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CALGARY,
AB, Oct. 18, 2023 /CNW/ - Tuktu
Resources Ltd. ("Tuktu" or the "Company") (TSXV:
TUK) is pleased to announce that on October 17, 2023 it entered into a purchase and
sale agreement (the "PSA") with an arm's length company (the
"Vendor") to purchase certain oil assets located in southern
Alberta (the "Assets") from
the Vendor (the "Acquisition").
In connection with the Acquisition, the Company entered into an
engagement agreement with Research Capital Corporation, as the sole
agent and sole bookrunner (the "Agent"), on a commercially
reasonable efforts basis to conduct a brokered private placement of
equity units of the Company (the "Units") at a price of
$0.06 per Unit (the "Issue
Price") for aggregate gross proceeds of up to $2,500,000 (collectively, the Offering and the
Concurrent Placement, as each term is defined herein, being the
"Private Placements"). Each Unit shall be comprised of one
common share in the capital of the Company (a "Common
Share") and one Common Share purchase warrant of the Company (a
"Warrant"). Each Warrant shall entitle the holder thereof to
purchase one Common Share at an exercise price of $0.0975 for a period of 36 months from
closing of the Private Placements. Further, the Company entered
into a non-binding term sheet with the Lender (as defined below) to
establish a credit facility.
ACQUISITION HIGHLIGHTS
Large Concentrated Land Positions within Economic Banff Light
Oil Resource Play
- Land position of 29,685 gross (29,396 net) hectares in southern
Alberta near to the
Foothills.
- Highly synergistic with the acquired lands building on the
Company's strategic land position in the southern Alberta Deep
Basin and Foothills.
Large Drilling Inventory Provides Years of Growth
Opportunity
- Targeting the Banff formation
within mappable Enhanced Permeability Fairway ("EPF")
located close to regional scale faults.
- Certain wells within the EPF have achieved IP30 rates of
>400 bbl/d of light oil, with a cumulative production of 450
Mbbls(1).
- Tuktu has identified at least 30 gross unrisked drilling
locations within this EPF on the lands being acquired pursuant to
the Acquisition. This is in addition to 20+ inventory of unrisked
drilling locations within the Company's current land
holdings(2).
High Quality Low Decline Light Oil Production
- Stable base production of approximately 165
bbl/d(4); 100% light oil with an average 33° API
gravity.
- Estimated annual decline of 16%.
- Immediate low risk production growth with several well
recompletion opportunities.
Long-Term Reserve Development Upside
- Estimated Acquisition Reserves and Net Present Value of Future
Net Revenue(3)
- PDP 0.31 MMbbl, $5.5 million
NPV10%
- TPP 2.1 MMbbl, $19.6 million
NPV10%
- Southern Alberta acquisition
announced March 21,
2023(8)
- PDP 727 MBoe ,$3.7 million
NPV10%
- TPP 1,449 Mboe, $6.2 million
NPV10%
- Southern Alberta oil
acquisition, announced December 8,
2022(7)
- PDP 27 MBoe ,$0.6 million
NPV10%
- TPP 1,329 Mboe, $35.1 million
NPV10%
Establishes a Growth Platform
- Combined production on a pro forma basis of 565
BOE/d(4).
- Pro forma land position in southern Alberta core area of 41,048 gross (40,118 net)
hectares.
Recompletion and Workover Program Targeting Increase in
Corporate Production
Tuktu has assembled a portfolio of opportunities, including well
recompletions and production optimization projects which are
anticipated to occur late Q4 2023, or early 2024(6).
These projects are targeted at increasing the Company's production
and may include some or all of the following:
- Artificial lift installation on a Foothills oil well which is
currently producing unassisted in a "free flow" state.
- A single standing well is contemplated to be completed for
sweet gas. The targeted reservoir is in a structurally favourable
position, and the log response is analogous to those of our current
producing Foothills gas wells. A successful operation could add
significant net production to the Company and delineate further
offset drilling locations.
- Optimizations, recompletions and re-entries on the newly
acquired assets have the potential to substantially increase the
acquisition volumes being acquired. By utilizing existing wellbores
for these opportunities, Tuktu is expecting to further decrease
inactive liability and extend the life of the Assets.
While subject to further technical due diligence and planning,
the Company is high grading projects with <1 year
payout(5). Together, low-cost completion and
optimization initiatives have the potential to double the Company's
total production.
