FOR: LEUCROTTA EXPLORATION INC.
TSX VENTURE SYMBOL: LXE
Date issue: April 05, 2017
Time in: 4:08 PM e
Attention:
CALGARY, ALBERTA–(Marketwired – April 5, 2017) –
NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION
IN THE UNITED STATES
Leucrotta Exploration Inc. (“Leucrotta” or the “Company”) (TSX VENTURE:LXE) is
pleased to announce that it has entered into agreements with public Alberta
based oil and gas companies to acquire 18.5 net sections of land located within
Leucrotta’s higher confidence mapping area(1) encompassing 116 gross (105 net)
sections of the Lower Montney Turbidite Light Oil Resource Play (the “Lands”)
(see detailed Press Release dated April 4, 2017) for $36 million (the
“Acquisition”). The Lands are comprised of 18 sections of 100% working interest
Crown lands and one 50% working interest section (Leucrotta currently being the
other 50% working interest partner). The Lands increase Leucrotta’s gross
acreage land base within Leucrotta’s higher confidence mapping area(1) by
approximately 18%.
The Lands are adjacent and intertwined with Leucrotta’s lands and gathering
system and are offsetting or in immediate vicinity of several significant Lower
and Upper Montney wells, including Leucrotta’s recently announced 8-22 Lower
Montney Turbidite Light Oil well as well as Leucrotta’s original Doe
development block that has been drilled for both liquids-rich gas in the Upper
and Lower Montney.
Leucrotta’s Lower Montney Light Oil wells, using type-well curve data used by
GLJ Petroleum Consultants Ltd. (“GLJ”) in preparing the GLJ’s reserves report
in respect of the Company’s reserves effective as at December 31, 2016, have an
average recovery of 669 mboes and generate an average NPV10 (as defined under
“Oil and Gas Metrics” under “Reader Advisories and Forward-Looking
Information”) of $7.1 million using GLJs January 2017 price forecast.(2) In
addition, based on the aforementioned GLJ type-well curve data and GLJ’s
January 2017 price forecast, Leucrotta’s Lower Montney Liquids-rich Gas wells
have an average recovery of 1,055 mboes and an average NPV10 of $8.7 million.(2)
Leucrotta has mapped 16 of the 18.5 sections in the Light Oil window and 2.5
sections in the liquids-rich gas window. This represents a possible increase in
drilling inventory of 128 Lower Montney Light Oil Wells and 10 Lower Montney
Liquids-rich Gas Wells using 8 wells per section for oil and 4 wells per
section for gas. The Acquisition will increase Leucrotta’s total Lower Montney
Oil drilling locations to 768 (20% increase) and Lower Montney Liquids-rich Gas
locations to 110 (10% increase).(3)
The Acquisition will be funded with a portion of the proceeds of a $50 million
bought deal equity financing (the “Financing”) co-led by Haywood Securities
Inc. and National Bank Financial Inc., details of which are provided below
under the heading “Bought Deal Financing” in this press release.
ACQUISITION OVERVIEW & STRATEGIC RATIONALE
Leucrotta has signed definitive agreements to acquire 18.5 net sections of
Montney Land in its Doe/Mica Core area for a total purchase price of $36
million. The Lands have the following characteristics and/or anticipated
benefits to the Company:
/T/
— Located directly adjacent Leucrotta’s Lower Montney Turbidite Resource
play as more fully described in Leucrotta’s press release dated April 4,
2017, a copy of which is available under Leucrotta’s SEDAR profile at
www.sedar.com.
— Leucrotta has drilled wells directly adjacent to a portion of the Lands
and believes the Company could book additional reserves on a portion of
the Lands. Montney competitors have also drilled successful wells in the
immediate vicinity of the Lands for both Upper and Lower Montney.
— Leucrotta’s 100% owned and operated pipeline infrastructure has been
constructed through parts of the Lands creating easier access and
improved half-cycle economics on the Lands.
— Majority of the Lands are located in the Oil Window of the Lower Montney
Turbidite Play as mapped internally by the Company.
— Ownership of Lands will eliminate drilling offset boundaries thereby
improving the effectiveness of the well spacing for both current and
acquired Lands.
— Lands materially add to the resource base captured by Leucrotta in its
core Doe/Mica area.
/T/
BOUGHT DEAL FINANCING
In connection with the Acquisition, Leucrotta has entered into an agreement
with a syndicate of underwriters, co-led by Haywood Securities Inc. and
National Bank Financial Inc. (collectively, the “Underwriters”), pursuant to
which the Underwriters have agreed to purchase for resale to the public, on a
bought deal basis: (i) 20,000,000 common shares of the Company (“Common
Shares”) at a price of $2.25 per Common Share for gross proceeds from the
offering of Common Shares of $45 million (the “Common Share Financing”); and
(ii) 1,852,000 Common Shares to be issued on a flow-through basis in respect of
Canadian Exploration Expenses (“CEE”) (the “Flow-Through Shares”) under the
Income Tax Act (Canada) at a price of $2.70 per Flow-Through Share for gross
proceeds from the offering of Flow-Through Shares of approximately $5 million
(the “Flow-Through Share Financing”). The aggregate gross proceeds from the
Common Share Financing and Flow-Through Share Financing will be approximately
$50 million (the “Financing”).
