PetroBakken Energy Ltd.

PetroBakken Energy Ltd.

March 02, 2010 08:03 ET

PetroBakken Announces Strategic Acquisition of a Cardium Focused Private Oil & Gas Company

CALGARY, ALBERTA--(Marketwire - March 2, 2010) - PetroBakken Energy Ltd. ("PetroBakken") (TSX:PBN) is pleased to announce that we have entered into an acquisition agreement (the "Agreement") with a private oil & gas company ("Privateco") with focused assets in the west Pembina Cardium play. Pursuant to the Agreement, PetroBakken has agreed to acquire all of the outstanding shares of Privateco (the "Transaction"). Consideration for the Transaction will be comprised of $88.7 million cash and the issuance of 5.7 million PetroBakken common shares. PetroBakken will also assume the net debt position of Privateco, estimated at $2 million at the end of 2009. Holders of 72% of the fully diluted common shares of Privateco have entered into agreements with PetroBakken to tender their shares in favour of the Transaction. The Transaction is anticipated to close before the end of April 2010.

Strategic Rationale

The Transaction further increases PetroBakken's operational presence and drilling inventory within the exciting Cardium light oil resource play and complements our strong growth platform centered on high-netback light oil resource plays. After closing the Transaction, and completion of the Result Energy Inc. acquisition, we will have:

  • Over 250 gross (180 net) sections of land within the Cardium light oil fairway, approximately 90% in west Pembina;
  • Over 500 net locations that are prospective for Cardium light oil;
  • Four rigs drilling Cardium light oil wells; and
  • Strategic, 100% owned facilities that are pipeline connected for both oil and gas, allowing new production to be brought on-stream quickly, and preserving our low operating cost advantage.

We are excited by the portfolio of opportunities that has been compiled within recent months, giving us exposure to this exciting light oil resource play. We have known for some time that the Cardium play contains significant resource potential, technically similar to the Bakken light oil resource play in southeast Saskatchewan. PetroBakken has been a leader in the development of the Bakken play having pioneered the use of many new technologies focused on maximizing oil recovery while drilling over 500 horizontal, multi stage fractured wells. This vast experience will provide significant benefits in developing our expanding base of Cardium lands.

Transaction Highlights

Privateco pursued a strategy of growing its exposure to the emerging Cardium light sweet crude oil resource play by assembling an asset base that includes:

  • Over 24 gross (23 net) sections of land in the core of the Cardium light oil fairway, including lands directly offset existing PetroBakken acreage, with some of the thickest reservoir on the west side of the Pembina Cardium field;
  • Four, 100% owned, pipeline connected facilities;
  • Current production of approximately 1,200 boepd (approximately 700 boepd from the Cardium);
  • Privateco has over 11 mmboe of proved plus probable reserves as at December 31, 2009; and
  • More than $55 million of tax pools.

Privateco has been executing an active drilling program with three new horizontal Cardium wells brought on stream since October 2009 and, with two rigs currently drilling, plans to have an additional six horizontal wells drilled and completed by spring break up (conditions permitting).

The Transaction

Gregg Smith, President and Chief Operating Officer of PetroBakken, commented, "We believe the Cardium play complements our current asset base and allows us to leverage our technical expertise gained in the Bakken and northeast British Columbia. This acquisition provides us with strategic assets that enhance our exposure to a high quality light oil resource and provides key infrastructure to accelerate the development of our expanding Cardium platform."

The Arrangement is subject to Privateco shareholder approval and customary regulatory, stock exchange, court, and other approvals. The Board of Directors of Privateco has unanimously approved the Transaction and recommended that the shareholders of Privateco approve the Transaction. Holders of 72% of the fully diluted common shares of Privateco have entered into agreements with PetroBakken pursuant to which they have agreed to tender their shares in favour of the Transaction. The Agreement prohibits Privateco from soliciting or initiating any discussion regarding any other transaction or sale of assets.

The Cardium Resource Play & 2010 Planned Drilling Activity

The Cardium at Pembina is an extensive reservoir considered to be the largest onshore light oil pool in North America. The Cardium formation has been producing oil and gas for over 50 years. Initial production from the Cardium horizon came as the result of successfully applying vertical fracture stimulation. As a result, the economic limits of drilling activity had been governed by the ability to produce from vertical wellbores. In recent years, the application of horizontal drilling and completion technology has enabled the limits of the play to be extended into what is now considered the Cardium Resource Play.

The Cardium horizon is typically a sandstone deposit encased in thick shale and is found across much of the Western Canadian Sedimentary Basin. Reservoir quality varies considerably across the basin as does the thickness and extent of the pay column. PetroBakken has focused its efforts on accumulating exposure to the Cardium in areas that have high quality reservoir and large potential accumulations in place due in part to the thickness of the reservoir.

Recent years have seen an increase of drilling within the Cardium and over 100 horizontal wells have been licensed to-date in 2010. Results have varied across the play, with Pembina area wells having initial production rates of approximately 250 bopd. Similarly, reserves vary across the play and are generally governed by thickness and reservoir quality.

PetroBakken intends to implement a multi-rig drilling program to continue the drilling that has already been undertaken by the companies being acquired. We plan to initiate a six rig Cardium drilling program immediately after spring break-up.

PetroBakken Energy Ltd. is a premier light oil production company combining, high growth, long-life Bakken reserves and production with legacy conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken has a multi-year inventory of Bakken and light oil development locations, along with significant future development opportunities in the Horn River and Montney gas resource plays in northeast BC and the Cardium in Alberta. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

Forward-Looking Statements. Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to the Agreement, potential reserves, production, and drilling locations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: the failure to obtain necessary Privateco shareholder approval with respect to the Agreement, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the Agreement, general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling; recompletions and related activities; timing and rig availability, the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by PetroBakken that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

BOE disclosure provided herein in respect of boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent an economic value at the wellhead.

Contact Information

  • PetroBakken Energy Ltd.
    John D. Wright
    Chairman of the Board and Chief Executive Officer
    PetroBakken Energy Ltd.
    R. Gregg Smith
    President and Chief Operating Officer
    PetroBakken Energy Ltd.
    Corey C. Ruttan
    Executive Vice President,
    Chief Financial Officer and Director
    PetroBakken Energy Ltd.
    Peter D. Scott
    Vice President, Finance
    PetroBakken Energy Ltd.
    Bill A. Kanters
    Vice President Business Development and Corporate Planning
    403.268.7808 (FAX)