energy Ltd. (“Pine Cliff” or the “Company”) (TSX: PNE) is pleased to announce that it has entered into an agreement to acquire oil and natural gas assets (the “Assets”) in the Ghost Pine area of Central Alberta for net cash consideration of $8.6 million, after estimated closing adjustments (the “Acquisition”).
The Acquisition will have an effective date of October 1, 2018 and is expected to close on or around May 31, 2019 (the “Closing Date”). The purchase and sale agreement related to the Acquisition, although binding between the parties, is subject to various standard conditions, including rights of first refusal and regulatory approvals. No assurances can be given that the Acquisition will be completed as proposed or at all.
Concurrently with the Acquisition, or shortly thereafter, Pine Cliff intends to close private placements of common shares (the “Common Shares“) for gross proceeds of up to $3 million and “flow-through” common shares (within the meaning of the Income Tax Act (Canada)) (the “Flow-Through Shares“) for gross proceeds of up to $4 million. The Acquisition is expected to be funded with working capital and the proceeds from the Common Share Private Placement, as defined below.
- The Assets will add significant growth opportunities in the Pekisko oil play, where Pine Cliff drilled its first oil well (the “Initial Well”) in late 2018. Based on Pine Cliff’s internal estimates, the Assets will increase Pine Cliff’s development inventory to an estimated 28 gross (27 net) Pekisko oil locations from its existing eight gross (six net) Pekisko locations. The Initial Well has produced an aggregate of 20,686 barrels of oil and liquids and 79,700 thousand cubic feet of gas since it started production in January 2019, for an average production rate of 362 boe/d during the first 90 days of production. The Assets also have prospective oil locations in the Duvernay, Basal Quartz and Glauconitic formations.
- The Assets possess a predictable production profile with an approximate 7% historical decline rate and are geographically synergistic with Pine Cliff’s other Ghost Pine area assets.
- The Assets currently produce approximately 1,575 Boe/d and are 75% weighted towards natural gas, 16% to natural gas liquids and 9% to oil.
- The Assets include ownership in key infrastructure including 99% ownership in a 30,000 Mcf/d gas plant, with significant excess capacity in close proximity to current Duvernay drilling activity.
Other notable attributes of the Assets are as follows:
|Net Working Interest Acres||104,692 (66% working interest)|
|Closing adjustments (1)||$1.3 million|
|Estimated 2019 adjusted funds flow from the Assets (June 1 – December 31, 2019) (2)||$0.9 million|
|Estimated 2020 adjusted funds flow from the Assets (3)||$2.0 million|
(1) Includes estimated net operating income from October 1, 2018 to May 31, 2019.
(2) June 1, 2019 – December 31, 2019 – Based on natural gas pricing of CDN$1.43/GJ AECO, crude oil pricing of US$60/bbl WTI, a 9% royalty rate (prior to gas cost allowance adjustments), $12.11 per Boe operating and transportation costs (including third party processing revenue). This is a non-GAAP measure, see “Non-GAAP Measures” for further information.
(3) Based on natural gas pricing of CDN$1.55/GJ AECO, crude oil pricing of US$58/bbl WTI, a 9% royalty rate (prior to gas cost allowance adjustments), $12.88 per Boe operating and transportation costs (including third party processing revenue). This is a non-GAAP measure, see “Non-GAAP Measures” for further information.
Based on the $8.6 million net purchase price of the Asset, the acquisition metrics are as follows:
|Production||$5,486 per flowing Boe|
|Historical cash flow multiple (1)||3.5 times|
|Forecast cash flow multiple (2)||4.1 times|
(1) Based on the estimated adjusted funds flow for the 12 months preceding the Closing Date. This is a non-GAAP measure, see “Non-GAAP Measures” for further information.
(2) Based on the estimated adjusted funds flow for the 12 months following the Closing Date. This is a non-GAAP measure, see “Non-GAAP Measures” for further information.