Notes:
|
|
(1)
|
Source: Geoscout. See
"Oil and Gas Advisories - Initial Production Rates" and
"Oil and Gas Advisories – Analogous Information".
|
|
|
(2)
|
See "Oil and Gas
Advisories – Drilling Locations".
|
|
|
(3)
|
Reserves information is
based on the Acquisition Reserves Report (as defined
below).
|
|
|
(4)
|
Current production for
the Assets of 165 BOE/d is based on average production from May to
July 2023, based on the Vendor's lease operating statements.
Current production for the Company's current assts is 400
BOE/d.
|
|
|
(5)
|
See "Oil and Gas
Advisories – Oil and Gas Metrics".
|
|
|
(6)
|
See "Forward-Looking
Information Advisories – Recompletion Plan".
|
|
|
(7)
|
Reserves information is
based on a report prepared by independent reserves evaluator,
Chapman Petroleum Engineering Ltd. (the "Chapman Report")
dated effective June 30, 2022 prepared in accordance with COGEH (as
defined below) and National Instrument 51-101 ("NI 51-101").
The Chapman Report was based on the average forecast pricing of
Chapman Petroleum Engineering Ltd. and inflation rates and foreign
exchange rates as at July 1, 2022.
|
|
|
(8)
|
Reserves information is
based on a report prepared by independent reserves evaluator, GLJ
Ltd. (the "GLJ Report") dated effective January 1,
2023 prepared in accordance with COGEH and NI 51-101. The GLJ
Report was based on the average forecast pricing of GLJ, McDaniel
& Associates Consultants Ltd. and Sproule Associates Ltd. as at
January 1, 2023.
|
|
|
|
|
ACQUISITION METRICS
Purchase Price
("P")(1,5)
|
$3 million
|
|
Adjusted Purchase
Price(2)
|
$1.5 million
|
|
12 Month Trailing
Operating Expenses(3)
|
$33.95/bbl
|
|
2023E
Production(4)
|
165 bbl/d
|
|
2023 Est. Annualized
NOI(3,6)
|
$2.2 million
|
|
Cost Per Flowing Barrel
(P/(bbls/d))(4,9)
|
$18,182
|
|
Trailing production
decline
|
16 %
|
|
Reserves
|
MMbbl(7,9,10)
|
NPV10% ($MM)
(7,8,10,11)
|
PDP
|
0.3
|
$5.50
|
Proven
|
0.3
|
$5.60
|
Proven +
Probable
|
2.1
|
$19.60
|
Reserves
|
P/MMbbl(7,9,10)
|
P/NPV10%(7,8,9,10,11)
|
PDP
|
$9.75
|
55 %
|
Proven
|
$9.75
|
55 %
|
Proven +
Probable
|
$1.44
|
15 %
|
Notes:
|
(1)
|
Prior to interim or
final adjustments.
|
|
(2)
|
The Adjusted Purchase
Price is the Purchase Price of $3.0 million less estimated interim
adjustments of $1.5 million, based on nine months of
adjustments.
|
|
(3)
|
Based on Vendor's books
and records or a projection of such records, as applicable, with an
asset decline of 16% and September 20, 2023 strip
pricing.
|
|
(4)
|
May to July 2023,
average production, based on the Vendor's lease operating
statements.
|
|
(5)
|
The components of the
Purchase Price (prior to any adjustments) are allocated as follows:
(i) $2.4 million to petroleum and natural gas rights; (ii) $599,990
to tangibles; and (iii) $10.00 to miscellaneous interests and
seismic rights.
|
|
(6)
|
Non-GAAP Financial
Measure. Non-GAAP financial measures do not have any standardized
meaning under IFRS and therefore may not be comparable to similar
measures presented by other companies where similar terminology is
used. Reference should be made to the section entitled "Non-GAAP
and Other Financial Measures".
|
|
(7)
|
Based on the
Acquisition Reserves Report. Assumes unadjusted Purchase Price. See
"Oil and Gas Advisories – Reserves Information".
|
|
(8)
|
Before tax net present
value is based on a 10% discount rate and the price deck set forth
under "Pricing Assumptions" below.
|
|
(9)
|
Supplementary financial
measure. Reference should be made to the section entitled
"Non-GAAP and Other Financial Measures".
|
|
(10)
|
See
"Abbreviations" below.
|
|
(11)
|
NPV10% means the net
present value of future net revenue before income tax discounted at
10%. The discounted net present value of future net revenues
attributable to reserves do not represent fair market value. See
"Oil and Gas Advisories – Reserves Information".
|
THE PSA
Pursuant to the PSA, Tuktu has agreed to purchase the Assets
from the Vendor for aggregate consideration of $3.0 million (the "Purchase Price"),
subject to customary adjustments. Concurrent with the execution of
the PSA, the Company paid a $150,000
deposit which will be credited towards the Purchase Price (the
"Deposit").
