CALGARY, June 18, 2014 /CNW/ - Cequence Energy Ltd. ("Cequence" or the
"Company") (TSX: CQE) is pleased to announce that it has entered into a
purchase and sale agreement (the "Agreement") for the sale of its
entire interest in its non-operated assets located in the Ansell area
(the "Ansell Assets") for total consideration of approximately
$141 million, prior to customary closing adjustments (the
"Transaction"). The Transaction is expected to close on or about July
7, 2014, subject to the satisfaction of standard industry closing
The Ansell Assets consist of 18,800 net acres of land, current
production of 1,600 boepd (90% natural gas) and a 49% working interest
in a 120 mmcf/d sales pipeline and a 30 mmcf/d compressor station. The
cash proceeds of $141 million represent approximately 18 percent of
Cequence's current enterprise value while representing 3.6 percent of
Cequence's year end proved plus probable reserves and 3.1 percent of
the Company's December 31, 2013 NPV 10% proved plus probable reserve
value. As of December 31, 2013, Cequence had a reserve net asset value
per share of $4.38 (based on the NPV10% of the Company's proved plus
probable reserves, net debt of $111 million at December 31, 2013 and
excluding the value of undeveloped land).
Cequence entered into a farm out agreement in 2013 in an effort to
accelerate the development of the Ansell property in a period of
challenging natural gas prices. To date, Cequence estimates that it has
invested $49.1 million, capital expenditures net of operating cashflow
from the property, on the Ansell property accumulating land, building
production facilities and participating in 7 gross (3.43 net) wells.
The Transaction demonstrates the Company's ability to identify emerging
opportunities and to strategically unlock value. The Transaction
serves to immediately increase the Company's financial flexibility and
ultimately shareholder value.
The proceeds of the Transaction provide Cequence with a non-dilutive
source of funding to accelerate its growth at Simonette and explore
opportunities to build a new core area. Simonette is operated by
Cequence and has a multiyear inventory of economic locations as
highlighted by recent drilling success and proved plus probable
reserves at December 31, 2013 of 113 million boe.
Upon closing of the Transaction, Cequence expects to increase its
Simonette drilling program, with continued focus on its Montney, Falher
and Dunvegan drilling inventory. Cequence is currently operating one
rig at Simonette that is drilling it's first six well Montney pad. A
second rig is expected to begin drilling a Dunvegan well in the coming
week. Cequence intends to provide a detailed update to its guidance on
closing of the Ansell disposition.
Although the Transaction will result in a short term reduction in
Cequence's production volumes, Cequence anticipates that the longer
term production growth profile will be stronger with the reallocation
of capital to Simonette where Cequence can strategically control the
pace of development and production facilities. Pro forma the
Transaction, Cequence's estimated current production is 10,400 boepd.
Initially, the proceeds from the Transaction will be used by the Company
to repay its bank indebtedness drawn under the Company's credit
facility of $47 million and to fund its current working capital
deficit. On closing of the Transaction, Cequence estimates that it
will have net cash of approximately $10 million comprised of $70
million in positive net working capital including cash, and senior
subordinated 5 year notes of $60 million.
The Company's lenders are conducting a pro forma borrowing base review
in connection with the Transaction.
Cequence is a publicly traded Canadian energy company involved in the
acquisition, exploitation, exploration, development and production of
natural gas and crude oil in western Canada. Further information about
Cequence may be found in its continuous disclosure documents filed with
Canadian securities regulators at www.sedar.com.
Forward looking statements or information
Certain statements included in this press release constitute
forward-looking statements or forward-looking information under
applicable securities legislation. Such forward-looking statements or
information are provided for the purpose of providing information about
management's current expectations and plans relating to the future.
Readers are cautioned that reliance on such information may not be
appropriate for other purposes, such as making investment decisions.
Forward-looking statements or information typically contain statements
with words such as "anticipate", "believe", "expect", "plan", "intend",
"estimate", "propose", "project" or similar words suggesting future
outcomes or statements regarding an outlook. Forward-looking statements
or information in this press release may include, but are not limited
to, statements or information with respect to the completion of the
disposition and timing thereof; business strategy and objectives;
development, exploration, acquisition and disposition plans, including
the anticipated benefits resulting therefrom and the timing thereof;
drillings plans, including the availability of drilling rigs; the
Company's lenders review of the Company's borrowing base; and the
anticipated use of proceeds of the disposition and expected debt
levels. Forward-looking statements or information are based on a number
of factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect.
Although the Company believes that the expectations reflected in such
forward-looking statements or information are reasonable, however,
undue reliance should not be placed on forward-looking statements
because the Company can give no assurance that such expectations will
prove to be correct. In addition to other factors and assumptions which
may be identified in this press release, assumptions have been made
regarding, among other things: the impact of increasing competition;
the timely receipt of any required regulatory approvals; the ability of
the Company to obtain qualified staff, equipment and services in a
timely and cost efficient manner; the ability of the operator of the
projects which the Company has an interest in to operate the field in a
safe, efficient and effective manner; the ability of the Company to
obtain financing on acceptable terms; field production rates and
decline rates; the ability to replace and expand oil and natural gas
reserves through acquisition, development of exploration; the timing
and costs of pipeline, storage and facility construction and expansion
and the ability of the Company to secure adequate product
transportation; future oil and natural gas prices; currency, exchange
and interest rates; the regulatory framework regarding royalties, taxes
and environmental matters; and the ability of the Company to
successfully market its oil and natural gas products. Readers are
cautioned that the foregoing list is not exhaustive of all factors and
assumptions which have been used.
Forward-looking statements or information are based on current
expectations, estimates and projections that involve a number of risks
and uncertainties which could cause actual results to differ materially
from those anticipated by the Company and described in the
forward-looking statements or information. These risks and
uncertainties may cause actual results to differ materially from the
forward-looking statements or information. The material risk factors
affecting the Company and its business are contained in the Company's
Annual Information Form which is available on SEDAR at www.sedar.com.
The forward-looking statements or information contained in this press
release are made as of the date hereof and the Company 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 required by applicable securities laws. The forward
looking statements or information contained in this press release are
expressly qualified by this cautionary statement.
BOEs are presented on the basis of one BOE for six Mcf of natural gas.
Disclosure provided herein in respect of BOEs may be misleading,
particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1
Bbl is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency
at the wellhead.
For the first quarter of 2014, the ratio between the acreage price of
West Texas Intermediate ("WTI") crude oil at Cushing and NYMEX natural
gas was approximately 22:1 ("Value Ratio"). The Value Ratio is
obtained using the first three months 2014 WTI average price of $98.65
(US$/Bbl) for crude oil and the first three months 2014 NYMEX average
price of $4.72 (US$/MMbtu) for natural gas. This Value Ratio is
significantly different from the energy equivalency ration of 6:1 and
using a 6:1 ratio would be misleading as an indication of value.
The TSX has neither approved nor disapproved the contents of this news
SOURCE: Cequence Energy Ltd.
For further information:
Paul Wanklyn, Chief Executive Officer, (403) 218-8850, firstname.lastname@example.org
David Gillis, Chief Financial Officer, (403) 806-4041, email@example.com