Crew Energy Inc. Announces Acquisition of Strategic Montney Acreage, Sale of Alberta Natural Gas and Associated Liquids Assets

Crew Energy Inc. Announces Acquisition of Strategic Montney Acreage, Sale of 
Alberta Natural Gas and Associated Liquids Assets and
Expanded 2014 Montney Focused Capital Program 
CALGARY, ALBERTA -- (Marketwired) -- 04/09/14 -- Crew Energy Inc.
("Crew" or the "Company") (TSX:CR) of Calgary, Alberta is pleased to
announce the successful completion of an acquisition of certain
strategic Montney liquids rich natural gas properties in northeast
British Columbia for approximately $105 million. The acquired assets
include 75 net sections of land that are either contiguous with
existing Crew land or increase Crew's working interest in joint
interest lands. An updated map of the Company's Montney acreage is
posted on the Company's website at www.crewenergy.com. 
In a separate transaction, Crew has entered into an agreement to sell
certain petroleum and natural gas assets (75% natural gas) focused
primarily in the Deep Basin of Alberta in exchange for approximately
$222 million in cash before closing adjustments plus approximately
400 bbls per day of heavy oil production. Upon completion of the
disposition, Crew plans to expand its previously announced 2014
exploration and development capital program by $39 million to $285
million to accelerate the Company's Montney development. 
Northeast British Columbia Acquisition 
In two transactions completed in late March 2014 Crew purchased
approximately 75 sections of highly prospective Montney rights in the
Septimus and Groundbirch areas of operation in northeast British
Columbia for approximately $105 million. Pursuant to these
transactions, the Company acquired: 


 
--  Current production of 1,400 boe per day (98% natural gas) based on field
    estimates; 
--  Total proved reserves of 4.7 million boe (94% natural gas) (1); 
--  Total proved plus probable reserves of 8.5 million boe (93% natural gas)
    (1); 
--  Significant resource to be evaluated in the near term; and 
--  48,100 net acres (75 net sections) of highly prospective Montney lands. 

 
(1) Reflects Company internally estimated "gross" reserves, prepared
by a qualified reserves evaluator effective December 31, 2013 in
accordance with the definitions and provisions contained in the COGE
Handbook. 
The majority of the existing reserve estimates and production are
from the Halfway and Belloy formations with only four Montney
locations included in the reserve assessment. Crew also acquired
underutilized strategic infrastructure consisting of 130 kilometers
of pipelines and over 6,200 hp of field compression. All of the
acquired lands are in what Crew has identified as the "wet" gas
hydrocarbon window. Crew now owns 544 (452 net) Montney sections in
northeast British Columbia of which an estimated 138 net sections are
located in the Montney "oil" window, 238 net sections are located in
the Montney "wet" gas window and 76 net sections are located in the
Montney "dry" gas window. 
The strategic importance of aggregating this large contiguous block
of land is expected to result in optimal operating efficiencies
through: 


 
--  Consolidating working interest in 54 sections to 100% which were
    previously 50%; 
--  Ability to drill longer horizontal wells at preferred orientations; 
--  Economies of scale from optimized pad drilling; 
--  Control of timing and pace of development; and 
--  Additional infrastructure access and ownership. 

 
Alberta Gas Disposition 
Crew has entered into an agreement to dispose of certain petroleum
and natural gas assets focused in the Deep Basin area of Alberta.
Total consideration to be received for the disposition consists of
$222 million in cash, before customary closing adjustments, plus
approximately 400 bbls per day of heavy oil production which is
located in Crew's Lloydminster operating area. The disposition is
scheduled to close on or about May 30, 2014 with an effective date of
April 1, 2014, subject to satisfaction of customary industry closing
conditions.  
The assets to be sold consist of: 


 
--  Current production of 7,000 boe per day (75% natural gas) based on field
    estimates; 
--  Total proved reserves of 34.1 million boe (71% natural gas) (1); 
--  Total proved plus probable reserves of 60.4 million boe (71% natural
    gas) (1); and 
--  254,000 net acres of land. 

 
(1) Reflects "gross" reserves assigned by the Company's independent
reserves evaluator, Sproule Associates Limited, effective December
31, 2013 in accordance with the definitions and provisions contained
in the COGE Handbook. 
The heavy oil assets to be acquired by Crew as consideration consist
of: 


 
--  Expected production at closing of 400 boe per day (99% oil) based on
    field estimates; 
--  Total proved reserves of 0.6 million boe (99% oil) (1); 
--  Total proved plus probable reserves of 0.8 million boe (99% oil) (1);
    and 
--  2,750 net acres of land. 