The Acquisition is expected to close in escrow on or about
December 1, 2023 (the "Escrow
Closing"). The Escrow Closing is subject to and conditional
upon, among other things: (i) Tuktu obtaining sufficient funds to
satisfy the Interim Purchase Price; and (ii) other customary
conditions and approvals, including the approval of the TSX Venture
Exchange (the "TSXV").
On Escrow Closing, the Company anticipates that the Purchase
Price, after interim adjustments and after deducting the Deposit,
will be approximately $1.35 million
(the "Interim Purchase Price"). The Interim Purchase Price
will be held in escrow following the Escrow Closing and will be
releasable to the Vendor upon receipt of AER approval for the
licence transfers related to the Assets, at which time the
Acquisition will be completed and Tuktu will obtain full and clear
title to the Assets (the "Acquisition Closing"). The Company
anticipates that the Acquisition Closing may occur on or about 60
business days following the Escrow Closing.
THE FINANCINGS
THE PRIVATE PLACEMENTS
Concurrent with the execution of the PSA, the Company entered
into an agreement with the Agent to conduct the Private Placements,
which are comprised of Offering and the Concurrent Placement, as
described further below.
The Offering is a brokered private placement of
16,666,667 Units at a price of $0.06 per Unit to be issued under the financing
exemption under Part 5A (the "Listed Issuer Financing
Exemption") of National Instrument 45-106 – Prospectus
Exemptions ("NI 45-106") for aggregate gross proceeds of
$1,000,000 (the
"Offering"). Each Unit will consist of one Common
Share and one Warrant. Each Warrant will entitle the holder thereof
to purchase one Common Share at an exercise price of $0.0975 for a period of 36 months from Closing
(as defined below).
The Concurrent Placement is being conducted by the Company
concurrently with the Offering and is a brokered private placement
led by the Agent of up to 25,000,000 Units at the Issue Price
(being a price of $0.06 per Unit) for
aggregate gross proceeds of up to $1,500,000 (the "Concurrent Placement").
The Units issued pursuant to the Concurrent Placement will consist
of one Common Share and one Warrant, and Warrants will be issued on
the same terms and conditions as those issued under the Offering.
The Company has granted the Agent an option (the "Agent's
Option") to offer for sale up to an additional 15% of the
number of Units sold in the Concurrent Placement, which Agent's
Option is exercisable, in whole or in part, at any time up to 48
hours prior to the closing of the Private Placements.
The net proceeds of the Private Placements are expected to be
used to fund the Interim Purchase Price and, to the extent there
are remaining net proceeds after the payment of the Interim
Purchase Price, the Company may use such proceeds to fund
development projects on its existing properties and the Assets and
may reallocate certain funds, from time to time, to working capital
purposes (which may include legal fees, customary AER deposit fees
and other fees and expenses related to the Acquisition), as the
Company deems necessary or appropriate. In the event that Escrow
Closing or Acquisition Closing does not occur, the Company will use
the net proceeds from the Offering and the Concurrent Placement to
fund development projects on its existing properties, for working
capital purposes and to finance any future property
acquisitions.
It is expected that the closing (the "Closing") of the
Private Placements will occur on or about November 30, 2023, or on such other date as may
be mutually determined by the Company and the Agent, acting
reasonably, and, in any event, on or before a date not later than
45 days after the date of this press release.
Subject to compliance with applicable regulatory requirements
and in accordance with NI 45-106, the Units issuable under the
Offering will be offered for sale to purchasers resident in
Canada other than Québec pursuant
to the listed issuer financing exemption under Part 5A of NI
45-106. The Common Shares issuable from the sale of Units sold
under the Offering are expected to be immediately freely tradeable
under applicable Canadian securities legislation if sold to
purchasers resident in Canada,
subject to any hold period imposed by the TSXV on the securities
issued to certain purchasers.
