Bonterra Energy Corp. Announces the Sale of a Two Percent Gross Overriding Royalty Interest in the Pembina Cardium Pool for T...
December 20 2017 - 4:15PM
Bonterra Energy Corp. (www.bonterraenergy.com) (TSX:BNE)
(“Bonterra” or “the Company”) is pleased to announce that it has
entered into a definitive agreement for the sale of a two percent
non-convertible gross overriding royalty (“GORR”) in the Pembina
Cardium pool for cash consideration of $52 million plus the
assignment of the purchaser’s working interest in certain PNG
rights, Tangibles (wells, pipelines, facilities) and Miscellaneous
Interests (contracts, surface agreements and permits) (the “GORR
Agreement”). The disposition represents a 14 times multiple
of 2018 forecasted cash flow.
GORR Agreement Details
Under the terms of the GORR Agreement, Bonterra
will sell a two percent GORR on its Pembina Cardium pool. The
Pembina Cardium pool represents approximately 90 percent of total
Corporate petroleum and natural gas sales. Total
consideration from the acquirer includes $52 million of cash, plus
2.5 net sections of land and approximately 115 BOE per day of
associated potential production in the Pembina and Willesden Green
Fields. The Company estimates five to seven additional net
internally identified drilling locations on the land
acquired. The GORR Agreement has a closing date of December
20, 2017 with an effective date of January 1, 2018.
This transaction is immediately accretive to
Bonterra and enables the Company to crystalize value from its
attractive, long-life and predictable asset base, while
strengthening the balance sheet and capturing significant value for
its shareholders. This improved liquidity and financial
position are expected to enhance the Company’s ability to pursue
acquisition opportunities and to continue investing in drilling
projects that offer strong returns in the current price
environment. The sale of the GORR is not anticipated to
materially impact the overall economics of Bonterra’s future cash
flows, but does provide an immediate cash injection at very
attractive metrics. The Pembina Cardium assets have delivered some
of the best operating metrics in the industry and continue to be a
core component of Bonterra’s value and long-term growth
strategy.
Based on forward strip commodity prices, the
assets acquired under the GORR Agreement are anticipated to
generate approximately $1 million of potential funds flow annually,
supporting the Company’s yield plus growth model. With the
$52 million applied to the balance sheet, Bonterra’s debt to funds
flow ratio is forecast to improve from approximately 3.7 times to
3.1 times in the near term, and assuming the successful execution
of its capital program, is forecast to fall to between 2.5 to 2.1
times at year end 2018, which is more in line with the Company’s
peers.
2018 Operational and Financial
Budget
In the interests of maintaining a prudent
balance between funds flow and capital spending plus dividends,
Bonterra also announces that it has set the Company’s 2018 capital
expenditures budget at approximately $75 million which will largely
be directed to new wells and facility upgrades and focused
primarily in the Pembina Cardium area. Given Bonterra’s low
corporate production decline rate of approximately 20 percent, the
capital budget is anticipated to increase annual production by
approximately two to four percent over 2017, with volumes expected
to range between 13,200 and 13,500 BOE per day.
After the impact of the GORR Agreement,
Bonterra’s 2018 forecasted funds flow is expected to be
approximately $125 million, assuming commodity price levels for
2018 averaging US$57/bbl WTI oil, C$1.75/mcf AECO natural gas and
an exchange rate of $0.78 $US/$CDN.
The Company’s base capital program will allocate
$67 million to drill 31 wells, plus $8 million for facilities and
pipelines investment, for a total base budget of $75 million.
Assuming $125 million in forecast corporate funds flow, this base
capital program is expected to result in funds flow net of
development capital expenditures (“Free Funds Flow”) of $50
million. This Free Funds Flow will be used to fund Bonterra’s
monthly dividend of $0.10 per share representing approximately $40
million annually. The Company anticipates the remaining $10 million
will be available to further reduce outstanding bank debt.
Bonterra’s total payout ratio, which represents the annual capital
program plus its dividend divided by corporate funds flow, is
expected to be 92 percent for 2018.
Bonterra Energy Corp. is a conventional oil and
gas corporation with operations in Alberta, Saskatchewan and
British Columbia. The shares are listed on The Toronto Stock
Exchange under the symbol "BNE".
For further information please contact:George
F. Fink, Chairman and CEO Robb D. Thompson, CFO and SecretaryAdrian
Neumann, COOTelephone: (403) 262-5307Fax: (403) 265-7488Email:
info@bonterraenergy.com
Forward Looking Information
Certain statements contained in this release
include statements which contain words such as "anticipate",
"could", "should", "expect", "seek", "may", "intend", "likely",
"will", "believe" and similar expressions, relating to matters that
are not historical facts, and such statements of our beliefs,
intentions and expectations about development, results and events
which will or may occur in the future, constitute "forward-looking
information" within the meaning of applicable Canadian securities
legislation and are based on certain assumptions and analysis made
by us derived from our experience and perceptions. Forward-looking
information in this release includes, but is not limited to:
expected cash provided by continuing operations; cash dividends;
future capital expenditures, including the amount and nature
thereof; oil and natural gas prices and demand; expansion and other
development trends of the oil and gas industry; business strategy
and outlook; expansion and growth of our business and operations;
and maintenance of existing customer, supplier and partner
relationships; supply channels; accounting policies; credit risks;
and other such matters.
All such forward-looking information is based on
certain assumptions and analyses made by us in light of our
experience and perception of historical trends, current conditions
and expected future developments, as well as other factors we
believe are appropriate in the circumstances. The risks,
uncertainties, and assumptions are difficult to predict and may
affect operations, and may include, without limitation: foreign
exchange fluctuations; equipment and labour shortages and
inflationary costs; general economic conditions; industry
conditions; changes in applicable environmental, taxation and other
laws and regulations as well as how such laws and regulations are
interpreted and enforced; the ability of oil and natural gas
companies to raise capital; the effect of weather conditions on
operations and facilities; the existence of operating risks;
volatility of oil and natural gas prices; oil and gas product
supply and demand; risks inherent in the ability to generate
sufficient cash flow from operations to meet current and future
obligations; increased competition; stock market volatility;
opportunities available to or pursued by us; and other factors,
many of which are beyond our control.
Actual results, performance or achievements
could differ materially from those expressed in, or implied by,
this forward-looking information and, accordingly, no assurance can
be given that any of the events anticipated by the forward-looking
information will transpire or occur, or if any of them do, what
benefits will be derived there from. Except as required by law,
Bonterra disclaims any intention or obligation to update or revise
any forward-looking information, whether as a result of new
information, future events or otherwise.
The forward-looking information contained herein
is expressly qualified by this cautionary statement.
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