CALGARY, Sept. 3, 2013 /CNW/ - Yangarra Resources Ltd. ("Yangarra" or the "Company") (TSXV:YGR) announces that it has entered into a 47 section Cardium Farm-In Agreement in the Willesden Green Area with an industry major ("Farmor").
The Farm-In Agreement
The Farm-In Agreement ("Farm-in") covers 47 gross (29 net) sections in the Willesden Green area that offset existing Yangarra land holdings. Yangarra has identified 61 gross (37 net) Cardium locations with similar geology to the Company's existing Cardium wells.
Yangarra will spend 100% of the capital costs on the earning wells to earn a 75% working interest in the section and will earn one section for each earning well drilled.
Yangarra has committed to drill 7 net earning wells over a two year period with a rolling-option thereafter. The deal is structured to allow drilling on a two well pad basis, with the first well on the pad designated as the earning well with the second well drilled on a working interest basis. Drilling and completion costs are significantly reduced by drilling on a two well pad-site.
The Company does not expect any infrastructure issues as the lands are either adjacent to existing Yangarra facilities or Farmor facilities.
The Company also announces that it has signed a commitment letter (the "Commitment Letter") with Alberta Treasury Branches ("ATB") for a subordinated term loan facility of up to $20 million. The key elements of the subordinated term loan include a two year committed term (subject to an extension for an additional year upon mutual consent), availability in three tranches at a floating rate currently less than 10% per annum, full payment of the principal on maturity with reserve-based financial covenants. The Commitment Letter is subject to standard documentation and closing conditions that the Company expects to satisfy by September 30, 2013. The Commitment Letter complements the Company's existing $45 million senior credit facility with ATB.
2013 Capital Budget
With the Farm-in transaction the Company expects to drill an additional four wells in 2013, which will increase the Capital Budget to $35 million, with cash flow expected to increase to $25 - $30 million and forecast working capital deficit (including bank debt and subordinated term loan facility) of less than $50 million at year end.
Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated. The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe). One ("BCF") equals one billion cubic feet of natural gas. One ("Mmcf") equals one million cubic feet of natural gas. Operating netbacks are calculated as revenue from all products less operating costs.
Forward looking information
Certain information regarding Yangarra set forth in this news release, including management's assessment of future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
All reference to $ (funds) are in Canadian dollars.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the Policies of the TSX Venture Exchange) accepts responsibility for the adequacy and accuracy of this release.
SOURCE: Yangarra Resources Ltd.
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