CALGARY, ALBERTA--(Marketwire - July 6, 2012) - On February 21, 2012, Anderson Energy Ltd. ("Anderson" or the "Company") (TSX:AXL) announced that in response to a lack of market recognition of the value in the Company's asset base, the Company's board of directors (the "Board") initiated a process to identify, examine and consider a range of strategic alternatives with a view to enhancing shareholder value. The strategic alternatives include, but are not limited to, a sale of all or a material portion of the assets of Anderson, either in one transaction or in a series of transactions, the outright sale of the Company, or a merger or other strategic transaction involving Anderson and a third party. The Board engaged BMO Capital Markets and RBC Capital Markets as financial advisors to assist in this process. The strategic review process is not complete and is still ongoing and the Company will continue to identify, examine and consider a full range of strategic alternatives.
Since its last press release on May 14, 2012, the Company has entered into agreements to sell or has closed the sale of approximately 428 BOED of production (51% natural gas), for cash consideration of $30.7 million subject to normal closing adjustments (the "Transactions"). Two outside operated units (Cardium oil unit and Pekisko gas unit), one half section of operated fully developed Cardium lands and some additional minor properties were sold in this process. The Cardium production was sold at $102,000/BOED based on first quarter 2012 production estimates and represented 6.3% of the Company's Cardium production. As of today's date, 72% of the Transactions have closed and the remainder are subject to normal course rights of first refusal and are estimated to close on or about July 31, 2012. Since January 1, 2012, Anderson has sold or agreed to sell interests in 13 properties for total consideration of $36.9 million. Total production sold or agreed to be sold was approximately 678 BOED (59% natural gas), and is considered by the Company to be non-strategic. The Company has swapped an additional 54 BOED of dry gas in exchange for additional interests in Cardium drillable lands at Garrington. Anderson has sold almost its entire position in W4M, exited the outside operated coal bed methane business and remains focused exclusively on its W5M assets. The Company has additional non-strategic assets which it is considering selling to improve its financial flexibility.
The Company's lenders have re-determined its bank lines to initially be $125 million, stepped down as dispositions close to $100 million and ultimately to be $90 million by September 30, 2012, subject to completion of customary loan documentation. The reduction is attributable to dramatic reductions in lender natural gas price decks (on average 40% lower than at the November 2011 review) and to the sale of assets in the first half of this year, including the Transactions. Notwithstanding the strong Cardium oil reserves additions in 2011, the bank line reduction relates to the weak natural gas markets in 2012, which are outside of the Company's control. Pro forma the Transactions, the Company's outstanding bank debt is estimated to be approximately $89 million at June 30, 2012. The maturity date of the loan is July 10, 2013 and the next scheduled redetermination of the borrowing base is on or before December 15, 2012.
The Company continues to focus on strategic alternatives including the sale of additional properties to repay bank indebtedness.
Anderson has hedged 1,500 BOPD of its oil production for the balance of 2012 using fixed price swaps at an average price of $103.87 WTI Canadian per barrel. The Company continues to monitor hedging opportunities for oil and natural gas for 2012 and 2013.
The Company has grown its oil production by more than five times since the inception of the Cardium play and did not drill any shallow gas wells in the past 30 months. On a reserves basis, the Company has grown its Cardium reserves as of December 31, 2011 to 13 MMBOE (38% of total proved plus probable reserves), all in the last two years. Shoulder season natural gas prices could be soft and likely volatile, however, the Company is encouraged that natural gas pricing could be stronger this coming winter. The warm winter last year caused natural gas storage in the United States to be very high for this time of year. A more normal winter could support natural gas prices at levels seen in the three years prior to 2011. Oil prices continue to be volatile and the Company benefits from being almost fully hedged for the balance of 2012.
It is Anderson's current intention to not disclose developments with respect to the strategic alternatives process unless and until the Board has approved a specific transaction or otherwise determines that disclosure is necessary in accordance with applicable law. The Company has not set a definitive schedule to complete the evaluation. The Company cautions that there are no assurances or guarantees that the strategic alternatives process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction.
Certain statements in this news release including, without limitation, management's assessment of future plans and operations; benefits and valuation of the development prospects described herein; extent of reserves additions; valuation and timing of property dispositions, potential results of the strategic alternative review process, including the possibility of further asset dispositions and use of proceeds therefrom, and enhancement of shareholder value, disclosure intentions with respect to the strategic alternative review process, commodity price outlook and general economic outlook may constitute "forward-looking information" (within the meaning of applicable Canadian securities legislation) or "forward-looking statements" (within the meaning of the United States Private Securities Litigation Reform Act of 1995, as amended) and necessarily involve risks and assumptions made by management of the Company including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodity prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; adequate weather to conduct operations; sufficiency of budgeted capital, operating and other costs to carry out planned activities; wells not performing as expected; incorrect assessment of the value of acquisitions and farm-ins; failure to realize the anticipated benefits of acquisitions and farm-ins; inability to complete property dispositions or to complete them at anticipated values; delays resulting from or inability to obtain required regulatory approvals; changes to government regulation; inability to access sufficient capital from internal and external sources; and other factors, many of which are beyond the Company's control. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as the factors are interdependent, and management's future course of action would depend on its assessment of all information at the time. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and readers should not place undue reliance on the assumptions and forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Anderson's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at Anderson's website (www.andersonenergy.ca).
The forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Disclosure provided herein in respect of barrels of oil equivalent (BOE) 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 a value equivalency at the wellhead.