The Company shall, pursuant to the provisions of the Income Tax Act (Canada),
incur eligible CEE (the “Qualifying Expenditures”) after the closing of the
Financing and prior to December 31, 2018 in the aggregate amount of not less
than the total amount of the gross proceeds raised from the issue and sale of
the Flow-Through Shares. The Company shall renounce the Qualifying Expenditures
so incurred to the purchasers of the Flow-Through Shares effective on or prior
to December 31, 2017.
The Common Shares and Flow-Through Shares to be issued under the Financing will
be distributed by way of a short form prospectus in British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario and New Brunswick. A portion of the Common
Share Financing may be conducted on a private placement basis in the United
States via Rule 144A to Qualified Institutional Buyers only under the U.S.
Securities Act of 1933, as amended and certain other jurisdictions outside of
Canada as the Company and the Underwriters may agree on a private placement
basis. No prospectus will be required to be filed in any jurisdiction other
than the Canadian jurisdictions.
Completion of the Acquisition and the Financing are subject to certain
conditions including the receipt of all necessary regulatory approvals,
including the approval of the TSX Venture Exchange and the securities
regulatory authorities, as applicable. The Financing is expected to close on or
about April 26, 2017 or such other date as agreed upon between Leucrotta and
the Underwriters, but in any event no later than May 15, 2017. The Acquisition
is expected to close on or about May 31, 2017.
ADVISOR
National Bank Financial Inc. acted as strategic advisor to Leucrotta with
respect to the Acquisition.
ABOUT LEUCROTTA EXPLORATION INC.
Leucrotta Exploration Inc. is a Montney focused producer with lands located in
the Dawson-Sunrise area in northeast British Columbia. Leucrotta’s current
acreage in the area is approximately 100,500 gross (90,200 net) acres or
approximately 157 gross (141 net) sections of Montney land. Current production
is approximately 3,000 boe/d (25% oil & NGLs). Leucrotta’s shares are listed on
the TSX Venture Exchange under the symbol “LXE”.
READER ADVISORIES AND FORWARD-LOOKING INFORMATION
NOTES:
(1) Leucrotta’s higher confidence mapping area is based on internal estimates
by management of the Company, estimated based on data collected by the Company
from its coring data collected and drilling programs conducted since inception
of the Company.
(2) Recovery is equivalent to EUR – Estimated Ultimate Recovery which is
defined as “those quantities of petroleum which are estimated, on a given date,
to be potentially recoverable from an accumulation, plus those quantities
already produced therefrom.”
The well economics presented in this press release are an internal estimate
prepared by a Qualified Reserves Evaluator (“QRE”) as defined in NI 51-101 (as
defined herein) and are based on an average of the proved plus probable type
curves used by GLJ for booked undeveloped horizontal wells in the Lower Montney
formation as per the year-end 2016 corporate reserves evaluation effective
December 31, 2016 prepared by GLJ in compliance with NI 51-101 and the COGE
Handbook. The curves represent an internal “best-estimate” expectation.
Type Curves – This Press Release contains references to type well, or “type
curve”, production and economics, which are derived, at least in part, from
available information respecting the well performance of other companies and,
as such, may be considered “analogous information” as defined in NI 51-101.
Production type curves are based on a methodology of analog, empirical and
theoretical assessments and workflow with consideration of the specific asset,
and as depicted in this presentation, is representative of The Company’s
current program, including relative to current performance. Some of this data
may not have been prepared by qualified reserves evaluators, may have been
prepared based on internal estimates, and the preparation of any estimates may
not be in strict accordance with COGEH. Estimates by engineering and geo-
technical practitioners may vary and the differences may be significant. The
Company believes that the provision of this analogous information is relevant
to the Company’s oil and gas activities, given its acreage position and
operations (either ongoing or planned) in the areas in question, and such
information has been updated as of the date hereof unless otherwise specified.
(3) Potential Drilling Locations – This press release discloses drilling
locations in four categories: (i) proved undeveloped locations; (ii) probable
undeveloped locations; (iii) unbooked locations; and (iv) an aggregate total of
(i), (ii) and (iii). Of the 768 total potential/possible Lower Montney oil
locations referenced in this press release, only the following have been
assigned reserves at December 31, 2016 as independently evaluated by GLJ, in
accordance with National Instrument 51-101 (“NI 51-101”):
/T/
— 1 Proved Undeveloped
— 2 Probable Undeveloped
/T/
The remaining 765 potential/possible locations are unbooked.
All of the additional 128 additional Lower Montney oil locations referenced in
this press release are unbooked locations and are included in the above total
of 768 locations.
Of the 110 total potential/possible Lower Montney liquids-rich gas locations
referenced in this press release, only the following have been assigned
reserves at December 31, 2016 as independently evaluated by GLJ, in accordance
with National Instrument 51-101 (“NI 51-101”):
/T/
— 4 Proved Undeveloped
— 6 Probable Undeveloped
/T/
The remaining 100 potential/possible locations are unbooked.
