Petrus Resources Ltd. ("
Petrus" or the
"
Company") (TSX: PRQ) is pleased to announce that
it has entered into a definitive agreement (the
"
Agreement") to acquire a privately owned limited
partnership (the "
LP") and its general partner
(the "
GP", and together, the "
Acquired
Entities") for total consideration of approximately $14.4
million, consisting of 10 million common shares of the Company (the
"
Shares") issued at a deemed price of $1.44 per
Share based on the volume weighted average trading price of the
Shares on the Toronto Stock Exchange ("
TSX") for
the five trading days prior to the date of the Agreement (the
"
Acquisition"). The Acquisition is expected to
close in early March and is subject to customary closing
conditions, including the approval of the TSX.
Acquisition Highlights
The Acquired Entities' assets are focused in
Petrus' core area, Ferrier, Alberta. Through the Acquisition,
Petrus will receive a contiguous, high working interest, Cardium
land position in Ferrier; an area where the vast majority of
mineral rights are leased and most acreage positions are secured
through corporate sale transactions. The proximity of the acquired
lands to Petrus’ existing Ferrier assets will allow current and
future production from the assets to be tied into Petrus’ owned and
operated gathering and processing infrastructure, which is expected
to provide considerable operating and cost synergies. The
Acquisition provides Petrus with an exceptional opportunity to
leverage its expertise successfully drilling low-risk, low-cost,
high return wells in this area.
Highlights of the Acquisition include:
-
Strategic consolidation of quality Cardium assets at Ferrier
-
A high working interest, undeveloped Cardium land position in 8 net
sections of land directly offsetting Petrus’ core development in
Ferrier
-
Meaningful drilling inventory of an estimated 40 gross unbooked
drilling locations1, the majority of which have been internally
identified by Petrus as Tier 1 locations
-
Stable base production of 425 boe/d2 (83.0% conventional natural
gas, 13.5% NGLs and 3.5% light oil) with an estimated annual
decline rate of 10%3
-
Potential to materially reduce operating costs through development
and utilization of Petrus’ owned and operated infrastructure
-
Attractive type curve economics at US$80/bbl WTI and $4.00/Mcf
AECO
_____________________________
1 See "Estimates of Drilling Locations".
2 Average daily production is for the month of
December, 2021.
3 See "Estimated Decline Rate".
Related Party Matters
The Acquisition is a related party transaction
under applicable securities legislation as, among other things, the
Acquired Entities are managed and directed by Ken Gray, the
President and Chief Executive Officer of both the GP and Petrus,
and Ken Gray and two of Petrus' controlling shareholders (Stuart
Gray and Glen Gray) own or control, in aggregate, approximately
69.5% of the LP's units and 50% of the GP's shares. The board of
directors of Petrus (the "Board") established a
committee of independent and disinterested directors of Petrus (the
"Independent Committee"), comprised of Don
Cormack, Patrick Arnell and Peter Verburg, to review and recommend
approval of the Agreement and the Acquisition to the Board. The
Board, with Ken Gray and Don Gray abstaining, approved the
Agreement and the Acquisition based on, among other things, the
recommendation of the Independent Committee, their review and
assessment of an independent reserves report prepared by GLJ Ltd.
effective December 31, 2020 and mechanically updated to November
30, 2021 evaluating the reserves volumes and net present values of
the Acquired Entities, and the advice received from the Company's
financial advisor for the Acquisition.
The Acquisition is exempt from the formal
valuation and minority shareholder approval requirements of
applicable securities legislation as neither the fair market value
of the subject matter of, nor the fair market value of the
consideration for, the Acquisition, insofar as it involves
interested parties, exceeds 25% of the Company's market
capitalization.
ABOUT PETRUS
Petrus is a public Canadian oil and gas company
focused on property exploitation, strategic acquisitions and
risk-managed exploration in Alberta.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Ken Gray President and Chief Executive Officer
T: 403-930-0889 E: kgray@petrusresources.com
CAUTIONARY STATEMENTS:
Oil and Gas Advisories
The oil and natural gas industry commonly
expresses production volumes and reserves on a barrel of oil
equivalent (“boe”) basis whereby natural gas volumes are converted
at the ratio of six thousand cubic feet to one barrel of oil. The
intention is to sum oil and natural gas measurement units into one
basis for improved measurement of results and comparisons with
other industry participants. Petrus uses the 6:1 boe measure which
is the approximate energy equivalence of the two commodities at the
burner tip. Boes do not represent an economic value equivalence at
the wellhead and therefore may be a misleading measure if used in
isolation.
