CALGARY, ALBERTA–(Marketwired – May 19, 2016) – Spartan Energy Corp. (“Spartan” or the “Company”) (TSX:SPE) is pleased to announce that it has entered into a definitive agreement (the “Acquisition Agreement”) providing for the acquisition by Spartan of Wyatt Oil + Gas Inc. (“Wyatt”), a privately held corporation with light oil assets in southeast Saskatchewan (the “Acquisition”). Based on the five day weighted average trading price of Spartan’s common shares (“Spartan Shares”) of $3.06 per share, the total consideration for the Acquisition is approximately $77 million. The total consideration is comprised of the issuance of approximately 11.4 million Spartan Shares and the assumption of approximately $42 million of net debt. Subject to the completion of certain conditions, including the approval of the Wyatt shareholders and the approval of the Toronto Stock Exchange, the Acquisition is anticipated to be completed prior to June 30, 2016.
National Bank Financial Inc. is acting as financial advisor to Wyatt and has provided its verbal opinion that, subject to the review of the final form of the documentation effecting the Acquisition, the consideration to be received by Wyatt shareholders pursuant to the Acquisition is fair, from a financial point of view, to the Wyatt shareholders. Certain Wyatt shareholders, including all senior officers and directors of Wyatt, who collectively hold over 58% of the issued and outstanding voting shares of Wyatt, have entered into agreements with Spartan pursuant to which they have agreed to vote their shares in favor of the Acquisition.
Strategic Rationale
The Acquisition includes approximately 1,330 boe/d (76% light oil and liquids) of production focused in the Alameda and Elcott areas of southeast Saskatchewan. An additional 2,300 Mcf/d of natural gas and 130 bbls/d of natural gas liquids are anticipated to be added in October once currently flared gas volumes are tied-in to infrastructure. The assets are comprised of approximately 45 net sections of land prospective for both Midale and Frobisher light oil and are complementary to Spartan’s existing southeast Saskatchewan core areas. Spartan has initially identified over 177 (162 net) Mississippian drilling locations across the asset base comprised of 79 (75 net) frac Midale locations and 98 (87 net) open-hole Midale and Frobisher locations.
The Alameda asset includes 29 net contiguous sections of operated lands with a 97% working interest. The Alameda property has large original oil in place with a current recovery factor of approximately 1.3%. Wyatt has commenced a 3.5 section waterflood project on the lands. Early results are encouraging and Spartan believes that there is significant unbooked waterflood upside associated with the assets. Spartan anticipates that primary recovery factors of 9% can be achieved in the Alameda pool with up to 18% recovery through the implementation of waterflood. The Acquisition includes all infrastructure required to accommodate future production growth, as Wyatt has invested over $22 million in facilities for the Alameda property, including 16,000 bbls/d of fluid capacity, field headers and 75 km of emulsion, gas and injection flowlines.
Acquisition Summary
Purchase Price | $77 million |
Current Production(1) | 1,330 boe/d (76% oil and NGLs) |
Proved Reserves(2) | 8,847 Mboe |
Proved Reserves NPV10(2) | $131.3 million |
Proved plus Probable Reserves(2) | 14,629 Mboe |
Proved plus Probable Reserves NPV10(2) | $223.2 million |
12 Month Cash Flow(3) | $11.3 million |
Total Land | ~29,500 net acres |
Total Drilling Locations | 177 (162 net) locations |
Acquisition Metrics
Current Production(1) | $57,895 per boe/d |
Proved Reserves(2) | $8.70 per boe |
Proved plus Probable Reserves(2) | $5.26 per boe |
Proved Reserves NPV10(2) | 0.59x |
Proved plus Probable Reserves NPV10(2) | 0.34x |
12 Month Cash Flow from Operations(3) | 6.8x |
12 Month Production Accretion(3) | 13% |
12 Month Cash Flow Accretion(3) | 5% |
1P Reserves Accretion(3) | 26% |
2P Reserves Accretion(3) | 25% |
Notes:
- Does not include an additional 2,300 MMcf of natural gas and 130 boe/d of natural gas liquids anticipated in October 2016 upon tie-in of currently flared gas volumes.
- Gross Company Reserves. Reserves were prepared by Sproule Associates Limited (“Sproule”) effective December 31, 2015 using the Sproule December 31, 2015 forecast prices and costs in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook (the “Sproule Report”). Gross Company Reserves means the company’s working interest reserves before the calculation of royalties, and before the consideration of the company’s royalty interests.
- Projected cash flows from operations, cash flow accretion and production accretion based on 12 month forecast production and cash flows at strip pricing (WTI US$49 2H 2016 and US$50 1H 2017), assuming cash flow from the applicable asset is reinvested in drilling during the period.
OUTLOOK
Spartan has maintained a disciplined approach to acquisitions through the recent downturn in the commodity cycle, protecting our balance sheet flexibility while seeking out acquisition opportunities that deliver high quality assets at an attractive valuation. The acquisition of Wyatt meets these criteria, providing a deep inventory of economic drilling locations that fit strategically with our existing asset base at a purchase price that delivers meaningful production, cash flow and reserves accretion for our shareholders.
Spartan continues to believe that the current commodity price environment will present attractive acquisition opportunities during the second half of 2016 and that Spartan is well positioned to take advantage. Our corporate strategy remains unchanged – we intend to continue to maintain our financial flexibility by spending within cash flow, while seeking to deliver additional per share growth through accretive acquisitions. Spartan will provide second half capital budget guidance upon completion of the Acquisition in June.