Gear Energy Ltd. (TSX: GXE) has entered into a definitive agreement for the acquisition by Gear of all of the issued and outstanding common shares of Steppe Resources Inc., a private oil and gas company. Steppe’s assets are focused in the Tableland area of Southeast Saskatchewan.
Acquisition highlights
- Approximate production of 1,175 BOE/d for June 2018
- Estimated 2H 2018 annualized funds from operations of $24 million
- netbacks of $52 per barrel for 1Q 2018
- Estimated 100 future light oil locations in the Torquay
Steppe shareholders will receive 0.1445 Gear common shares for each Steppe Share held. As a result, Gear will issue in aggregate 21,896,087 Gear Shares and will assume the net debt of Steppe of approximately $40.9 million, after considering expected Steppe transaction costs. The total consideration represents a Steppe enterprise value of $70.4 million.
Upon closing Gear will also enter into an increased borrowing-based credit facility commensurate. Gear is forecasting a net debt of approximately $71 million by the end of 2018 and a fourth quarter 2018 annualized net debt to funds from operations ratio of 0.7 times.
For 2019 Gear management forecasts a six-well light oil drilling program for the Steppe assets with the following forecasted values.
- Annual production: 1,400 – 1,500 BOE/d (99% light oil)
- Royalty rate: 8%
- Operating costs: $13.00/BOE
- Estimated net operating income: $27 million
- Capital expenditures: $18 million
The Oil and Gas Conference®
Gear Energy is presenting at EnerCom’s The Oil & Gas Conference® at the Denver Downtown Westin Hotel, Denver, Colo. Aug. 19-23, 2018. EnerCom expects to have more than 80 presenting oil and gas companies and more than 2000 financial professionals attending this year’s conference.
To learn more about the conference and presenter schedule please visit the conference website here.