The minimum and maximum amounts to be raised pursuant to the
Offering are each $1,000,000. In the
event the Company does not raise the minimum gross proceeds of
$1,000,000 pursuant to the Offering,
the Offering will not be completed and no securities will be issued
under the Listed Issuer Financing Exemption.
Units issuable in the Concurrent Placement are expected to be
offered to purchasers pursuant to the accredited investor exemption
under Section 2.3 of NI 45-106 and will be subject to the
standard statutory four-month plus one day hold period.
In connection with the Private Placements, the Company will pay
the Agent a cash commission equal to 8.0% of the gross proceeds of
the Private Placements or $0.0048 per
Unit, other than in respect of proceeds from the sale of Units to
certain "president's list" purchasers identified by the Company
(the "President's List Purchasers"), for which a 4.0% cash
commission will be payable. In addition, the Agent will receive
such number of broker warrants (the "Broker Warrants") as is
equal to 8.0% of the number of Units sold under the Private
Placements, other than in respect of the Units sold to the
President's List Purchasers, for which the Agent shall receive
Broker Warrants equal to 4.0% of the number of such Units. Each
Broker Warrant shall entitle the holder thereof to purchase one
Unit at an exercise price equal to $0.06 for a period of 36 months following the
Closing.
There is an offering document relating to the Offering (the
"Offering Document") that can be accessed under the Company's
profile at www.sedarplus.ca and on the Company's website at
www.tukturesources.com. Prospective investors should read
the Offering Document before making an investment decision.
THE DEBT FINANCING
Concurrent with the execution of the PSA, the Company entered
into a non-binding term sheet (the "Term Sheet") with a
third-party lender (the "Lender") for a credit facility up
to USD $1,500,000. The Company
expects to enter into a binding commitment with such Lender prior
to or concurrent with the Acquisition Closing to provide a credit
facility (the "Facility") to Tuktu. If established, the
funds available under the Facility may be drawn for development
capital expenditures and AER deposit fees.
The Term Sheet was provided to Tuktu for discussion
purposes only and does not contain all the terms, conditions,
representations, warranties, and other provisions with respect to
the Facility. The Term Sheet does not constitute a commitment or
offer to provide financing by the Lender. No commitment or
agreement exists or arises prior to the execution of a binding
commitment letter. The indicative terms and conditions outlined in
the Term Sheet are subject to the Lender's review and approval
process and are subject to change based on due diligence review and
further analysis.
About Tuktu Resources
Ltd.
Completion of the Acquisition is expected to add to Tuktu's
existing assets in southern Alberta. With its multidecadal experience in
this area, Tuktu intends to expand its holdings within this area,
while it continues to evaluate Deep Basin and Foothills assets for
further acquisitions. For additional information about Tuktu please
contact:
Tuktu Resources Ltd.
501, 888 – 4th Avenue S.W.
Calgary, Alberta T2P 0V2
Attention: Tim de Freitas,
President and Chief Executive Officer (phone 403-478-0141); or
Mark Smith, CFO and VP Finance
(phone 403-613-9661)
This press release does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities in
the United States. The securities
have not been and will not be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act") or
any state securities laws and may not be offered or sold within
the United States or to U.S.
Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such
registration is available.
Neither the TSXV nor its Regulation Services Provider (as
that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this press
release.
All amounts in this press release are stated in Canadian dollars
unless otherwise specified.
FORWARD-LOOKING INFORMATION
ADVISORIES
Certain information contained in the press release may
constitute forward-looking statements and information
(collectively, "forward-looking statements") within the
meaning of applicable securities legislation that involve known and
unknown risks, assumptions, uncertainties and other factors.
