Vermilion Energy announced Monday that it has entered into definitive purchase and sale agreements with Total E&P France (Total) whereby Vermilion, through its wholly owned subsidiaries, will acquire certain working interests in six producing fields located in the Paris and Aquitaine basins in France (the “Acquisition”). The Assets (as defined below) are expected to average approximately 2,200 boe per day of production in 2012, weighted 86% to high quality Brent based crude, and add an estimated 6.7(1) million boe of proved plus probable reserves (96% crude oil) . Taking into consideration an effective date of January 1, 2011, customary closing adjustments, and an anticipated closing in late January 2012, the cash to close the Acquisition is currently estimated at approximately C$115 million. The Acquisition remains subject to customary conditions and receipt of all necessary regulatory approvals.
The assets being acquired consist of predominantly operated interests in six fields including the Itteville (79%), Vert Le Grand (90%), Vert Le Petit (100%), La Croix Blanche (100%) and Dommartin-Lettree (56%, non-operated) fields in the Paris Basin and in the Vic Bilh (73%) field in the Aquitaine Basin (the “Assets”). Vermilion previously held the remaining non-operated working interests in each of the Itteville, Vert Le Grand and Vic Bilh fields which will result in Vermilion having a 100% operated working interest in five of the six fields upon closing of the proposed Acquisition.
Based on estimated 2012 average daily production levels the acquisition metrics reflect a cash cost of approximately C$52,000 per boepd and C$17.21 per boe of proved plus probable reserves as evaluated by GLJ and effective December 31, 2011. Upon closing of the Acquisition, Vermilion will continue to maintain considerable financial flexibility, with approximately C$650 million of remaining borrowing capacity and a net debt to fund flows ratio of approximately 1.0 times, upon closing of the Acquisition.
This Acquisition is a natural addition to our current France asset base and is well aligned with our strategic objective to maintain and consolidate our core operating areas and to own and operate 100% of our assets. The Acquisition will further strengthen Vermilion’s position as the leading oil producer in France, and with a significant weighting toward high quality oil will provide robust netbacks in the current commodity price environment. Vermilion believes it has identified numerous areas where it can reduce the Asset's current cost structure and increase production through optimized production operations, waterflood management and exploitation of infill development opportunities.
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