Original Provost Asset Purchase Feb 2011 Canrock/PetrosandsCALGARY, Feb. 25 /CNW/ - PetroSands Resources (Canada) Inc. ("PetroSands" or the "Company")(TSX-V:PCA) is pleased to announce that is has purchased and closed two separate acquisitions. The Company has acquired a 400 boe/d oil weighted asset located west of the fourth meridian in Alberta for consideration of $16,000,000, subject to customary adjustments (the "Acqusition"). PetroSands has also acquired all the issued and outstanding shares of a private Alberta company "PrivateCo" by issuing 1.75 million common shares of PCA.
- Production metric per flowing boe $40,000
- Production metric per flowing boe (Excluding land) $32,500
- Purchase Price $16,000,000
- Proved plus Probable Reserves 1,237 MBOE
- P+P Metrics $12.93/boe
- Total Unbooked Hz Multi-Frac Locations Up to 10 in total
- P+P RLI 12 yrs
- Effective Date: February 1, 2011
- Independent Net Present Value of $20.2 million (10% discount rate and P+P reserves)
- Solid base production, low decline asset less than 15%, and 12 year Reserve Life Index
- Medium crude (24o API) and associated gas is pipeline connected to market • 100% working interest, all season access, existing vertical well control and 3D seismic
- PetroSands plans and forecasts to drill and complete a series of horizontal multi-frac wells at a cost of approximately $1.2 million per well. The first well has an internally estimated rate of return greater than 200%, 120 mstb recoverable oil, 3.0 times recycle ratio, and IP of up to 90 boe/d. PetroSands plans to drill the first horizontalmulti-frac well in the second quarter.
- Total cash consideration of $16.0 million of which $13.0 million was paid at closing and the additional $3,000,000 plus standard adjustments to be paid to vendor on August 15, 2012
- $1,000,000 of cash plus assets in PrivateCo for 1,750,000 shares of PetroSands
- Undeveloped land of 3,600 net acres which PetroSands estimates value of $3.0 million
The aforementioned reserves information is based on an independent engineering evaluation report prepared by GLJ Petroleum Consultants Ltd. effective October, 2010. The acquired asset is strategically located in a core area and has numerous low risk vertical and horizontal drilling locations on the acquired lands. Using existing vertical well control and complete 3D seismic coverage, management has identified up to 10 horizontal multi-frac drilling locations, which have the potential to more than double production on the Property to over 1000 boe/d. The Property produces medium oil from Manville formations which management successfully developed at a previous entity. The Company plans to significantly increase recovery utilizing horizontal multi-frac technology. Dundee Securities Ltd. is acting as financial advisor to the company and Fraser Mackenzie Ltd. is acting as strategic advisor. As a result of the Acquisition, PetroSands is increasing its guidance for 2011 exit production to 1,000 Boe/d - 80% oil and NGL's. The Acquisition is forecast to be accretive to PetroSands in 2011 on several key metrics, including cash flow and production per share (fully diluted).