CALGARY,
March 18, 2013 /CNW/ - Whitecap
Resources Inc. ("Whitecap" or the "Company") (TSX: WCP) and Invicta
Energy Corp. ("Invicta") (TSXV: VCA) are pleased to announce that
they have entered into an arrangement agreement (the "Arrangement
Agreement") providing for the acquisition by Whitecap of all the
issued and outstanding common shares of Invicta (the
"Transaction"). Invicta is a light oil-weighted public energy
company with its operations immediately offsetting Whitecap's lands
and Viking production in the Lucky Hills area of west central
Saskatchewan. Under the terms of
the Transaction, Invicta shareholders will receive, at their
election, for each Invicta share held, either: (i) 0.05891 of a
Whitecap common share; or (ii) $0.51911 in cash, subject to an aggregate cash
maximum of $10.7 million. Whitecap
will also assume the net debt of Invicta, estimated at $17.4 million, after accounting for costs,
severance and option proceeds associated with the Transaction, as
at March 31, 2013.
The $0.51911 per
share Transaction value represents a 30 percent premium to the
closing market price of the Invicta common shares on March 15, 2013 and a 37 percent premium to the
volume weighted average trading price of the Invicta common shares
for the 10 trading days ending March 15,
2013. The total Transaction value is approximately
$60.2 million, including the
assumption of net debt.
STRATEGIC RATIONALE
Since our initial entrance into the Viking light oil resource play
in February 2012 we have steadily
improved our operational results and capital efficiencies and have
significantly exceeded our initial expectations. The Invicta lands,
and associated locations, are within our core Lucky Hills area
where we own the majority of the offsetting lands. With 87 percent
of the acreage on Crown lands, the acquired locations have some of
the best economic parameters in the greater Dodsland area.
In the first quarter of 2013, Whitecap drilled
and placed on-stream 19 (17.4 net) Viking horizontal wells in Lucky
Hills with average drill and complete costs of $785,000 per well. Of the 19 wells drilled in the
first quarter, 15 have 30 or more days of production with an
average IP (30) rate in excess of 100 boe/d (80% light oil). Many
of these results directly offset the Invicta lands and are well
above our current Viking type curve.
Whitecap is also acquiring three multi-well oil
batteries that are currently tied-in to Whitecap's infrastructure
for oil gathering and gas conservation. The Invicta facilities
enhance Whitecap's ability to lower costs and increase netbacks in
this area over time.
We initially acquired 1,600 boe/d of light oil
production in Lucky Hills as part of the Compass transaction in
February 2012 and now have current
production in excess of 3,500 boe/d, an increase of 119 percent
before the acquisition of Invicta. This demonstrates the
significant organic growth Whitecap has already experienced with
the Viking horizontal oil play. Pro forma the Transaction, Whitecap
anticipates current production in the Viking formation to be in
excess of 4,000 boe/d.
The Invicta lands will generate free cash flow
and further strengthen the sustainability of our dividend-growth
strategy. We estimate the transaction to impact Whitecap's 2013 and
2014 forecasts as follows:
|
2013 (1) |
2014 |
Average production |
400 boe/d |
650 boe/d |
Cash flow (2) (3) |
$8.9 million |
$14.1 million |
Development capital spending |
$4.7 million |
$7.2 million |
Free cash flow (3) |
$4.2 million |
$6.9 million |
Note: the impact on 2013 is based on a closing date of
May 1, 2013 and therefore does not
represent full year 2013 average production, cash flow, development
capital spending and free cash flow.
SUMMARY OF THE TRANSACTION
Through the Transaction, Whitecap is acquiring high quality, high
netback light oil assets located in the Lucky Hills area of west
central Saskatchewan focused on
the Viking formation. The acquired Viking assets are complementary
to our existing operations and are immediately offsetting our lands
in west central Saskatchewan.
Invicta has current production of approximately 500 boe/d (> 80%
oil and NGLs) and a low risk horizontal development drilling
inventory of 77 net locations. Of these 77 locations, only 36
locations have reserves booked to them in Whitecap's internal
assessment of Invicta's reserves.
