Bellamont Exploration Ltd.
TSX VENTURE : BMX.A
TSX VENTURE : BMX.B

Bellamont Exploration Ltd.

November 04, 2009 08:44 ET

Bellamont Exploration Ltd. Announces Peace River Arch Core Area Light Oil Acquisition, a $10 Million Bought Deal Financing and a $2 Million Private Placement Financing

CALGARY, ALBERTA--(Marketwire - Nov. 4, 2009) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Bellamont Exploration Ltd. (the "Corporation" or "Bellamont") (TSX VENTURE:BMX.A) (TSX VENTURE:BMX.B) is pleased to announce that it has entered into an agreement to acquire assets located in the Corporation's Peace River Arch core area (the "Acquisition"). In addition, the Corporation announces that it has entered into a $10 million bought deal financing and a $2 million private placement financing.

ACQUISITION

The Acquisition assets are located in the central area of the Peace River Arch adjacent to the Corporation's Sinclair and Saddle Hills properties. Current production from the properties is approximately 210 boe/d; comprised of 164 bbl/d of high quality light gravity (40 degrees API) oil and 279 mcf/d of natural gas, 80% of which is operated. The purchase price for the assets is $17,150,000, comprised of $14,000,000 in cash and 5,080,000 Bellamont Class A shares issued to the vendor, Storm Exploration Ltd., at a deemed price of $0.62 per share. The Agreement is effective November 1, 2009 and is expected to close on or before December 1, 2009. Highlights of the Acquisition are as follows:

  • Accretive on all key metrics;
  • Estimated proved plus probable reserves of approximately 1,156,000 boe (1), 90% of which is light gravity oil producing from the Doe Creek Formation;
  • Excellent netback, estimated to be $38.48/boe , based on US$75.00 /bbl WTI (CDN $80.54 Edm) and US$4.00/mmbtu Nymex (CDN$3.69 AECO);
  • Acquisition cost of $14.83/boe (proved plus probable);
  • 2.6 recycle ratio;
  • Stable, predictable low decline production;
  • Long life reserves (15.2 year RLI);
  • Ownership in oil and gas processing facilities including a company operated battery that treats 75% of the acquired production volumes;
  • Near term drilling opportunities;
  • Long term waterflood upside, with potential to double the acquired reserves over time.
  1. Based on 1,222,000 boe of proved plus probable reserves as of December 31, 2008, as assessed by a combination of the Corporation's and the Vendor's independent engineering firms and adjusted for production up to November 1, 2009.

BOUGHT DEAL FINANCING

The Corporation is pleased to announce that it has entered into a bought deal financing agreement with a syndicate of underwriters led by FirstEnergy Capital Corp. and including GMP Securities L.P., RBC Capital Markets, National Bank Financial and J.F. Mackie & Company (collectively, the "Underwriters") to issue 13,000,000 Subscription Receipts ("Receipts") at a price of $0.62 per Receipt and 2,750,000 Class A shares on a flow-though basis ("Flow Through Shares") at a price of $0.75 per Flow Through Share, for gross proceeds of $10,122,500 (the "Offering"). In addition the Underwriters have been granted an over-allotment option, exercisable for a period of 30 days following closing of the Offering, to purchase an additional 1,950,000 Receipts, at $0.62 per Receipt.

Each Receipt will entitle the holder thereof, without further payment of any additional consideration or further action, to receive one Class A Share of Bellamont upon the completion of the Acquisition.

The Receipts and Shares shall be offered in all provinces of Canada (other than Quebec) by way of short form prospectus, and in the U.S. on a private placement basis pursuant to exemptions from registration requirements. The closing of the offering is expected to occur on November 26, 2009, and is subject to certain conditions including the approval of the TSX Venture Exchange and the receipt of necessary regulatory approvals.

PRIVATE PLACEMENT FINANCING

The Corporation has also entered into a separate private placement financing pursuant to which the Corporation will issue 2,800,000 million Class A shares on a flow-through basis at an average price of $0.714 per share for gross proceeds of $2,000,000 ("the "Private Placement"). The Private Placement provides that the Corporation will incur and renounce qualifying expenditures for the entire amount of the gross proceeds (the "Commitment Amount"), such that at least one half of the Commitment Amount will be renounced as Canadian Exploratory Expenses while the remaining amount will be renounced as Canadian Development Expenses, as such terms are defined in the Income Tax Act (Canada). Closing of the private placement is expected to occur on November 6, 2009.

STRATEGIC RATIONALE

The Acquisition is consistent with the Corporation's mandate to acquire, explore and exploit high working interest, high quality, large oil/gas in place reservoirs. The Acquisition properties have excellent synergy with Bellamont's existing assets as the Corporation is currently operating Doe Creek production in both the Sinclair and Saddle Hills Areas. Upon closing, the Corporation's Doe Creek production will increase from 160 boe/d to 320 boe/d and the facilities included in the Acquisition are likely to result in reductions in operating costs on our existing properties. Due to the excellent netback of the Acquisition properties, Bellamont's corporate netback will improve by approximately 30%.

The Doe Creek Formation has been water flooded extensively in the Peace River Arch, with the Energy and Resources Conservation Board predicted recovery factors averaging approximately 25% and some forecasted to be as high as 45%. The Corporation believes that a recovery factor of 30% on the Acquisition lands is possible over time, which if achieved, would effectively double the bookable reserves net to the Corporation from the Acquisition. Development plans at Saddle Hills, which is currently being water flooded, include drilling an additional horizontal well and converting one existing well to a water injector. At Sinclair, Bellamont plans to drill two horizontal wells and implement a water flood by converting two existing wells to water injectors.

