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VANCOUVER, BC, Oct. 24,
2022 /CNW/ - Canada Energy Partners Inc. (NEX:
CE.H) (the "Company" or "CE") today announced the execution of a
Participation Agreement ("PA") and Joint Operating Agreement with
Arcadia Operating, LLC ("Arcadia") and the Standard Mutual
Assurance Company, LLC to drill three development wells on the
Grand Slam oil and gas production leases in Matagorda County, Texas. The Grand Slam field
is located 90 miles south of Houston and the three proposed well sites are
in the middle of existing oil and gas infrastructure, pipelines and
gathering stations. The Grand Slam field entered production in
2,000 and has a history of prolific production. The
fundamental terms of the PA are as follows: (i) the Company will
advance USD$13.5 million to acquire
interests in the three development wells; (ii) upon commencement of
production, the Company will receive first priority to 70.74% of
the net production revenues; and (iii) upon repayment of the
Company's capital contributions, the working interest entitlements
will be adjusted to 53.06%.
The Company intends to complete an equity financing to fund its
capital contribution obligations under the PA and to provide for
working capital. The terms of the proposed financing will be
announced shortly in consultation with the Company's capital
markets advisors. Completion of the proposed transaction under the
PA is subject to approval of the TSX Venture Exchange.
"This agreement represents our first project in Texas and we are excited to partner with
Arcadia Operating and SMAC Partners as we are aligned on the
significant potential of the Grand Slam Project," said Grant Hall, President and CEO of Canada Energy
Partners. "The company continues to investigate and review other
investment opportunities and will be using the funds earned from
the Grand Slam to pursue similar opportunities wherever they are
located."
Opportunity Highlights
- Located in one of the world's major mega basins
- Asset surrounded by major upstream and midstream
infrastructure
- Up to $28 Million of NPV (10)
potential
- Gross reserves of 21 BCF and 674 MBO associated with proposed
development plan
- Additional unquantified contingent resources provide
optionality and running room
- Highly experienced and proven management
- Project largely de-risked
Grand Slam (Figure 1) offers and attractive opportunity to
acquire 53.06% working interest by drilling three (3) development
wells in the thickest portion of the Claughton A&B reservoirs
(Frio Fm), that will recover ~21 BCF & 647,000 Bbls of gross
reserves at a total capital expenditure of approximately
$13.5 million. Each new well is
estimated to cost ~$4.7 million to
drill and complete (D&C). It is expected the new wells will
produce a balance mix of gas (85%) and liquids (15%), providing a
high-margin stable cashflow. Arcadia is the non-operated partner and brings
nearly 100 years of operating experience in the basin.
Grand Slam is a liquid-rich gas field discovered in 2000 by the
completion of the Runnells Gas Unit Well No.3. The discovery well
initially produced 22 MMscfpd. Located in the heart of the
Frio trend wedged between several
large gulf coast fields 90 miles SW of Houston in Matagorda
County. Grand Slam is covered by proprietary 3D seismic, it
produced ~21 BCF of gas and 665,000 Bbls of condensate, out of 7
wells within the leased acreage (704 acres). Historically, some of
the wells had an initial production (IP) ~20 MMscfpd and 620 Bcpd.
(Figure 1).
Reserves volumes reported below (Table) are the result of a
third-party reserves evaluation as of June
1, 2022, performed by Chapman Petroleum Engineering Ltd.
("Chapman") of Calgary, Alberta
and was conducted in accordance with the definitions, standards and
procedures contained in the Canadian Oil and Gas Evaluators
Handbook ("COGEH") and National Instrument 51-101 - Standards for
Disclosure of Oil and Gas Activities ("NI 51-101").
The table below shows the Total Proved Undeveloped (PUD),
Probable (2P) and Possible (3P) reserves in Gross and Net to CEP.
Chapman's reserves evaluation only considers the proposed three (3)
well development plan. Other resources could be produced with
additional infill drilling locations as estimated by the
Operator.
Arcadia is a 93-year-old
independent Texas based oil and
gas company with its antecedent founding in 1929 shortly after the
discovery of the great East Texas
oil field. The company which was a part of the early Texas petroleum industry pioneers was
headquartered in Tyler, Texas for
61 years before moving to Dallas,
Texas in 1991. The company's operational activities have
been primarily focused on the Gulf Coast, Eastern, and Southern
regions of Texas where it has
overseen thousands of wells in all phases of development.
Forward Looking Statement
Cautionary Statement Regarding Forward-Looking Information This
news release includes certain "forward-looking statements" under
applicable Canadian securities legislation that are not historical
facts. Forward-looking statements involve risks, uncertainties, and
other factors that could cause actual results, performance,
prospects, and opportunities to differ materially from those
expressed or implied by such forward-looking statements.
Forward-looking statements in this news release include, but are
not limited to, statements with respect to the Company's
objectives, goals or future plans. Forward-looking statements are
necessarily based on a number of estimates and assumptions that,
while considered reasonable, are subject to known and unknown
risks, uncertainties and other factors which may cause actual
results and future events to differ materially from those expressed
or implied by such forward-looking statements. Such factors
include, but are not limited to: general business, economic and
social uncertainties; litigation, legislative, environmental and
other judicial, regulatory, political and competitive developments;
delay or failure to receive board, shareholder or regulatory
approvals; those additional risks set out in CEP's public documents
filed on SEDAR at www.sedar.com; and other matters discussed in
this news release. Although the Company believes that the
assumptions and factors used in preparing the forward-looking
statements are reasonable, undue reliance should not be placed on
these statements, which only apply as of the date of this news
release, and no assurance can be given that such events will occur
in the disclosed time frames or at all. Except where required by
law, the Company disclaims any intention or obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
Neither the Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the Exchange) accepts
responsibility of the adequacy or accuracy of this release.
Glossary
Bbls: barrels of crude oil
BCF: Billion Cubic Feet of natural gas
Bcpd: barrels of condensate per day
MMscfpd: Millions of standard cubic feet of natural gas per day
(gas volume at 60°F and 14.65 psia)
MBO: Thousands of barrels of Oil.
Qualified Person's Statement
The technical information contained in this press release has
been reviewed and approved by Ricardo
Chona, a consultant to CEP. Mr. Chona is a member of the
Society of Petroleum Engineers (SPE), holds a M.Sc. in Petroleum
Engineering from New Mexico Institute of
Mining and Technology (New Mexico
Tech) and has over 30 years' experience in the oil and gas
industry. The recovery and reserve estimates provided in this news
release are estimates only, and there is no guarantee that the
estimated reserves will be recovered. Actual reserves may
eventually prove to be greater than, or less than, the estimates
provided herein. In certain of the tables set forth above, the
columns may not fully reconcile due to rounding.
SOURCE Canada Energy Partners Inc.