CALGARY, Feb. 25, 2013 /CNW/ - Cequence Energy Ltd. ("Cequence") (TSX:
CQE) is pleased to announce that it has entered into agreements with
Donnybrook Energy Inc. ("Donnybrook") (TSX: DEI) pursuant to which
Cequence has agreed to acquire Donnybrook's interests in its oil and
gas properties located in the Simonette and Resthaven areas of Alberta
(the "Donnybrook Assets"). As consideration for the assets, Cequence
will transfer its interest in its non-operated oil and gas properties
located in the Fir area (the "Non-core Assets"), and issue an aggregate
of 10,300,000 Cequence common shares to Donnybrook, which shares will
be distributed to the Donnybrook shareholders, representing aggregate
consideration to Donnybrook of approximately $23 million. Cequence
believes that this expansion and consolidation of its contiguous
Montney land position at Simonette has significant present and future
economic and strategic value.
Cequence is also pleased to announce the results of its recent drilling
Assets Being Acquired From Donnybrook
The Donnybrook Assets consist of 19.2 net sections of Montney lands,
associated reserves and production in the Simonette and Resthaven areas
of Alberta. At Simonette, Cequence will acquire all of Donnybrook's
interest in 33 gross (16.5 net) sections of Montney rights. Cequence
is currently a partner with Donnybrook in these assets. In addition,
2.7 net sections of Montney land will be acquired at Resthaven. Current
production of the acquired properties is approximately 120 boe/d.
Cequence is acquiring 720 mboe of proved reserves and 1,407 mboe of
proved and probable reserves with a net present value estimated at $12
million, based on the December 31, 2011 GLJ reserves report of
Cequence. Based on the closing price of the Cequence common shares on
February 22, 2012, the value attributed to the land acquired is $11
million or approximately $2,200 per hectare.
The acquisition will increase Cequence's holdings at Simonette/Resthaven
to 96 gross (89 net) Montney sections. The Donnybrook Assets increase
Cequence's working interest to 100% in several sections of land
immediately adjacent to the Company's recent Montney drilling
activity. As a 100% working interest owner in substantially all of its
Simonette Montney landbase, Cequence will control the pace of future
development with no limitations arising from section boundaries or
partner interests. Cequence management has identified approximately 70
future net potential horizontal locations that can be added to its
existing Montney drilling inventory.
A land map of Cequence's holdings at Simonette, showing the location of
Donnybrook Assets, has been posted to Cequence's website at www.cequence-energy.com.
Cequence Falher Drilling Results at Simonette/Resthaven
Cequence recently completed a well located at 2-6-61-26W5. The well was
drilled to a final measured depth of 5,136 meters in the Falher
formation including approximately 2,086 meters of horizontal section.
Eighteen 50 tonne fracs were successfully placed using a frac port
system. The well flowed on clean-up for 52 hours at a final rate of
13.1 mmcf/d plus liquids with 2,005 psi flowing casing pressure This
is the final well drilled in the Resthaven farm-in whereby Cequence
earned a 65% working interest in nine sections of land prospective for
Falher and Dunvegan natural gas and liquids. The 2-6 well is
approximately 2.5 miles south of the Company's previously announced
discovery well at 16-18 and further validates the potential for as many
as 30 net locations at Simonette/Resthaven. Well costs to drill and
complete the 2-6 well are estimated to be approximately $7.1 million.
The first three wells completed as part of the 2013 drilling program
have tested at an aggregate 42.4 mmcfd plus liquids from three separate
formations including the Montney, Dunvegan and Falher formations. Two
additional Montney wells in Simonette and a Wilrich well in Ansell are
expected to be completed before spring break-up.
Agreements and Timing
The transaction will be effected pursuant to the terms of an asset
exchange agreement (the "Asset Exchange Agreement") and an arrangement
agreement (the "Arrangement Agreement"), both between Cequence and
Donnybrook dated February 22, 2013. Pursuant to the terms of the
Arrangement Agreement and the plan of arrangement (the "Arrangement"),
at the effective time of the Arrangement, the transactions contemplated
by the Asset Exchange Agreement will become effective and Donnybrook
will convey to Cequence its rights to the Donnybrook Assets in exchange
for all of Cequence's rights in the Non-Core Assets and the issuance by
Cequence to Donnybrook of 10,300,000 Cequence common shares. The
Arrangement Agreement further provides that the common shares received
by Donnybrook shall immediately be transferred from Donnybrook to the
Donnybrook shareholders on a pro rata basis.
