Kelt Exploration To Buy Strategic Assets For $192 Million

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
CA$192.0MM
Description

To acquire certain crude oil and natural gas assets at Pouce Coupe/Spirit River.

Kelt Exploration Ltd. (TO: KEL) has entered into an agreement on Nov. 6 with a Canadian oil and gas company to acquire certain crude oil and natural gas assets located at Pouce Coupe/Spirit River for $192 million.

The assets are in close proximity to the company's core producing areas at Grande Cache and Karr in west central Alberta. The acquisition has an effective date of Oct. 1 and is subject to standard industry closing conditions. Closing is expected to occur on or around Dec. 20.

The acquisition will financed by existing cash on hand and proceeds from an equity financing. The company has received a commitment letter from its bank, National Bank of Canada, whereby Kelt's available bank credit line will be increased to $100 million, upon satisfactory closing of the Pouce Coupe/Spirit River asset acquisition.

Key Attributes of Assets to be Acquired

  • Current net production is estimated to be 4,800 barrels of oil equivalent per day (BOE/d) with 40% oil and 60% gas;
  • At current index pricing for crude oil of WTI US $95 per barrel and for natural gas at AECO $3.25 per GJ, operating netbacks are $23 per BOE, providing $40 million of annual operating income at current production levels;
  • Petroleum and natural gas reserves to be acquired have been evaluated internally by Kelt effective Oct.1: Proved developed producing reserves were 10.1 million BOE, with no associated future development costs, total proved reserves were 13.8 million BOE, with $49.2 million in associated future development capital, and total proved plus probable reserves were 23.0 million BOE, with $134.9 million in associated future development capital;
  • Long-life reserves with a proved plus probable reserve life index of 13.1 years based on current production;
  • Major infrastructure component with interests in major oil and gas facilities including the following: 20.2% ownership interest in a 140 million cubic feet per day (MMcf/d) gas processing plant, varying ownership interests in gas compressors and oil batteries, and varying ownership interests in an extensive network of oil and gas gathering pipelines that will be accessible for transportation of oil and gas resulting from future drilling;
  • Current net production includes 750 BOE/d from unit interests of which approximately 55% is operated;
  • The Pouce Coupe/Spirit River assets include an extensive land position that is a complementary fit geographically to Kelt's existing core areas at Karr and Grande Cache and are located 20 and 40 miles north of Karr and Grande Cache respectively. The acquisition includes 256,345 gross acres (400 gross sections) and 103,303 net acres (161 net sections) of land; and
  • The acquisition includes an established field office located in the town of Grande Prairie, Alberta which is expected to become Kelt's main field operating base for all of the company's operated operations in the newly acquired Pouce Coupe/Spirit River area and in the company's existing areas at Karr and Grande Cache.

Equity Financing

In connection with the acquisition, Kelt entered into brokered and non-brokered equity financings for gross aggregate proceeds of $101.1 million.

Brokered Private Placement

Kelt has entered into an agreement with a syndicate of underwriters led by Peters & Co. Ltd., and including CIBC World Markets Inc., FirstEnergy Capital Corp., RBC Capital Markets, National Bank Financial Inc., Scotia Capital Inc., AltaCorp Capital Inc., Cormark Securities Inc., GMP Securities Inc., Dundee Capital Markets, and Macquarie Capital Markets Canada Ltd., pursuant to which the underwriters have agreed to purchase for resale to the public, on a bought deal private placement basis, 10 million subscription receipts at $8.15 per subscription receipt, resulting in gross proceeds of $81.5 million. The gross proceeds from the sale of subscription receipts will be held in escrow pending the completion of the Pouce Coupe/Spirit River acquisition. If all outstanding conditions to the completion of the Pouce Coupe/Spirit River acquisition are met, the net proceeds from the sale of the subscription receipts will be released to Kelt to finance, in part, the purchase price, and each subscription receipt will be exchanged for one Kelt common share for no additional consideration. The financing is expected to close on or around Dec. 3.

Non-brokered Private Placement

In conjunction, Kelt has agreed to issue to certain directors, officers and employees of the company, on a non-brokered basis, an additional 2.4 million subscription receipts at a price of $8.15 per subscription receipt, resulting in additional gross proceeds of $19.6 million. If all outstanding conditions to the completion of the Pouce Coupe/Spirit River acquisition are met, the net proceeds from the sale of the subscription receipts will be released to Kelt to finance, in part, the purchase price, and each subscription receipt will be exchanged for one Kelt common share for no additional consideration. The non-brokered private placement will close concurrently with the closing of the brokered private placement on or around Dec. 3.

Private Placements

Net proceeds from these private placement equity offerings will be used to finance, in part, the Pouce Coupe/Spirit River acquisition. This transaction is subject to certain conditions including normal regulatory approvals and specifically, the approval of the Toronto Stock Exchange. The subscription receipts will be offered in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec by way of private placement. The Kelt common shares issued in connection with the private placements are subject to a statutory hold period of four months plus one day from the date of completion of the private placements, in accordance with applicable securities legislation.

Kelt Exploration Ltd. is an oil and gas company focuses on exploration, development and production of crude oil and natural gas resources, primarily in west central Alberta and northeastern British Columbia. The company based in Calgary.