CALGARY, March 12, 2015 /PRNewswire/ - (TSX:PMT) -
Perpetual Energy Inc. ("Perpetual", the "Corporation" or the
"Company") is pleased to announce the signing of a definitive
agreement with Tourmaline Oil Corp. ("Tourmaline") to swap its
joint interest share in its West
Edson asset in West Central Alberta in exchange for 6.75
million TOU common shares ("TOU Shares") having a current market
value of approximately $256.5 million
based on today's closing price of the TOU Shares on the Toronto
Stock Exchange. The transaction includes all joint interest lands
Perpetual holds with Tourmaline in West
Edson, together with the associated wells and infrastructure
(the 'West Edson Property'). Closing is expected to occur on or
around April 1, 2015 and is subject
to customary closing conditions, including receipt of approval
under the Competition Act. Following a thorough independent review
process with external financial and legal advisors, the transaction
was unanimously approved by an independent committee of the Board
of Directors of Perpetual comprised of all of the six independent
directors of the Corporation. Upon closing, the TOU Shares will be
subject to a minimum statutory hold period of four months in
accordance with applicable securities laws.
Based on the Company's third party engineering report prepared
by McDaniel and Associates Consultants Ltd. ("McDaniel"), as at
December 31, 2014, the disposition
includes 7.2 MMboe of recognized proved and probable developed
natural gas and natural gas liquids reserves as well as 16.8 MMboe
of proved and probable undeveloped reserves. Also included in the
transaction are 9,600 net acres of undeveloped lands not currently
assigned reserves at year-end 2014. Perpetual's current production
from the West Edson Property is approximately 5,750 boe/d.
The Company intends to retain the TOU Shares and systematically
manage its obligations, including the redemption of its outstanding
convertible debentures (PMT.DB.E) which mature on December 31, 2015. Further, the TOU Shares will
be utilized as required to fund the Company's development plans at
East Edson as appropriate in the
current commodity price environment and provide additional
financial flexibility for Perpetual to capture and evaluate other
high impact growth opportunities.
The transaction positions Perpetual to capture the upside of the
West Edson Property through ownership of the TOU Shares and also
provides Perpetual shareholders with the value creation potential
inherent in Tourmaline's extensive land and drilling opportunity
inventory and strong balance sheet in this period of low commodity
prices. At the same time, it materially strengthens Perpetual's
present financial situation, augmenting the Company's potential to
optimize the shareholder value inherent in its existing diversified
portfolio of assets. The TOU Shares also provide greater
flexibility to capture and evaluate other new high impact
opportunities and pursue strategic initiatives.
Furthermore, the increased liquidity of the TOU Shares relative
to the West Edson Property positions Perpetual to manage downside
risks associated with the current uncertain and volatile commodity
price environment. As only 20 percent of the Company's West Edson
Property reserves were proved developed reserves at year-end 2014,
Perpetual expects the transaction will enhance Perpetual's
borrowing base when re-determined as part of the semi-annual review
scheduled to occur on or before April 30,
2015. Considering the TOU Shares as an offset to outstanding
debt, this transaction drives material positive progress on one of
the Company's 2015 strategic priorities, to reduce debt and manage
downside risk, bolstering Perpetual's financial flexibility and
optionality to manage its future credit facility, convertible
debenture and senior note obligations.
As the market value of the TOU Shares approximates the net
present value of the proved and probable reserves assigned to the
West Edson Property, discounted at 10 percent, as assessed by
McDaniel at year- end 2014, using McDaniel future commodity price
assumptions, the Company estimates that the transaction is neutral
on a net asset value basis.
Based on the current forward market for natural gas and NGL
prices, Perpetual estimates the swap of the West Edson Property for
TOU Shares will reduce 2015 estimated funds flow by an estimated
$15 to $20 million. At the same time,
Perpetual will eliminate future 2015 capital spending of
approximately $15 million that would
have been invested to maintain production from the West Edson
Property at current levels.