For over seven years Pine Cliff has grown by acquiring low decline and low operating cost assets in an ongoing effort to enhance shareholder value. The Acquisition is another one of those purchases, and has the added advantage of materially increasing Pine Cliff’s liquid weighted drilling inventory that can deliver economic rates of return at current commodity prices. Pine Cliff has attempted to buy the Assets multiple times in the past as they are strategic due to the contiguous nature of the Assets to its core Ghost Pine area. The results of the Initial Well have only added to the recent motivation for Pine Cliff to complete this strategic purchase to build a deeper inventory of high working interest, operated Pekisko locations.
Flow-Through and Common Share Equity Financings
Pine Cliff is also pleased to announce that it intends to issue, by way of non-brokered private placement, up to 13,333,333 Flow-Through Shares on a “flow-through” basis in respect of Canadian development expenses (“CDE“) at a price of $0.30 per Flow-Through Share, resulting in gross proceeds of up to $4.0 million (the “Flow-Through Private Placement”). Pine Cliff shall, pursuant to the provisions of the Income Tax Act (Canada), incur eligible CDE after the closing date of the Flow-Through Private Placement and prior to March 30, 2020 in the aggregate amount of not less than the gross proceeds of the Flow-Through Private Placement (the “CDE Obligation”). The net proceeds of the Flow-Through Private Placement are expected to be used to incur eligible CDE.
Pine Cliff also intends to complete a non-brokered private placement of up to 12,000,000 Common Shares (the “Common Share Private Placement“), at a price of $0.25 per Common Share, for gross proceeds of up to $3 million (collectively the Common Share Private Placement and the Flow-Through Private Placement are referred to as the “Private Placements“). It is anticipated that certain insiders, including officers and directors of Pine Cliff, will participate in the Common Share Private Placement. The net proceeds of the Common Share Private Placement are expected to be used to partially finance the Acquisition. As a part of the Private Placements and subject to normal course closing provisions, the Alberta Investment Management Corporation has indicated that it intends to increase its shareholdings in the Company by approximately 15,000,000 Common Shares on behalf of certain of its clients.
The Flow-Through Shares and Common Shares (collectively, the “Offered Shares”) will be offered in the provinces of Alberta, British Columbia, Ontario and Saskatchewan and such other provinces or territories of Canada as may be determined by Pine Cliff. The Offered Shares will be issued pursuant to applicable exemptions from the prospectus requirements under applicable securities laws, and will be subject to a hold period expiring four months and one day from the closing date of the Private Placements. The completion of the Private Placements are subject to certain conditions including the closing of the Acquisition and customary regulatory approvals, including the approval of the Toronto Stock Exchange.
This news release does not constitute an offer to sell or a solicitation of any offer to buy the Offered Shares in the United States. The Offered Shares have not been and will not be registered under the U.S. Securities Act and may not be offered or sold in the United States absent registration under, or an applicable exemption from the registration requirements of, the U.S. Securities Act.
2019 Guidance Increases
Pine Cliff’s Board of Directors has approved an increase of $1.1 million in the Pine Cliff 2019 capital budget to $11.1 million. Pine Cliff intends to spend approximately $1.9 million drilling four (0.4 net) wells in the liquids rich Edson area of Alberta, $2.8 million drilling one (1.0 net) oil well in Central Alberta, $3.9 million on facilities and major maintenance capital and $2.5 million on abandonments and reclamation. The revised 2019 capital budget is expected to meet Pine Cliff’s CDE Obligation.
After taking into account the Acquisition as of the Closing Date, Pine Cliff is budgeting its 2019 annual production volumes to increase to a range of 19,250 to 19,750 Boe per day, weighted 92% to natural gas.
About Pine Cliff
Pine Cliff is an oil and natural gas company with a long-term view of creating shareholder value. Further information relating to Pine Cliff may be found on www.sedar.com as well as on Pine Cliff’s website at www.pinecliffenergy.com.