Estimates of Drilling
Locations
Unbooked drilling locations are the internal
estimates of the Company based on assumptions 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 (including contingent and prospective).
Unbooked locations have been identified by Petrus' management as an
estimation of the multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that Petrus will
drill all unbooked drilling locations and if drilled there is no
certainty that such locations will result in additional oil and
natural gas reserves, resources or production. The drilling
locations on which Petrus will actually drill wells, including the
number and timing thereof, is ultimately dependent upon the
availability of funding, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and
other factors.
Estimated Decline Rate
Based on Petrus' internally developed type
curves, which were constructed as of December 31, 2021
Abbreviations
In this Press Release, the abbreviations set
forth below have the following meanings:
Oil and Natural Gas Liquids |
Natural Gas |
|
|
|
|
bbl |
barrel |
Mcf |
thousand cubic feet |
|
|
|
|
bbls |
barrels |
GJ |
Gigajoules |
|
|
|
|
NGLs |
natural gas liquids |
|
|
|
|
|
|
boe/d |
Barrels of oil equivalent per day |
|
|
Forward-Looking Statements
This news release contains forward‐looking
statements regarding: Petrus' ability to tie the acquired assets
into its facilities and the expectation that the Acquisition and
the proximity of the assets to Petrus' existing assets will provide
considerable operating and cost synergies; the potential to
materially reduce operating costs of the acquired assets; Petrus'
expectations regarding unbooked drilling locations (and the quality
thereof) and decline rate; and the closing of the Acquisition and
the timing of the same. These forward‐looking statements are
provided as of the date of this news release, or the effective date
of the documents referred to in this news release, as applicable,
and reflect predictions, expectations or beliefs regarding future
events based on the Company's beliefs at the time the statements
were made, as well as various assumptions made by and information
currently available to it. In making the forward-looking statements
included in this news release, the Company has applied several
material assumptions, including, but not limited to, the assumption
that: Toronto Stock Exchange approval of the Acquisition will be
obtained in a timely manner; that all conditions precedent to the
completion of the Acquisition will be satisfied in a timely manner;
assumptions regarding commodity prices, including those set forth
above; the impact of regional and/or global events, including the
ongoing COVID-19 pandemic, inflation and the Russian-Ukrainian war,
on energy demand and commodity prices; that the Company's
operations and production will not be disrupted by circumstances
attributable to the foregoing events and the responses of
governments and the public to such going forward; future capital
expenditure and decommissioning expenditure levels; future
operating costs and general and administrative costs; future crude
oil, natural gas liquids and natural gas prices and differentials
between light, medium and heavy oil prices and Canadian, WTI and
world oil and natural gas prices; future hedging activities; future
crude oil, natural gas liquids and natural gas production levels,
including that Petrus will not be required to shut-in production
due to low commodity prices or the deterioration of commodity
prices; future exchange rates and interest rates; future debt
levels; Petrus' ability to execute its capital programs as planned
without significant adverse impacts from various factors beyond its
control, including extreme weather events, wild fires,
infrastructure access and delays in obtaining regulatory approvals
and third party consents; Petrus' ability to obtain equipment in a
timely manner to carry out development activities and the costs
thereof; Petrus' ability to market its oil and natural gas
successfully to current and new customers; Petrus' ability to
obtain financing on acceptable terms, including Petrus' ability to
maintain the existing borrowing base under its syndicated bank
facility, Petrus' ability (if necessary) to replace its syndicated
bank facility; and Petrus' ability to add production and reserves
through our development and exploitation activities. Although
management considers these assumptions to be reasonable based on
information available to it, they may prove to be incorrect. By
their very nature, forward‐looking statements involve inherent
risks and uncertainties, both general and specific, and risks exist
that estimates, forecasts, projections and other forward‐looking
statements will not be achieved or that assumptions on which they
are based do not reflect future experience. We caution readers not
to place undue reliance on these forward‐looking statements as a
number of important factors could cause the actual outcomes to
differ materially from the expectations expressed in them. These
risk factors may be generally stated as the risk that the
assumptions expressed above do not occur, but specifically include,
without limitation, risks relating to: general market conditions;
the failure to receive all applicable third party and regulatory
approvals for the Acquisition, and the additional risks described
in the Company's latest Annual Information Form, and other
disclosure documents filed by the Company on SEDAR. The foregoing
list of factors that may affect future results is not exhaustive.
When relying on Petrus' forward‐looking statements, investors and
others should carefully consider the foregoing factors and other
uncertainties and potential events. The Company does not undertake
to update any forward‐looking statement, whether written or oral,
that may be made from time to time by the Company or on behalf of
the Company, except as required by law.
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