Forward-Looking Information
Certain information regarding Perpetual in this news release
including management's assessment of future plans and operations
may constitute forward-looking statements under applicable
securities laws. The forward-looking information includes, without
limitation, statements regarding the expected timing for the
closing of the sale of its interest in the West Edson Property and
the anticipated use, value and benefits of the TOU Shares received
in exchange thereof including the expected impact on the
Corporation's financial position and benefits for Perpetual's
shareholders; the expected current retention of the TOU Shares and
the resulting positive impact on the Corporation's borrowing base
under it credit facility upon redetermination of the credit
facility; the impact of the transaction on the Corporation's net
asset value; the ability of the Corporation to reduce debt and
manage downside risk in the current uncertain and volatile
commodity price environment; prospective drilling and operational
activities and capital expenditures at East and West Edson; forecast production and production
type; forecast and realized commodity prices; expected funding,
allocation and timing of capital expenditures; projected use of
funds flow and anticipated funds flow; planned drilling and
development and the results thereof; expected dispositions,
anticipated proceeds therefrom and the use of proceeds therefrom;
and commodity prices. Various assumptions were used in drawing the
conclusions or making the forecasts and projections contained in
the forward-looking information contained in this press release,
which assumptions are based on management analysis of historical
trends, experience, current conditions, and expected future
developments pertaining to Perpetual and the industry in which it
operates as well as certain assumptions regarding the matters
outlined above. Forward-looking information is based on current
expectations, estimates and projections that involve a number of
risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Perpetual
and described in the forward looking information contained in this
press release. Undue reliance should not be placed on
forward-looking information, which is not a guarantee of
performance and is subject to a number of risks or uncertainties,
including without limitation those described under "Risk
Factors" in Perpetual's Annual Information Form and MD&A
for the year ended December 31, 2014
and those included in other reports on file with Canadian
securities regulatory authorities which may be accessed through the
SEDAR website (www.sedar.com) and at Perpetual's website
(www.perpetualenergyinc.com). Readers are cautioned that the
foregoing list of risk factors is not exhaustive. Forward-looking
information is based on the estimates and opinions of Perpetual's
management at the time the information is released and Perpetual
disclaims any intent or obligation to update publicly any such
forward-looking information, whether as a result of new
information, future events or otherwise, other than as expressly
required by applicable securities laws.
Also included in this press release are estimates of the
effect on Perpetual's 2015 funds flow of the swap of the West Edson
Property for TOU shares including estimated average production of
5,750 boe/d for 2015, capital expenditures, and other assumptions
for 2015. To the extent any such estimate constitutes a financial
outlook, it was approved by management and the Board of Directors
of Perpetual on March 12, 2015 and is
included to provide readers with an understanding of Perpetual's
anticipated funds flows based on the capital expenditure and other
assumptions described herein and readers are catutioned that the
information may not be appropriate for other purposes.
Volume Conversions
Barrel of oil equivalent ("boe") may be
misleading, particularly if used in isolation. In accordance with
National Instrument 51-101 ("NI 51-101"), a
conversion ratio for natural gas of 6 Mcf:1 bbl has been used,
which is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. In addition, utilizing a conversion on
a 6 Mcf:1 bbl basis may be misleading as an indicator of value as
the value ratio between natural gas and crude oil, based on the
current prices of natural gas and crude oil, differ significantly
from the energy equivalency of 6 Mcf:1 bbl.
Webcast
Perpetual will be participating in the FirstEnergy East Coast
Energy Conference on Friday, March 13,
2015. The Company presentation will be webcast at
10:35 a.m., Eastern Time. Interested
parties are invited to take part in the webcast at
http://jetslides.tv/lobby/1091.
About Perpetual
Perpetual Energy Inc. is a Canadian energy company with a
spectrum of resource-style opportunities spanning heavy oil, NGL
and bitumen along with a large base of shallow gas assets.
Perpetual's shares and convertible debentures are listed on the
Toronto Stock Exchange under the symbol "PMT" and "PMT.DB.E",
respectively. Further information with respect to Perpetual can be
found at its website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved
the information contained herein.
SOURCE Perpetual Energy Inc.