Manitok Announces The Closing Of The Final Tranche Of The Equity Financing, Update On The Wayne Acquisition And A Financial Update
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MANITOK ENERGY INC. ANNOUNCES THE CLOSING OF THE FINAL TRANCHE OF THE EQUITY FINANCING, UPDATE ON THE WAYNE ACQUISITION AND A FINANCIAL UPDATE
June 17, 2015, Calgary, Alberta – Manitok Energy Inc. (the "Corporation" or "Manitok") (TSX-V: MEI) is pleased to announce it has closed on the second and final tranche of approximately $6.6 million of gross proceeds (about 8.3 million common shares in the capital of the Corporation ("Common Shares")) of the previously announced non-brokered private placement of a combination of Common Shares at a price of $0.80 per Common Share, Common Shares issued on a "flow through" basis pursuant to the Income Tax Act (Canada) with respect to Canadian development expense ("CDE Shares") at a price of $0.85 per CDE Share and Common Shares issued on a "flow through" basis pursuant to the Income Tax Act (Canada) with respect to Canadian exploration expense ("CEE Shares") at a price of $0.95 per CEE Share (the "Offering").
In aggregate the Corporation closed on approximately $16.8 million (about 19.8 million Common Shares) of gross proceeds pursuant to the Offering. Subsequent to the Offering, the Corporation's outstanding Common Shares are 85,089,784 and outstanding stock options are 6,434,273.
As previously announced in the Corporation's press release dated June 12, 2015, Manitok has closed the acquisition of certain petroleum and natural gas assets in the Wayne area of southeast Alberta for a total cash consideration of $61.5 million prior to transaction costs and customary closing adjustments (the "Wayne Acquisition").
Highlights of the Wayne Acquisition are as follows:
- The Corporation's total oil production in the immediate area surrounding its lands is the second highest next to Cenovus Energy. The critical mass in production, together with the oil treating facility and large land position, provides Manitok with a strong competitive position in the area.
- Manitok acquired a 100% working interest in a 25,000 bbls/d oil treating facility, which is directly tied into the Inter Pipeline Fund Central Alberta Pipeline, and is currently designed to transport 6,600 bbls/d of clean oil. There is an 8 MMcf/d gas plant associated with the Wayne facility that can be expanded by the addition of compression to over 20 MMcf/d. The facility has capacity to dispose of 26,000 bbls/d of water and has acid gas disposal capacity of 4.4 MMcf/d that can be expanded to 15.0 MMcf/d. The Wayne facility is the largest oil treating facility in the area and provides Manitok with greater control over its production timing and operating costs. Manitok will also focus on increasing third-party volumes through the facility to maximize oil handling and processing fee revenue.
- About 51 Lithic Glauc ("LG") and 75 Basal Quartz ("BQ") unbooked horizontal drilling locations are associated with the Wayne Acquisition, which increases Manitok's total horizontal drilling inventory to about 159 LG and 137 BQ locations on approximately 267,000 acres of freehold mineral rights in southeast Alberta. The drilling locations have strong economic metrics at current strip pricing.
- Approximately 80 of the 296 lower Mannville horizontal drilling locations mentioned above are within an 11 kilometre radius of the Wayne facility and could be quickly tied in through existing infrastructure.
- Acquisition and related financing is accretive to existing shareholders, captures a highly scalable growth opportunity that more than doubles Manitok's drilling inventory, gains greater control of that value creation with operatorship of a key oil facility in the area and strengthens its balance sheet.
The Wayne Acquisition assets have the following characteristics:
|Production (1)||1,800 boe/d (66% oil and liquids)|
|Total Proved Reserves (all PDP) (2)||2,710 mboe|
|Total Proved plus Probable Reserves (2)||3,577 mboe|
|Undeveloped Land, with 2D and 3D seismic coverage||49,728 acres|
(1) Based on June 2015 expected production, estimated by management of Manitok.
(2) Based upon an independent engineering evaluation prepared by McDaniel & Associates Consultants Ltd. effective December 31, 2014 using GLJ Petroleum Consultants December 31, 2014 price forecast ("McDaniel Report"). The McDaniel Report evaluated the oil, NGL and natural gas reserves attributable to the assets. The McDaniel Report is an excerpt from an area report and has been prepared in accordance with Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
The Wayne Acquisition metrics are presented net of the undeveloped land value:
|Net purchase price of reserves(1)||$55.5 million|
|Total Proved Reserves(3)||$20.48/boe|
|Total Proved plus Probable Reserves (3)||$15.52/boe|
(1) The net purchase price assumes a value of $6.0 million for undeveloped land.
(2) Based on June 2015 expected production, estimated by management of Manitok.
