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
NEWS RELEASE TRANSMITTED BY Marketwired
FOR: Crew Energy Inc.
TSX SYMBOL: CR
APRIL 9, 2014
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 - April 9, 2014) - 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
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
-- 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)
-- 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
-- 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 $222 million in cash, before customary
closing adjustments, plus approximately 400 bbls per day of heavy oil
production which is located in Crew's Lloydminster operating area. The
disposition is scheduled to close on or about May 30, 2014 with an effective
date of April 1, 2014, subject to satisfaction of customary industry closing
The assets to be sold consist of:
-- Current production of 7,000 boe per day (75% natural gas) based on field
-- Total proved reserves of 34.1 million boe (71% natural gas) (1);
-- Total proved plus probable reserves of 60.4 million boe (71% natural
gas) (1); and
-- 254,000 net acres of land.
(1) Reflects "gross" reserves assigned by the Company's
independent reserves evaluator, Sproule Associates Limited, effective December
31, 2013 in accordance with the definitions and provisions contained in the
The heavy oil assets to be acquired by Crew as consideration consist of:
-- Expected production at closing of 400 boe per day (99% oil) based on
-- Total proved reserves of 0.6 million boe (99% oil) (1);
-- Total proved plus probable reserves of 0.8 million boe (99% oil) (1);
-- 2,750 net acres of land.
(1) Reflects "gross" reserves assigned by the purchasers independent
reserves evaluator, Sproule Associates Limited, extracted from their report
effective December 31, 2013 prepared in accordance with the definitions and
provisions contained in the COGE Handbook.
Inclusive of all of these transactions, Crew expects to have the following
pro-forma operational and financial attributes:
Post-Transactions Corporate Summary Pro-forma (1)
Production metrics (boe per day):
At closing (2) 23,800
Forecasted average 2014 25,500 - 26,500
Forecasted exit 2014 26,000 - 27,000
Forecasted exit 2015 (4) 38,000 - 40,000
Estimated 2014 funds from operations ($ 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
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.
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.
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
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.
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.
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.
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.
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.
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".
FOR FURTHER INFORMATION PLEASE CONTACT:
Crew Energy Inc.
President and C.E.O.
Crew Energy Inc.
Senior Vice President and C.F.O.
Crew Energy Inc.
Senior Vice President and C.O.O.
INDUSTRY: Energy and Utilities - Oil and Gas
-0- Apr/09/2014 20:08 GMT
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