Marquee Energy Ltd. (“Marquee” or the “Company”) (TSXV: “MQL”) is pleased to announce that it has entered into an agreement (the “Acquisition” or the “Transaction”) with an industry major to acquire complementary land and gas-processing infrastructure within its core area at Michichi. The Acquisition includes approximately 550 boe/d (25% Oil & NGLs) of production, 21 net sections of land with Banff rights contiguous with the heart of Marquee’s light oil play, and extensive infrastructure. Consideration for the Acquisition is approximately $11.98 million to be funded through an accompanying infrastructure-based facility financing (the “Facility Agreement”).
The Transaction and Facility Agreement are both scheduled to close on or before August 19, 2015, subject to standard regulatory approvals. Upon closing, Marquee will own approximately 270 net undeveloped sections of land in its Michichi core area and expand its horizontal oil prospect inventory to more than 290 locations.
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Acquisition Summary: |
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Net Consideration(1): |
$11.98 million cash |
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Current Production: |
550 boe/d (25% oil & NGLs) |
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Land: |
21 net undeveloped sections (15 with Banff rights) |
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Proved Producing Reserves: |
1,116 mboe(2) |
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Proved Developed Producing NPV 10%: |
$14.5MM(3) |
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Proved plus Probable Reserves: |
2,271 mboe(2) |
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Proved plus Probable NPV 10%: |
$21.8MM(3) |
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Locations: |
>40 undrilled locations |
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(1) |
Net of cash adjustments resulting from July 1, 2015 effective date |
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(2) |
Based on GLJ Petroleum Consultants (GLJ) reserve evaluation of the Craigmyle property effective July 1, 2015 |
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(3) |
Abandonment and reclamation of all future wells to be drilled by the Company have been included; all other abandonment and reclamation costs for existing wells and facilities have not been included. |
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Acquisition Metrics (1): |
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Production : |
$18,145/ boed |
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Proved Developed Producing Reserves (2): |
$8.94/boe |
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Proved plus Probable Reserves (2): |
$4.39/boe |
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(1) |
Net of undeveloped land value of $2.0MM at $150/acre |
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(2) |
Based on GLJ Petroleum Consultants (GLJ) reserve evaluation of the Craigmyle property effective July 1, 2015 |
Strategic Rationale
The Acquisition represents the fourth significant consolidation negotiated by Marquee in its Michichi core area in the last 20 months. Marquee’s geologic and seismic mapping supports the expansion of the multi-zone oil fairway over the lands and infrastructure involved in the Transaction. The Company’s technical work identified 42 drilling locations with dual zone potential, of which as many as 20 locations may have triple zone oil potential.
The assets are ideally situated, provide significant operational synergy and are expected to lead to reductions in operating costs and future capital costs due to shorter tie-ins and processing flexibility. Rationalization of current operations and synergies with the Acquisition are anticipated to result in smooth integration of the new production and infrastructure, with minimal impact to the Company’s current operating cost budget. Marquee also believes that the Transaction will have no effect on its current LLR Assessment.
The key highlights of the Acquisition are as follows:
- Continued consolidation of Marquee’s core area at Michichi
- Addition of 42 dual-zone well locations and 21 net sections of land with Banff rights
- Operation and control of an additional gas plant with current capacity of 10 mmcf/d and expansion of Marquee’s owned and operated gas-gathering system
- Reductions in operating costs and future capital expenditures with shorter tie-ins to existing infrastructure
- Consolidation and expansion of working interest on key waterflood pilot lands
- Third party gas handling revenues of approximately $500,000 per year
Facility Agreement
Marquee will fund the Acquisition by way of a Facility Agreement with a third party (the “Facility Purchaser”) under which the Company will receive$15.0 million, before transaction costs, in exchange for beneficial ownership of the gas plant included in the Acquisition. Pursuant to the Facility Agreement, the Company has been contracted by the Facility Purchaser to operate and control the facility over a nine year term and will continue to process gas from producing lands involved in the Transaction at the facility over the same term. Marquee will pay the Facility Purchaser an annual facility tariff fee for the life of the Agreement, but retain all third party processing revenues generated. Marquee has the option to reacquire the facility during, and at the end of the nine year term. Marquee estimates that the operating cost savings achieved by the Acquisition in addition to third party processing revenues, will largely offset the tariff fee realized on the Facility Agreement. The Facility Agreement enables the Company to complete consolidation of available assets in its core Michichi area without debt or dilution. Marquee’s banking syndicate views the combination of agreements as neutral to its current borrowing base.
Advisors
Peters & Co. Limited is acting as financial advisor and Haywood Securities Inc. is acting as strategic advisor to Marquee in respect to the Transaction.
National Bank Financial is acting as financial advisor and Canaccord Genuity Corp. is acting as strategic advisor to Marquee in respect to the Facility Agreement.
Enercom Conference
Marquee is participating in EnerCom’s The Oil & Gas Conference® 20 at the Westin in Denver, Colorado. President & CEO Richard Thompson will present on August 18th, 2015 at 4:50 p.m. (MDT) in Confluence C. To view the live webcast please visit: https://www.oilandgas360.com/togc-webcast/mql/.
ABOUT MARQUEE
Marquee Energy Ltd. is a Calgary based, junior energy company focused on high rate of return oil development and production. Marquee is committed to growing the company through exploitation of existing opportunities and continued consolidation within its core area at Michichi. The Company’s shares are traded on the Toronto Stock Exchange under the trading symbol “MQL.V” and on the OTCQX marketplace under the symbol “MQLXF”. An updated presentation and additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) atwww.sedar.com.