 
(1) Reflects "gross" reserves assigned by the purchasers independent
reserves evaluator, Sproule Associates Limited, extracted from their
report effective December 31, 2013 prepared in accordance with the
definitions and provisions contained in the COGE Handbook. 
Inclusive of all of these transactions, Crew expects to have the
following pro-forma operational and financial attributes: 


 
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Post-Transactions Corporate Summary                            Pro-forma (1)
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Production metrics (boe per day):                                           
  At closing (2)                                                      23,800
  Forecasted average 2014                                    25,500 - 26,500
  Forecasted exit 2014                                       26,000 - 27,000
  Forecasted exit 2015 (4)                                   38,000 - 40,000
Financial metrics                                                           
  Estimated 2014 funds from operations ($ mm)                            200
  Estimated net debt at closing ($ mm)                                   280
Reserves and Land                                                           
  Estimated proved reserves (mmboe) (3)                                 87.2
  Estimated proved plus probable reserves (mmboe) (3)                  146.2
  Montney lands (sections)                                     544 (452 net)
  Total Company acreage (net)                                        831,000
                                                                            
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1.  Pro-forma assuming transactions completed on dates specified. 
2.  Based on field estimates. 
3.  Based upon the reserve report prepared by the Company's independent
    reserves evaluator, Sproule Associates Limited, effective December 31,
    2013 in respect of the Company's oil and gas interests owned as at such
    date, and after removing the reserves assigned to the Company's Alberta
    Gas assets which are subject to the disposition, and adding the
    internally estimated reserves attributed to the Company's northeast
    British Columbia acquisitions completed in late March, 2014. Reflects
    "gross" reserves as such term is defined in the COGE Handbook. 
4.  Reflects target production based on internal long range planning which
    are subject to change as more definitive capital plans and budgets are
    prepared in respect of 2015.  

 
Strategic Rationale 
Regarding the acquired Montney lands, Crew's CEO, Dale Shwed was
quoted as saying; "The acquired assets fit like integral pieces of a
puzzle and are contiguous to, or have joint interest, with Crew's
existing land base. Operationally, the acquired assets are a great
strategic fit that provide the economies of scale and logistics that
are complementary to Crew's existing operations and future
development plans." The acquisition of the joint interest lands
(approximately 54 gross sections) will allow Crew to control the
timing and pace of development of a significant land block at
Groundbirch which is supported by underutilized pipeline
infrastructure and field compression. With 75 net sections acquired
and a development strategy that includes 8 to 12 wells per section,
this acquisition adds over 600 net drilling locations to our Montney
inventory which now stands at over 2,100 estimated locations. More
importantly, with Montney type curve wells in the Septimus area
recently exhibiting a net present value of $8.2 million per well, the
successful development of only 1.5 net sections of the acquired lands
(based on 12.8 development wells) would payout this entire
acquisition.  
The disposition of the Alberta gas assets will provide the Company
with a non-dilutive clear line of sight to funding the acceleration
of our five year Montney growth plan. We will be able to focus our
resources in a play which, in 2013, achieved a recycle ratio of 3.1x
versus our corporate average of 2.3x. With the disposition of a
significant portion (31%) of our proved plus probable reserves,
including future development costs of $394 million, the Company is
well positioned to replace these reserves with the continued
development of the Montney where, prior to these British Columbia
acquisitions, only 0.5 TCFE (12.2%) has been booked out of a
previously announced best estimate contingent resource of 4.1 TCFE.
Production rates and expected ultimate recoveries ("EURs") have
continued to improve with the latest subset of wells producing at 6
to 8 mmcf per day with associated liquids of 30 bbls per mmcf (60%
condensate). EURs have steadily improved since 2011 (2.8 bcf/well) to
2012 (3.2 bcf/well) to 2013 (4.3 bcf/well) and are expected to
continue to improve over time as Crew continues to better understand
the Montney reservoir and how to apply new technologies related to
drilling and completion practices.  
Operations Update 
Crew drilled 21 (19.0 net) wells in the first quarter. The Company
drilled five (5.0 net) Montney wet gas wells, nine (7.6 net) heavy
oil wells at Lloydminster, six (6.0 net) oil wells at Princess and
one (0.4 net) oil well at Pine Creek. Crew currently has two rigs
operating in northeast British Columbia drilling a two well pad at
Groundbirch and a six well pad at Septimus. Crew's results at
Septimus continued to be strong with two wells coming on production
at the end of the quarter at 6 to 8 mmcf per day. Crew re-tested the
fourth quarter 2013, 1-24 oil well at Tower for 11 days with an
average flow rate of 720 boe per day (540 bbl per day of oil)
validating light oil production 11 kilometers northwest of the
Company's existing Montney oil production. This well is expected to
be tied-in during the third quarter. Current production based on
field estimates is 30,400 boe per day which is inclusive of the 1,400
boe per day acquisition which closed in late March. Production in the
first quarter is expected to average approximately 28,000 boe per day
as the majority of first quarter drilled wells came on production
late in March. Extreme weather conditions experienced in western
Canada in the first quarter caused operational delays and outages and
there were an abnormally high number of wells which were required to
be shut-in due to offsetting drilling operations in the Company's
Lloydminster operations. In addition, the compressor at Crew's Sierra
property in northeastern British Columbia (approximately 350 boe per
day) experienced a fire late in 2013 and the Company elected to
accept an insurance settlement rather than replacing the equipment
and restoring production levels.  
After spring break-up subsides, Crew's plans include the following: 


