Celtic Exploration has closed the acquisition of oil and gas assets located at the Company's core operating area at Kaybob South, Alberta, for an adjusted closing price of $52.7 million. The assets acquired by Celtic are comprised of an operated 49.88% working interest in the Kaybob South Beaverhill Lake Gas Unit No.2, as well as other assets in the Kaybob South area. In addition, the acquisition of certain non-unit interests, representing approximately 50 to 60 BOE per day of current production, has closed in escrow, subject to certain pre-emptive rights to purchase which, unless exercised, expire on July 9, 2007.
The key attributes of the assets acquired, excluding the non-unit assets which are subject to outstanding pre-emptive rights to purchase, are as follows:
- current production capability is approximately 1,040 BOE per day, 63% natural gas and 37% natural gas liquids;
- oil and gas reserves consist of approximately 2.8 million BOE, proved and approximately 4.4 million BOE, proved plus probable;
- long-life reserves with a reserve life index of approximately 11.5 years (on a proved plus probable basis);
- complementary fit with a large contiguous land position adjacent to Celtic's Kaybob South exploration and development area; and
- ownership and operatorship in compressor facilities and a major pipeline system that Celtic currently uses to transport its existing Kaybob South Montney production from the Kaybob South field to the Kaybob South KA Gas Processing Plant.
Petroleum and natural gas reserves to be acquired were evaluated by Sproule Associates Limited, effective December 31, 2006. The Company has reduced the amount of reserves in the Sproule report to reflect production from January 1, 2007 to April 30, 2007, given that the effective date of the acquisition is May 1, 2007.
During September 2007, for approximately three to four weeks, the unit production acquired (approximately 1,000 BOE/d) will be shut-in, allowing the Company to complete upgrades to the pipeline and related facilities. These upgrades will ensure a more stable production and transportation profile in the future.