NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX: NVA) is pleased to announce that it has entered into an agreement to acquire Cenovus Pipestone Partnership which holds assets in the Pipestone area of Northwest Alberta (the “Acquired Business”) for $625 million (the “Acquisition”) before closing adjustments. The assets of the Acquired Business are situated primarily in the premium core of the condensate-rich Alberta Triassic Montney fairway and on 35,250 net acres of land featuring four layers of Montney development. The assets of the Acquired Business represent a 29% increase to NuVista’s current Montney land position.

The Acquired Business includes 9,600 Boe/d of production and significant infrastructure. The Acquisition will be funded with NuVista’s expanded credit facilities, a $214 million private placement (the “Private Placement”) of subscription receipts (the “Subscription Receipts”) and a concurrent $170 million prospectus offering (the “Prospectus Offering” and together with the Private Placement, the “Financings”) of Subscription Receipts.  A syndicate of underwriters led by CIBC Capital Markets, Peters & Co. Limited and RBC Capital Markets (collectively, the “Underwriters”) have agreed to purchase the Financings, which will be offered at a price of $8.10 per Subscription Receipt for gross proceeds of $384 million.

Additionally, NuVista will raise by way of a private placement, up to approximately $35 million in common shares (“Common Shares”) on a “flow-through” basis in respect of Canadian Development Expenses (“CDE”) pursuant to the Income Tax Act (Canada) at a price of $9.05 per Common Share (the “Flow Through Offering”).


  • High-quality, condensate-rich Montney position in the over-pressured Pipestone area including:
  • 35,250 net acres of land, the majority of which is a single contiguous block with four layers of well-delineated development potential;
  • 157 MMBoe gross Proved plus Probable (“P+PA”) reserves(1)with $1.21 billion Net Present Value before Tax discounted at 10 percent (“NPVBT10”)(1) booked predominately in only one zone thus far;
  • Full-field development production targeting over 50,000 Boe/d, generating over $400 million of targeted annual adjusted funds flow(2,3)and almost $200 million of targeted free adjusted funds flow(2,3); and
  • Current production of 9,600 Boe/d (83% Montney) with a low decline rate estimated to be 22% and associated infrastructure.
  • NuVista’s full-field development production line of sight increased from 60,000 Boe/d to over 110,000 Boe/d, with higher condensate weighting and enhanced free adjusted funds flow per barrel;
  • Strongly accretive on every key financial and operational metric, on an unadjusted and debt-adjusted basis, over the medium and long term. The Acquisition is approximately 30% accretive to P+PA Net Asset Value before Tax discounted at 10 percent (“NAVBT10”)(1,4)per share and, once material incremental volumes from the Acquired Business are brought on-stream, over 30% accretive to adjusted funds flow per share(2,3)by 2020-2021;
  • Upon closing, NuVista’s credit facility is expected to be increased to approximately $450 million from $310 million; and
  • Exposure to an additional 52,800 net acres of non-Montney land with access to existing infrastructure.

Strategic Rationale

This is a rare and compelling acquisition for NuVista. It adds significantly to our core of the top condensate-rich lands in the Pipestone area which are de-risked to a high degree, with economics that rank in the best echelon of our development opportunities. Recent evidence of Lower Montney success on this block further leverages our existing Lower Montney knowledge for early mover advantage. Based on NuVista’s development plans, the Acquisition increases our line of sight for future full-field development production to over 110,000 Boe/d, with an increased condensate gas ratio (“CGR”) that will result in enhanced margins and free adjusted funds flow generation. NuVista expects sufficient inventory to sustain or grow production from this level for more than a decade. The Acquired Business also generate significant free adjusted funds flow(2) currently, which will be used to accelerate activity on our existing lands. The Acquisition adds materially to the best of our portfolio, enhances our long term prospects, and is significantly accretive to all key operational and financial measures over the near and long term. NuVista is maintaining its financial discipline through the Acquisition, with 2018 year end net debt to adjusted funds flow(2) targeted to be approximately 1.6x, a level we expect to maintain and improve over time. We believe the Acquisition will deliver significant growth and free adjusted funds flow(2), and drive substantial value creation for NuVista shareholders over the short and especially the long term.