The Transaction has the following characteristics:
Total Transaction price (including net debt) |
$60.2 million |
Current production |
500 boe/d (> 80% oil and NGLs) |
Proved reserves (4) |
2,612 Mboe (80% oil and NGLs) |
Proved plus probable reserves (4) |
3,045 Mboe (80% oil and NGLs) |
Proved plus probable RLI (5) |
16.7 years |
Operating netback (2) (3) |
$58.00/boe |
Net of undeveloped land at an estimated value of
$5.0 million, using $100/acre, the associated Transaction metrics are
as follows:
Current production |
$110,400/boe/d |
Proved reserves |
$21.13/boe |
Proved plus probable reserves |
$18.13/boe |
Proved plus probable reserves recycle ratio |
3.2x |
The Transaction is forecast to be accretive on
cash flow per share, production per share, proved plus probable
reserves per share and on net asset value per share to Whitecap, on
a fully diluted basis.
INCREASED 2013 GUIDANCE
On a stand-alone basis, Whitecap is pleased to announce that it is
currently producing greater than 17,500 boe/d (71% oil and NGLs).
Following the Transaction, Whitecap will continue to expand on its
2013 capital program in west central Saskatchewan drilling an additional 8 (4.2
net) horizontal wells targeting the Viking formation. Our revised
2013 guidance has average production increasing 3 percent to 17,200
- 17,400 boe/d and capital spending increasing 3 percent to
$160 million from our previous
guidance provided. We anticipate the Transaction to be debt neutral
to Whitecap with 2013 year-end net debt to cash flow of 1.3 times
to 1.4 times.
Notes: |
|
(1) |
Partial year operating and financial information
based on a closing date of May 1, 2013. |
(2) |
Based on an Edmonton Par price of C$87.50/bbl,
C$3.00/GJ AECO and CAD/USD exchange rate of 0.98. |
(3) |
Cash flow, free cash flow and operating netback are
non-GAAP measures. Refer to the Non-GAAP measures section of this
press release. |
(4) |
Based on Invicta's working interest reserves before
the calculation for royalties, and before the consideration of
Invicta's royalty interest reserves. Reserves estimates are based
on Whitecap's internal evaluation and were prepared by a member of
Whitecap's management who is a qualified reserves evaluator in
accordance with National Instrument 51-101 effective April 1,
2013. |
(5) |
Based on current production of 500 boe/d. |
PLAN OF ARRANGEMENT
Whitecap and Invicta have entered into an Arrangement Agreement
pursuant to which Whitecap and Invicta have agreed that the
Transaction will be undertaken by means of a plan of arrangement
under the Business Corporations Act (Alberta). Invicta shareholders will receive,
at their election, for each Invicta share held, either: (i) 0.05891
of a Whitecap common share; or (ii) $0.51911 in cash, subject to an aggregate cash
maximum of $10.7 million, in exchange
for all of the outstanding shares of Invicta and subject to the
terms and conditions of the Arrangement Agreement. The Arrangement
Agreement contemplates that Invicta will hold a meeting of its
shareholders on or prior to May 9,
2013 to permit shareholders to vote on the Arrangement.
The board of directors of Invicta unanimously
supports the Transaction, has determined that the Transaction is in
the best interest of Invicta and recommends that the shareholders
of Invicta vote in favor of the Transaction. Certain Invicta
shareholders, including all senior officers and directors who
collectively hold over 22 percent of the issued and outstanding
voting shares of Invicta (assuming exercise of in-the-money
options), have entered into agreements with Whitecap pursuant to
which they have agreed to vote their shares in favor of the
Transaction at the Invicta shareholder meeting.
The Arrangement Agreement provides for
non-solicitation covenants (subject to the fiduciary obligations of
the board of directors of Invicta and the right of Whitecap to
match any Superior Proposal (as defined in the Arrangement
Agreement). The Arrangement Agreement, among other things, provides
for mutual nonācompletion fees of $2.4
million in the event the Transaction is not completed or is
terminated by either party in certain circumstances. The
Arrangement Agreement provides that completion of the Transaction
is subject to certain conditions, including the receipt of all
required regulatory approvals, including the approval of the TSXV
and the TSX, the approval of the shareholders of Invicta including,
if applicable the approval of the majority of the minority and the
approval of the Court of Queen's Bench of Alberta. The Transaction is anticipated to
close in April 2013.
FINANCIAL ADVISORS
GMP Securities L.P. is acting as exclusive financial advisor to
Invicta with respect to the Transaction and has provided the Board
of Directors of Invicta with its opinion that, subject to its
review of the final form of documents effecting the Arrangement
Agreement, the consideration to be received by Invicta shareholders
is fair, from a financial point of view, to Invicta shareholders.