Forward-looking statements may be identified by words like
"anticipates", "estimates", "expects", "indicates", "intends",
"may", "could" "should", "would", "plans", "target", "scheduled",
"projects", "outlook", "proposed", "potential", "will", "seek" and
similar expressions. Forward-looking statements in this press
release include statements regarding, among other things: that the
Company will complete the Acquisition on the expected terms and
timing thereof; the anticipated timing of the Escrow Closing; the
anticipated amounts of the Private Placements; expectations
regarding applicable regulatory approvals, including those of the
TSXV and the AER; the Company's anticipated use of the proceeds of
the Private Placements, including with respect to funding of the
Interim Purchase Price; the estimated Interim Purchase Price; that
Tuktu will receive full and clear title to the Assets; the
anticipated annual decline of the Assets; financial and operating
forecasts with respect to the Assets; the Company's intention to
exploit the reservoirs and the Company's long term business
strategy with respect to the Assets; that the Company will be able
to implement a well workover/recompletion program and the
anticipated production growth resulting therefrom; the anticipated
savings in completion costs and corresponding increase of return on
capital; the anticipated terms of the Private Placements, including
with respect to the Warrants; the anticipated exemptions from NI
45-106 under the Private Placements; the anticipated
freely-tradeable status of the Common Shares issued under the
Offering; estimated acquisition metrics, including estimated
production; projections with respect to operating expenditures and
capital expenditures; and other similar statements. Such statements
reflect the current views of management of the Company with respect
to future events and are subject to certain risks, uncertainties
and assumptions that could cause results to differ materially from
those expressed in the forward-looking statements.
Statements relating to "reserves" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that
the reserves can be profitably produced in the future. There are
numerous uncertainties inherent in estimating quantities of crude
oil, natural gas and NGL reserves and the future cash flows
attributed to such reserves. The reserve and associated cash flow
information set forth above are estimates only. In general,
estimates of economically recoverable crude oil, natural gas and
NGL reserves and the future net cash flows therefrom are based upon
a number of variable factors and assumptions, such as historical
production from the properties, production rates, ultimate reserve
recovery, timing and amount of capital expenditures, marketability
of oil and natural gas, royalty rates, the assumed effects of
regulation by governmental agencies and future operating costs, all
of which may vary materially. For these reasons, estimates of the
economically recoverable crude oil, NGL and natural gas reserves
attributable to any particular group of properties, classification
of such reserves based on risk of recovery and estimates of future
net revenues associated with reserves prepared by different
engineers, or by the same engineers at different times, may vary.
Tuktu's and the Assets' actual production, revenues, taxes and
development and operating expenditures with respect to their
respective reserves will vary from estimates thereof and such
variations could be material.
With respect to forward-looking statements contained in this
press release, the Company has made assumptions regarding, among
other things: that the Company will be able to successfully
complete the Acquisition and the Private Placements on
substantially the terms contemplated; future pricing; commodity
prices; future exchange and interest rates; supply of and demand
for commodities; that the Company will be able to exploit the
Mississippian aged reservoirs in the land base; that the Company
will be able to successfully implement a well workover/recompletion
program to increase production; inflation; the availability
of capital on satisfactory terms; the availability and price of
labour and materials; the impact of increasing competition;
conditions in general economic and financial markets; access to
capital; the receipt and timing of regulatory, TSXV, AER and other
required approvals; the ability of the Company to implement its
business strategies and complete future acquisitions; the Company's
long term business strategy; operating costs and capital
expenditures; and effects of regulation by governmental
agencies.
Factors that could cause actual results to vary from
forward-looking statements or may affect the operations,
performance, development and results of the Company's businesses
include, among other things: risks and assumptions associated with
operations, such as the Company's ability to successfully implement
its strategic initiatives and achieve expected benefits;
assumptions regarding the Assets and the value of the Acquisition;
risks regarding the Company's ability to complete the Acquisition
and the Private Placements on substantially the terms contemplated;
assumptions concerning operational reliability; risks inherent in
the Company's future operations; the Company's ability to generate
sufficient cash flow from operations to meet its future
obligations; the Company's ability to exploit the Mississippian
aged reservoirs in the land base; the Company's ability to
implement a well workover/recompletion program to increase
production; risks regarding the Company's ability to reduce
operating costs and increase production; increases in maintenance,
operating or financing costs; the realization of the anticipated
benefits of future acquisitions, if any; the availability and price
of labour, equipment and materials; competitive factors, including
competition from third parties in the areas in which the Company
intends to operate, pricing pressures and supply and demand in the
oil and gas industry; fluctuations in currency and interest rates;
inflation; risks of war, hostilities, civil insurrection, pandemics
(including COVID-19), instability and political and economic
conditions in or affecting countries in which the Company intends
to operate (including the ongoing Russian-Ukrainian conflict and
Israeli-Hamas conflict); severe weather conditions and risks
related to climate change; terrorist threats; risks associated with
technology; changes in laws and regulations, including
environmental, regulatory and taxation laws, and the interpretation
of such changes to the management team's future business;
availability of adequate levels of insurance; difficulty in
obtaining necessary regulatory approvals and the maintenance of
such approvals; general economic and business conditions and
markets; and such other similar risks and uncertainties. The impact
of any one assumption, risk, uncertainty or other factor on a
forward-looking statement cannot be determined with certainty, as
these are interdependent and the Company's future course of action
depends on the assessment of all information available at the
relevant time.
