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It was recently announced that West 5 Resources Inc. (“West 5”) has engaged Earth Horse Energy Advisors (“Earth Horse”) to assist it with a corporate sale process (source article available here). XI asks the question; how does the XI data compare to the agent’s data, what additional information can we gather, and who might look at buying West 5?
The screenshot below uses AssetBook’s working interest assumptions and shows the company having operations that are focused in the Chip Lake area.
Figure 1 – Assets owned by West 5 Resources Inc. (wells, land, facilities and pipelines)
AssetBook displays West 5 as having a WI boe/d of 330.34 (assuming a 100% working interest) with an average API of 37.21, matching closely with the advertisement that was released by Earth Horse as West 5’s advisor and agent with the sale of the company. Also, XI has calculated Undev (ha) land of 2499.20 for West 5 assets in the Chip Lake area.
Calculated reserves in the AssetBook are 1.3 mmboe with an RLI of 10.81; again, matching closely to the value which was released by Earth Horse.
West 5’s LLR according to Earth Horse is 1.34 as of June, whereas the AssetBook calculated LLR is 1.51, with an asset value of 9 million and liability value of 6 million. The difference is likely due to a lack of public site-specific liability information factoring into our calculation.
Figure 2 – LLR Summary for West 5 Resources Inc.
(Download this LLR Summary here)
West 5 is categorized in Alberta as a micro-producer with mixed commodities. AssetBook can help rank companies based on production, year-over-year declines, inactive well %, marginal well rate and other criteria contained in the AER’s Manual 23. Depending on the factor, West 5 tends to be middle of the pack in most areas.
So, who is going to pick up these assets? Who is drilling in the area, and which companies have synergy with West 5?
There are 9 different companies which show synergy with West 5 in non-producing wells as well as land holdings. We can also see that there are 15 companies who are actively drilling relatively close to the West 5 assets. Two names that stick out are Obsidian Energy Ltd. (“Obsidian”) and Vermilion Energy Inc. (“Vermilion”) who meet both the synergy and the active drilling criteria (within the last 2 years in the area)
Figure 3 – West 5 wells and land, and the top 10 companies’ wells spudded since May 2021.
West 5 has a high working interest in, and operates, their focused asset base with a low decline (forecasted to be 8.6%). According to Earth Horse, who expects a strong amount of interest in this offering, they have an annualized net operating income of $3.6 million that includes processing income. The company is debt free and would be attractive to both start-ups looking for their initial acquisition or for established companies, large or small, looking for a tuck-in acquisition.
As we know, sometimes the logical purchaser isn’t always the company that is the successful purchaser in the end. The deadline for bids is August 10th – it will be interesting to see who buys this company!
Hopefully this article has demonstrated some of the ways you can analyze any company in Western Canada, prior to a public sale or before committing to signing a CA and spending time/resources in a data room process.
For a more detailed look at West 5’s production history, ARO, land expiries, etc. or if you’d like to learn more about how XI’s AssetSuite software can analyze other companies, packages, or regions throughout Western Canada, visit our website or contact XI Technologies.