Calgary, Alberta – Pine Cliff Energy Ltd. (TSX: PNE) (“Pine Cliff” or the “Company“) is pleased to announce that it has entered into a definitive agreement (the “Agreement“) to acquire all of the issued and outstanding common shares of a privately held oil and gas company for a cash purchase price of $22.2 million, prior to working capital adjustments (the “Acquisition“). The Acquisition further consolidates Pine Cliff’s core Ghost Pine area and is expected to close on or before December 31, 2021 (the “Closing Date“). The Acquisition will be paid entirely with cash without the use of debt or issuance of equity.
The Acquisition will add approximately 1,900 Boe/d (approximately 71% natural gas, 23% crude oil and 6% natural gas liquids) of low decline production and 100% ownership in strategic crude oil and natural gas infrastructure that will lower Pine Cliff’s Ghost Pine area operating costs. Pine Cliff has also identified development drilling opportunities in the acquired assets which appear to be comparable to the Company’s recent Pekisko crude oil and Mannville natural gas drilling locations.
The Acquisition metrics are as follows:
|Production(1)||$11,605 per flowing Boe|
|Forecast adjusted funds flow multiple(2)||1.7 times|
|PDP Reserve value at NPV 10(3)||$41.5 million|
|2P Reserve value at NPV 10(3)||$55.5 million|
(1) Based on the November 2021 production month average.
(2) Based on the estimated adjusted funds flow for the 12 months following the Closing Date, assuming a WTI crude oil price of US$70.00 per Bbl, CAD/USD FX of 1.274, MSW differential of $4.96 per Bbl and an AECO natural gas price of $3.50 per Mcf. Readers are cautioned that this information may not be appropriate for other purposes. This is a non-GAAP measure, see “Non-GAAP Measures” for further information.
(3) Based on an independent engineering reserve report dated October 1, 2021.
Strategic Rationale of the Acquisition
Pine Cliff has primarily grown by acquiring low decline and low operating cost assets in an ongoing effort to build a company that can return capital to its shareholders. The Acquisition is another one of those purchases, and has the added advantage of increasing Pine Cliff’s drilling inventory that can deliver economic rates of return at current commodity prices. The results of Pine Cliff’s recent development drilling program in 2021 added to the motivation to complete the Acquisition. For further details on the Acquisition, please see the Company’s most recent corporate presentation on its website found at http://www.pinecliffenergy.com.
With the combination of Pine Cliff’s recent drilling results discussed below and the Acquisition, the Company expects to enter 2022 with production volumes exceeding 21,000 Boe/d, weighted 89% to natural gas. Pine Cliff believes that this increased production base and additional funds flow, combined with the ongoing strength of commodity prices, will permit Pine Cliff to implement a sustainable dividend model in the second half of 2022.
Update on Fourth Quarter Development Drilling Program
During the month of November, 2021, the Company’s two gross (2.0 net) Pekisko wells drilled in the Ghost Pine area during the third quarter of 2021, averaged a combined 360 Boe/d (201 Bbls/d crude oil; 30 Bbls/d natural gas liquids and 776 Mcf/d of natural gas).
In November, Pine Cliff drilled and completed one gross (0.9 net) Mannville natural gas well in the Ghost Pine area that was tested and placed on production on December 11, 2021. Pine Cliff is evaluating the area for additional Mannville natural gas locations.
Pine Cliff also drilled two additional Pekisko oil wells (1.4 net) in December in the Ghost Pine area which are expected to be placed on production in early January, 2022.
Demand Loan Facility
Pine Cliff is also pleased to announce that it has entered into a demand loan facility (the “Facility“) with Canadian Western Bank (the “Lender“), whereby the Lender will provide up to $5.0 million of borrowings at an interest rate of Canadian Prime rate plus 2.0%. Amounts can be drawn, repaid, and redrawn by the Company at any time and amounts outstanding under the Facility are repayable on demand. The Facility, which is currently undrawn, is expected to assist with working capital management and is not required to fund the Acquisition.
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.