Arsenal Energy Inc. Announces Strategic Acquisition in its Core Oil-Producing Areas of Alberta
10/26/2011 @ 7:49PM
Source :
MarketWire Canada
Arsenal Energy Inc. (AEI)
Quote :
0.64 -0.01 (-1.54%) @ 12:50PM
Arsenal Energy Inc. Announces Strategic Acquisition in its Core Oil-Producing Areas of Alberta
Arsenal Energy Inc. ("Arsenal") (TSX:AEI) (PINK SHEETS:AEYIF) is pleased to
announce that it has entered into an agreement to purchase certain producing
properties (the "Acquired Properties") for a total consideration of $40.25
million (the "Acquisition"). The Acquisition is consistent with Arsenal's
strategy of acquiring low decline water flood projects in eastern Alberta for
reserve growth in the medium term, and acquiring very low cost reserves, land,
and infrastructure in long life gas plays for the long term.
The Acquired Properties are currently producing approximately 1,500 boe/d (50%
liquids) and include 1.8 million boe of proved and 2.5 million boe of proved
plus probable reserves.
The Acquired Properties strategically fit in Arsenal's eastern Alberta core
operating areas. Upon completion of the Acquisition, Arsenal's production from
its Princess/Provost areas will increase from approximately 920 boe/d to
approximately 1,850 boe/d. The Acquired Properties produce medium gravity oil,
are all operated, and have high working interests. Arsenal has identified a
number of additional pools on its heritage lands and on the Acquired Properties
which management feel may benefit from water re-injection.
Arsenal is also acquiring 580 boe/d of gas production in the Desan area of NE
BC. The Acquired Properties are operated, have a high working interest, and a
relatively low decline rate. Arsenal views the Desan purchase as a counter
cyclical core gas property acquisition at very low cost.
The Acquisition is scheduled to close November 15th. Arsenal intends to fund the
Acquisition entirely with bank debt within its existing credit facility. Pro
forma debt at closing is estimated at $50 million with pro forma annualized cash
flow of $42 million, representing pro forma debt to cash flow of 1.2x. Subject
to the closing of the Acquisition, Arsenal anticipates it will exit 2011 at
approximately 3,900 boe/d. In conjunction with the Acquisition, Arsenal has
hedged 700 bbls/d of oil at a price of $92.10 CDN/bbl until the end of 2013.
Arsenal's credit facility of $60 million is currently under review to take into
consideration recent drilling activities and to incorporate the Acquisition.
Arsenal expects that its borrowing base will be increased to account for the
added activity and production. The Acquisition is not expected to affect
Arsenal's planned capital development program for the remainder of 2011 and for
2012.
Desjardins Securities Inc. acted as Arsenal's exclusive financial advisor with
respect to the Acquisition.
These posts are not to be used as investment advice.
