CALGARY, ALBERTA – Enercapita Energy Ltd. (“Enercapita”, the “Fund”) is pleased to announce that the Fund has successfully closed three separate acquisitions to acquire 1,125 boe/d of low decline, predictable, low cost, light oil and liquids production for cash consideration of $41.1 million. The acquisitions bring Enercapita’s March 31, 2016 total production base to 2,300 boe/d. In addition, Enercapita has an incremental 300 boe/d of predominantly gas production shut in that will be restarted as commodity prices increase. The acquired assets have substantive upside including an inventory of low cost opportunities to increase production and reduce costs through optimization and exploitation, further water flood optimization strategies to increase oil recovery and a significant undeveloped land base. These acquisitions continue the successful execution of our business plan to acquire proven high quality assets while remaining financially disciplined.
The acquisitions were funded with cash on hand and the Fund now has fully deployed approximately $80 million in capital to date, has no bank debt and an undrawn bank line. Enercapita is in a strong financial position and remains disciplined protecting our cash flows and distributions through our ongoing hedging program.
This strong financial platform positions Enercapita well in this uncertain commodity price environment. Our conservative business model of acquiring proven, low decline production and concurrently hedging production has produced the desired cash flow and yield stability. This approach has protected our cash flow and balance sheet, while positioning the Fund to be opportunistic in adding high quality assets in this depressed commodity price environment.
Key Attributes of the Acquisitions
– Current production of 1,125 boe/d – 85% light oil and liquids
– Low decline rate of approximately 10% with low risk, predictable production profile
– Low operating costs of $17.00 / bbl and royalties of 10%
– Strong netbacks of approximately $16.75 / boe based on West Texas Intermediate oil price of US$ 42.00 / bbl
– High working interest and operatorship of 73% of the production
– Substantial forecasted production additions with minimal capital requirements
– Large original oil in place pools with expected improved recovery factors through primary and water flood optimization
– Ownership and control of key infrastructure including several oil batteries, oil terminals, a gas processing facility and several gas gathering systems
– Opportunities to lower operating costs through synergies with existing assets
– Significant undeveloped land position for future development
Summary of Reserves and Acquisition Metrics:
Total Consideration $41.1 million
Current Production 1,125 boe/d (85% oil/NGLs)
Proved Developed Producing Reserves (1) 4.5 MMboe
Proved Developed Producing NPV10 (2) $68.4 million
Proved Plus Probable Reserves (1) 7.0 MMboe
Proved Plus Probable NPV10 (2) $92.2 million
Proved Plus Probable Reserve Life Index 17.0 years
Cash flow netback (4) $16.75/boe
The Acquisition metrics are as follows:
Current Production (3) $36,533/boe/d
Proved Developed Producing Reserves $9.13/boe
Proved plus Probable Reserves $5.87/boe
Annualized Cash Flow (4) $6.9 million/year
(1) Based on independent engineering effective December 31, 2015
(2) Before tax net present value based on a 10 percent rate and Sproule December 31, 2015 price forecast
(3) Based on current production of 1,125 boe/d
(4) Based on $42.00 US WTI; 0.75 FX; $2.00 /GJ
Since our inception in February 2014 we have had tremendous success at Enercapita – – raising and deploying approximately $80 million in capital at historically attractive valuation metrics. In addition, we have formalized our team, secured a significant asset base and remain very well positioned financially with no bank debt. Based on forward commodity prices of $42.00 US West Texas Intermediate oil prices Enercapita’s annualized net operating income is forecast at approximately $12.0 million providing a highly resilient 1.8 x preferred unit interest coverage.
The current environment presents a tremendous opportunity to continue to build on Enercapita’s success to date. After a year of disconnect between seller and buyer expectations, companies with high debt levels are now being forced to monetize assets to repay debt. This is providing significant opportunity for Enercapita and an ongoing need for continued capital support to fully realize the market opportunity ahead of us.
The Company’s cash flows remain well protected through hedges and are structured to provide further upside through costless collars and participating floor products. Currently Enercapita is 60% hedged for 2016 at an average floor hedge price of $C 59.95/bbl and $C 3.20/GJ and 52% hedged for 2017 at an average floor hedge price of $C 58.94/bbl and $C 3.43/GJ. In addition, we are hedged 50% in 2018 and 22% in 2019.
Our approach at Enercapita is unchanged. We remain fiscally disciplined. We steadfastly protect our balance sheet. We remain keenly focused on accretive transactions as we continue to aggregate a portfolio of high quality, long life, low decline producing assets as we focus on our mandate of maximizing free cash flow.
Enercapita is an energy fund focused on the growth of long life, low decline, low cost, low risk energy assets through the exploitation and optimization of existing production. The fund is an RRSP eligible investment vehicle that streams the cash flow from its production directly to its investors on a priority basis.
Forward Looking Information
This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words “anticipate,” “expect,” “may” “should” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Enercapita, if any, reflect Enercapita’s beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of businesses, including fluctuations in interest rates; general economic conditions; supply and demand for businesses; competition for available businesses; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Enercapita undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.