Daylight Energy Announces Closing of West Acquisition, Provides Updated 2010 Guidance and Announces May & June 2010 Dividend
May 12 2010 - 8:27AM
Marketwired Canada
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Daylight Energy Ltd. (TSX:DAY) ("Daylight" or the "Corporation") is pleased to
announce the closing of our acquisition of West Energy Ltd. ("West"). Daylight
also provides updated 2010 capital expenditure and production guidance and
announces a $0.05 monthly dividend per common share for May and June of 2010.
ACQUISITION OF WEST ENERGY LTD.
Daylight's acquisition of West continues our strategy of executing transactions
with near-term cash flow strength supported by long-term development potential
to provide growth opportunities for our shareholders. The acquired assets are
highly complementary to Daylight's Pembina operations and expand our position in
this active region of Alberta.
The transaction was approved at the annual and special meeting of West
shareholders and by the Court of Queen's Bench of Alberta on May 11, 2010. Over
99% of the votes cast by the West shareholders, present at the meeting in person
or by proxy, voted in favor of the transaction. Daylight has acquired all of the
issued and outstanding common shares of West through the cash payment of $115
million and the issuance of approximately 29 million Daylight common shares
which results in Daylight having approximately 204 million common shares
outstanding as at closing. It is expected that the West common shares will be
delisted from the TSX on or about May 17, 2010. Highlights of the West
acquisition include:
-- Increases Daylight's Cardium rights in the Pembina area to over 100 net
sections.
-- Adds unrisked drilling inventory of 80 to 160 horizontal Cardium light
oil locations to Daylight's inventory at Pembina.
-- Provides substantial light oil asset opportunities beyond the Cardium
horizontals, in particular the Belly River which has large original oil
in place and the potential to significantly improve recovery factors and
increase reserves.
-- Generates synergies and opportunities to reduce operating costs by
combining Daylight and West's existing light oil facilities, gathering
systems and infrastructure.
Daylight has also amended and restated our credit facilities to a capacity of
$650 million and as at closing, approximately $350 million is drawn against
these credit facilities. Daylight's balance sheet continues to provide
significant capacity and flexibility to fund our capital program while remaining
well positioned to execute on strategic acquisitions as they arise.
UPDATED 2010 GUIDANCE
Daylight also announces that we are maintaining our 2010 capital budget at $300
million and updates our production guidance for the 2010 year taking into
account the acquisition of West.
Our 2010 capital program has become more oil focused with reallocations across
our inventory of repeatable, low risk resource play projects in our key growth
areas of Pembina (Cardium light oil), West Central (Cardium light oil and
liquids rich natural gas) and Elmworth (natural gas). Daylight's 2010 drilling
program will continue to use and improve upon our successful horizontal drilling
techniques and innovative completion technologies that significantly contributed
to our recent operational success. Daylight's asset base, including the
production volumes acquired from West and our 2010 capital program, is expected
to deliver average production of 43,000 to 44,000 boe per day for 2010 with an
anticipated 2010 exit rate of over 47,000 boe per day (an increase of over 23%
from Q4 2009 production levels). Updated 2010 production guidance includes the
previously announced deferred on stream timing of over 20 million cubic feet
("mmcf") per day of new production capacity from our Q1 2010 capital program
until mid-Q4 2010 with an estimated impact of 1,000 to 1,500 boe per day on
Daylight's 2010 production volumes. This deferral is intended to allow Daylight
to take advantage of the strong initial flow rates of these wells at a later
time when Daylight management expects natural gas prices to be stronger.
Daylight's production volumes for the remainder of 2010 are expected to be
weighted approximately 45% to 50% towards oil and natural gas liquids ("NGLs")
with the balance consisting of natural gas. Daylight's current production,
including volumes acquired from West, is approximately 45,000 to 46,000 boe per
day.
CAPITAL EXPENDITURE PROGRAM
Daylight's 2010 capital expenditure program reflects a significantly increased
pace of investment in our Cardium horizontal light oil program, while continuing
to advance our other key resource play developments. Capital has been
reallocated to our core areas with the following geological zones and commodity
targets:
----------------------------------------------------------------------------
2010 Capital
Core Area Allocation Geological Zone & Commodity Target
----------------------------------------------------------------------------
Pembina $175 million Cardium (Horizontal) - Light Oil
----------------------------------------------------------------------------
West Central $ 75 million Bluesky (Horizontal) - Liquids Rich Natural Gas
Cardium (Horizontal) - Liquids Rich Natural Gas
Wilrich (Horizontal) - Natural Gas
Montney (Horizontal) - Natural Gas
Cretaceous (Multi-zone) - Natural Gas
----------------------------------------------------------------------------
Elmworth $ 50 million Cadomin (Horizontal) - Natural Gas
Nikanassin (Horizontal) - Natural Gas
Doe Creek (Horizontal) - Light Oil Uphole
Cretaceous (Multi-zone) - Natural Gas
----------------------------------------------------------------------------
Total $300 million
---------------------------
---------------------------
MAY & JUNE 2010 DIVIDEND
Daylight also announces that it will pay a cash dividend of $0.05 per common
share for the months of May and June 2010, as set forth below:
----------------------------------------------------------------------------
Dividend Payment Dividend Per
Record Date Ex-Dividend Date Date Share(i)
----------------------------------------------------------------------------
May 31, 2010 May 27, 2010 June 15, 2010 $0.05
June 30, 2010 June 28, 2010 July 15, 2010 $0.05
----------------------------------------------------------------------------
(i) The dividend is considered an "eligible dividend" for tax purposes.
