/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./
VANCOUVER, BC, Oct. 24, 2022 /CNW/ - Canada Energy Partners Inc. (NEX: CE.H) (the "Company" or "CE") today announced the execution of a Participation Agreement ("PA") and Joint Operating Agreement with Arcadia Operating, LLC ("Arcadia") and the Standard Mutual Assurance Company, LLC to drill three development wells on the Grand Slam oil and gas production leases in Matagorda County, Texas. The Grand Slam field is located 90 miles south of Houston and the three proposed well sites are in the middle of existing oil and gas infrastructure, pipelines and gathering stations. The Grand Slam field entered production in 2,000 and has a history of prolific production. The fundamental terms of the PA are as follows: (i) the Company will advance USD$13.5 million to acquire interests in the three development wells; (ii) upon commencement of production, the Company will receive first priority to 70.74% of the net production revenues; and (iii) upon repayment of the Company's capital contributions, the working interest entitlements will be adjusted to 53.06%.
The Company intends to complete an equity financing to fund its capital contribution obligations under the PA and to provide for working capital. The terms of the proposed financing will be announced shortly in consultation with the Company's capital markets advisors. Completion of the proposed transaction under the PA is subject to approval of the TSX Venture Exchange.
"This agreement represents our first project in Texas and we are excited to partner with Arcadia Operating and SMAC Partners as we are aligned on the significant potential of the Grand Slam Project," said Grant Hall, President and CEO of Canada Energy Partners. "The company continues to investigate and review other investment opportunities and will be using the funds earned from the Grand Slam to pursue similar opportunities wherever they are located."
Opportunity Highlights
- Located in one of the world's major mega basins
- Asset surrounded by major upstream and midstream infrastructure
- Up to $28 Million of NPV (10) potential
- Gross reserves of 21 BCF and 674 MBO associated with proposed development plan
- Additional unquantified contingent resources provide optionality and running room
- Highly experienced and proven management
- Project largely de-risked
Grand Slam (Figure 1) offers and attractive opportunity to acquire 53.06% working interest by drilling three (3) development wells in the thickest portion of the Claughton A&B reservoirs (Frio Fm), that will recover ~21 BCF & 647,000 Bbls of gross reserves at a total capital expenditure of approximately $13.5 million. Each new well is estimated to cost ~$4.7 million to drill and complete (D&C). It is expected the new wells will produce a balance mix of gas (85%) and liquids (15%), providing a high-margin stable cashflow. Arcadia is the non-operated partner and brings nearly 100 years of operating experience in the basin.
Grand Slam is a liquid-rich gas field discovered in 2000 by the completion of the Runnells Gas Unit Well No.3. The discovery well initially produced 22 MMscfpd. Located in the heart of the Frio trend wedged between several large gulf coast fields 90 miles SW of Houston in Matagorda County. Grand Slam is covered by proprietary 3D seismic, it produced ~21 BCF of gas and 665,000 Bbls of condensate, out of 7 wells within the leased acreage (704 acres). Historically, some of the wells had an initial production (IP) ~20 MMscfpd and 620 Bcpd. (Figure 1).
Reserves volumes reported in Table 1 are the result of a third-party reserves evaluation as of June 1, 2022, performed by Chapman Petroleum Engineering Ltd. ("Chapman") of Calgary, Alberta and was conducted in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluators Handbook ("COGEH") and National Instrument 51-101 - Standards for Disclosure of Oil and Gas Activities ("NI 51-101").
Table 1 shows the Total Proved Undeveloped (PUD), Probable (2P) and Possible (3P) reserves in Gross and Net to CEP. Chapman's reserves evaluation only considers the proposed three (3) well development plan. Other resources could be produced with additional infill drilling locations as estimated by the Operator.
Arcadia is a 93-year-old independent Texas based oil and gas company with its antecedent founding in 1929 shortly after the discovery of the great East Texas oil field. The company which was a part of the early Texas petroleum industry pioneers was headquartered in Tyler, Texas for 61 years before moving to Dallas, Texas in 1991. The company's operational activities have been primarily focused on the Gulf Coast, Eastern, and Southern regions of Texas where it has overseen thousands of wells in all phases of development.
Forward Looking Statement
Cautionary Statement Regarding Forward-Looking Information This news release includes certain "forward-looking statements" under applicable Canadian securities legislation that are not historical facts. Forward-looking statements involve risks, uncertainties, and other factors that could cause actual results, performance, prospects, and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements in this news release include, but are not limited to, statements with respect to the Company's objectives, goals or future plans. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic and social uncertainties; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; delay or failure to receive board, shareholder or regulatory approvals; those additional risks set out in CEP's public documents filed on SEDAR at www.sedar.com; and other matters discussed in this news release. Although the Company believes that the assumptions and factors used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. Except where required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
