August 29, 2018 - 6:05 PM EDT
Print Email Article Font Down Font Up Charts
Journey Energy Inc. Executed Definitive Agreement with a Strategic Joint Venture Partner to Delineate East Duvernay Oil Resource

Canada NewsWire

EXPANDED DUVERNAY LAND BASE TO APPROXIMATELY 140 GROSS SECTIONS

CALGARY, Aug. 29, 2018 /CNW/ - Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") is pleased to announce that it has entered into a definitive agreement (the "Agreement") to develop its East Duvernay shale oil resource prospect with a strategic joint venture partner, Kiwetinohk Resources Corp. ("Kiwetinohk"). In addition, through a series of transactions, Journey, and Kiwetinohk, have increased the amount of contiguous lands in the East Duvernay shale oil resource prospect from approximately 100 sections to approximately 140 sections.

About Journey's East Duvernay Shale Oil Resource Prospect

The Company has assembled a large, contiguous, highly prospective, 100% working interest land block in the emerging East Duvernay shale oil resource prospect in the Gilby area of central Alberta. As a result, Journey now controls approximately 140 sections of land.

Highlights of Journey's activity in the East Duvernay over the past nine months are as follows:

  • Assembled an initial land position combining acquisitions of freehold and crown lands to create a contiguous 100 section block in the heart of the East Duvernay oil window ("Duvernay Lands").
  • Addressed near term land expiry issues with the drilling of a vertical Duvernay test well at 6-28-42-3-W5 in May. Analysis of the results of this well confirmed that this land block contains some of the thickest (approximately 30 meters) and most prospective shales in the East Duvernay oil play. At the time of drilling, the 6-28 well was configured to be re-entered and drilled horizontally into the Duvernay.
  • Journey and Kiwetinohk have recently added approximately 40 sections of Duvernay lands, increasing our resource base to approximately 140 gross sections of contiguous lands. This land block is strategically located near existing gas gathering and transporting infrastructure including Journey's 50-100% owned gas gathering systems and 43.3% Journey owned Gilby gas plant; and transportation infrastructure.

Summary of the Joint Venture Arrangement

Journey has entered into a joint venture arrangement with a strategic partner, Kiwetinohk, an Alberta based private oil and gas company. Kiwetinohk is led by Pat Carlson. Mr. Carlson, and a number of his team members have been instrumental in the development of large scale resource plays in the past. The team is highly regarded for their expertise and their ability to execute projects of this nature.

The Agreement contemplates both a two well "Commitment" phase followed by a five well "Option" phase. Although each location has not been finalized, both Kiwetinohk and Journey will work together in formulating the most effective drilling program to delineate the most prospective sections, mitigate land expiries and test potential development concepts.  Highlights of each phase are as follows:

  • For the two well Commitment phase, Kiwetinohk will pay 100% of the capital costs, and have 100% working interest, before payout of 58.33% of its costs to drill, complete, equip and tie in. Journey will be entitled to a 3.75% gross over-riding royalty on the production from the wells prior to payout. After payout, and conversion of the royalty, Kiwetinohk will have a 70.83% working interest in the commitment wellbores while Journey will have a 29.17% working interest. After earning, the working interests in the Commitment blocks, outside of the two commitment wells, will be Kiwetinohk 62.5% and Journey 37.5%. Kiwetinohk will be the operator of all of the lands earned.
  • For the five well Option phase, Kiwetinohk will pay 100% of the capital costs, and have 100% working interest, before payout of 33.33% of its costs to drill, complete, equip and tie in. Journey will receive no royalty prior to payout. After payout, Kiwetinohk will have 70.83% working interest in the option wellbores while Journey will have a 29.17% working interest. After earning, the final working interests in the applicable earned Option block, outside of the five option wells, will be Kiwetinohk 62.5% and Journey 37.5%. Kiwetinohk will be the operator of all of the lands earned.

It is anticipated that operations will commence in the next 30 days with the first well being the re-entry and horizontal sidetrack of the previously drilled Journey 6-28-42-3-W5 vertical stratigraphic well. Journey currently anticipates the Commitment two well phase of this joint venture to be completed by the end of 2018.

Outlook

Entering into this joint venture arrangement is a major development for Journey. The assembly of a significant land position in a new emerging play, coupled with securing an experienced and technically capable partner has happened over a relatively short period of time.

This new opportunity gives Journey a growth platform for its future. The reduction in overall working interest in the play allows Journey to "right size" its capital commitments to its available resources.  In addition, this joint venture will allow for the effective and timely development of the Duvernay resource while insuring all lands are retained. The Commitment and Option drilling phases limit Journey's capital expenditures in the near term, and most of these expenditures have already been incurred.  At the same time Journey will participate in the upside at a level that is both meaningful and manageable with a 37.5% working interest.  The reduction in working interest is partially offset by the increased land capture but more importantly, the reduction in working interest comes with the selection of a strategic joint venture partner that has a proven track record and significant experience in the development of large resource in place prospects.

