Trilogy Energy Corp. Announces Agreement to Sell Certain Assets in the Grande Prairie Area of Alberta for $50 Million and Provides an Update on its Borrowing Base and Debt Levels

CALGARY, May 1, 2017 /CNW/ - Trilogy Energy Corp. ("Trilogy" or the "Company") (TSX – TET) is pleased to announce that it has agreed to sell certain assets located in the Grande Prairie area of Alberta for cash consideration of $50 Million (before customary adjustments).  The transaction is conditional upon the purchaser's receipt of the Alberta Energy Regulator ("AER") approvals for the transfer of the wells, pipelines and facilities.  Payment of the purchase price has been deposited with Trilogy's legal counsel and will be released upon satisfaction of this condition.  The assets being sold consist of approximately 44,427 total net acres of mineral rights (including approximately 11,500 net acres of Montney and/or Doig mineral rights) in the Valhalla area along with current production of approximately 1,100 Boe/d (16% oil and natural gas liquids) net to Trilogy, estimated Total Proved Developed Producing reserves of approximately 1,800 MBoe and Total Proved plus Probable reserves of approximately 5,500 MBoe, each as at December 31, 2016, net of Q1 2017 production.   

The sale is effective May 1, 2017 and is expected to be completed before the end of May, 2017, provided the purchaser receives the above mentioned AER approvals.  Proceeds from the sale will be applied to reduce Trilogy's indebtedness under its revolving credit facility.

Debt

The annual review for Trilogy's revolving credit facility has concluded and, subject to the completion of customary documentation, has resulted in an extension of the term for one year to April, 2019 and a borrowing base of $300 Million, which will be reduced to $290 Million on closing to reflect the sale of the assets in the Grande Prairie area. 

About Trilogy

Trilogy is a petroleum and natural gas-focused Canadian energy corporation that actively develops, produces and sells natural gas, crude oil and natural gas liquids.  Trilogy's geographically concentrated assets are primarily high working interest properties that provide abundant low-risk infill drilling opportunities and good access to infrastructure and processing facilities, many of which are operated and controlled by Trilogy.  Trilogy's common shares are listed on the Toronto Stock Exchange under the symbol "TET".

Forward-Looking Information

Certain information included in this news release constitutes forward-looking statements under applicable securities legislation.  Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget", "goal", "objective", "possible", "probable", "projected", scheduled", or state that certain actions, events or results "may", "could", should", "would," "might", or "will" be taken, occur or be achieved, or similar words suggesting future outcomes or statements regarding an outlook.  Forward-looking statements or information in this news release include, but are not limited to:

  • the expected timing of the asset sale and the use of proceeds from the sale;
  • the terms of Trilogy's renewed revolving credit facility;
  • the effect of the sale on Trilogy's estimated reserves as at December 31, 2016; and
  • other statements regarding the Company's business strategy and objectives.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect.  In addition to other assumptions identified in this document, assumptions have been made regarding, among other things:

  • future crude oil, natural gas, condensate, NGLs and other commodity pricing and supply;
  • funds flow from operations and cash flow consistent with expectations;
  • current reserves estimates;
  • credit facility availability and access to sources of funding for Trilogy's planned operations and expenditures;
  • the ability of Trilogy to service and repay its debt when due;
  • current production forecasts and the relative mix of crude oil, natural gas and NGLs therein;
  • geology applicable to Trilogy's land holdings;
  • the extent and development potential of Trilogy's assets;
  • the ability of Trilogy and its industry partners to obtain drilling and operational results, improvements and efficiencies consistent with expectations (including in respect of anticipated production volumes, reserves additions and NGL yields);
  • well economics;
  • decline rates;
  • foreign currency, exchange and interest rates;
  • royalty rates, taxes and capital, operating, general & administrative and other costs and expenses;
  • assumptions regarding royalties and expenses and the applicability and continuity of royalty regimes and government incentive programs to Trilogy's operations;
  • general business, economic, industry and market conditions;
  • projected capital investment levels and the successful and timely implementation of capital projects;
  • anticipated timelines and budgets being met in respect of drilling programs and other operations;
  • the ability of Trilogy to obtain equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its evaluations and activities;
  • the ability of Trilogy to secure adequate product processing, transportation, fractionation and storage capacity on acceptable terms or at all and assumptions regarding the timing and costs of run-times, outages and turnarounds;
  • the ability of Trilogy to market its oil, natural gas, condensate, other NGLs and other products successfully to current and new customers;
  • expectation that counterparties will fulfill their obligations under operating, processing, marketing and midstream agreements;
  • the timely receipt of required regulatory approvals;
  • the continuation of assumed tax regimes, estimates and projections in respect of the application of tax laws and estimates of deferred tax amounts, tax assets and tax pools;
  • the extent of Trilogy's liabilities; and
  • assumptions used in calculating the provisions made for the cost of the Kaybob North Montney pipeline release and the third party prior year production reallocations.

