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CALGARY, AB, July 28, 2022 /CNW/ – Journey Energy Inc. (TSX: JOY); (OTCQX: JRNGF) (“Journey” or the “Company“) is pleased to announce that it has today entered into a definitive agreement for the strategic acquisition of producing petroleum and natural gas assets in Alberta.
Journey today entered into a definitive agreement with a senior producer for the purchase of petroleum and natural gas assets (the “Acquisition“) currently producing approximately 4,400 boe/d (71% oil and NGL’s) primarily in the Medicine Hat, Kaybob, Ferrier, and Ante Creek areas of Alberta for a total purchase price of $140 million prior to closing adjustments. Pro-forma, assuming an October 1 closing date, this transaction will increase Journey’s fourth quarter production to 14,200-14,600 boe/d and it will increase Journey’s liquid (oil and NGL’s) weighting to approximately 55%. The gross purchase price represents 2.0 times annualized operating income3 and is highly accretive to Journey on both cash flow and free cash flow per share metrics while maintaining conservative corporate leverage ratios.
A summary of the relevant metrics for the acquisition are as follows:
|
Gross purchase price1 |
$140 million |
|
Estimated net purchase price2 |
$116 million |
|
June 2022 average daily sales volumes |
4,400 boe/d (71% oil and NGL’s) |
|
Annual decline rate |
12 % |
|
Annual oil decline rate |
10 % |
|
Proved Developed Producing Reserve Life Index |
8.2 years |
|
Net wellbores |
420 |
|
Liability Management Rating (June 2022) |
~4.5 |
|
Undeveloped land |
45,672 gross (15,338 net) acres |
|
First-half 2022 operating netback3 |
$44.50/boe |
|
Reserves4 |
|
|
PDP |
12,680 mboe |
|
Proved |
13,827 mboe |
|
Proved plus Probable |
18,166 mboe |
|
Acquisition cost metrics3 |
|
|
Multiple of operating income |
2.0x |
|
Flowing barrel |
$31,800/boe/d |
|
Cost per PDP reserves |
$11.04/boe |
|
PDP Recycle Ratio |
4.0x |
|
Notes: |
|
|
1. |
Before interim period adjustments for net operating income and other adjustments. |
|
2. |
Journey currently estimates that the net operating income adjustments will be approximately $25 million based on projections of net operating income from the effective date to the currently anticipated closing date of October 1, 2022. |
|
3. |
The acquisition cost metrics are based on the currently gross purchase price of $140 million and the first half, 2022 operating netback of the acquired properties. |
|
4. |
Reserve volumes are based on the vendors independent reserve evaluator’s report with an effective date of December 31, 2021 and adjusted by Journey to reflect estimated production and other adjustments to the effective date of the transaction of May 1, 2022. |
This Acquisition strengthens Journey’s ability to drive shareholder returns through ongoing execution of the Company’s business plan while providing free cash flow to pursue further enhancements to Journey’s growth model. These low decline, high free cash flow assets lend themselves to the implementation of a return of capital business model over time.
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