(1) Reserves information for the Acquired Business is based upon GLJ Petroleum Consultants Ltd.’s’ (“GLJ”) reserve report effective June 30, 2018 at GLJ’s July 1, 2018 price forecast (the “Acquisition Report”). Reserves information for NuVista is based upon GLJ’s reserve report effective December 31, 2017 at GLJ’s January 1, 2018 price forecast the (“NuVista Report”).
(2) See “Non-GAAP Financial and Capital Management Measures”.
(3) Pricing assumption for the full field development target: $US 65/Bbl WTI, $US 3.00/MMBtu NYMEX, $C 1.90/GJ AECO, CAD:USD 1.25 FX.
(4) See “Advisory Regarding Oil and Gas Information”.

High Quality Assets

The Acquired Business includes 35,250 net acres (86% working interest) in the core of the premium condensate-rich Pipestone Montney fairway in close proximity to NuVista’s existing Pipestone assets. A 200 metre-thick Montney interval underlies the lands, with locations proven in four layers through significant delineation by the previous operator and offsetting operators. The lands exhibit a rare combination of high reservoir quality and rich to very-rich condensate yields, all in an over-pressured regime. GLJ has assigned 157 MMBoe of P+PA reserves effective June 30, 2018, to the Acquired Business across 89 (gross) Montney locations primarily in the C layer only plus 187 (gross) developed Montney and non-Montney wells with an NPVBT10 of $1.21 billion. The condensate weighting of the acquired P+PA reserves assigned by GLJ is approximately 20% (equivalent to approximately 23% condensate if volumes were not being processed in a deep cut plant with higher ethane/propane recoveries and overall Boes). We see significant upside into the range of 35+% condensate ratio for development volumes as drilling moves further northeast and into the other layers which have recently been tested at higher CGR’s.

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In addition to the 8,000 Boe/d of Montney production, the Acquired Business also includes 1,600 Boe/d of production from various zones on 52,800 net acres of non-Montney land. These assets are located to the northeast of the Pipestone Montney acreage and consist largely of non-operated, low decline unit production with below industry average asset retirement obligations. Also included is a 39% operated working interest in the area gathering and compression system and the Wembley Gas Plant.

Step Change in Full-Field Development Production Expectation

The Acquisition further enhances NuVista’s ability to deliver industry-leading profitable growth and returns. When they reach full field development, we target the Acquired Business to add over 50,000 Boe/d of production to NuVista. When combined with NuVista’s existing assets, future full-field development production is targeted to increase to over 110,000 Boe/d. The condensate weighting of full-field development production also increases from approximately 30% to 32+%. At the expanded full-field development production level, NuVista is targeting to generate approximately $850 million of adjusted funds flow(1,2) and $325 million of free adjusted funds flow(1,2). The pace to reach full-field development production levels will be adjusted as needed over time to ensure balance sheet strength remains as always a priority.

(1) See “Non-GAAP Financial and Capital Management Measures”.
(2) Pricing assumption for full field development target: $US 65/Bbl WTI; $US 3.00/MMBtu NYMEX; $C 1.90/GJ AECO; CAD:USD 1.25 FX.

Positive Pro-Forma Impact

The Acquisition has a significant positive impact on NuVista. It increases P+PA reserves by 45%, and increases P+PA NPVBT10(1,3) by 68%. It also increases NuVista’s P+PA drilling locations by 33%, with locations that rank among the best in NuVista’s portfolio. It is important to note that although inventory has been booked predominately in a single zone, NuVista sees full-field development encompassing a total of four Montney horizons based on demonstrated production on all layers thus far. The asset is expected to produce at approximately 35+% condensate once development ramps up, which is highly valuable and accretive to NuVista’s current outlook.

