CALGARY – Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to announce that it has entered into an agreement for the sale of its oil and natural gas interests in the Foothills area of Alberta to an arm’s length private company for total consideration of $1.8 million, subject to customary closing conditions and adjustments (the “Disposition”). The Disposition has an effective date of November 1, 2019 and is expected to close in the first quarter of 2020.
NON-CORE ASSET DISPOSITION
In the third quarter of 2019, production in the Company’s Foothills area averaged approximately 390 boe/d (64% natural gas), which comprised 5% of Petrus’ total production. The Foothills assets include facility interests and 35,127 net acres of undeveloped land. The Disposition is expected to reduce the Company’s indebtedness, operating expenses and future abandonment liabilities. It is expected to reduce Petrus’ undiscounted, uninflated decommissioning obligation by $7.5 million or 18%. Following transfer of the non-core assets, Petrus’ liability management ratio (LMR) is expected to improve from 4.6 to approximately 5.2. Excluding the Foothills area assets, Petrus’ third quarter 2019 operating expenses would have been $3.39/boe.
The Company’s total net debt at December 31, 2019 is expected to be approximately $124 million, down from $139.2 million and $226.7 million at the end of 2018 and 2015, respectively. The cash proceeds from the Disposition will be used to reduce the borrowings under the Company’s revolving credit facility.
The previously announced drilling activity of 4 gross (1.6 net) Cardium light oil wells in the Company’s core area of Ferrier, Alberta are now on production. The first 3 gross (1.2 net) wells have been producing for approximately 3 months and over the initial 30 days, their average production was approximately 3,100 boe/d (1,200 boe/d net to Petrus) (85% liquids). Cumulative gross light oil production from the 4 gross wells has been approximately 175 mbbl, and the Company expects that two of these wells will have reached economic payout by mid‑December (3.5 months). The Company expects to resume drilling activity in the first quarter of 2020.
Petrus announces that Mr. Brett Booth, Mr. Marcus Schlegel and Mr. Ross Keilly have resigned from their management positions. The Company thanks them for their service and wishes them the best in their future endeavours. The Board of Directors is confident that the Company has sufficient organizational capabilities to achieve the Company’s current business objectives. Petrus intends to continue its disciplined focus on balance sheet improvement and capital deployment in 2020. The capital plan targets modest cash flow and production growth while directing in excess of $10 million toward debt reduction in 2020.
Petrus is a public Canadian oil and gas company focused on property exploitation, strategic acquisitions and risk-managed exploration in Alberta.