The Non-Core Assets are not operated by Cequence and consist of 5 net
sections of land with current production of approximately 220 boepd.
The Non-Core Assets have proved reserves of 861 mboe and proved plus
probable reserves of 1,287 mboe and a net present value of $8.8
million, at December 31, 2012, as estimated by Cequence.
The Arrangement will be effected pursuant to the provisions of the Business Corporations Act (Alberta). Completion of the transaction is expected to occur in
mid-April 2013 and is subject to the satisfaction of several
conditions, including receipt of the applicable court, stock exchange
and regulatory approvals as well as the approval by not less than 66 ⅔%
of the Donnybrook shareholders entitled to vote at a meeting of
Donnybrook shareholders. In connection with such meeting, Donnybrook
will prepare and mail to each Donnybrook shareholder an information
circular setting forth, among other things, details of the
Arrangement. It is expected that Donnybrook will mail the information
circular in mid-March and hold the required meeting of Donnybrook
shareholders in mid-April with closing of the Arrangement and the Asset
Exchange Agreement to occur shortly thereafter provided that all
shareholder, court and regulatory approvals are obtained. Management
and directors of Donnybrook holding approximately 12.5 percent of the
issued and outstanding Donnybrook common shares have entered into
support agreements pursuant to which they have agreed to vote in favour
of the Arrangement.
Under the terms of the Arrangement Agreement, Donnybrook has agreed that
it will not solicit or initiate any inquiries or discussions that may
reasonably be expected to lead to an alternative sale of the Donnybrook
Assets or any other transaction which could impede, interfere, prevent
or delay the transaction contemplated under the Arrangement Agreement.
In addition, should a Superior Proposal (as such term is defined in the
Arrangement Agreement) be presented to Donnybrook, Donnybrook has
granted Cequence the right to match such Superior Proposal. The
Arrangement Agreement also provides for the payment of a reciprocal
non-completion fee of $1.0 million under certain circumstances.
Complete details of the Arrangement, the plan of arrangement and the
Asset Exchange Agreement are available in their respective agreements
which will be available for viewing at www.sedar.com.
Peters & Co. Limited is acting as financial advisor to Cequence 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 Information and Additional Advisories
Certain information included in this press release constitutes
forward-looking information under applicable securities legislation.
Such forward-looking information is 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 information typically contains
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 information in this press release may include, but is
not limited to, the timing for completion of the transactions
contemplated herein, receipt of regulatory and Donnybrook shareholder
approvals, meeting dates, future development plans, future production
levels, the viability of future prospective drilling locations and the
anticipated benefits resulting from the transactions described in this
press release. Forward-looking information is based on a number of
factors and assumptions which have been used to develop such
information but which may prove to be incorrect. Although Cequence
believes that the expectations reflected in such forward-looking
information are reasonable, undue reliance should not be placed on
forward-looking information because Cequence 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 and are implicit in, among other
things: reserves; field production rates and decline rates; the ability
of Cequence to secure adequate product transportation; the timely
receipt of any required regulatory and Donnybrook shareholder
approvals; the ability of Cequence to obtain qualified staff, equipment
and services in a timely and cost efficient manner to develop its
business; future oil and natural gas prices; currency, exchange and
interest rates; the regulatory framework regarding royalties, taxes and
environmental matters; and the ability of Cequence 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 information is 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 Cequence and described in the forward-looking information. The
material risk factors affecting Cequence and its business are contained
in Cequence's Annual Information Form which is available under
Cequence's issuer profile on SEDAR at www.sedar.com.
The forward-looking information contained in this press release is made
as of the date hereof and Cequence undertakes no obligation to update
publicly or revise any forward-looking information, whether as a result
of new information, future events or otherwise, unless required by
applicable securities laws. The forward looking information contained
in this press release is expressly qualified by this cautionary
Cequence uses test rate information as one indicator of potential future
well productivity. The test rates set forth in this press release are
of a short duration and are not necessarily indicative of future
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. Given that the value ratio based on the current price
of crude oil as compared to natural gas is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis
may be misleading as an indication of value.
The Toronto Stock Exchange has neither approved nor disapproved the
contents of this press release.
SOURCE: Cequence Energy Ltd.
For further information:
Paul Wanklyn, President & CEO, (403) 218-8850, firstname.lastname@example.org
David Gillis, VP Finance & CFO, (403) 806-4041, email@example.com