CALGARY, Oct. 27, 2014 /CNW/ - (TSX:PMT) - Perpetual Energy Inc. ("Perpetual", the "Corporation" or the "Company")
is pleased to announce the signing of a definitive purchase and sale
agreement to divest of several non-core heavy oil properties in eastern
Alberta for gross proceeds of $21.6 million, excluding certain closing
adjustments and transaction costs. A deposit of $3.24 million has been
paid to Perpetual, with the remaining disposition proceeds due at
closing which is expected to occur on or prior to November 7, 2014.
Integrating the McDaniel year end 2013 reserve estimates for these
assets, adjusted for 2014 production, and internal estimates for
reserve additions driven by Perpetual's 2014 capital spending program,
the disposition includes an estimated 870 Mboe of heavy oil reserves
and 4,026 net acres of undeveloped Mannville heavy oil rights.
Production from the divestiture package is expected to average
approximately 400 to 415 boe/d of primarily heavy oil for the fourth
quarter of 2014.
Proceeds from this disposition will initially establish a bank and
working capital surplus, providing for interest savings and added
optionality for managing the Corporation's convertible debentures
series (PMT.DB.E) which mature on December 31, 2015. As at September
30, 2014, the Corporation is undrawn on its $100 million credit
facility, with an estimated working capital deficit of $6 million,
including $24.9 million of restricted funds from proceeds received from
the sale of the East Edson gross overriding royalty in July 2014, but
excluding cash remaining in escrow funded by the joint venture partner
for their capital spending commitments under the East Edson farm-in.
The semi-annual borrowing base review on the Company's credit facility
is expected to be completed by the end of October.
This disposition drives further positive progress on the Company's 2014
strategic priority to reduce debt and manage downside risk. The
proceeds will bolster Perpetual's financial flexibility to continue to
deploy capital to its chosen key diversifying growth strategies both in
the Mannville area, where capital spending is concentrating on
waterflood implementation in several larger heavy oil pools, and at
Edson for development of the economically attractive Wilrich
liquids-rich gas trend.
EAST EDSON OPERATIONS UPDATE
Since closing the East Edson joint venture in July 2014, Perpetual has
been actively executing its planned drilling program, primarily drawing
on the $70 million of farm-in funds established in the joint venture
partner escrow account. Nine wells have been rig released thus far,
with seven (7.0 net) horizontal wells drilled within the Northeast
development area and two (2.0 net) wells terminating within the
Southwest development area as defined by McDaniel and Associates
Consultants Ltd. ("McDaniel") in the updated reserve report for the
East Edson area dated July 14, 2014. Thus far, four of the nine wells
have been completed and tied in through the existing compressor
station, two of which have been flowing through the Rosevear gas plant
since August. Both of these new wells are producing significantly above
their respective type curves at IP rates of over 10 MMcf/d plus
associated natural gas liquids ("NGL" or "liquids"), as depicted in the
production plot. The additional two completed wells are currently
beginning initial flow back, clean up and testing operations.
Completion, frac and testing operations are to be performed in the
remaining five standing wells prior to year end.
Operations are on track for 6 gross (6.0 net) additional wells to be
drilled prior to year end with three drilling rigs currently active.
Two (2.0 net) wells will be drilled within the same Northeast
development area on previously drilled pads. Four (4.0 net) wells are
scheduled within the Southwest development area as defined by McDaniel.
Perpetual estimates the majority of the $70 million of joint venture
partner escrow funds will be spent in the second half of 2014 on
drilling, completion and tie-in operations as well as seismic
activities related to the East Edson joint venture commitments.
Including the start-up of the first two new wells, production at East
Edson is currently averaging over 25 MMcf/d, plus associated liquids
estimated at approximately 20 to 25 bbl per MMcf. As part of the joint
venture, a gross overriding royalty of 5.6 MMcf/d, plus associated
liquids, is payable to the joint venture partner on a monthly basis.