Paradigm Capital Inc. is acting as strategic advisors to Invicta in
connection with the Transaction.
Note Regarding Forward-Looking Statements and
Other Advisories
This press release contains forward-looking statements and
forward-looking information (collectively "forward-looking
information") within the meaning of applicable securities laws
relating to the Company's plans and other aspects of Whitecap's
anticipated future operations, management focus, strategies,
financial, operating and production results and business
opportunities, including expected 2013 and 2014 production, cash
flow, operating netbacks, net debt to cash flow, our capital
expenditure program, drilling and development plans and the timing
thereof. In addition, and without limiting the generality of the
foregoing, this press release contains forward-looking information
regarding Invicta and the Transaction and the benefits to be
acquired therefrom including drilling and reserve potential,
anticipated rates of return, operating costs and other economics,
production levels, and the impact of the Transaction on Whitecap
and its results and development plans, including, on its
production, cash flow, development capital spending and free cash
flow, and the timing and anticipated closing date for the
Transaction. Forward-looking information typically uses words such
as "anticipate", "believe", "project", "expect", "goal", "plan",
"intend" or similar words suggesting future outcomes, statements
that actions, events or conditions "may", "would", "could" or
"will" be taken or occur in the future. The forward-looking
information is based on certain key expectations and assumptions
made by Whitecap's management, including expectations and
assumptions concerning prevailing commodity prices, exchange rates,
interest rates, applicable royalty rates and tax laws; future
production rates and estimates of operating costs; performance of
existing and future wells; reserve and resource volumes;
anticipated timing and results of capital expenditures; the success
obtained in drilling new wells; the sufficiency of budgeted capital
expenditures in carrying out planned activities; the timing,
location and extent of future drilling operations; the state of the
economy and the exploration and production business; results of
operations; performance; business prospects and opportunities; the
availability and cost of financing, labour and services; the impact
of increasing competition; ability to market oil and natural gas
successfully, Whitecap's ability to access capital, obtaining the
necessary shareholder and regulatory approvals, including the TSXV
and the TSX and satisfaction of the other conditions to closing the
Transaction.
Statements relating to "reserves" are also
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.
Although the Company believes that the
expectations and assumptions on which such forward-looking
information is based are reasonable, undue reliance should not be
placed on the forward-looking information because Whitecap can give
no assurance that they will prove to be correct. Since
forward-looking information addresses future events and conditions,
by its very nature they involve inherent risks and uncertainties.
The Transaction may not be completed on the anticipated time frames
or at all and the Company's actual results, performance or
achievement could differ materially from those expressed in, or
implied by, the forward-looking information and, accordingly, no
assurance can be given that any of the events anticipated by the
forward-looking information will transpire or occur, or if any of
them do so, what benefits that the Company will derive there from.
Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press
release in order to provide securityholders with a more complete
perspective on Whitecap's future operations and such information
may not be appropriate for other purposes.
Readers are cautioned that the foregoing lists
of factors are not exhaustive. Additional information on these and
other factors that could affect our operations or financial results
are included in reports on file with applicable securities
regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com).
These forward-looking statements are made as of
the date of this press release and Whitecap disclaims any intent or
obligation to update publicly any forward-looking information,
whether as a result of new information, future events or results or
otherwise, other than as required by applicable securities
laws.
Non-GAAP measures
This document contains the terms "cash flow", "free cash flow" and
"operating netbacks" which do not have a standardized meaning
prescribed by Canadian GAAP and therefore may not be comparable
with the calculation of similar measures by other companies.
Whitecap uses cash flow, free cash flow and operating netbacks to
analyze financial and operating performance. Whitecap feels these
benchmarks are key measures of profitability and overall
sustainability for the Company. Each of these terms is commonly
used in the oil and gas industry. Cash flow, free cash flow and
operating netbacks are not intended to represent operating profits
nor should they be viewed as an alternative to cash flow provided
by operating activities, net earnings or other measures of
financial performance calculated in accordance with GAAP. Cash
flows are calculated as cash flows from operating activities less
changes in non-cash working capital. Free cash flows are calculated
as cash flow minus development capital expenditures. Operating
netbacks are determined by deducting royalties, production expenses
and transportation and selling expenses from oil and gas
revenue.
Note: "Boe" means barrel of oil equivalent on
the basis of 6 mcf of natural gas to 1 bbl of oil. Boe's 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. Given 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 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may
be misleading as an indication of value.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
SOURCE Whitecap Resources Inc.