A definitive agreement for the sale of its power generation asset along with associated producing assets in the Countess, Alberta area was entered into on November 2, 2020. The Company commissioned the 4.2 megawatt power generation asset on September 29, 2020. Approximately 750 mcf/d of natural gas from the Company’s Countess producing wells is currently being consumed by the generators. In addition, Journey sold a minor, non-core asset in the Telfordville, Alberta area in a separate transaction.
Production from all assets being sold is approximately 8,900 mcf/d and 90 bbl/d of liquids (oil and natural gas liquids). In addition to the power project the sold assets include 455 gross (439 net) wells, and have associated asset retirement obligations of approximately $30 million (uninflated and undiscounted). Closing of both asset sales is expected to occur on or before December 15, 2020, and is not subject to any government approvals.
In addition, the Company has been proactive in reducing its cost structure to be more representative of the size of the business moving forward. Current staffing levels have been reduced by ten employees since April of 2020, and this is expected to reduce corporate general and administrative costs by approximately $1.0 million per year. The full impact of these savings will be felt after the first quarter of 2021. The Company has also worked closely with its landlord to renegotiate the head office lease. In addition to a reduction in rent the landlord has agreed to take back approximately one-third of current office space. This new agreement is effective on November 1, 2020 and will allow Journey to realize approximately $5 million in overall savings (for both base rent and operating cost recoveries) between November 1, 2020 and the expiry of the original lease in February of 2024. These cost reduction initiatives, along with a reduction in ongoing interest costs, largely offsets the reduction in cash flow from the asset sales. Further corporate guidance will be provided in due course.
Company President and Chief Executive Officer Alex Verge says, “These asset sales and cost reduction initiatives, along with the recently announced restructuring of bank borrowings, represent another positive step forward for Journey, allowing the Company to reduce leverage and improve sustainability in these challenging times. Journey plans to remain diligent and steadfast in our resolve to provide all stakeholders with a brighter future through reducing our near term leverage and cost structure. We thank all of our stakeholders for their support and we look forward to updating you on our progress.”
No securities regulatory authority has either approved or disapproved of the contents of this press release. 29dk2902l