The Acquisition is also accretive on all medium and long term key financial and operational measures. It is approximately 30% accretive to P+PA NAVBT10(1,2) per share and, once material incremental volumes from the Acquired Business are brought on-stream starting in 2020-2021, the Acquisition is approximately 30% accretive to adjusted funds flow per share. It is also approximately 9% accretive to 2020E adjusted funds flow per share at the midpoint of our outlook ranges, and approximately neutral to 2019E adjusted funds flow per share versus consensus(3), as NuVista is able to accelerate production on its existing lands with the free adjusted funds flow from the Acquired Business, while arranging long term egress for incremental production from the Acquired Business. As such, we have conservatively assumed that new development production from the Acquired Business only begins to meaningfully contribute to corporate volumes in late 2020 or 2021 despite the possibility of commencing in 2019.

Conservative Financial Strategy

Upon completion of the Acquisition, NuVista will maintain its strong financial position. Net debt to adjusted funds flow immediately following the Acquisition is expected to be approximately 1.8x. NuVista expects to maintain and improve its conservative leverage levels over time. Upon closing of the Acquisition, NuVista expects to have drawn approximately $240 million on its anticipated expanded credit facility of approximately $450 million.

Increased 2018 Guidance and Preliminary 2019 and 2020 Outlook

Our revised 2018 guidance and preliminary 2019-2020 outlook is set out below. 2018 guidance reflects the inclusion of the Acquired Business effective July 1. In the fourth quarter of 2018, we anticipate spending an additional $35 million to accelerate completions on 5 wells at Bilbo and commence drilling on 4 wells at Elmworth. With the start-up of the SemCAMS Wapiti gas plant in the first half of 2019, we expect to have access to an additional 10,000 Boe/d of capacity.

For the high end of the range of 2019 and 2020 outlook, we have assumed that our planned Pipestone compressor station is accelerated to start up in the fourth quarter of 2019. This is expected to occur if we achieve historically typical regulatory approval timing, and with the required compressor station/water handling capital spending of approximately $100 million underpinned by the free adjusted funds flow from the Acquired Business. For this case we have also assumed that growth above base production from the Acquired Business commences in the fourth quarter of 2020, driven by favorable timing of access to NGTL and other egress. In this event, infrastructure spending by the Acquired Business commences in 2019.

For the low end of the range of 2019 and 2020 outlook, we have conservatively assumed that our planned Pipestone compressor station does not start up until the first half of 2020. We have also conservatively assumed for the low case that due to NGTL and other egress timing constraints, growth above base production from the Acquired Business does not commence until 2021 and growth spending there does not commence until 2020.

In all years, we expect the Acquired Business base production to deliver approximately 9,000 Boe/d and generate approximately $60 million of adjusted funds flow(2) and $50 million of free adjusted funds flow(2) based on $10 million of annual capital expenditures to maintain base production.

Although initial gas volumes from the Acquired Business will be exposed to AECO pricing, the increased condensate percentage more than makes up for the reduced gas pricing as compared to NuVista’s preexisting gas sales which are largely tied to NYMEX pricing. In the near term, we expect approximately 40% of total corporate gas sales to be exposed to AECO pricing. As such, approximately 70% of corporate revenues are expected to come from condensate sales, 7% of revenues from NGL sales, and approximately 23% of revenues from natural gas sales. We will look to diversify markets for natural gas production from the Acquired Business over time.

Growth Plan to 110,000 Boe/d

NuVista’s pro-forma condensate-rich Montney development inventory provides clear line-of-sight to growth to over 110,000 Boe/d. This represents over an 80% increase from our previous five-year plan of 60,000 Boe/d with increased margin through production with superior condensate yields, and with accretive per-share metrics. For the Acquired Business, we currently target to execute an annual program of approximately 20 wells during ramp-up, and with approximately 12 wells per year required thereafter to sustain production.

NuVista has top quality assets and every team member is focused upon relentless improvement. We are excited to extend our growth plan to 110,000 Boe/d while adding greater value per share. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their continued guidance and support.

Conference Call

NuVista will host a pre-recorded conference call to discuss the Acquisition today. The details of the conference call are below.

An updated presentation on the Acquisition is available on NuVista’s website at


Pre-Recorded Conference Call
To listen to the conference call, please dial (toll-free Canada/US): 1-800-408-3053 and enter passcode 6503338#.

The replay is available through August 23, 2018.



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