CALGARY, Dec. 10 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the "Company") has entered into an agreement to dispose of the Company's natural gas assets in the Garrington and Willesden Green areas in West Central Alberta. The consideration to be paid to ProspEx under the agreement is $8.0 million, subject to closing adjustments. The acquisition has an effective date of November 1, 2009, with closing expected to occur in late December, 2009. These assets consist of 16 gross (8.6 net) producing wells with production of approximately 250 net barrels of oil equivalent ("boe") per day, along with associated gas gathering and field compression facilities.
This disposition further consolidates ProspEx's asset base around the core areas within West Central Alberta and the Deep Basin where the Company intends to allocate the majority of its capital spending on the Company's inventory of repeatable drilling prospects utilizing horizontal drilling technology.
As previously announced, ProspEx drilled its first horizontal well at East Kakwa in the Deep Basin during the third quarter. This well was brought on production in early November, 2009 and has produced at an average restricted rate of 8.1 million cubic feet per day to date (approximately 850 boe per day net to ProspEx's 60% working interest, including associated liquids production).
ProspEx is currently drilling a second horizontal well (60% ProspEx working interest) at East Kakwa. Intermediate casing has been set and drilling of the horizontal leg is in progress. A third horizontal well (50% ProspEx working interest) on the East Kakwa trend has been licensed and is scheduled for drilling shortly after the completion of drilling of the second well.
ProspEx's total corporate production is currently about 3,000 boe per day. In addition to this production, the Company has approximately 250 boe per day of production off line for various operational reasons. This production is expected to be brought on stream over the winter.
ProspEx expects annual average production in 2010 to range between 3,100 and 3,300 boe per day after forecasting risked production, on-stream timing of production resulting from the Company's projected capital program, and estimated decline rates on new and existing production. This guidance is unchanged from previous guidance, as better than expected production performance from the first horizontal well in East Kakwa is expected to offset the disposition.
Following the disposition of the Garrington and Willesden Green assets, ProspEx expects that the limit of its credit facility will be reduced to $33 million from the current limit of $40 million. The next scheduled review date for this facility is May 31, 2010. The Company's net debt at September 30, 2009 was $27.8 million. The proceeds from the Garrington disposition are initially expected to be used to reduce this level of indebtedness.
ProspEx Resources Ltd. is a Calgary-based junior oil and gas company focused on exploration for natural gas in the Western Canadian Sedimentary Basin.
Guidance regarding production may constitute a "financial outlook" as contemplated by National Instrument 51-102 of the Canadian Securities Administrators entitled Disclosure Obligations. The purpose of such financial outlook is to forecast the anticipated production of the Company in 2010. Please be advised that the information may not be appropriate for other purposes.
Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: anticipated capital expenditures, production forecasts, production additions and deletions, additions to and deletions from the Company's historical and future capital programs, acquisitions or dispositions, expected timing of the tie-in of wells, expected timing of the receipt of regulatory approvals and expected timing of the completion of facilities projects.
Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs and capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Risk Factors" and "Industry Conditions" in the Company's most recent Annual Information Form, under the heading "Business Risks" in the Company's Management's Discussion and Analysis for the year ended December 31, 2008, and in the Company's most recent consolidated financial statements, management information circular, quarterly reports, material change reports and news releases available under the Company's profile on SEDAR (www.sedar.com). Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Information" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions.
The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.
For the purposes of this press release, boes have been calculated on the basis of six thousand cubic feet of gas to one barrel of oil. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
SOURCE PROSPEX RESOURCES LTD.
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