achieve production of 1,200 barrels of oil equivalent per day (boe/d) by December, Cooper said. According to him, junior companies start attracting attention around that size, and many, including Aroway, “hope to get acquired by a bigger player.”
Aroway Energy could attract interest by December, CEO says
Aroway Energy (TSX-V:ARW), a Vancouver, British Columbia-based junior oil producer, expects to reach a production level that could attract buyers by December, said CEO Chris Cooper.
The company is developing light oil land within the Peace River Arch region of northern Alberta, weighted 90% in oil.
Aroway, which has a market cap of CAD 28.8m (USD 29m), expects to achieve production of 1,200 barrels of oil equivalent per day (boe/d) by December, Cooper said. According to him, junior companies start attracting attention around that size, and many, including Aroway, “hope to get acquired by a bigger player.”
Aroway is under no financial pressure and is not planning a proactive sale, but it would entertain interest and hire an investment bank if it receives a serious approach, Cooper said.
An industry analyst contended junior companies start garnering interest at closer to 2,000 boe/d but did note Aroway’s dominance in oil in an extremely depressed gas market makes it “a different story.” Aroway has a joint venture agreement with a financing partner, and together their land holdings already exceed the 1,200 boe/d mark, Cooper pointed out. He would not name the JV partner.
Nearby players to Aroway are heavily weighted to gas and could look to acquire more liquid assets, Cooper said. Larger players that surround Aroway, according to Cooper, include Birchcliff Energy, Bonavista Energy, Crescent Point Energy, Canadian Natural Resources and Shell Canada.
The industry analyst and an industry source said Aroway was likely too small to attract the attention of those large players, especially a company such as Shell, which the analyst said is unlikely to even notice companies with less than 15,000 boe/d. With around 200,000 boe/d of assets up for sale right now in Western Canada, large buyers have their “pick of the litter,” the analyst said.
A mid-size company, such as Guide Exploration, is a potentially better fit, the industry source agreed. Privately held Guide acquired publicly traded WestFire Energy in an all-share reverse merger transaction just weeks ago, valued at USD 198m, to become an intermediate oil and gas company renamed Long Run Exploration, with a base in light-oil-focused resource areas, including some in the Peace River region.
Following completion of the merger, Long Run will have estimated production of approximately 26,000 boe/d, of which 50% is light oil and natural gas liquids. Its annualized projected cash flow will be approximately USD 225m, according to public company records.
Bonavista recently sold two properties with production of 1,900 boe/d, 75% of it in the Peace River region, for CAD 38k a flowing barrel, the analyst said.
The analyst and a second industry source agreed the buyer of those assets, which wasn’t publicly announced, would be a very likely buyer of Aroway. A person familiar with Bonavista said the buyer of those Peace River assets was Petrus Resources.
According to a Petrus 2Q12 report posted on its website, Petrus successfully closed the acquisition “of certain oil and natural gas assets in the Peace River area of Alberta” on June 29 2012, for cash consideration of USD 60m, before closing adjustments and related costs. Petrus was founded in December 2010 and has roughly 2,600 boe/d of production, according to that report.
Calgary-based Crescent Point Energy was previously named as a possible Aroway buyer by this news service. CEO Scott Saxberg recently told this news service Crescent was actively seeking buys between USD 5m and USD 1bn, but that he had not heard of Aroway. He did say Aroway is an example of the type of company Crescent might consider.
The second industry source doubted whether Crescent would seriously consider acquiring Aroway, as Crescent paid roughly CAD 9.5m in October for a 19% interest in Arcan Resources property in the Peace River area and “has done nothing” with that investment. Since then, Arcan’s share price has drastically fallen, the second source noted. Crescent Point generally focuses on larger companies with more of an upside, the analyst added.
Birchcliff, which announced it ended a formal sale process earlier this year, is still rumored as a potential sale target and not likely to make buys, the second source and analyst said. The analyst also noted Birchcliff “has more than enough acreage” in the Peace River area.
Aroway’s regular advisors include auditor James Stafford.
by Deborah Balshem and Ron Mandel
Source: Proprietary Intelligence
Value: USD 29m (market cap)
Stake Value: more than 30% inclusive
ABOUT AROWAY ENERGY INC.
Aroway Energy Inc. is a Western Canadian junior oil and gas production and exploration company participating in oil exploration prospects, through a joint venture partnership. Aroway and its Partner have assembled an impressive land package of 121 sections (77,440 acres) with 3D seismic coverage over 75% of its lands, all within its core area, the Peace River Arch. All of the Company’s exploration and development targets are in close proximity to tie-in, gathering and plant infrastructure, controlled and owned by Aroway’s Joint Venture Partner. Aroway is currently producing approximately 650 boe/d (90% oil) and has an additional 200 boe/d of shut in natural gas. Aroway expects to exit 2012 with total production of approximately 1200 boe/d.
Yours truly
Judy-Ann Pottinger
Director of Communications
Aroway Energy Inc.
Suite 1910, 1055 West Hastings Street
Vancouver, BC V6E 2E9
Direct: 604-304-4090
Mobile: 604-617-5290
www.arowayenergy.com
