CALGARY, AB – Tenth Avenue Petroleum Corp. (“TPC” or the “Company”) (TSXV:TPC) is pleased to announce that further to the Company’s press release dated January 13, 2022, the Company has closed the acquisition of high quality, low decline, high netback, oil production in the Murray Lake and Hays areas of Southern, Alberta from Avalon Energy Ltd. (the “Acquisition” or “Acquired Assets“).
The Acquisition is accretive on a production, cashflow and reserves basis. The consideration for the Acquisition was $2,500,000 subject to normal closing adjustments, payable with $1,750,000 cash and the issuance of 3,000,000 common shares of the Company at a price of $0.25 per common share for equity value of $750,000.
The Company has obtained the necessary approvals to close the Acquisition, including receiving final acceptance from the TSX Venture Exchange (“Exchange“). No finder fees were payable by the Company in connection with the Acquisition.
SUMMARY ACQUISITION HIGHLIGHTS
- December 2021 average production of 76 bbls/d (100% oil) of sustainable, high working interest production (97% WI);
- Low base decline of 14%;
- High operating netbacks in December 2021 of $45.16/boe at US$71.69/bbl WTI;
- Attractive purchase price of 1.24x cash flow(1) or $28,441/flowing boe;
- 185% production increase over current volumes while PDP reserve volumes (mboe) will increase by approximately 74%(2) )(3) and PDP NPV10 will increase by approximately 105%(2)(3);
- Shares outstanding (basic): 38,344,100 (post Acquisition);
- No debt;
- The Company has identified the potential to increase production through low risk capex opportunities;
- The addition of another material core area provides improved flexibility in capital deployment offering better returns on investment.
Notes:
- Operating Netback was calculated using December 2021 averages crude oil contracted price US$ 71.69/bbl, and by subtracting royalties and operating costs from revenues estimates are based on the Company’s internal evaluation in accordance with National Instrument 51‐101 (“NI 51-101”) and the COGE Handbook.
- All reserves information in this press release are gross reserves. The reserve information for the Company in the foregoing table is derived from the independent engineering report effective as of September 1, 2021 prepared by McDaniel’s & Associates Consultants Ltd. (“McDaniel’s”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “Company Reserve Report”). The reserves associated with the acquisition is based on the Company’s internal evaluation prepared by a qualified reserves evaluator in accordance NI-51-101 and COGE Handbook.
The Acquisition strengthens the Company’s business model which is focused on delivering accretive growth by adding high quality oil focused assets with low decline and predictable cash flows. The Acquisition materially increases the Company’s existing production base by 185% to 135 boe/d (97% oil & NGLs) from 47 boe/d and expands the Company’s existing core area with the addition of two oil growth opportunities in Southern Alberta.
THE ACQUISITION
The Acquired Assets are made up of two 100% working interest, operated conventional Mannville oil pools providing for high operating netbacks and maintains the Company’s high oil weighting (97% oil & NGLs). The Acquired Assets have an established decline profile of less than 14%, further solidifying the Company’s underlying production base and providing a dependable cash flow stream.
The Company believes these assets have been under capitalized during the last several years. The majority of identified locations are low risk infill locations in established high quality conventional oil pools which are expected to provide attractive economics, even in much lower commodity price environments. Based on the historical low established decline rate of the base production, it is expected that minimal capital will be required to maintain existing production levels, providing the Company with a strong platform for future sustainable growth.
In addition to the identified low risk development drilling inventory, the Company believes there is significant upside associated with the Acquired Assets through down spacing as well as pool and Enhanced Oil Recovery (EOR) resource opportunities.
The Acquisition is consistent with the Company’s strategy to capitalize on neglected, undervalued opportunities to enhance the quality of the Company’s business model and asset base throughout various commodity price cycles. The Acquisition is accretive on all key per valuation metrics and are expected to improve the Company’s operating netbacks and exposure to additional oil drilling inventory, further strengthening the Company’s disciplined growth strategy.
THE ACQUISITION CHARACTERISTICS:
Total Transaction Price: | $2.5 million | |
Production (1) | ~76 bbls (100% oil & NGLs) | |
Total Proved Developed Producing (PDP) NPV10 | $2.9 million | |
Total Proved + Probable (TPP) NPV10 | $3.4 million | |
Total Proved Developed Producing Reserves (2) | 169.4 mboe | |
Total Proved plus Probable Reserves (TPP)(2) | 207.9 mboe |
Notes:
- Based on field estimates, including December 2021 average price US$71.69, 1.2793 FX CAD/USD, blow down metrics (future 12 month on blowdown scenario)
- All reserves information in this press release are gross reserves. Gross reserves for the Acquired Assets, are the Acquired Assets’ total working interest reserves before the deduction of any royalties and including any royalty interest’s receivable on the Acquired Assets.
- All reserves information in this press release are gross reserves. The reserve information for the Company in the foregoing table is derived from the independent engineering report effective as of September 1, 2021 prepared by McDaniel’s & Associates Consultants Ltd. (“McDaniel’s”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “Company Reserve Report”). The reserves associated with the acquisition is based on the Company’s internal evaluation prepared by a qualified reserves evaluator in accordance NI-51-101 and COGE Handbook.