(3) Based on the McDaniel Report which did not include any future horizontal drilling locations or development capital.
|Total Outstanding Common Shares (000s)||65,280||85,089||30%|
|Total Average Production (boe/d) (1)||4,800||6,500||35%|
|Proved plus Probable Reserves (Mboe) (2)||11,438||15,015||31%|
|Net Asset Value per Share||$2.14||$2.18||2%|
|Horizontal Drilling Locations||120||305||154%|
(1) Production volumes include 700 to 800 boe/d (50% oil) currently restricted in Carseland due to the liquids handling capability of the third party gas plant but not the 548 boe/d (36% oil) of tested production capability from 2 horizontal wells drilled late in 2014 which will be tied-in late in the third quarter of 2015.
(2) Based on Manitok's reserves report effective December 31, 2014 prepared by Sproule Associates Ltd. and the McDaniel Report which did not include any future horizontal drilling locations or development capital.
The Wayne Acquisition, coupled with the Offering, is accretive to shareholders of the Corporation. Manitok has significantly increased its leverage to a commodity price recovery, considering the assets were purchased at a significant commodity price low and there is no value in the reserves report associated with the additional 126 unbooked lower Mannville horizontal drilling locations on the Wayne lands. Additionally, another 59 unbooked horizontal LG drilling locations in the Wayne area are associated with land rights acquired previously through a royalty company.
Manitok is well positioned in the area, with at least two lower Mannville oil plays that have strong economic metrics at current strip pricing. The Wayne Acquisition, along with the way in which it was financed, has strengthened the Corporation's balance sheet and provided Manitok with tremendous running room in southeast Alberta.
On June 15, 2015 credit facilities were reviewed by the Corporation's lender, and the operating demand loan facility was set at $80 million, up from the previously press released $75 million with Manitok's year-end financial results. The Corporation anticipates net debt to be approximately $67 to $68 million on June 30, 2015.
For the remainder of 2015, Manitok has hedged 2,000 bbls/d of crude oil at an average price of $89.82 CAD WTI and has 1,000 bbls/d of crude oil at an average price of $79.95 CAD WTI for 2016 and 500 bbls/d of crude oil at an average price of $79.75 CAD WTI for 2017. The Corporation also has option collar transactions for 1,000 bbls/d of crude oil from $68.70 to $86.20 CAD WTI net of the deferred premium for both the 2016 and 2017 calendar years. The Corporation also has 16,000 GJs/d of natural gas at an average price of $3.48 after the deferred premium for the remainder of 2015.
Manitok is a public oil and gas exploration and development company focused on conventional oil and gas reservoirs in southeast Alberta and the western Canadian foothills.
For further information view our website at www.manitokenergy.com or contact:
Manitok Energy Inc.
Massimo M. Geremia, President & Chief Executive Officer
This press release contains forward-looking statements. More particularly, this press release contains statements concerning the management estimated expected production rate of the assets acquired under the Wayne Acquisition, and estimated total average production rate of the Corporation following the Wayne Acquisition.
The forward-looking statements in this press release are based on certain key expectations and assumptions made by Manitok, including expectations and assumptions concerning the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the successful application of technology, prevailing weather conditions, commodity prices, royalty regimes and exchange rates and the availability of capital, labour and services.
Although Manitok believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Manitok can give no assurance that they will prove to be correct. Since forward-looking statements 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, risks associated with the oil and gas industry in general (e.g., 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 reserves estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), uncertainty as to the availability of labour and services, availability of financing at commercially reasonable terms, commodity price and exchange rate fluctuations, unexpected adverse weather conditions, general business, economic, competitive, political and social uncertainties, capital market conditions and market prices for securities and changes to existing laws and regulations. Certain of these risks are set out in more detail in Manitok's current Annual Information Form, which is available on Manitok's profile on the System for Electronic Document Analysis and Retrieval ("SEDAR") website at www.sedar.com and on the Corporation's website at www.manitokenergy.com.
Forward-looking statements are based on estimates and opinions of management of Manitok at the time the statements are presented. Manitok may, as considered necessary in the circumstances, update or revise such forward-looking statements, whether as a result of new information, future events or otherwise, but Manitok undertakes no obligation to update or revise any forward-looking statements, except as required by applicable securities laws.
Non-GAAP Financial Measures
This press release contains references to measures used in the oil and natural gas industry such as "net debt". These measures do not have standardized meanings prescribed by generally accepted accounting principles ("GAAP") an, therefore should not be considered in isolation. These reported amounts and their underlying calculations are not necessarily comparable or calculated in an identical manner to a similarly titled measure of other companies where similar terminology is used. Where these measures are used they should be given careful consideration by the reader. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding the Corporation's liquidity and its ability to generate funds to finance its operations.
Manitok uses net debt as a measure to assess its financial position. Net debt includes current assets less current liabilities excluding the current portion of the fair value of financial instruments and the deferred premium on financial instruments, plus the long-term financial obligation.
Barrels of Oil Equivalent
The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per boe amounts have been calculated using a conversion ratio of six thousand cubic feet (6 mcf) of natural gas to one barrel (1 bbl) of crude oil. The boe conversion ratio of 6 mcf to 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.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.