All of the additional 10 additional Lower Montney Liquids-rich gas locations
referenced in this press release are unbooked locations and are included in the
above total of 110 locations.
Unbooked locations are based on the Company’s prospective acreage and internal
estimates as to the number of wells that can be drilled per section. Unbooked
locations do not have attributed reserves or resources (including contingent
and prospective). Unbooked locations have been identified by management as an
estimation of the Company’s multi-year drilling activities based on evaluation
of applicable geologic, seismic, engineering, production and reserves
information. There is no certainty that the Company will drill all unbooked
drilling locations and if drilled there is no certainty that such locations
will result in additional oil and gas reserves, resources or production. The
drilling locations on which the Company will actually drill wells, including
the number and timing thereof is ultimately dependent upon the availability of
funding, regulatory approvals, seasonal restrictions, oil and natural gas
prices, costs, actual drilling results, additional reservoir information that
is obtained and other factors. While certain of the unbooked drilling locations
have been de-risked by drilling existing wells in relative close proximity to
such unbooked drilling locations, the majority of other unbooked drilling
locations are farther away from existing wells where management has less
information about the characteristics of the reservoir and therefore there is
more uncertainty whether wells will be drilled in such locations and if drilled
there is more uncertainty that such wells will result in additional oil and gas
reserves, resources or production.
Currency
All dollar figures are Canadian dollars unless otherwise noted.
Oil and Gas Metrics
This new release contains metrics commonly used in the oil and gas industry,
such as “NPV”, “BOE”, and “Half-cycle economics”. These terms do not have
standardized meanings or standardized methods of calculation and therefore may
not be comparable to similar measures presented by other companies. Readers are
cautioned that the information provided by these metrics, or that can be
derived from the metrics presented in this presentation should not be unduly
relied upon. The following oil and gas metrics have the following meanings as
used in this press release:
NPV10 – The term NPV10 as used in this press release refers to the Net Present
Value of the proved and probable reserves discounted at 10% which is the
present value of future cash flows minus the initial capital, discounted at 10%.
Boe – Barrel of Oil Equivalent. All boe conversions in the report are derived
by converting gas to oil at the ratio of six thousand cubic feet of natural gas
to one barrel of oil equivalent. Boe may be misleading, particularly if used in
isolation. A boe conversion rate of 1 Boe: 6 Mcf is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Readers are cautioned that
Boe may be misleading, particularly if used in isolation.
Half Cycle Economics – The term half-cycle economics as used in this press
release refers to economics of a project including drilling, completing and
tie-in of wells and excludes land, seismic and initial facility costs.
Forward-Looking Information
This press release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws. The use of any of
the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”,
“should”, “believe”, “intends”, “forecast”, “plans”, “guidance” and similar
expressions are intended to identify forward-looking statements or information.
More particularly and without limitation, this document contains
forward-looking statements and information relating to the terms of the
Financing, anticipated use of proceeds under the Financing, terms of the
Acquisition and anticipated benefits of the Acquisition to the Company. The
forward-looking statements and information are based on certain key
expectations and assumptions made by the Company, including expectations and
assumptions relating to prevailing commodity prices and exchange rates,
applicable royalty rates and tax laws, future well production rates, the
performance of existing wells, the success of drilling new wells, the
availability of capital to undertake planned activities and the availability
and cost of labour and services.
Although the Company believes that the expectations reflected in such
forward-looking statements and information are reasonable, it can give no
assurance that such expectations will prove to be correct. Since
forward-looking statements and information address future events and
conditions, by their very nature they involve inherent risks and uncertainties.
Actual results may differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to, the risks
associated with the oil and gas industry in general such as operational risks
in development, exploration and production, delays or changes in plans with
respect to exploration or development projects or capital expenditures, the
uncertainty of estimates and projections relating to production rates, costs
and expenses, commodity price and exchange rate fluctuations, marketing and
transportation, environmental risks, competition, the ability to access
sufficient capital from internal and external sources and changes in tax,
royalty and environmental legislation. The forward-looking statements and
information contained in this document are made as of the date hereof for the
purpose of providing the readers with the Company’s expectations for the coming
year. The forward-looking statements and information may not be appropriate for
other purposes. The Company undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
securities laws.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
This press release is not an offer of the securities for sale in the United
States. The securities have not been registered under the U.S. Securities Act
of 1933, as amended, and may not be offered or sold in the United States absent
registration or an exemption from registration. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the securities in any state in which such offer,
solicitation or sale would be unlawful.
– END RELEASE – 05/04/2017
For further information:
Leucrotta Exploration Inc.
Robert Zakresky
President and Chief Executive Officer
(403) 705-4525
(403) 705-4526 (FAX)
OR
Leucrotta Exploration Inc.
Nolan Chicoine
Vice President, Finance and Chief Financial Officer
(403) 705-4525
(403) 705-4526 (FAX)
www.leucrotta.ca
COMPANY:
FOR: LEUCROTTA EXPLORATION INC.
TSX VENTURE SYMBOL: LXE
INDUSTRY: Energy and Utilities – Oil and Gas
RELEASE ID: 20170405CC0072
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