The agreement has the unanimous approval of the Board of Directors of both PrimeWest and Seventh, and includes lock-up agreements from all of the officers and directors of Seventh, representing approximately 23% of the outstanding shares of Seventh on a fully diluted basis. Documentation regarding the transaction will be mailed to Seventh shareholders of record as quickly as possible, subject to clarification of certain regulatory requirements. A break fee is contained in the agreement, which would be payable under certain circumstances if the acquisition does not close.
The assets of Seventh being acquired are predominantly comprised of natural gas adjacent to PrimeWest's existing assets in the Princess, Hays and Taber areas and currently produce 1300 BOE per day, of which 72% is natural gas and 28% is crude oil and natural gas liquids. In order to protect the transaction economics, PrimeWest has hedged approximately 70% of the gas production at a price of CDN$6.18 per thousand cubic feet for one year.
A total of 3.1 MMBOE of proven plus probable reserves are being acquired, based upon independent engineering estimates using the methodology prescribed in National Instrument 51-101. The acquisition includes approximately 39,000 net acres of undeveloped land, and a proprietary 3-D seismic inventory, both of which will provide enhanced future development opportunities for PrimeWest.
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