Although Trilogy believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward‑looking statements because Trilogy can give no assurance that such expectations will prove to be correct.  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 Trilogy and described in the forward‑looking statements or information.  These risks and uncertainties include but are not limited to:

  • fluctuations in crude oil, natural gas, condensate and other natural gas liquids and commodity prices;
  • the ability to generate sufficient funds flow from operations and obtain financing on acceptable terms to fund planned exploration, development, construction and operational activities and to meet current and future obligations ;
  • the possibility that Trilogy will not commercially develop its Duvernay shale assets in the near future or at all;
  • uncertainties as to the availability and cost of financing;
  • Trilogy's ability to satisfy maintenance covenants within its credit and debt arrangements;
  • the risk and effect of a downgrade in Trilogy's credit rating;
  • fluctuations in foreign currency, exchange rates and interest rates;
  • the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil, natural gas, condensate and other natural gas liquids, and market demand;
  • risks and uncertainties involving the geology of oil and gas;
  • the uncertainty of reserves estimates reserves life;
  • the uncertainty of estimates and projections relating to future production and NG yields as well as costs and expenses;
  • the ability of Trilogy to add production and reserves through development and exploration activities and acquisitions;
  • Trilogy's ability to secure adequate product processing, transmission, transportation, fractionation and storage capacity on acceptable terms and on a timely basis or at all;
  • potential disruptions or unexpected technical difficulties in designing, developing, or operating new, expanded, or existing pipelines or facilities (including third party operated pipelines and facilities);
  • risks inherent in Trilogy's marketing operations, including credit and other financing risks and the risk that Trilogy may not be able to enter into arrangements for the sale of its sales volumes;
  • volatile business, economic and market conditions;
  • general risks related to strategic and capital allocation decisions, including potential delays or changes in plans with respect to exploration or development projects or capital expenditures and Trilogy's ability to react to same;
  • availability of equipment, goods, services and personnel in a timely manner and at an acceptable cost;
  • health, safety, security and environmental risks;
  • the timing and cost of future abandonment and reclamation obligations and potential liabilities for environmental damage and contamination;
  • risks and costs associated with environmental, regulatory and compliance, including those potentially associated with hydraulic fracturing, greenhouse gases and "climate change" and the cost to Trilogy in order to comply with same;
  • weather conditions;
  • the possibility that government policies, regulations or laws may change, including risks related to the imposition of moratoriums;
  • the possibility that regulatory approvals may be delayed or withheld;
  • risks associated with Trilogy's ability to enter into and maintain leases and licenses;
  • uncertainty with regard to royalty payments and the applicability of and changes to royalty regimes and incentive programs including, without limitation, applicable royalty incentive regimes and the Modernized Royalty Framework, the Emerging Resources Program and the Enhanced Hydrocarbon Recovery Program, among others;
  • imprecision in estimates of product sales, commodity prices, capital expenditures, tax pools, tax deductions available to Trilogy, changes to and the interpretation of tax legislation and regulations;
  • uncertainty regarding results of objections to Trilogy's exploration and development plans by third party industry participants, aboriginal and local populations and other stakeholders;
  • risks associated with existing and potential lawsuits, regulatory actions, audits and assessments;
  • changes in land values paid by industry;
  • risks associated with Trilogy's mitigation strategies including insurance and hedging activities;
  • risks related to the actions and financial circumstances of Trilogy agents and contractors, counterparties and joint venture partners, including renegotiation of contracts;
  • risks relating to cybersecurity, vandalism, and terrorism;
  • the ability of management to execute its business plan;
  • the risk that the assumptions used by Management to estimate the provision for the costs resulting from the recent Kaybob North Montney pipeline release and the third party prior year production reallocation prove to be incorrect; and

other risks and uncertainties described elsewhere in this document and in Trilogy's other filings with Canadian securities authorities, including its Annual Information Form.

The forward-looking statements and information contained in this news release are made as of the date hereof and Trilogy 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.

Oil and Gas Advisory

This document contains disclosure expressed as "Boe/d" and "MBoe ".  All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil (6:1).  Equivalency measures may be misleading, particularly if used in isolation.  A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.  For Q4 2016, the ratio between Trilogy's average realized oil price and the average realized natural gas price was approximately 18:1 ("Value Ratio").  The Value Ratio is obtained using the Q4 2016 average realized oil price of $56.16 (CAD$/Bbl) and the Q4 2016 average realized natural gas price of $3.17 (CAD$/Mcf).  This Value Ratio is significantly different from the energy equivalency ratio of 6:1 and using a 6:1 ratio would be misleading as an indication of value.

All reserves information in this News Release is gross reserves.  Gross reserves means Trilogy's interest (operating and non-operating) share before deduction of royalties and without including any royalty interest.  Reserves estimates are based on the independent engineering evaluation prepared by McDaniel & Associates Consultants Ltd. dated March 7, 2017, evaluating Trilogy's crude oil, natural gas and natural gas liquids reserves effective as of December 31, 2016.

SOURCE Trilogy Energy Corp.

For further information: J.H.T. (Jim) Riddell, Chief Executive Officer; J.B. (John) Williams, President and Chief Operating Officer; M.G. (Mike) Kohut, Chief Financial Officer; Trilogy Energy Corp., #1400, 332 - 6th Avenue S.W., Calgary, Alberta T2P 0B2, Phone: (403) 290-2900, Fax: (403) 263-8915

RELATED LINKS
www.trilogyenergy.com

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