 
--  Complete two Groundbirch wells; 
--  Complete a six well pad at Septimus; 
--  Spud a five well pad at Septimus; 
--  Spud a six well pad at Tower; 
--  Resume drilling operations at Lloydminster and Princess; and 
--  Begin construction of the Tower oil facility and the new Septimus gas
    facility.

 
Expanded Capital Program 
After the closing of the Alberta Gas disposition, Crew plans to
expand its exploration and development capital program by $39 million
to $285 million. The expanded program will be entirely focused on
Montney development with the drilling well count increasing by 50% to
30 wells from the previously budgeted 20 wells to supply production
volumes to the new 60 mmcf per day plant at Septimus expected to be
onstream early in the third quarter of 2015. Capital expenditures for
Lloydminster (25 wells and $36 million capital) and Princess (16
wells and $39 million capital) remain as previously forecasted. 
Advisors 
Cormark Securities Inc. has acted as financial advisor to Crew on the
transactions, TD Securities Inc. acted as strategic advisor on the
transactions and Macquarie Capital Markets Canada Ltd. and GMP
Securities LP have acted as strategic advisors to Crew with respect
to the Montney acquistions. 
Cautionary Statements 
Forward-Looking Information and Statements 
This news release contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use
of any of the words "expect", "anticipate", "continue", "estimate",
"may", "will", "project", "should", "believe", "plans", "intends"
"forecast" and similar expressions are intended to identify
forward-looking information or statements. In particular, but without
limiting the foregoing, this news release contains forward-looking
information and statements pertaining to the following: various
matters related to the proposed transactions disclosed herein
including completion of the proposed Alberta Gas asset disposition
(and related heavy oil acquisition) and acquisition and the timing
thereof, satisfaction of closing conditions thereto, the amount of
and use of proceeds, the effect of the transaction on continuing
operations and the benefits anticipated to be derived therefrom,
post-transaction strategy, plans, opportunities and operations;
Crew's plans to expand its 2014 capital program and budget on a
post-transaction basis; the anticipated potential of Crew's asset
base; the volume and product mix of Crew's oil and gas production;
production estimates including 2014 forecast average and exit
productions and 2015 estimated exit target; estimated 2014 funds from
operations; projected debt levels including forecast 2014 net debt on
a post-transaction basis; future oil and natural gas prices and
Crew's commodity risk management programs; future liquidity and
financial capacity; future results from operations and operating
metrics; anticipated reductions in operating costs; future costs,
expenses and royalty rates; future interest costs; the exchange rate
between the $US and $Cdn; future development, exploration,
acquisition and development activities and related capital
expenditures and the timing thereof; the number of wells to be
drilled, completed and tied-in and the timing thereof; the amount and
timing of capital projects; the total future capital associated with
development of reserves and resources; and methods of funding our
capital program, including possible non-core asset divestitures and
asset swaps.  
Forward-looking statements or information are based on a number of
material factors, expectations or assumptions of Crew which have been
used to develop such statements and information but which may prove
to be incorrect. Although Crew believes that the expectations
reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking
statements because Crew can give no assurance that such expectations
will prove to be correct. In addition to other factors and
assumptions which may be identified herein, assumptions have been
made regarding, among other things: that all conditions to closing of
the Gas disposition are satisfied or waived; the impact of increasing
competition; the general stability of the economic and political
environment in which Crew operates; the timely receipt of any
required regulatory approvals; the ability of Crew to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects in which Crew has an interest in to operate the field in
a safe, efficient and effective manner; the ability of Crew to obtain
financing on acceptable terms; field production rates and decline
rates; the ability to replace and expand oil and natural gas reserves
through acquisition, development and exploration; the timing and cost
of pipeline, storage and facility construction and expansion and the
ability of Crew to secure adequate product transportation; future
commodity prices; currency, exchange and interest rates; regulatory
framework regarding royalties, taxes and environmental matters in the
jurisdictions in which Crew operates; the ability of Crew to
successfully market its oil and natural gas products. There are a
number of assumptions associated with the potential of resource
volumes including the quality of the Montney reservoir, future
drilling programs and the funding thereof, continued performance from
existing wells and performance of new wells, the growth of
infrastructure, well density per section, and recovery factors and
discovery and development necessarily involves known and unknown
risks and uncertainties, including those identified in this press
release. Included herein is an estimate of Crew's year end net debt
based on assumptions as to cash flow, capital spending in 2014 and
the other assumptions utilized in arriving at Crew's 2014 capital
budget on a post-transaction basis. To the extent such estimate
constitutes a financial outlook, it is included herein to provide
readers with an understanding of estimated capital expenditures and
the effect thereof on debt levels and readers are cautioned that the
information may not be appropriate for other purposes. 
The forward-looking information and statements included in this news
release are not guarantees of future performance and should not be
unduly relied upon. Such information and statements, including the
assumptions made in respect thereof, involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to defer materially from those anticipated in such
forward-looking information or statements including, without
limitation: changes in commodity prices; the potential for variation
in the quality of the Montney formation; changes in the demand for or
supply of Crew's products; unanticipated operating results or
production declines; changes in tax or environmental laws, royalty
rates or other regulatory matters; changes in development plans of
Crew or by third party operators of Crew's properties, increased debt
levels or debt service requirements; inaccurate estimation of Crew's
oil and gas reserve and resource volumes; limited, unfavourable or a
lack of access to capital markets; increased costs; a lack of
adequate insurance coverage; the impact of competitors; and certain
other risks detailed from time-to-time in Crew's public disclosure
documents (including, without limitation, those risks identified in
this news release and Crew's Annual Information Form). 
The forward-looking information and statements contained in this news
release speak only as of the date of this news release, and Crew does
not assume any obligation to publicly update or revise any of the
included forward-looking statements or information, whether as a
result of new information, future events or otherwise, except as may
be required by applicable securities laws. 
Reserves 
The recovery and reserves estimates contained herein are estimates
only and there is no guarantee that the estimated reserves will be
recovered. In relation to the disclosure of estimates for individual
properties, such estimates may not reflect the same confidence level
as estimates of reserves and future net revenue for all properties,
due to the effects of aggregation.  
Resource Estimates 
This news release contains references to estimates of oil and gas
classified as Contingent Resources in the Montney region in
northeastern British Columbia which are not, and should not be
confused with, oil and gas reserves. Such estimates are based upon
independent resource evaluations effective as at April 30, 2013 and
May 31, 2013, respectively, prepared in accordance with the Canadian
Oil and Gas Evaluation Handbook. Such estimates are subject to a
number of cautionary statements, assumptions, risks, positive and
negative factors relevant to the estimates and contingencies, the
details of which were set forth in Crew's previously disseminated
press release dated July 9, 2013. Accordingly, readers are referred
to and encouraged to review the sections entitled "Montney Resource
Evaluation", "Definitions of Oil and Gas Resources and Reserves" and
"Information Regarding Disclosure on Oil and Gas Reserves, Resources
and Operational Information" in the July 9, 2013 press release for
applicable definitions, cautionary language, explanations and
discussion of resources estimated herein, all of which is
incorporated herein by reference. 
Test Results and Initial Production Rates 
A pressure transient analysis or well-test interpretation has not
been carried out and thus certain of the test results provided herein
should be considered to be preliminary until such analysis or
interpretation has been completed. Test results and initial
production rates disclosed herein may not necessarily be indicative
of long term performance or of ultimate recovery. 
BOE Equivalent 
Barrel of oil equivalents or 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 than
the energy equivalency of 6:1, utilizing a 6:1 conversion basis may
be misleading as an indication of value.  
Crew is an oil and gas exploration and production company whose
shares are traded on The Toronto Stock Exchange under the trading
symbol "CR".
Contacts:
Crew Energy Inc.
Dale Shwed
President and C.E.O.
(403) 231-8850
dale.shwed@crewenergy.com 
Crew Energy Inc.
John Leach
Senior Vice President and C.F.O.
(403) 231-8859
john.leach@crewenergy.com 
Crew Energy Inc.
Rob Morgan
Senior Vice President and C.O.O.
(403) 513-9628
rob.morgan@crewenergy.com
www.crewenergy.com
 
 
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