The Board of Directors of Daylight has set the May and June dividend at $0.05
per common share per month. Daylight expects to pay a sustainable dividend on a
monthly basis, provided however that any decision to pay dividends on the common
shares will be made by the Board of Directors on the basis of Daylight funds
from operations, earnings, financial requirements, commodity price levels, legal
requirements and other conditions existing at such future times.
Daylight currently intends to designate all dividends to be "eligible dividends"
for the purposes of the Income Tax Act (Canada) such that shareholders who are
individuals will benefit from the enhanced gross-up and dividend tax credit
mechanism under the Income Tax Act (Canada).
Daylight is a growing intermediate oil, liquids rich natural gas and natural gas
producing company with a high quality suite of resource play assets in Western
Canada. Daylight's highly focused team utilizes technical expertise in
exploitation, development and acquisitions to create long-term value for
shareholders. The Daylight team has developed a multi-year inventory of
repeatable, low risk exploitation resource play projects with substantial
potential reserve additions on assets owned and controlled in the premier Deep
Basin area of Alberta and Northeast British Columbia. Daylight has approximately
204 million common shares currently outstanding which will trade on the TSX
under the symbol DAY. Daylight Series B, Series C, and Series D convertible
debentures trade on the TSX under the symbols DAY.DB.B, DAY.DB.C and DAY.DB.D,
respectively.
An updated corporate presentation is available on Daylight's website at
www.daylightenergy.com.
ADVISORY:
Forward-Looking Information and Statements
This press release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws. The use of any of
the words "expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and
similar expressions are intended to identify forward-looking statements or
information. More particularly and without limitation, this press release
contains forward-looking statements and information concerning: the anticipated
timing of the delisting of West's common shares from the Toronto Stock Exchange;
anticipated capital expenditures in connection with Daylight's 2010 capital
expenditure program; anticipated production levels for the balance of 2010 and
exit production rates for 2010; anticipated production levels by product type
for the balance of 2010 and exit 2010; expectations regarding future dividends
declared and paid on the common shares; the timing of bringing additional
production on-stream and the benefits thereof; anticipated future natural gas
prices; and expected initial production rates of certain deferred natural gas
production.
The forward-looking statements and information in this press release are based
on certain key expectations and assumptions made by Daylight, including
expectations and assumptions concerning: prevailing and future commodity prices
and exchange rates; applicable royalty rates and tax laws; future well
production rates; the performance of existing wells; application of existing
technologies and future advancements in technology to Daylight's operations and
drilling activities; the success obtained in drilling new wells; the inventory
of new drilling locations; the sufficiency of budgeted capital expenditures in
carrying out planned activities; the availability and cost of labour and
services; the receipt, in a timely manner, of regulatory and third party
approvals; and the ability of Daylight to achieve the benefits of the West
acquisition. Although Daylight believes that the expectations and assumptions on
which such forward-looking statements and information are based are reasonable,
undue reliance should not be placed on the forward-looking statements and
information because Daylight can give no assurance that they will prove to be
correct. There is no representation by Daylight that actual results achieved
during the periods identified in this press release will be the same in whole or
in part as those forecast.
Since forward-looking statements and information address future events and
conditions, by their very nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to the risks
associated with the oil and gas industry in general such as: operational risks
in development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of reserve and resource (including original oil in place) estimates;
the uncertainty of estimates and projections relating to production, costs and
expenses; health, safety and environmental risks; commodity price and exchange
rate fluctuations; marketing and transportation of petroleum and natural gas and
loss of markets; environmental risks; competition; risks associated with
utilizing existing technologies and future technological advancements in
Daylight's operations and drilling activities; failure to realize the
anticipated benefits of acquisitions, including the West acquisition; risks
regarding the integration of West; incorrect assessment of the values of
acquisitions, including the West acquisition; ability to access sufficient
capital from internal and external sources; failure to obtain required
regulatory and other third party approvals; and changes in legislation,
including but not limited to tax laws, royalty rates and environmental
regulations.
Readers are cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could affect the
operations or financial results of Daylight are included in reports on file with
applicable securities regulatory authorities, including but not limited to
Daylight Resources Trust's annual information form for the year ended December
31, 2009 and the Notice of Annual and Special Meeting and Information Circular
and Proxy Statement dated April 7, 2010, each of which may be accessed on
Daylight Resources Trust's SEDAR profile at www.sedar.com.
The forward-looking statements and information contained in this press release
are made as of the date hereof and Daylight undertakes no obligation to update
publicly or revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise, unless so required by
applicable securities laws.
Barrels of Oil Equivalent
"Boe" means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet
of natural gas. Boe's may be misleading, particularly if used in isolation. A
boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an
energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead.
Original Oil in Place
"Original oil in place" as used in this press release means the total oil and
gas estimated to have originally existed in the earth's crust in naturally
occurring accumulations (also defined as "original resources" in the COGE
Handbook). Original oil in place includes both discovered and undiscovered
resources, and there is no certainty that any portion of the undiscovered
resources will be discovered and, if discovered, that any volumes will be
economically viable or technically feasible to recover or produce. Original oil
in place also includes volumes that have already been produced from such
accumulations. Readers should not unduly rely upon estimates of original oil in
place in terms of assessing the Daylight's reserves or recoverable resources.
All estimates of original oil in place contained in this presentation are based
upon internal estimates of management of Daylight.
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