President of Journey Alex Verge commented, "The signing of the definitive agreement for the Duvernay play is a significant milestone for Journey, in our transition from a conventional value Company to an emerging growth Company. Journey has worked diligently in assembling its significant land position, in technically advancing the play, and now in selecting a partner that has both the experience and access to capital to lever on our efforts and develop this resource into a significant commercial success. I look forward to reporting the results of our joint efforts on these lands in the coming months."

About the Company

Journey is a Canadian exploration and production company focused on oil-weighted operations in western Canada. Journey has recently expanded its Alberta footprint by accumulating a significant position in the emerging East Duvernay shale oil prospect. Journey's strategy is to grow its production base by drilling on its existing core lands, continuing to implement its water flood projects, and participating both financially and technically in the development of the Duvernay oil prospect it has assembled. 

ADVISORIES

This press release contains forward-looking statements and forward-looking information (collectively "forward looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of our anticipated future operations, management focus, strategies, financial, operating and production results, industry conditions, commodity prices and business opportunities. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding decline rates, anticipated netbacks, drilling inventory, estimated average drill, complete and equip and tie-in costs, anticipated potential of the Assets including, but not limited to, EOR performance and opportunities, capacity of infrastructure, potential reduction in operating costs, production guidance, total payout ratio, capital program and allocation thereof, future production, decline rates, funds flow, net debt, net debt to funds flow, exchange rates, reserve life, development and drilling plans, well economics, future cost reductions, potential growth, and the source of funding our capital spending. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future.

The forward-looking information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices and differentials, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; the ability to efficiently integrate assets and employees acquired through acquisitions, including the Acquisition, the ability to market oil and natural gas successfully and our ability to access capital. Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Journey can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. Our actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide security holders with a more complete perspective on our future operations and such information may not be appropriate for other purposes.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect our operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).These forward looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Journeys prospective results of operations, funds flow, netbacks, debt, payout ratio well economics and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about Journey's anticipated future business operations. Journey disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on March 23, 2018. Forward-looking information may relate to our future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, and long-term objectives. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective funds flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date.  No assurance can be given that the expectations set out in the Prospectus or herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.

Non-IFRS Measures

The company uses the following non-IFRS measures in evaluating corporate performance. These terms do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures.by other companies.

(1)

The Company considers "funds flow" as a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Funds flow is calculated by taking cash from operating activities as reported in the Company's financial statements and adding or deducting the following items: changes in non-cash working capital; transaction costs and decommissioning costs. Journey's determination of funds flow may not be comparable to that reported by other companies. Journey also presents Funds Flow per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net income per share, which per share amount is calculated under IFRS and is more fully described in the notes to the financial statements.

(2)

Net debt is a non-IFRS measure and represents current assets less: current liabilities, bank debt and the promissory notes outstanding. For purposes of Journey's net calculation, the impact of the potential future liability (or asset) related to the mark-to-market measurement of derivative contracts as well as the provision for decommissioning liabilities have been excluded from the calculation.

(3)

Operating netback is a non-IFRS measure, is calculated on a per boe basis and equals total revenue (excluding hedging gains and losses); minus the aggregate of: royalties, transportation and field operating costs. Journey considers operating netback as an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.

 

Barrel of Oil Equivalents

Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent at six (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term boe may be misleading particularly if used in isolation. The boe conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

Oil and Gas Measures and Metrics

The Company uses the following metrics in assessing its performance and comparing itself to other companies in the oil and gas industry. These terms do not have a standardized meaning and therefore may not be comparable with the calculation of similar measures.by other companies:

1)

Corporate Decline is the rate at which production from a grouping of assets falls from the beginning of a fiscal year to the end of that year.

2)

IP 365 is the average daily production rate of a well in its first 365 days of production expressed in boe's.

 

Abbreviations

bbl

barrel

bbls

barrels

bbl/d

barrels of oil or NGL per day

boe

barrels of oil equivalent

boe/d

barrels of oil equivalent per day

gj

gigajoules

Mbbls

Thousand barrels

MMBtu

Million British thermal units

NGL

Natural gas liquids

Mcf

thousand cubic feet

Mmcf

Million cubic feet

Mmcf/d

Million cubic feet per day

Mboe

Thousand boe

$M

Thousands of dollars

OOIP

Original oil in place

 

No securities regulatory authority has either approved or disapproved of the contents of this press release.

SOURCE Journey Energy Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2018/29/c1180.html

Alex G. Verge, President and Chief Executive Officer, 403.303.3232, [email protected]; Gerry Gilewicz, Chief Financial Officer, 403.303.3238, [email protected] CNW Group 2018


Source: Canada Newswire (August 29, 2018 - 6:05 PM EDT)

News by QuoteMedia
www.quotemedia.com

Legal Notice