CALGARY, ALBERTA--(Marketwire - March 10, 2010) -
Crew Energy Inc. (TSX:CR) of Calgary, Alberta ("Crew" or the "Company") has entered into a binding Purchase and Sale Agreement (the "Sale Agreement") to dispose of oil and gas assets excluding Cardium formation rights (the "Assets") in the Edson area of west central Alberta for $126 million, subject to closing adjustments. The Company has also entered into a Farm-out Arrangement (the "Farm-out") with respect to the Cardium rights on the same lands (collectively, the "Transaction"). The divestment is expected to close on or about April 1, 2010.
THE ASSETS
Details of the Company's divested Assets are as follows:
-- Year-end 2009 reserves, based upon Crew's independent reserve evaluation prepared by GLJ Petroleum Consultants Ltd. ("GLJ"), on a proved basis are 4.6 million boe and on a proved plus probable basis are 7.1 million boe (19% liquids and 81% natural gas); -- Current production attributed to the Assets is approximately 1,700 boe per day (21% liquids and 79% natural gas); -- Divestment metrics are approximately $27.39 per boe on a proved basis and $17.75 per boe on proved plus probable basis, and $74,118 per flowing boe; and -- Petroleum and natural gas rights comprising 72 gross (50 net) sections excluding Cardium formation rights on 32 net sections. The closing of the Transaction is subject to customary conditions including, without limitation, customary purchaser due diligence.
FARM-OUT ARRANGEMENT
In conjunction with the disposition, Crew has entered into a Farm-out on standard industry terms with the purchaser of the Assets regarding the Cardium formation rights, which were excluded from the Sale Agreement and retained by Crew. Under the terms of the Farm-out, the purchaser:
-- Commits to drill and complete two horizontal Cardium wells to earn a 50%
interest in eight sections of Cardium mineral rights;
-- Has the right to drill additional wells, on a rolling option basis, to
earn a 50% interest in four sections of Cardium mineral rights for every
option well drilled; and
-- Will have until December 31, 2011 to drill up to nine earning wells.
Crew's 50% share of Cardium solution gas will be processed through existing facilities under preferential terms.
This Farm-out will provide Crew with additional Cardium information which Crew will utilize to maximize the value of its remaining lands in the area. It will also allow the Company to focus its Cardium operations on Crew's 100% working interest contiguous blocks of Cardium prospective lands at Pine Creek where the Company has identified in excess of 80 Cardium drilling locations.
EXPANDED DRILLING PROGRAM
Subject to completion of the Transaction, Crew is pleased to announce an expanded 2010 capital expenditure program and updated year-end guidance.
In the Septimus, British Columbia area the Company plans to move forward with the expansion of the Septimus gas processing facility to 50 mmcf per day from its current capacity of 25 mmcf per day. The expansion is expected to be completed by year end and upon equalization with the current owner, Aux Sable Canada ("ASC"), Crew will become a 50% owner and will remain operator of the facility. The Company now plans to drill up to 10 horizontal wells on its Montney play in northeast British Columbia and expects to exit 2010 producing over 4,500 boe per day from the area.
In the Princess, Alberta area Crew will expand its drilling program to include 50 horizontal wells. This represents a 20 well increase over the previously disclosed 2010 budget and is expected to generate production of over 8,000 boe per day by year end which is a 54% increase from current production of 5,200 boe per day. Capital has been allocated to add production infrastructure in the area in order to facilitate production growth and operating cost reduction initiatives.
In the Pine Creek, Alberta area Crew has over 80 horizontal Cardium oil locations identified. The Company now plans to drill two to three Cardium wells at Pine Creek in 2010. Crew owns pipeline infrastructure and an underutilized gas processing facility in the area to accommodate future production growth. Assuming the Farmee earns an interest in the 32 net sections of Cardium rights at Edson, Crew will own 43.4 net sections of Cardium rights in the greater Edson-Pine Creek area. The geology and reservoir characteristics of the Cardium formation in the Pine Creek area are, in the opinion of Management, similar to areas where horizontal drilling and multi-fracture stimulation completions have proved successful.
GUIDANCE INCREASES AND DEBT IS FURTHER REDUCED
The sale of the Edson production as of April 1, 2010 is expected to be offset by production additions from a $55 million increase in 2010 capital spending. The Company's Board of Directors has approved an expanded 2010 exploration and development budget of $175 million. The increased spending results in a revised annual production forecast for the Company of between 15,000 and 15,500 boe per day (54% natural gas, 46% liquids) net of the disposed volumes. The additional spending is anticipated to significantly impact second half production growth which has resulted in the Company increasing forecasted 2010 exit production from over 17,000 boe per day to in excess of 18,000 boe per day. This increased exit rate will have a larger component of oil and natural gas liquids which is estimated at 54% of total production. The revised forecast is expected to increase funds from operations from an estimated $120 million to an estimated $130 million assuming a natural gas price of CDN $5.50 per mcf, an oil price of US$80 per bbl, operating costs of $10.25 per boe and royalties of 25%. Based upon these revised assumptions year-end net debt is forecasted to be approximately $90 million or 0.7 times trailing funds from operations.
CAUTIONARY STATEMENTS
Information Regarding Disclosure on Oil and Gas Reserves
In accordance with Canadian practice, production volumes are reported on a company gross basis, before deduction of Crown and other royalties, unless otherwise stated. Unless otherwise specified, all reserve volumes in this news release and all information derived therefrom are based on "company interest reserves" using forecast prices and costs. "Company interest reserves" consist of "company gross reserves" (as defined in National Instrument 51-101 adopted by the Canadian Securities Regulators ("NI 51-101")) plus Crew's royalty interests in reserves. "Company interest reserves" are not a measure defined in NI 51-101 and does not have a standardized meaning under NI 51-101. Accordingly our Company interest reserves may not be comparable to reserves presented or disclosed by other issuers. In relation to the disclosure of estimates of reserves on an individual property such as Edson, such estimates for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.