CALGARY – Altura Energy Inc. (“Altura” or the “Corporation”) (TSXV: ATU) is pleased to announce it has entered into a definitive agreement for an asset sale with a private company (“PrivateCo”). Under the terms of the agreement, PrivateCo will acquire a 12.5% working interest (the “Disposition Assets”) in the Corporation’s production, wells, lands and facilities for $7.0 million in two transactions. The asset sale provides Altura the funding to advance drilling its oil prospect in the Entice area of Alberta while maintaining financial strength and flexibility to continue development of the Rex pool at Leduc-Woodbend.
The first transaction closed on December 4, 2019, whereby Altura divested Disposition Assets equal to 7.0% of corporate assets for $3.5 million. Proceeds will primarily be used to drill a horizontal well in the Entice area on or before March 31, 2020. Altura will carry PrivateCo for a 7.0% working interest in the well.
The second transaction will close on or before December 31, 2020 whereby Altura will divest 5.5% of corporate assets for $3.5 million. Proceeds will primarily be used to drill a second horizontal well in the Entice area or a horizontal well in the Leduc-Woodbend area on or before December 31, 2020. If the well is drilled in Entice, PrivateCo will be carried for a 5.5% working interest in the well.
In the event a second well is drilled in Entice and both parties agree to drill a third well in Entice, the agreement provides for a third transaction whereby Altura will divest an additional 4.0% of corporate assets for $3.0 million. Proceeds would primarily be used to drill a horizontal well in Entice on or before December 31, 2021. Altura would carry PrivateCo for a 4.0% working interest in the well.
If all three transactions close, Altura will have sold a total working interest of 16.5% of corporate assets, including asset retirement obligations (“ARO”), for total consideration of $10.0 million. PrivateCo is arms-length to Altura and the transaction with PrivateCo constitutes an “exempt transaction” pursuant to TSXV Policy 5.3 because it satisfies the requirements of Section 3.1 of that policy.
Metrics for the first and second transactions comprising the sale of a total of 12.5% of corporate assets for $7.0 million are shown below.
The reserves as at December 31, 2018, based on the evaluation by Altura’s independent reserves evaluator, McDaniel & Associates Consultants Ltd. (the “McDaniel Report”), assigned to a PrivateCo 12.5% working interest are:
|Proved Developed Producing (“PDP”)||153.4||320||8.9||215.6||–|
|Total Proved (“1P”)||555.1||1,188||30.6||783.7||$9,416|
|Total Proved + Probable(2) (“2P”)||886.7||1,971||50.4||1,265.7||$11,934|
|(1) Based on the average of the published price forecasts for McDaniel & Associates Consultants Ltd., GLJ Petroleum Consultants Ltd., and Sproule Associates Ltd. at January 1, 2019.|
|(2) Numbers may not add due to rounding.|
The PrivateCo 12.5% working interest includes approximately 152 (19 net) sections of land and third quarter 2019 sales volumes of 235 boe per day (67% oil and liquids) with an operating netback of $23.04 per boe.
Transaction metrics include:
|Allocated to capital carries||($ 354,000)|
|Allocated to asset sale||$6,646,000|
|$/PDP reserves (1)||$30.83/boe|
|(1) Equals proceeds allocated to asset sale divided by PDP reserves.|
|(2) Equals proceeds allocated to asset sale plus 1P FDC divided by 1P reserves.|
|(3) Equals proceeds allocated to asset sale plus 2P FDC divided by 2P reserves.|
At a 12.5% working interest, PrivateCo would assume net ARO of $0.8 million, thereby reducing Altura’s September 30, 2019 ARO liability from $6.7 million to $5.9 million. Altura’s Liability Management Rating (“LMR”) is currently 9.75 and will not be impacted by the sale of assets as Altura will remain the operator of the assets.
In June 2019, Altura drilled a vertical stratigraphic well at Entice, south of Strathmore, Alberta to evaluate geological and geophysical data of an under exploited formation, targeting light to medium API oil. There are a number of vertical wells, combined with extensive 3D seismic coverage in the area that provided a means to identify and map the hydrocarbon accumulation. The Corporation has secured 84 sections (53,760 acres) of land in the area which has year-round access.
Post-closing the asset sale, Altura will have the financial resources to advance drilling at Entice to evaluate the commerciality of this new prospect and to continue development of its Rex oil pool at Leduc-Woodbend. Altura plans to provide guidance on the Corporation’s 2020 capital program in early 2020.
REVISED CREDIT FACILITIES
Upon the closing of the first transaction the Corporation’s credit facility will be amended to $9.0 million and replaces Altura’s existing $10.0 million credit facility.
ABOUT ALTURA ENERGY INC.
Altura is a junior oil and gas exploration, development and production company with operations in central Alberta. Altura predominantly produces from the Rex member in the Upper Mannville group and is focused on delivering per share growth and attractive shareholder returns through a combination of organic growth and strategic acquisitions.