The forward-looking statements contained in this press release
are made as of the date hereof and the parties do not undertake any
obligation to update 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.
RECOMPLETION PLAN
The Company has presented herein a illustrative recompletion
plan in respect of the acquired Assets and Tuktu's current assets.
The plan is based on a number of assumptions including, without
limitation: the required reinvestment rates to maintain production;
expected recovery factors; enhanced oil recovery options; average
production per year resulting from such development plan; expected
cash flow and free cash flow; capital expenditures per year;
expectations as to commodity prices, royalty rates, production
costs, general and administrative expenses and certain other
assumptions. Such plan is not based on a budget or capital
expenditures plan approved by the Board of Directors of the Company
and is not intended to present a forecast of future performance or
a financial outlook. In addition, such plan does not represent
management's expectations of the Company's future performance but
rather is intended to present readers insight into management's
view of the opportunities associated with the Acquisition as used
by management for planning and strategy purposes based on the
commodity pricing and other assumptions used for such strategy. In
addition, the plan does not represent an estimate of reserves or
the future net present value of reserves. There is no certainty
that the Company will proceed with any of the projects contemplated
by the plan and even if the Company does proceed with such plans
there is no certainty that the reserves recovered will match the
expectations used for such plan. All future capital expenditures
will ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, debt levels, actual drilling results, additional reservoir
information that is obtained and other factors. The assumptions
used for the plan presented herein are subject to a number of risks
including the risks set out under the forward-looking advisory set
out above.
FORWARD LOOKING FINANCIAL
INFORMATION
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about the prospective operational and financial
results of the Assets, all of which are subject to the same
assumptions, risk factors, limitations, and qualifications as set
forth in the above paragraphs. FOFI contained in this press release
was made as of the date of this press release and was provided for
the purpose of providing further information about the Company's
future business operations, the Company disclaims any intention or
obligation to update or revise any FOFI contained in this press
release, whether as a result of new information, future events or
otherwise, unless required pursuant to applicable securities laws.
Readers are cautioned that the FOFI contained in this press release
should not be used for purposes other than for which it is
disclosed herein.
NON-GAAP AND OTHER FINANCIAL
MEASURES
This press release uses various specified financial measures (as
such terms are defined in National Instrument 52-112 – Non-GAAP
Disclosure and Other Financial Measures Disclosure ("NI
51-112")) including "non-GAAP financial measures", "non-GAAP
ratios" and "supplementary financial measures" (as such terms are
defined in NI 51-112), which are described in further detail below.
Management believes that the presentation of these non-GAAP
measures provide useful information to investors and shareholders
as the measures provide increased transparency and the ability to
better analyze performance against prior periods on a comparable
basis. These non-GAAP and other financial measures are not
standardized financial measures under IFRS and might not be
comparable to similar measures presented by other companies where
similar terminology is used. Investors are cautioned that these
measures should not be construed as alternatives to or more
meaningful than the most directly comparable IFRS measures as
indicators of the Company's performance.
Non-GAAP Financial Measures
Net Operating Income
Management feels net operating income is a key industry
benchmark and measure of operating performance of the Company that
assists management and investors in assessing the Company's
profitability and is commonly used by other petroleum and natural
gas producers. Net operating income is calculated as petroleum and
natural gas revenue less royalties, transportation and operating
expenses.
Supplementary financial measures
This press release may contain certain supplementary financial
measures. NI 52-112 defines a supplementary financial measure as a
financial measure that: (i) is intended to be disclosed on a
periodic basis to depict the historical or expected future
financial performance, financial position or cash flow of an
entity; (ii) is not disclosed in the financial statements of the
entity; (iii) is not a non-GAAP financial measure; and (iv) is not
a non-GAAP ratio.
