Calgary-based Progress Energy Trust on Monday announced the acquisition of some assets in northeast British Columbia and northwest Alberta, which are adjacent to its core Deep Basin and Foothills properties, from a private company for total consideration of C$526 million. Subsequent to the transaction, Progress sold a partial interest in the Foothills assets to ProEx Energy Ltd., a company it formed in 2004, for C$134.3 million, putting its portion of the acquisition at C$390.3 million.
Both transactions are expected to close by April 2.
Current production from the new Progress properties is estimated at 6,400 boe/d, 95% weighted to natural gas. Proved plus probable reserves are estimated at 17 million boe. The transaction, which includes 250,000 net undeveloped acres in the company’s core regions, will bring its total land position to more than 600,000 net undeveloped acres.
“We have demonstrated discipline while the acquisition market was relatively overheated and concentrated on drilling which has resulted in three-year average finding and development cost efficiencies of C$10.63/boe,” said CEO Michael Culbert. “We have consistently told unitholders that we would be patient and wait for the right acquisition opportunity where the assets had a similar pedigree to what we own at present. This opportunity meets our criteria because of its gas-focused assets, which hold significant growth potential in large contiguous land blocks within our operating areas.”
Progress said there is 3-D seismic coverage on more than 1,700 square kilometers and 2-D data on more than 4,200 kilometers being bought. More than 90% of the production is operated. The acquisition is projected to be accretive to Progress on cash flow and production per unit in 2007. The full accretive impact of the acquisition will be realized in 2008 on a per-unit of reserves, production and cash flow.
“We have developed an extensive working knowledge of the Deep Basin and Foothills regions, which gives us the confidence in the tremendous upside potential of these assets,” said Culbert.
With the purchase, Progress expects its 2007 average production to increase by 25% to 22,000-24,000 boe/d. Exit production in 2007 is expected to be 24,000-26,000 boe/d, up 35% from the exit rate in 2006.
ProEx, which has a technical services agreement with Progress that allows full access to Progress management, said its new assets complement its existing operations in the BC Foothills.
“Since our inception, our focus has been on building the underlying value of each share of ProEx and to this point we have accomplished this entirely through the drill bit,” said ProEx CEO David Johnson. Johnson is also chairman of Progress. “The assets we are acquiring today are a hand-in-glove fit with our existing producing assets in northeast British Columbia and will expand our exploration inventory and growth potential substantially.”
ProEx estimates current production of the BC assets is 2,200 boe/d, 95% weighted to gas. Proved plus probable reserves are 6.6 million boe. The deal will add 80,000 net undeveloped acres to ProEx’s leasehold, bringing total undeveloped land under control to 365,000 acres. The acquisition includes more than 800 square kilometers of 3-D seismic coverage and 2,000 kilometers of 2-D data.
ProEx forecasts 2007 average production to be 10,000-10,500 boe/d. Exit 2007 production is expected to range between 12,000-13,000 boe/d. With the acquisition, ProEx will increase its 2007 exploration and development capital budget to C$150 million from C$120 million.
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