Perpetual is also pleased to advise that all required regulatory
approvals for the new East Edson gas plant at 10-3-52-17W5 have been
received and site preparation operations have commenced. Perpetual
committed to construct the new 30 MMcf/d gas plant prior to September
2015 as part of the joint venture arrangement. All equipment has been
ordered and construction costs are expected to be on budget,
incorporating an enhanced design for the refrigeration plant and
several pipeline components to accommodate 60 MMcf/d to facilitate
future expansion. Lease construction for the gas plant will begin as
planned during the fourth quarter of 2014.
WEST EDSON OPERATIONAL UPDATE
Drilling operations have been extremely active at West Edson post spring
break-up. Since the end of the second quarter nine gross (3.6 net)
wells have been drilled at West Edson. Six wells (3.0 net) were
completed, tested and tied-in during the third quarter, including the
16-2-51-18W5 well drilled in the second quarter. Early production from
each of the six wells has met or exceeded the West Edson type curve,
including three wells (1.5 net) which targeted areas of potential
reservoir pressure depletion to help assess the optimal spacing and
development plan for the Wilrich resource at West Edson. Completion and
tie-in operations are currently in progress for the remaining two (1.0
net) operated standing wells to maintain high heat content gas sales
production at full capacity at current average levels of 63.5 MMcf/d
(31.75 MMcf/d net), plus associated C5+, for the remainder of 2014.
Drilling operations will also resume prior to year end.
Forward-Looking Information
Certain information regarding Perpetual in this news release including
management's assessment of future plans and operations may constitute
forward-looking statements under applicable securities laws. The
forward-looking information includes, without limitation, statements
regarding the expected timing for the closing of the sale of non-core
heavy oil properties and the anticipated use of proceeds and benefits
from the sale, prospective drilling and operational activities and
capital expenditures at East and West Edson, ; forecast production and
production type; forecast and realized commodity prices; expected
funding, allocation and timing of capital expenditures; projected use
of funds flow and anticipated funds flow; planned drilling and
development and the results thereof; expected dispositions, anticipated
proceeds therefrom and the use of proceeds therefrom; and commodity
prices. Various assumptions were used in drawing the conclusions or
making the forecasts and projections contained in the forward-looking
information contained in this press release, which assumptions are
based on management analysis of historical trends, experience, current
conditions, and expected future developments pertaining to Perpetual
and the industry in which it operates as well as certain assumptions
regarding the matters outlined above. Forward-looking information is
based on current expectations, estimates and projections that involve a
number of risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Perpetual and
described in the forward looking information contained in this press
release. Undue reliance should not be placed on forward-looking
information, which is not a guarantee of performance and is subject to
a number of risks or uncertainties, including without limitation those
described under "Risk Factors" in Perpetual's Annual Information Form and MD&A for the year ended
December 31, 2013 and those included in other reports on file with
Canadian securities regulatory authorities which may be accessed
through the SEDAR website (www.sedar.com) and at Perpetual's website (www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not
exhaustive. Forward-looking information is based on the estimates and
opinions of Perpetual's management at the time the information is
released and Perpetual disclaims any intent or obligation to update
publicly any such forward-looking information, whether as a result of
new information, future events or otherwise, other than as expressly
required by applicable securities laws.
Volume Conversions
Barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. In accordance
with National Instrument 51-101 ("NI 51-101"), a conversion ratio for natural gas of 6 Mcf:1bbl has been used, which
is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency
at the wellhead. In addition, utilizing a conversion on a 6 Mcf:1 bbl
basis may be misleading as an indicator of value as the value ratio
between natural gas and crude oil, based on the current prices of
natural gas and crude oil, differ significantly from the energy
equivalency of 6 Mcf:1 bbl.
About Perpetual
Perpetual Energy Inc. is a Canadian energy company with a spectrum of
resource-style opportunities spanning heavy oil, NGL and bitumen along
with a large base of shallow gas assets. Perpetual's shares and
convertible debentures are listed on the Toronto Stock Exchange under
the symbol "PMT" and "PMT.DB.E", respectively. Further information with
respect to Perpetual can be found at its website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the
information contained herein.
SOURCE Perpetual Energy Inc.
Image with caption: "Early drilling results at East Edson exceed type curve expectations. (CNW Group/Perpetual Energy Inc.)". Image available at: http://photos.newswire.ca/images/download/20141027_C9134_PHOTO_EN_43107.jpg