The Company calculates "Purchase Price/PDP NPV10%" by dividing
the Purchase Price by the net present value of the proved developed
producing reserves discounted at 10%, "Purchase Price/Proven
NPV10%" by dividing the Purchase Price by the net present value of
the proven reserves discounted at 10%, "Purchase Price/Proven +
Probable NPV10%" by dividing the Purchase Price by the net present
value of the proven and probable developed producing reserves
discounted at 10%, "Purchase Price/PDP" by dividing the Purchase
Price by the estimated proved developed producing reserves,
"Purchase Price/Proven" by dividing the Purchase Price by the
estimated proven reserves and "Purchase Price/2P" by dividing the
Purchase Price by the estimated total proved plus probable
reserves.
OIL AND GAS ADVISORIES
RESERVES INFORMATION: Reserves estimates in this
press release: (i) in respect of the Acquisition are based on the
evaluations prepared by GLJ Ltd. as set out in the Acquisition
Reserves Report effective as at December 31,
2022; (ii) in respect of the acquisition announced in March
of 2023 are based on evaluations prepared by GLJ Ltd. as set out in
the GLJ Report effective as at January 1,
2023; and (iii) in respect of the acquisition announced in
December 2022 are based on
evaluations prepared by Chapman Petroleum Engineering Ltd., as set
out in the Chapman Report effective as at June 30, 2022, each of which was prepared in
accordance with NI 51-101 and the COGE Handbook ("COGEH").
The Acquisition Reserves Report was based on the average price and
market forecasts of three independent reserves evaluators (GLJ,
McDaniel & Associates Consultants Ltd. and Sproule Associates
Ltd.) as of January 1, 2023 which is
set forth under the heading "Pricing Assumptions" below, the GLJ
Report was based on the average forecast pricing of GLJ, McDaniel
& Associates Consultants Ltd. and Sproule Associates Ltd. as at
January 1, 2023 and the Chapman
Report was based on the average forecast pricing of Chapman
Petroleum Engineering Ltd. and inflation rates and foreign exchange
rates as at July 1, 2022 . There is
no assurance that the forecast prices and costs assumptions will be
attained, and variances could be material. The recovery and reserve
estimates of the crude oil, natural gas liquids and natural gas
reserves provided herein are estimates only and there is no
guarantee that the estimated reserves will be recovered. Actual
crude oil, natural gas and natural gas liquids reserves may be
greater than or less than the estimates provided herein.
This press release contains estimates of the NPV of the
Company's future net revenue from reserves associated with the
Assets and assets acquired pursuant to previously completed
acquisitions, as applicbale. Such amounts do not represent the fair
market value of such reserves. The recovery and reserve estimates
provided herein are estimates only and there is no guarantee that
the estimated reserves will be recovered. The NPV of the respective
assets' base production is a snapshot in time and is based on the
reserves evaluated using the applicable pricing assumptions
described above. The NPV is calculated using a discount rate of
10%, on a before tax basis and is the sum of the present value of
proved plus probable developed producing reserves based on the
applicable pricing assumptions. It should not be assumed that the
undiscounted or discounted NPV of future net revenue attributable
to the respective assets represents the fair market value of those
assets. The estimates for reserves for individual properties may
not reflect the same confidence level as estimates of reserves for
all properties due to the effects of aggregation. The recovery and
reserve estimates of crude oil, NGL and natural gas reserves are
estimates only and there is no guarantee that the estimated
reserves will be recovered. Actual reserves may be greater than or
less than the estimates relied upon for NPV calculations,
herein.
BOE ADVISORY: The term "BOE" or barrels of oil
equivalent may be misleading, particularly if used in isolation. A
BOE conversion ratio of six thousand cubic feet of natural gas to
one barrel of oil equivalent (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.
Additionally, given that the value ratio based on the current price
of crude oil, as compared to natural gas, is significantly
different from the energy equivalency of 6:1; utilizing a
conversion ratio of 6:1 may be misleading as an indication of
value.
INITIAL PRODUCTION RATES: References in this press
release to IP rates, other short-term production rates or initial
performance measures relating to new wells are useful in confirming
the presence of hydrocarbons; however, such rates are not
determinative of the rates at which such wells will commence
production and decline thereafter and are not indicative of
long-term performance or of ultimate recovery. All IP rates
presented herein represent the results from wells after all "load"
fluids (used in well completion stimulation) have been recovered.
