The acquisition is effective April 1, 2006 and is expected to close June 27, 2006. It is subject to typical pre-closing conditions and regulatory approvals. A small portion of the assets (less than 40 boed) are subject to rights of first refusal. The acquisition details are as follows:
- Purchase Price: $42.35 million. - Reserves: - 1.99 million boe proved plus probable reserves (April 1, 2006 Independent engineering studies). - $21.28 per boe (proved plus probable). - Production: - Average 4.35 MMcf/d (725 boed) in mid April 2006. - $58,400 per boed. - Upside Potential - Low-risk development upside. - The Company expects to add approximately 700 boed over time through recompletions, drilling and tie-ins on the existing properties. - Extensive adjacent crown lands for future expansion. - Stacked reservoir potential in the Devonian, Mannville and Viking. - Well and compressor optimization opportunities. - Land: - Undeveloped Land: 24,500 gross acres; 22,700 net acres; 93% average working interest. - Total: 80,500 gross acres; 76,100 net acres; 95% average working interest. - Infrastructure: - 4 compressor/dehydration facilities at 100% working interest. - 1 compressor/dehydration facility at 90% working interest. - Extensive gathering system. - Seismic: 435 km of 2D seismic. - Year round access in 3 of the 5 properties.The assets lie in east central Alberta in an area where Iteration management and staff have extensive exploration and development expertise. The stacked pay sections allow for a number of development opportunities in the existing wells, coupled with low risk drilling opportunities. The Company controlled facility and pipeline base will provide the economic and operational base for expansion into the adjacent crown lands.
The acquisition is anticipated to make a significant contribution to the Company's growth in its eastern core area. After the deal is closed, the Company expects the following corporate guidance for 2006:
- Production: - June 3, 2006 production (not including the acquisition) was 3900 boed, with a further 450 boed tested behind pipe and waiting to come on stream. - Expected 2006 average production of 4400 to 4600 boed, a 24 to 29% increase over the 2005 average. - Expected 2006 exit rate of 5400 to 5800 boed, a 38 to 49% increase over the 2005 exit rate. - Expected 2006 netback of approximately $30.40/boe, a 9% decrease from 2005(x). - Land Base: - 115,000 net acres undeveloped. - 119,000 net acres developed. - Currently equalizing into 52,000 net acres. - Total land base of 286,000 net acres, a 260% increase over April 2005. - CAPEX: $118 million, including $50 million of acquisitions. - Cash flow(x): - Estimated 2006 cash flow of $45 to $47 million. - Annualized expected Q4 cash flow of $69 to $72 million. - Balance sheet: Expected year-end debt of $58 to 60 million(x). (x) Price assumptions: - WTI oil at $60 US/bbl. - AECO gas. Q2 2006 $6.00 Cdn/GJ Q3 2006 $5.65 Cdn/GJ Q4 2006 $9.11 Cdn/GJ
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