Cequence Energy to acquire Montney assets in Simonette and provides update on
recent drilling activity
CALGARY, Feb. 25, 2013 /CNW/ - Cequence Energy Ltd. ("Cequence") (TSX: CQE) is
pleased to announce that it has entered into agreements with Donnybrook Energy
Inc. ("Donnybrook") (TSX: DEI) pursuant to which Cequence has agreed to
acquire Donnybrook's interests in its oil and gas properties located in the
Simonette and Resthaven areas of Alberta (the "Donnybrook Assets"). As
consideration for the assets, Cequence will transfer its interest in its
non-operated oil and gas properties located in the Fir area (the "Non-core
Assets"), and issue an aggregate of 10,300,000 Cequence common shares to
Donnybrook, which shares will be distributed to the Donnybrook shareholders,
representing aggregate consideration to Donnybrook of approximately $23
million. Cequence believes that this expansion and consolidation of its
contiguous Montney land position at Simonette has significant present and
future economic and strategic value.
Cequence is also pleased to announce the results of its recent drilling at
Assets Being Acquired From Donnybrook
The Donnybrook Assets consist of 19.2 net sections of Montney lands,
associated reserves and production in the Simonette and Resthaven areas of
Alberta. At Simonette, Cequence will acquire all of Donnybrook's interest in
33 gross (16.5 net) sections of Montney rights. Cequence is currently a
partner with Donnybrook in these assets. In addition, 2.7 net sections of
Montney land will be acquired at Resthaven. Current production of the acquired
properties is approximately 120 boe/d.
Cequence is acquiring 720 mboe of proved reserves and 1,407 mboe of proved and
probable reserves with a net present value estimated at $12 million, based on
the December 31, 2011 GLJ reserves report of Cequence. Based on the closing
price of the Cequence common shares on February 22, 2012, the value attributed
to the land acquired is $11 million or approximately $2,200 per hectare.
The acquisition will increase Cequence's holdings at Simonette/Resthaven to 96
gross (89 net) Montney sections. The Donnybrook Assets increase Cequence's
working interest to 100% in several sections of land immediately adjacent to
the Company's recent Montney drilling activity. As a 100% working interest
owner in substantially all of its Simonette Montney landbase, Cequence will
control the pace of future development with no limitations arising from
section boundaries or partner interests. Cequence management has identified
approximately 70 future net potential horizontal locations that can be added
to its existing Montney drilling inventory.
A land map of Cequence's holdings at Simonette, showing the location of
Donnybrook Assets, has been posted to Cequence's website at
Cequence Falher Drilling Results at Simonette/Resthaven
Cequence recently completed a well located at 2-6-61-26W5. The well was
drilled to a final measured depth of 5,136 meters in the Falher formation
including approximately 2,086 meters of horizontal section. Eighteen 50
tonne fracs were successfully placed using a frac port system. The well
flowed on clean-up for 52 hours at a final rate of 13.1 mmcf/d plus liquids
with 2,005 psi flowing casing pressure This is the final well drilled in
the Resthaven farm-in whereby Cequence earned a 65% working interest in nine
sections of land prospective for Falher and Dunvegan natural gas and
liquids. The 2-6 well is approximately 2.5 miles south of the Company's
previously announced discovery well at 16-18 and further validates the
potential for as many as 30 net locations at Simonette/Resthaven. Well costs
to drill and complete the 2-6 well are estimated to be approximately $7.1
The first three wells completed as part of the 2013 drilling program have
tested at an aggregate 42.4 mmcfd plus liquids from three separate formations
including the Montney, Dunvegan and Falher formations. Two additional
Montney wells in Simonette and a Wilrich well in Ansell are expected to be
completed before spring break-up.
Agreements and Timing
The transaction will be effected pursuant to the terms of an asset exchange
agreement (the "Asset Exchange Agreement") and an arrangement agreement (the
"Arrangement Agreement"), both between Cequence and Donnybrook dated February
22, 2013. Pursuant to the terms of the Arrangement Agreement and the plan of
arrangement (the "Arrangement"), at the effective time of the Arrangement, the
transactions contemplated by the Asset Exchange Agreement will become
effective and Donnybrook will convey to Cequence its rights to the Donnybrook
Assets in exchange for all of Cequence's rights in the Non-Core Assets and the
issuance by Cequence to Donnybrook of 10,300,000 Cequence common shares. The
Arrangement Agreement further provides that the common shares received by
Donnybrook shall immediately be transferred from Donnybrook to the Donnybrook
shareholders on a pro rata basis.
The Non-Core Assets are not operated by Cequence and consist of 5 net sections
of land with current production of approximately 220 boepd. The Non-Core
Assets have proved reserves of 861 mboe and proved plus probable reserves of
1,287 mboe and a net present value of $8.8 million, at December 31, 2012, as
estimated by Cequence.
