Great Plains Exploration Inc. has entered into agreements to acquire production, facilities, undeveloped lands and a large exploration block in Northeastern British Columbia. Total consideration for the package was $11 million, which included a $6 million asset purchase in the Klua area and a $5 million exploration commitment in the Greater Sierra area.
The Klua assets include approximately 340 BOE/d of production from a reserve base estimated at 510,000 proved plus probable BOEs. Facilities include 55 km of gathering lines and an operated sour gas plant with current capacity of 10 mmcf/d which can be expanded to 20 mmcf/d. This underutilized capability in both the plant and gathering system offers capacity for re-completion opportunities as well as new drilling and future shale gas development. Exploration acreage in the Klua package totals 34,000 net acres valued by Great Plains management at approximately $4 million based on prevailing area prices and prospectivity for exploration.
The Great Plains technical team believes that there is potential to find prospects from 3 to 20 bcf in size and has already identified a drill-ready Keg River prospect which is summer accessible. This transaction has now closed with an effective date of August 1, 2008.
The $5 million exploration commitment is due October 1, 2008 and requires that Great Plains participates in either the drilling of exploration wells or the shooting of 3D seismic. Great Plains has been granted an
The transaction as a whole offers an optimum mix of production with exploration upside and provides an excellent opportunity for Great Plains to consolidate its area position and build upon the RedStar acquisition which was completed earlier this year. Budgeted expenditures and drilling plans for Great Plains overall are currently under review with some re-allocation expected away from Alberta and into Northeast BC.
Funding for this transaction was provided through existing credit facilities which are now drawn by $19.7 million against lines of $33 million, plus an acquisition line of $14 million. With the addition of the Klua assets, total corporate production now stands at approximately 1,950 BOE/d with an estimated 1,000 BOE/d behind pipe. Great Plains expects to see further production increases over the next few months as new projects come on-stream, including the Company's most recent oil discovery at Crossfire.
Great Plains still maintains a forward debt/cash flow ratio of below 1.3/1 after this transaction and will continue to access accretive acquisitions and impact exploration opportunities as drivers for growth.
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