Calgary-based Advantage Energy Income Fund, which joined the Toronto Stock Exchange May 29, increased its reserve base by 43% this week by acquiring all the shares of an unnamed private oil and gas company for C$57.8 million in cash. The undisclosed acquisition gives gas-heavy Advantage 33% more natural gas reserves, 32% more light oil reserves and 16% more heavy oil reserves.

The properties produce approximately 1,650 boe/d, 5,400 Mcf/d and 90 bbl/d of natural gas liquids. Total reserves are estimated to be 7.1 MMboe on an established (proved plus 50% probable) basis, with two-thirds in crude oil and one-third in natural gas.

The acquisition, which is scheduled to close July 26, is expected to increase Advantage’s established reserve life index by 14% to 8.1 years, said the company. The reserves were acquired at a cost of C$8.17/boe and approximately C$35,200/boe/d. Cash flow is estimated to be C$14.1 million, equating to a cash flow multiple of 4.1.

“We have begun to execute our business plan of acquiring high quality, long-life light oil and natural gas properties,” said CEO Kelly Drader. “This transaction will strengthen and diversify our reserve base while significantly enhancing the Fund’s long-term cash flow. Additionally, the assets acquired provide opportunities for significant near-term development upside through modest capital expenditures.”

Advantage was known as Search Energy Corp. before it was reorganized earlier this year. The reorganization converted Search into a trust entity that distributes most of its cash flow to trust unitholders. As a trust, exposure is minimized on exploration risk, allowing the company to focus on growth through the acquisition and development of producing oil and natural gas properties. Advantage is managed through a privately held management company controlled by Drader and Gary Bourgeois. Both worked for Enerplus Group before joining Advantage.

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