Delphi closes Bigstone Montney buy for $13.65-million

2013-03-26 18:46 ET - News Release


Mr. David Reid reports


Delphi Energy Corp. has closed a land acquisition in the heart of its Bigstone Montney acreage. Levering off of the positive results of its last five successful Montney wells in the area (the two most recent of which were detailed in Delphi's March 20, 2013, press release), the company has acquired an additional 30 gross (26.8 net) sections of Montney rights directly offsetting the company's existing acreage and wells. The land was acquired for a purchase price of $13.65-million ($796 per acre) and fills in the gap between the company's existing lands in east and west Bigstone and Montney lands to the south of Bigstone East acquired pursuant to the company's previously announced farm-in (detailed in the Dec. 12, 2012, press release).

The acquisition has several key benefits to Delphi:

  • The company's land position in the Bigstone Montney play (subsequent to the potential full earning of the previous farm-in) increases by 40 per cent to 108 gross (93 net) sections from 78 gross (66.2 net).
  • An independent evaluation report, effective Feb. 1, 2013, and prepared by Seaton-Jordan & Associates Ltd., assigned a fair value to the acquired lands of $26.95-million.
  • The company's inventory of drilling locations in the Bigstone Montney play increases by 54 locations or 40 per cent to 140 net potential two-mile horizontal drilling locations.
  • The company anticipates the assignment of reserves on certain of the acquisition lands immediately offsetting existing producing wells.
  • The efficiency of future capital spending related to infrastructure and development drilling due to a very large contiguous land base is significantly enhanced.

The acquisition puts the final large piece of the Bigstone Montney project in place for Delphi, creating one of the largest land positions in the area. Delphi's project area now has an estimated drilling inventory totalling over $1.2-billion of capital for full development.

Delphi's previously reported 15-10-60-23W5 Montney horizontal well was drilled from a surface location of 16-3-60-23W5 located directly on the new acquisition lands and is pipeline connected to the company's 100-per-cent-owned compression and dehydration facility. This 16-3 surface location will be used for pad drilling, where additional horizontal wells will be drilled south on the acquisition lands.

The company estimates up to 2.5 net undeveloped locations, of the 54 net locations identified, could be immediately added to the reserve report due to proximity of existing well control and production. This would add approximately $18-million of total proved plus probable reserve value, discounted at 10 per cent, based on the average before-tax net present value of the company's P+P undeveloped Montney locations in the year-end 2012 GLJ Petroleum Consultants Ltd. reserve report.

Although the acquisition lands are non-producing at this time, it is immediately accretive to the company's net asset value after giving effect to the undeveloped land value, internally estimated reserve value and the purchase price.

The acquisition was financed utilizing Delphi's existing borrowing capacity. The acquisition and a reallocation of second half 2013 capital expenditures will result in the company's 2013 net capital program increasing by approximately $5.0-million from previous guidance of $50.0-million to $55.0-million. Approximately $3.0-million in minor dispositions were completed during the first quarter of 2013, with additional non-core assets being evaluated for disposition in 2013.

The production from Delphi's two most recent Montney wells -- the first wells in the Greater Bigstone area to utilize slick water frack techniques -- continues at the previously announced levels, with natural gas liquid yields averaging 102 barrels per million cubic feet (74 per cent condensate), supporting the robust economic returns with top-quartile netbacks and time to payout. The acquisition lands significantly increase the scale of Delphi's opportunity inventory at Bigstone. The company is now extremely well positioned to pursue additional capital sources to unlock value from the company's Montney asset base.

We seek Safe Harbor.