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TSX Venture Exchange
Trading Symbol: PCA
CALGARY, Feb. 25 /CNW/ - PetroSands Resources (Canada) Inc.
("PetroSands" or the "Company")(TSX-V:PCA) is pleased to announce that
is has purchased and closed two separate acquisitions. The Company has
acquired a 400 boe/d oil weighted asset located west of the fourth
meridian in Alberta for consideration of $16,000,000, subject to
customary adjustments (the "Acqusition"). PetroSands has also acquired
all the issued and outstanding shares of a private Alberta company
"PrivateCo" by issuing 1.75 million common shares of PCA.
OIL ASSET/PRIVATECO ACQUISITION HIGHLIGHTS & STRATEGIC RATIONALE
• Production metric per flowing boe
• Production metric per flowing boe (Excluding land)
• Purchase Price
• Proved plus Probable Reserves
• P+P Metrics
• Total Unbooked Hz Multi-Frac Locations
Up to 10 in total
• P+P RLI
• Effective Date:
February 1, 2011
• Independent Net Present Value of $20.2 million (10% discount rate and
• Solid base production, low decline asset less than 15%, and 12 year
Reserve Life Index
• Medium crude (24o API) and associated gas is pipeline connected to market
• 100% working interest, all season access, existing vertical well
control and 3D seismic
• PetroSands plans and forecasts to drill and complete a series of
horizontal multi-frac wells at a cost of approximately $1.2 million per
well. The first well has an internally estimated rate of return greater
than 200%, 120 mstb recoverable oil, 3.0 times recycle ratio, and IP of
up to 90 boe/d. PetroSands plans to drill the first horizontal
multi-frac well in the second quarter.
• Total cash consideration of $16.0 million of which $13.0 million was
paid at closing and the additional $3,000,000 plus standard adjustments
to be paid to vendor on August 15, 2012
• $1,000,000 of cash plus assets in PrivateCo for 1,750,000 shares of
• Undeveloped land of 3,600 net acres which PetroSands estimates value
of $3.0 million
The aforementioned reserves information is based on an independent
engineering evaluation report prepared by GLJ Petroleum Consultants
Ltd. effective October, 2010.
The acquired asset is strategically located in a core area and has
numerous low-risk vertical and horizontal drilling locations on the
acquired lands. Using existing vertical well control and complete 3D
seismic coverage, management has identified up to 10 horizontal
multi-frac drilling locations, which have the potential to more than
double production on the Property to over 1000 boe/d. The Property
produces medium oil from Manville formations which management
successfully developed at a previous entity. The Company plans to
significantly increase recovery utilizing horizontal multi-frac
Dundee Securities Ltd. is acting as financial advisor to the company and
Fraser Mackenzie Ltd. is acting as strategic advisor.
As a result of the Acquisition, PetroSands is increasing its guidance
for 2011 exit production to 1,000 Boe/d - 80% oil and NGL's. The
Acquisition is forecast to be accretive to PetroSands in 2011 on
several key metrics, including cash flow and production per share
INCREASED 2011 GUIDANCE
PetroSands 2011 guidance below includes the addition of the Property's
forecast production volumes with capital included for four infill
horizontal multi-frac wells on the Property.
|Average 2011 Production: | 600 boe/d ( 80% oil and NGL's)
|Exit 2011 Production: |1,000 boe/d ( 80% oil and NGL's)|
|2011 Capital Expenditure: |$22 million ($4.2 million net of
|2011 Cash Flow: |$8.0 million
|Shares Outstanding: | 22 million basic
|Bank Debt on Bank Line: |$(5.7) million drawn on $10.0 million
PetroSands had secured a $10,000,000 senior credit facility with a
financial institution that carries interest at prime plus one percent.
The Company has also confirmed a 150 boe/d multiyear oil hedge at
approximately $90-$100 per barrel in conjunction with the new facility.
BOARD OF DIRECTORS & TEAM
The new proposed board of directors is to be comprised of six directors
including Brian Prokop as Chairman and director, Greg Busby, Malvin
Spooner, Chad Dust, George Paulus, and Alan Cruikshank as directors.
PCA's business strategy is to grow through drilling and acquisitions
which lead to lower risk, scalable and repeatable development of medium
and heavy oil multiple pool projects primarily in Alberta and
Saskatchewan. In the fourth quarter of 2010 PetroSands initiated a
recapitalization plan which later resulted in a series of financings by
issuing 0.5 million then 0.2 million and 12.7 million common shares of
PCA for gross proceeds totaling $7.3 million dollars which was
completed in early 2011.
About PetroSands Canada
PetroSands Resources (Canada) Inc. is a dynamic new publicly traded
junior oil and gas company focused on exploration and development of
oil and natural gas in Canada. The Company is focused on strategic
acquisitions in its core areas that aggressively expand production,
cash flow, and reserves as well as opportunistic transactions in the
energy sector. The Company holds in excess of 38,000 net acres of
undeveloped land for production and exploration and currently has 22
million common shares outstanding. PetroSands common shares are traded
on the TSXV under the trading symbol PCA.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
ON BEHALF OF THE BOARD
FOR FURTHER INFORMATION PLEASE CONTACT:
FORWARD LOOKING STATEMENTS: This press release contains forward-looking
statements. More particularly, this press release contains statements
concerning the potential exploration and development opportunities
associated with the Acquisition, the expected board and management team
of PetroSands following the Acquisition, the potential results of wells
drilled and completion techniques, the potential application of
secondary and tertiary recovery schemes, the anticipated impact of the
Acquisition on PetroSands.
The forward-looking statements contained in this document are based on
certain key expectations and assumptions made by PetroSands, including,
with respect to the success of future drilling and development
activities, the performance of existing wells, the performance of new
wells, the successful application of technology, prevailing commodity
prices and prevailing royalty regimes. Although PetroSands believes
that the expectations and assumptions on which the forward-looking
statements are based are reasonable, undue reliance should not be
placed on the forward-looking statements because PetroSands can give no
assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very nature
they involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of
factors and risks. These include, but are not limited to, the failure
to obtain necessary regulatory approvals or satisfy the conditions to
effecting the closing of the Acquisition, risks associated with the oil
and natural gas industry in general (e.g., operational risks in
development, exploration and production; delays or changes in plans
with respect to exploration or development projects or capital
expenditures; the uncertainty of reserve estimates; the uncertainty of
estimates and projections relating to production, costs and expenses,
and health, safety and environmental risks), commodity price and
exchange rate fluctuations changes to existing laws and regulations and
uncertainties resulting from potential delays or changes in plans with
respect to exploration or development projects or capital expenditures.
Certain of these risks are set out in more detail in PetroSands'
Management Discussion and Analysis which has been filed on SEDAR and
can be accessed at www.sedar.com.
The forward-looking statements contained in this document are made as of
the date hereof and PetroSands undertakes no obligation to update
publicly or revise any forward-looking statements or information,
whether as a result of new information, future events or otherwise,
unless so required by applicable securities laws.
Estimates of future net revenue contained in this press release are
estimated values and do not represent fair market value.
Meaning of Boe: When used in this press release, Boe means a barrel of
oil equivalent on the basis of 1 Boe to 6 thousand cubic feet of
natural gas. Boe per day means a barrel of oil equivalent per day.
Boe's may be misleading, particularly if used in isolation. A Boe
conversion ratio of 1 Boe for 6 thousand cubic feet of natural gas is
based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the
SOURCE PetroSands Resources (Canada) Inc.
For further information: