TIDMCOPL
RNS Number : 3895M
Canadian Overseas Petroleum Ltd
21 January 2021
Canadian Overseas Petroleum Limited
Secures Term Sheet for up to US$65 million Senior Credit
Facility
Calgary, Canada & London, United Kingdom, January 21, 2021 -
Canadian Overseas Petroleum Limited ("COPL" or the "Company") (XOP:
CSE) & (COPL: LSE), an international oil and gas exploration
and development company, today announces that:
-- The Company has signed a Term Sheet for a US$65 million
Senior Credit Facility ("Credit Facility" or "Facility") with a US
based Global Investment Firm (the "Lender") to finance the closing
of its acquisition of Atomic Oil and Gas LLC ("Atomic") and its
related entities announced on December 16, 2020. The facility has a
term of four years and is subject to typical lending conditions
through its term.
-- The Facility has a base size of $45 million, with an
additional, or "accordion", $20 million to fund future development
at the sole discretion of the lender.
-- The terms of the Facility are market competitive.
Closing of the Credit Facility, which is not yet legally
binding, is expected on or about the week of February 15, 2021 and
is subject to typical closing conditions, which include entering
into a formal Lending Agreement. At closing, draw down of the
Credit Facility would allow the Company to complete the acquisition
of Atomic and its related entities.
Arthur Millholland, President and CEO, commented : "We look
forward to the completion of the Atomic acquisition which will be
materially value enhancing to COPL, providing an immediate and
growing revenue stream from day one. Crude oil prices have
increased significantly since we entered into the transaction thus
enhancing the overall value of the proposition. Working with our
new colleagues we plan to accelerate the production profile from
the Atomic assets. This represents a step change in the strategic
growth opportunities open to COPL and we look to the future with
renewed confidence."
Ryan Gaffney, CFO, added: "Securing this credit facility term
sheet is a key milestone as it means we will be fully funded and
enables us to complete the Atomic acquisition. The quality of the
assets we are acquiring has allowed the Company to attract the debt
necessary to complete under better terms than other proposals."
Highlights of the transaction to COPL
-- The low crude oil price, which initially enabled COPL to
entertain the transaction, has increased significantly which
enhances the overall value;
-- The acquisition has a high NPV asset at a price well below
traditional metrics: Proved(P1) value of $101.7mm (net of
royalties); Proved + Probable(P2) value of $185.8mm (net of
royalties);
-- The acquisition presents a high ROI > 50%; $2.18/bbl
acquisition cost on P2 reserves vs a value of $7.52/bbl at NPV10%.
(net of royalties);
-- COPL receives material leverage via the transaction, due to enhanced scale and funding
-- The new enlarged team will capitalise on the Company's
existing technical resources combined with operational
expertise.
Advisors
-- M&A and Debt Advisor: Eight Capital; Calgary, Alberta, Canada
-- Debt Advisor: ERG Capital Partners (US) LLC, South Norwalk, CT, USA
-- Legal Advisors: McCarthy Tétrault; London, United Kingdom,
Calgary, Alberta, Canada; Davis Graham & Stubbs LLP; Denver,
Colorado, USA
About Atomic
Atomic is a closely-held private oil and gas company
incorporated under the laws of the State of Colorado. Atomic's
assets are located in Powder River Basin in the State of Wyoming,
USA where it holds operated interests in 52,258 acres (gross) of
contiguous leasehold. There are two oil production Units within the
lease block: the Barron Flats Shannon Miscible Flood Unit (57.7%
WI) and the Cole Creek Unit (66.7%), as well as one unitized
exploration area - the Barron Flats Federal Unit (deep). Atomic has
two affiliates: The Southwestern Production Corp, the operating
entity; and PipeCo, a midstream company holding the pipeline and
facility assets.
Benefits to COPL from the Atomic acquisition
-- COPL is acquiring 31.1 mm Barrels of Oil Equivalent ("BOE")
(24.7 mm BOE net after royalties) of Proved and Probable Reserves
("2P") (Ryder Scott Reserve Report dated 1(st) October 2020 of
Atomic's Oil and Gas Reserves (the "Ryder Scott Report"), a summary
of which can be found on the Company's Press Release dated December
16, 2020.
-- Atomic has two operated oil fields: the Barron Flats Shannon
Unit (57.7% WI) and Cole Creek Unit (66.7% WI) located in the
Powder River Basin in the State of Wyoming, USA:
-- Oil producing assets are at the beginning of their 40+ year
life with increasing production to a future production plateau.
-- Current production rate of 1,400 bbls / d (gross) rising to
5,000 bbls/d (gross) in 2022 and c.7,000 bbls/d (gross) in 2026 (2P
reserve case, Ryder Scott Report).
-- Produced crude oil is light (40degAPI) and sweet.
-- Barron Flats Shannon Unit (57.7% WI) : Natural Gas and
Propane Miscible Flood commenced December 2019. Production
increased from c. 200 bbls/d (gross) to 1400 bbls/d (gross) from
2017 to Sept 2020 with a forecast 2P production rate plateau of
5000 bbls/d (gross) in 2022 (Ryder Scott Report).
-- Cole Creek Unit (66.7% WI) : Current field limits defined by
drilling, Miscible Flood to be commenced upon plateau of Barron
Flats Shannon Unit production. Forecast production rate plateau of
c. 3,500 bbls/d (gross) under the 2P reserves case (Ryder Scott
Report) in 2026.
-- The Atomic assets have new infrastructure and direct access
to pipeline with no legacy abandonment or reclamation
liabilities.
-- The Barrons Flat facilities are state-of-the-art,
environmentally responsible facilities with zero gas flaring,
minimal methane emissions, with required electricity sourced from
an adjacent wind farm:
-- Produced associated gas is reinjected into the reservoir
along with the purchased natural gas and propane miscible flood
injection stream.
-- The opportunity to undertake this acquisition became
available only as a result of the Covid-19 environment and the drop
in oil prices during 2020.
-- The acquisition has a high NPV asset at a price well below
traditional metrics : Proved(P1) value of $101.7mm (net of
royalties); Proved + Probable(P2) value of $185.8mm (net of
royalties).
-- Note: a summary of the Ryder Scott Report in accordance with
Canadian Oil and Gas Evaluation Handbook Guidelines (COGEH) is
located within COPL's December 16, 2020 press release.
-- Note: The valuation in the Ryder Scott Report dated October
1, 2020 was based on WTI pricing for 2020 of $39/bbl. Current WTI
oil prices are >$50/bbl. The WTI oil price forecast for the
valuation is presented in the summary of the Ryder Scott Report
located within the COPL December 16, 2020 press release.
-- The acquisition presents a high ROI > 50%; $2.18/bbl
acquisition cost on P2 reserves vs a value of $7.52/bbl at NPV10%.
(net of royalties)
-- COPL receives material leverage via the transaction, due to enhanced scale and funding.
-- On completion, the operative staff of Southwestern Production
Corp will join the COPL team thus maximizing our existing technical
resources with their operational expertise.
About COPL
COPL is an international oil and gas exploration, development
and production company actively pursuing opportunities in the
United States through the acquisition of Atomic Oil and Gas LLC,
and in sub-Saharan Africa through its ShoreCan joint venture
company in Nigeria, and independently in other countries.
For further information, please contact:
Mr. Arthur Millholland, President & CEO
Canadian Overseas Petroleum Limited
Tel: + 1 (403) 262 5441
Cathy Hume
CHF Investor Relations
Tel: +1 (416) 868 1079 ext. 251
Email: cathy@chfir.com
Charles Goodwin
Yellow Jersey PR Limited
Tel: +44 (0) 77 4778 8221
Email: copl@yellowjerseypr.com
The Common Shares are listed under the symbol "XOP" on the CSE
and under the symbol "COPL" on the London Stock Exchange.
This news release contains forward-looking statements. The use
of any of the words "initial, "scheduled", "can", "will", "prior
to", "estimate", "anticipate", "believe", "should", "forecast",
"future", "continue", "may", "expect", and similar expressions are
intended to identify forward-looking statements. The
forward-looking statements contained herein are based on certain
key expectations and assumptions made by the Company, including,
but not limited to, the ability to finalise the necessary funding
for completion of the Atomic acquisition and financing for
continued operations, delays or changes in plans with respect to
exploration or development projects or capital expenditures.
Although the Company believes that the expectations and assumptions
on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements since the Company can give no assurance that they will
prove to be correct since forward-looking statements address future
events and conditions, by their very nature they involve inherent
risks and uncertainties most of which are beyond the control of
Canadian Overseas Petroleum Ltd. For example, the uncertainty of
reserve estimates, the uncertainty of estimates and projections
relating to production, cost overruns, health and safety issues,
political and environmental risks, commodity price and exchange
rate fluctuations, changes in legislation affecting the oil and gas
industry could cause actual results to vary materially from those
expressed or implied by the forward-looking information.
Forward-looking statements contained in this news release are made
as of the date hereof and Canadian Overseas Petroleum 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.
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