In addition to the Saddle Hills and Sinclair pools, the Acquisition assets have 2 (0.5 net) horizontal drilling locations on a section of land offsetting a recent successful Doe Creek horizontal well that is producing at an initial rate in excess of 300 bbl/d. The first of these two wells was spud on October 31, 2009.

OTHER DEVELOPMENTS

At Grimshaw, the Corporation has spud the first of two (1.4 net) follow up wells to the previously announced horizontal Montney oil well at 4-29-83-23-W5 (the "4-29"), which had test rates of 400 bbl/d, and is expected to produce at an initial rate of 150 bbl/d. Bellamont has a 100% working interest in the 4-29 well up to payout and a 70% working after payout. Construction of production facilities for all the wells is underway. The 4-29 well is expected to be on production in mid November. The two new wells, which will be drilled horizontally and completed via multi-staged fracs, are expected to be on production by year end. Bellamont owns an average 76.0% working interest (after payout of the 4-29 well) in 10 contiguous sections (6400 acres) of land in the Grimshaw area.

In Valhalla, the Corporation has licensed to drill a 100% working interest horizontal Fahler development well and complete it with multi-staged fracs. The Corporation expects to commence drilling operations on this well by mid November. Bellamont has now successfully re-entered three vertical wells in Valhalla with average initial production rates of approximately 800 mcf/d per well. Bellamont expects that a successful horizontal well with multi-staged fracs could have an initial production rate of 3 mmcf/d. Currently, the Corporation has an average working interest of 89% in 15 gross sections (13.4 net) and the right to earn an additional 15 sections (7.5 net) under several farm-in agreements. By drilling the new horizontal well, Bellamont will earn a 100% working interest in an additional 2.5 sections, subject to a non convertible overriding royalty.

All of the wells to be drilled by Bellamont (including the 4-29 well) will qualify for the Alberta Government's royalty reduction program, which provides for a 5.0% maximum royalty for the first 12 months of production, or 50 thousand barrels of oil production or 500 million cubic feet of gas production, whichever is reached first.

At Rycroft, the Corporation is planning to shoot a 25 square mile three dimensional seismic program over 14.5 gross sections of company owned lands. The Corporation's land base holds multi zonal potential for oil in the Montney and Charlie Lake Formations and natural gas in the Dunvegan, Gething, Bluesky, Kiskatinaw and Doig. In particular, the Corporation expects the seismic program will be beneficial in following up its Montney oil and Gething natural gas discoveries in the area. Bellamont expects to commence the program imminently and it will be interpreted by year end, enabling the Corporation to drill in the first quarter of 2010.

The Corporation has suspended a net total of 730 mcf/d (130 boe/d) from non-core properties due to low natural gas prices. The Corporation has recently closed an agreement to sell 70 boe/d of these suspended volumes and will resume the other 60 boe/d of suspended volumes in 2010 when natural gas prices are forecasted to recover.

INCREASED BUDGET AND GUIDANCE

As a result of the Acquisition and the financing, the Corporation has revised its 2009 capital budget to $32.5 million. Pro-forma the Acquisition, the Corporation expects to exit 2009 at approximately 1,125 boe/d of production. Based on risked success of the remaining capital program for 2009, the Corporation expects to average 1,350 boe/d (approximately 40% light oil) in the first quarter of 2010.

The Corporation's balance sheet remains strong with an estimated $4.35 million of positive working capital as of September 30, 2009 and a $7.25 million unutilized line of credit. Bellamont is currently reviewing its line of credit facility with its lender and expects an increase of borrowing capacity following the Closing of the Acquisition. As a result, Bellamont will have the financial flexibility to pursue additional low risk development opportunities on its land base. For more information regarding the company, please refer to the new corporate presentation on Bellamont's webpage at www.bellamont.com.

Bellamont is an emerging oil and gas company focused on the acquisition, exploration, development and production of oil and natural gas in western Canada and trades on the TSX Venture Exchange under the symbols "BMX.A" and "BMX.B". The Corporation has 56,280,781 Class A shares and 1,012,000 Class B shares outstanding.

Bellamont trades on the TSX Venture Exchange under the symbols "BMX.A" and "BMX.B".

This document contains forward-looking statements. More particularly, this document contains statements concerning the Corporation's future production levels and planned exploration, development and acquisition activities.

The forward-looking statements are based on certain key expectations and assumptions made by Bellamont, including expectations and assumptions concerning prevailing commodity prices and exchange rates, availability and cost of labour and services, the timing of receipt of regulatory approvals, the performance of existing wells, the success obtained in drilling new wells, the performance of new wells, pool recovery factors, and the sufficiency of budgeted capital expenditures in carrying out the Corporation's planned activities.

Although Bellamont 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 because Bellamont 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. Actual results could 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 (e.g., 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 reserve estimates; the uncertainty of pool recovery factors, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. These risks are set out in more detail in the Corporation's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Bellamont 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.

Oil and Gas Advisory

This press release contains disclosure expressed as "Boe/d". All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Bellamont Exploration Ltd.
    Steve Moran
    President and Chief Executive Officer
    (403) 802-1355
    (403) 802-1315 (FAX)
    www.bellamont.com
    or
    Bellamont Exploration Ltd.
    200, 1324-17th Avenue S.W.
    Calgary, Alberta T2T 5S8