Birchcliff Energy Ltd.

Birchcliff Energy Ltd.

September 27, 2007 09:17 ET

Birchcliff Energy Ltd. Announces the Closing of Its Acquisition of Strategic Assets in the Peace River Arch Area of Alberta and $115 Million Bought Deal Financing

Birchcliff Also Announces the Spudding of Its First Montney/Doig Horizontal Gas Well

CALGARY, ALBERTA--(Marketwire - Sept. 27, 2007) -


Birchcliff Energy Ltd. ("Birchcliff" or the "Company") (TSX:BIR) is pleased to announce that it has completed its previously announced purchase from Compton Petroleum Corporation of oil and natural gas assets (the "Worsley Property") in the Peace River Arch area of Alberta for a total cash consideration of approximately $262 million after interim closing adjustments and related costs (the "Acquisition"). The Acquisition was financed by the issuance of 30,263,170 common shares for gross proceeds of $115,000,046, an increase in its current revolving credit facilities to $200 million and a new $100 million non-revolving credit facility. The Acquisition is effective July 1, 2007.


The Worsley Property is located in the Peace River Arch area of Alberta approximately 100 miles north of Grande Prairie, which is in close proximity to Birchcliff's existing assets. Current production is approximately 3,400 BOE per day, consisting of 2,580 BBLS per day of 38 degrees light oil and natural gas liquids and 4.9 MMCF per day of natural gas. The Worsley Property is characterized by large contiguous blocks of mainly 100% working interest lands containing a very large Charlie Lake light oil pool. Essentially, all of the production is operated and the related infrastructure is owned.

Jeff Tonken, President & C.E.O. of Birchcliff commented,

"Birchcliff is very pleased to add such a high quality asset to our portfolio of properties in the Peace River Arch area. The cash flow from this long life asset will allow Birchcliff to better position itself strategically within the Peace River Arch in order to maximize its natural gas opportunities when the timing is appropriate."


In order to ensure the stability of its cash flows from its oil properties, Birchcliff has entered into the following hedging contracts for Birchcliff's light oil production for the remainder of 2007 and for 2008, based on average daily NYMEX US$ WTI prices.

Bbls/d Strike (US$)
Floor Ceiling
------- ---------
Nov. 1/07 to Dec. 31/07 (costless collar) 2,500 $65.00 - $81.00
2008 Calendar Year (costless collar) 1,000 $67.50 - $79.10
Q1 2008 (costless collar) 1,000 $67.50 - $81.40

Birchcliff may continue to hedge its light oil production on an ongoing basis but has no present intention of hedging its natural gas.


The $100 million equity financing of 26,315,800 common shares at $3.80 per common share was purchased by a syndicate of underwriters jointly led by GMP Securities L.P. and Scotia Capital Inc., which included Cormark Securities Inc., HSBC Securities (Canada) Inc. and Raymond James Ltd. The syndicate of underwriters has exercised their overallotment option to purchase an additional 3,947,170 common shares for an additional $15 million of gross proceeds. The total number of common shares issued is now 30,263,170 for total gross proceeds of $115 million. After closing, Birchcliff has 94,472,583 common shares outstanding.


In conjunction with the Acquisition, the Corporation entered into an Amended and Restated Syndicated Credit Agreement with a syndicate of banks that increased the Corporation's revolving credit facilities to a maximum limit of $200 million. The remaining terms of the revolving credit facilities remain essentially the same but the interest rates applicable to the Corporation's drawn loans are based on a pricing grid and will increase as a result of the increased ratio of outstanding indebtedness to earnings before interest, taxes, depreciation and amortization.

Birchcliff has also drawn down the full amount its $100 million non-revolving credit facility that matures 1 year after closing of the Acquisition. The Pro forma June 30, 2007 total debt as per Birchcliff's Short Form Prospectus was $263.3 million. This calculation was assuming the overallotment was not exercised. The net proceeds on the overallotment are approximately $14.3 million and would reduce the June 30, 2007 pro forma debt to $249 million.


The spudding of our first horizontal well is a significant event in the evolution of our Montney/Doig Resource gas play. To date Birchcliff has established a vast land position, exceeding 35 net sections of land. Through the drilling of 22.0 gross (18.5 net) vertical wells we have delineated a very large original gas in place accumulation in the Montney and Doig formations. These vertical wells include 5 wells that are part of a large, previously announced, farm-in, that have earned 10 (7.0 net) sections. We are now focusing our efforts on developing and exploiting this large gas in place resource.

Industry has been rapidly advancing new technology to maximize production rates and recovery factors from various resource plays. Specific to our Montney/Doig play, Encana, ARC Resources Energy Trust and Canadian Natural Resources have been successfully using new horizontal drilling and completion techniques. These industry players have quoted costs of $4 to $5 million per well (essentially, 2 times the cost of a vertical well) resulting in 3 to 5 times the production and 3 to 5 times the ultimate recoverable reserves achievable with vertical wells. A key development for the horizontal well design is the application of multi-stage fracture completion techniques.

Recently we spudded our first horizontal well and expect it to be drilled cased and on production before year end. We are also currently planning the logistics, operational optimization and regulatory applications for four additional horizontal locations planned for drilling in the first half of 2008.

Birchcliff expects to exit 2007 at approximately 10,300 to 10,500 boe per day.

We encourage anyone interested in further details on our Company to visit our website at



Certain information set forth in this press release contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Birchcliff's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the competition for qualified personnel and management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect and, as such, undue reliance should not be placed on forward-looking statements. Birchcliff's actual results, performance or achievement could differ materially from those expressed in or implied by these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will derive therefrom. Except as required by law, Birchcliff disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

BOE Conversions: The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent ("6:1"). A boe conversion ratio of 6:1 is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Birchcliff is a publicly traded company that trades on the TSX Exchange under the symbol "BIR".

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Birchcliff Energy Ltd.
    Jeff Tonken
    President and Chief Executive Officer
    (403) 261-6401
    (403) 261-6424 (FAX)
    Birchcliff Energy Ltd.
    Bruno Geremia
    Vice President and Chief Financial Officer
    (403) 261-6401
    (403) 261-6424 (FAX)
    Birchcliff Energy Ltd.
    Jim Surbey
    Vice President, Corporate Development
    (403) 261-6401
    (403) 261-6424 (FAX)