Caledonian Royalty Corporation Announces Strategic Transaction of Lario Oil & Gas Company

CALGARY, Feb. 17, 2012 /CNW/ - Caledonian Royalty Corporation ("Caledonian") is pleased to announce that it has closed the acquisition of Lario Oil & Gas Company ("Lario"), a privately held Canadian company for a total purchase price of $35.7 million. $25.7 million of the purchase price was paid on closing and the remaining $10 million is to be paid to the vendor on or before September 30, 2012. Lario will be merged with Caledonian in the near future and all correspondence for Lario can now be directed to Caledonian's offices.

Acquisition Highlights:

  • Current production of approximately 820 barrels of oil equivalent (boe) per day, split 52% gas and 48% oil and natural gas liquids;
  • The Lario transaction is expected to be accretive to Caledonian on a per royalty unit basis for cash flow, reserves and production;
  • At current commodity prices approximately 74% of the revenues of Lario are derived from oil and natural gas liquids providing support for Caledonian's distributable cash flows during a period of low natural gas prices;
  • Diversification of Caledonian's current portfolio of royalty interests to include non-operated working interests, increased oil and natural gas liquids and operational potential;
  • The acquisition provides exposure to:
    • Future growth potential from oil and liquids rich gas;
    • The Edson and Niton areas in Alberta, characterized by long life production from horizontal well development with significant future potential;
  • High quality operators including Crocotta Energy Inc. and ConocoPhillips Canada;
  • Approximately 78 gross (23 net) sections of land with upside through more than 42 identified low-risk drilling locations; and a proposed waterflood project at Medicine River in which Caledonian can participate, farmout or sell in order to enhance unitholder value;
  • Unique financing structure with a vendor backstop of the balance of the purchase price and a portion of Caledonian's credit facility with Alberta Treasury Branches.

Reserve Summary:

Caledonian's independent reservoir engineers, GLJ Petroleum Consultants has assigned reserves effective January 1, 2012 in accordance with NI 51-101 as follows:

  • Approximately 2.7 million boe of proved plus probable (42% oil and natural gas liquids) and 1.8 million boe of proved reserves (38% oil and natural gas liquids);
  • Reserve life index of 9.5 years proved plus probable and 7.3 years proved.

Acquisition Metrics:

  • 2012 Cash Flow Multiple of approximately 5.6 times based on production of 820 boe/d (Cdn$98.98/bbl WTI, Cdn$3.48/mcf AECO);
  • $43,535 per producing boe;
  • Proved plus probable reserves of $13.17 per boe and proved reserves of $19.72 per boe.

James S. Kinnear, Chairman and CEO, stated: "This acquisition adds to holdings in our core focus areas of Edson, Niton and Medicine River providing steady cash flow from solid producing areas with significant upside potential. This transaction also increases the ratio of revenues derived from oil and natural gas liquids and is accretive to Caledonian Royalty Unitholders."

Cautionary Statement Regarding Forward-Looking Information

This news release offers Caledonian's future plans and operations as at February 7, 2012. Certain information contained in this news release, including future financial or operating performance, may be deemed "forward looking".  All statements in this presentation, other than statements of historical fact, that address events or developments concerning Caledonian that Caledonian expects to occur, are "forward-looking statements".  Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "does not expect", "plans", "anticipates", "does not anticipate", "believes", "intends", "estimates", "projects", "potential", "scheduled", "forecast", "budget" and similar expressions, or that events or conditions "will", "would", "may", "could", "should" or "might" occur.  All such forward-looking statements are subject to important risk factors and uncertainties, many of which are beyond Caledonian's ability to control or predict. This forward looking information is provided to allow readers to better understand Caledonian's business and prospects and may not be suitable for alternative purposes.

SOURCE Caledonian Royalty Corporation

For further information:

James S. Kinnear, Chairman and CEO or
Charles V. Selby, President
Caledonian Royalty Corporation
Suite 2200, 300 - 5th Ave S.W.
Calgary Alberta T2P 3C4
Telephone: 403.532.8800
Fax: 403.532.8805

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Caledonian Royalty Corporation

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