While encouraging, readers are cautioned not to place reliance on
such rates in calculating the aggregate production for the Company.
Accordingly, the Company cautions that the test results should be
considered to be preliminary.
DRILLING LOCATIONS: This press release discloses drilling
locations in three categories: (i) TPP locations; and (ii) unbooked
locations. In respect of Assets, proved locations and probable
locations are derived from the Acquisition Reserves Report and
account for drilling locations that have associated proved and/or
probable reserves, as applicable. In respect of Tuktu, proved
locations and probable locations are derived from the Chapman
Report. In respect of the Assets to be acquired pursuant to the
Acquisition, the 30 gross drilling locations identified herein, 6
gross are TPP locations, and 24 gross are unbooked locations. In
respect of Tuktu, the 20+ gross drilling locations identified
herein, 4 gross are TPP locations, and 16+ gross are unbooked
locations. Unbooked drilling locations are the internal
estimates of Tuktu based on Tuktu's or the Assets prospective
acreage and an assumption as to the number of wells that can be
drilled per section based on industry practice and internal review.
Unbooked locations do not have attributed reserves or resources
(including contingent and prospective). Unbooked locations
have been identified by Tuktu's management as an estimation of
Tuktu's multi-year drilling activities based on evaluation of
applicable geologic, seismic, engineering, production and reserves
information. There is no certainty that Tuktu will drill all
unbooked drilling locations and if drilled there is no certainty
that such locations will result in additional oil and natural gas
reserves, resources or production. The drilling locations on
which Tuktu will actually drill wells, including the number and
timing thereof is ultimately dependent upon the availability of
funding, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors.
While a certain number of the unbooked drilling locations have been
de-risked by Tuktu drilling existing wells in relative close
proximity to such unbooked drilling locations, the majority of
other unbooked drilling locations are farther away from existing
wells where management of Tuktu has less information about the
characteristics of the reservoir and therefore there is more
uncertainty whether wells will be drilled in such locations and if
drilled there is more uncertainty that such wells will result in
additional oil and gas reserves, resources or production.
ANALOGOUS INFORMATION: Certain information in this press
release may constitute "analogous information" as defined in NI
51-101, with respect to the Assets including, but not limited to,
information relating to well locations that are in geographical
proximity to or believed to be on-trend with other drilling
locations to be acquired by the Company pursuant to the
Acquisition. There is no certainty that the results of the
analogous information or inferred thereby will be achieved by the
Company and such information should not be construed as an estimate
of future production levels or the actual characteristics and
quality of the Assets.
OIL AND GAS METRICS: This press release contains certain
oil and gas metrics, including payout, which do not have
standardized meanings or standard methods of calculation and
therefore such measures may not be comparable to similar measures
used by other companies and should not be used to make comparisons.
Payout means the anticipated years of production from a well
required to fully pay for the costs associated to drill, complete
equip and tie-in a well. Such metrics have been included in
this document to provide readers with additional measures to
evaluate the Company's performance; however, such measures are not
reliable indicators of the Company's future performance and future
performance may not compare to the Company's performance in
previous periods and therefore such metrics should not be unduly
relied upon.
PRICING ASSUMPTIONS
|
Edmonton
Light
$CAD/bbl
|
|
|
2023
|
$103.77
|
2024
|
$97.74
|
2025
|
$95.27
|
2026
|
$95.58
|
2027
|
$97.07
|
2028
|
$99.01
|
2029
|
$100.99
|
2030
|
$103.01
|
2031
|
$105.07
|
2032
|
$106.69
|
2033
|
$108.83
|
2034
|
$111.00
|
2035
|
$113.22
|
2036
|
$115.49
|
2037
|
$117.80
|
|
|
escalating
at
|
2 %
|
ABBREVIATIONS
Terms and abbreviations that are used in this press release that
are not otherwise defined herein are provided below:
bbl(s) - barrel(s)
bbls/d - barrels per day
BOE - barrels of oil equivalent (6 Mcf = 1 bbl)
Mbbl - thousand barrels of oil
MMbbl – million barrels of oil
Mcf - thousand cubic feet
NGL - natural gas liquids as defined in NI 51-101
PDP - proved developed producing
TPP - total proved plus probable
SOURCE Tuktu Resources Ltd.