CALGARY, AB – Kiwetinohk Energy Corp. (TSX: KEC) today announced the closing of its Placid Montney asset consolidation (the Montney Acquisition) for an adjusted closing price of $58.3 million. Kiwetinohk announced the deal on August 24, 2022 and posted a news release and updated corporate presentation on September 14, 2022, providing detailed consolidated pro-forma highlights.
As stated in the news release on September 14, the Montney Acquisition increases the Company’s working interest in the Placid area, adding 1,200 Boe/d of current production, 30 MMcf/d of natural gas and 1,750 bbl/d of condensate plant processing capacity, 35.2 net sections of land (approximately 60% undeveloped) and 42.2 net Montney locations. At a consolidated asset level, the Company expects Placid area production to plateau between 11,500 to 13,000 boe/d, at which time asset level cash flow is expected to be approximately $145 million to $180 million, based on August 19 strip pricing. An estimated $160 million of capital is required to reach plateau production from current pro-forma production of 8,200 boe/d, then requiring approximately $70 million to $85 million of capital per year to sustain plateau production rates and to deliver asset level free cash flow of $75 million to $95 million (and not the $100 million to $125 million disclosed in our September 14 news release which was provided in error), based on August 19 strip pricing. Of the $58.3 million closing transaction price, the Company estimates acquired facility and undeveloped land value of approximately $30 million to $45 million based on facility replacement value and recent comparable land transactions.
We, at Kiwetinohk, are passionate about addressing climate change and the future of energy. Kiwetinohk’s mission is to build a profitable energy transition business providing clean, reliable, dispatchable, affordable energy. Kiwetinohk develops and produces natural gas and related products and is in the process of developing renewable power, natural gas-fired power, carbon capture and hydrogen clean energy projects. We view climate change with a sense of urgency, and we want to make a difference.
Kiwetinohk’s common shares trade on the Toronto Stock Exchange under the symbol KEC.
Additional details are available within the year-end documents available on Kiwetinohk’s website at www.kiwetinohk.com and SEDAR at www.sedar.com.
Barrel of Oil Equivalency
The term “boe” may be misleading, particularly if used in isolation. A boe conversion rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from an energy equivalency of 6:1, utilizing a conversion ratio of 6:1 may be misleading as an indication of value.
Drilling Locations
This press release discloses drilling locations or inventory. The table below shows the total locations broken down into proved locations, probable locations and unbooked locations. Proved locations and probable locations are derived from McDaniel’s reserves evaluation as of December 31, 2021, and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on the Company’s prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources.
Acquired Placid Montney |
|
Proved Locations, Net |
6.3 |
Probable Locations, Net |
3.8 |
Unbooked Locations, Net |
32.1 |
Total Locations, Net |
42.2 |
Unbooked locations consist of drilling locations that have been identified by management as an estimation of the Company’s multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production, and reserves information. There is no certainty that we will drill all of these drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources, or production. The drilling locations on which we drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been de-risked by drilling existing wells in relative close proximity to such unbooked drilling locations, other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.
Production and Production Type Information
References to petroleum, crude oil, natural gas liquids (NGLs), natural gas and average daily production in this press release refer to the light and medium crude oil, tight crude oil, conventional natural gas, shale gas and NGLs product types, as applicable, as defined in NI 51-101.
NI 51-101 includes condensate within the NGLs product type. The Company has disclosed condensate as combined with crude oil and separately from other NGLs since the price of condensate as compared to other NGLs is currently significantly higher, and the Company believes that this crude oil and condensate presentation provides a more accurate description of its operations and results therefrom. Crude oil therefore refers to light oil, medium oil, tight oil, and condensate. NGLs refers to ethane, propane, butane, and pentane combined. Natural gas refers to conventional natural gas and shale gas combined.