Cardinal Announces Acquisition of Quality Low Decline Light Cardinal Announces Acquisition of Quality Low Decline Light Oil Assets, $170 Million Financing and Updated 2017 Guidance
CALGARY, ALBERTA--(Marketwired - June 1, 2017) - NOT FOR DISSEMINATION IN THE UNITED STATES, FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.
Cardinal Energy Ltd. ("Cardinal" or the "Company") (TSX:CJ) is pleased to announce that it has entered into an agreement (the "Acquisition") to purchase high quality, low decline light oil assets in Western Canada (the "Assets") for cash consideration of $330 million (the "Purchase Price") before closing adjustments. The Assets to be acquired are in the Weyburn/Midale area of southeast Saskatchewan and in the House Mountain area of Alberta. The Assets will add 5,000 boe/d (100% oil and NGL's) of low decline light oil production (99% operated) that generate significant free cash flow and include a significant light oil development drilling inventory.
The Acquisition will be funded with a $170 million bought deal financing (the "Financing") and by Cardinal's credit facilities. We expect that the available lending limit under our credit facilities will be increased to $325 million following the closing of the Acquisition.
Cardinal is focused on keeping our debt to adjusted funds flow ratio to less than 1X.
Cardinal anticipates selling royalty interests and fee title lands (the "RI") associated with the Assets prior to year end, the proceeds of which will be applied to repay all or part of the Purchase Price funded by our credit facilities.
The Acquisition is consistent with Cardinal's strategy and business plan and will add $55 million of annualized operating income (revenue less royalties and operating expenses) to Cardinal based on the Assets Q1 2017 production and realized prices. Minimal capital has been spent on the Assets over the past few years and Cardinal believes that there are numerous optimization opportunities available as well as a potential to reduce operating costs per boe. The multiple of adjusted funds flow for the Acquisition based on the Purchase Price less estimated adjustments and the operating income above is 5.8X. Cardinal anticipates the adjusted funds flow multiple will fall below 4.0x after giving effect to the RI sales.
Benefits to Cardinal - Is 42% accretive to Q1 2017 adjusted funds flow per share (basic).
- On a pro forma look forward, our annualized second half adjusted funds flow will increase to $1.38/share.
- Increases our pro forma Q1 2017 netback by 19% to $19.64/boe (based on the Q1 2017 average WTI price of $51.90).
- Increases our light oil weighting by 20% to 45% of our oil production and our oil and NGL's weighting by 4% to 86%.
- Initially reduces our operating costs per boe by 3% which we believe will be further reduced in 2018.
- Decreases the decline of our base assets (not including our 2016/17 drill programs) to less than a 10% decline per year.
- Improves the percentage of Cardinal's producing reserves as of a percentage of total proved and probable ("2P") reserves from 86% to 90%.
- Adds a new light oil sales point which has opportunities for further consolidation.
- Adds over 300 light oil drilling locations.
- Together with the Financing, increases Cardinal's overall market capitalization moving the Company towards index inclusion and increasing overall adjusted funds flow and relevance.