The Arrangement will be effected pursuant to the provisions of the Business
Corporations Act (Alberta). Completion of the transaction is expected to
occur in mid-April 2013 and is subject to the satisfaction of several
conditions, including receipt of the applicable court, stock exchange and
regulatory approvals as well as the approval by not less than 66 ⅔% of the
Donnybrook shareholders entitled to vote at a meeting of Donnybrook
shareholders. In connection with such meeting, Donnybrook will prepare and
mail to each Donnybrook shareholder an information circular setting forth,
among other things, details of the Arrangement. It is expected that
Donnybrook will mail the information circular in mid-March and hold the
required meeting of Donnybrook shareholders in mid-April with closing of the
Arrangement and the Asset Exchange Agreement to occur shortly thereafter
provided that all shareholder, court and regulatory approvals are obtained.
Management and directors of Donnybrook holding approximately 12.5 percent of
the issued and outstanding Donnybrook common shares have entered into support
agreements pursuant to which they have agreed to vote in favour of the
Under the terms of the Arrangement Agreement, Donnybrook has agreed that it
will not solicit or initiate any inquiries or discussions that may reasonably
be expected to lead to an alternative sale of the Donnybrook Assets or any
other transaction which could impede, interfere, prevent or delay the
transaction contemplated under the Arrangement Agreement. In addition,
should a Superior Proposal (as such term is defined in the Arrangement
Agreement) be presented to Donnybrook, Donnybrook has granted Cequence the
right to match such Superior Proposal. The Arrangement Agreement also
provides for the payment of a reciprocal non-completion fee of $1.0 million
under certain circumstances.
Complete details of the Arrangement, the plan of arrangement and the Asset
Exchange Agreement are available in their respective agreements which will be
available for viewing at www.sedar.com.
Peters & Co. Limited is acting as financial advisor to Cequence in connection
with the transaction.
Cequence is a publicly traded Canadian energy company involved in the
acquisition, exploitation, exploration, development and production of natural
gas and crude oil in western Canada. Further information about Cequence may be
found in its continuous disclosure documents filed with Canadian securities
regulators at www.sedar.com.
Forward Looking Information and Additional Advisories
Certain information included in this press release constitutes forward-looking
information under applicable securities legislation. Such forward-looking
information is provided for the purpose of providing information about
management's current expectations and plans relating to the future. Readers
are cautioned that reliance on such information may not be appropriate for
other purposes, such as making investment decisions. Forward-looking
information typically contains statements with words such as "anticipate",
"believe", "expect", "plan", "intend", "estimate", "propose", "project" or
similar words suggesting future outcomes or statements regarding an outlook.
Forward-looking information in this press release may include, but is not
limited to, the timing for completion of the transactions contemplated herein,
receipt of regulatory and Donnybrook shareholder approvals, meeting dates,
future development plans, future production levels, the viability of future
prospective drilling locations and the anticipated benefits resulting from the
transactions described in this press release. Forward-looking information is
based on a number of factors and assumptions which have been used to develop
such information but which may prove to be incorrect. Although Cequence
believes that the expectations reflected in such forward-looking information
are reasonable, undue reliance should not be placed on forward-looking
information because Cequence can give no assurance that such expectations will
prove to be correct. In addition to other factors and assumptions which may be
identified in this press release, assumptions have been made regarding and are
implicit in, among other things: reserves; field production rates and decline
rates; the ability of Cequence to secure adequate product transportation; the
timely receipt of any required regulatory and Donnybrook shareholder
approvals; the ability of Cequence to obtain qualified staff, equipment and
services in a timely and cost efficient manner to develop its business;
future oil and natural gas prices; currency, exchange and interest rates; the
regulatory framework regarding royalties, taxes and environmental matters; and
the ability of Cequence to successfully market its oil and natural gas
products. Readers are cautioned that the foregoing list is not exhaustive of
all factors and assumptions which have been used.
Forward-looking information is based on current expectations, estimates and
projections that involve a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated by Cequence and
described in the forward-looking information. The material risk factors
affecting Cequence and its business are contained in Cequence's Annual
Information Form which is available under Cequence's issuer profile on SEDAR
The forward-looking information contained in this press release is made as of
the date hereof and Cequence undertakes no obligation to update publicly or
revise any forward-looking information, whether as a result of new
information, future events or otherwise, unless required by applicable
securities laws. The forward looking information contained in this press
release is expressly qualified by this cautionary statement.
Cequence uses test rate information as one indicator of potential future well
productivity. The test rates set forth in this press release are of a short
duration and are not necessarily indicative of future performance.
Boes are presented on the basis of one Boe for six Mcf of natural gas.
Disclosure provided herein in respect of Boes may be misleading, particularly
if used in isolation. A Boe conversion ratio of 6 Mcf:1 Bbl is based on an
energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead. Given that the
value ratio based on the current price of crude oil as compared to natural gas
is significantly different from the energy equivalency of 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of value.
The Toronto Stock Exchange has neither approved nor disapproved the contents
of this press release.
Paul Wanklyn, President & CEO, (403) 218-8850,email@example.com
David Gillis, VP Finance & CFO, (403) 806-4041,firstname.lastname@example.org
SOURCE: Cequence Energy Ltd.
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CO: Cequence Energy Ltd.
NI: OIL MNA FIELD
-0- Feb/25/2013 11:00 GMT
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