Tenth Avenue Petroleum announces closing of light oil acquisition

CALGARY, AB – September 30, 2022 / Tenth Avenue Petroleum Corp. (“TPC” or the “Company”) (TSXV:TPC) is pleased to announce that the Company has closed the acquisition of a light oil, high netback asset in Southern Alberta from Danzig Resources Ltd. (the “Acquisition” or “Acquired Assets“).

SUMMARY ACQUISITION HIGHLIGHTS

• Production of 38 boe/d⁽¹⁾ (69% oil and natural gas liquids), including 26 bbls/d of light oil;
• Operating netback of $66.90/boe⁽²⁾ >;
• Estimated run-rate of approximately$698,000⁽³⁾ net operating income;
• Attractive purchase price of approximately1.1x run rate cash flow⁽³⁾ or approximately $20,000/flowing boe;
• Acquisition is accretive on a per share basis: 3.76% of additional shares issued, increasing production by 21%;
• Danzig Resources Ltd. will retain a three percent (3%) gross overriding royalty on production from a natural gas well located at 102/6-11-015-26W4/00, which is awaiting tie-in;
• Post Acquisition, the Company will have 39,844,100 issued and outstanding shares, on an undiluted basis.

Notes

1. Disclosure of production on a per boe basis in this press release consists of the constituent product types and their respective quantities disclosed elsewhere in this press release. Refer to Barrel of Oil Equivalency and Production and Product Type Information in this press release for additional disclosure.
2. Also referred to as “operating netback” for the period June 2022. Operating netback is a non-GAAP financial measure. Refer to Oil & Gas Advisories in this press release for additional disclosure and assumptions.
3. Disclosure of Net Operating Income is based on June 2022 actual production, prices, royalties and operating costs.Refer to Oil & Gas Advisories in this press release for additional disclosure and assumptions.

Consideration for the Acquisition was $760,000 subject to normal closing adjustments, payable with $400,000 cash and the issuance of 1,500,000 common shares of the Company (“Consideration Shares“) at an ascribed price of $0.24 per share, which was the share price at closing.

The Acquisition strengthens the Company’s business model of acquiring high quality, operated, light and medium gravity crude oil reservoirs that contain large original oil in place (“OOIP“) with low recovery factors. The Acquisition increases the Company’s current production base by 21% to approximately 182 boe/d (88% oil and natural gas liquids) from the Q2/22 average of 143 boe/d and expands the Company’s existing core area in Southern Alberta.

THE ACQUISITION

The Acquisition has an effective date of September 1, 2022 and consists of a 100% working interest in 5 wells, a 100% owned multi well oil facility (05-21-015-25W4M) and a 35% ownership in a potential gas well awaiting tie-in. The current conventional production is from the Sunburst zone, located in the Vulcan area of Alberta. This asset generates high operating netbacks and has additional revenue streams from custom treating, water disposal and gas handling. Much like the Murray Lake asset that the Company purchased in Q1/22, the Acquired Assets show potential upside to implement an Enhanced Oil Recovery (“EOR“) with waterflood to increase production and recovery factors. The existing Sunburst pool has recovered less than 10% to date and under an EOR waterflood program could achieve upwards of +20% recovery factor with an estimated 3.5MMbbl OOIP per section.

The Acquisition is consistent with the Company’s strategy to assemble under capitalized, undervalued opportunities to enhance the quality of the Company’s business model and asset base throughout various commodity price cycles. Based on the Company’s base production historical decline rate, it is expected that minimal capital will be required to maintain existing production levels on the Acquires, providing the Company with a strong platform for future cash flow and sustainability. The Acquisition is accretive on key valuation metrics and is expected to improve the Company’s operating netbacks and exposure to additional drilling inventory, EOR waterflood opportunities and further strengthens the Company’s disciplined growth strategy. Closing of the Acquisition is subject to certain customary conditions and regulatory and other approvals, including all necessary approvals of the TSX Venture Exchange.

Lock-Up Period

The Consideration Shares (representing approximately 3.76% of the issued and outstanding common shares of the Company, on a non-diluted basis, post-Acquisition) will be subject to a lockup such that 50% of the Consideration Shares will be subject to a six-month escrow period and remaining 50% of the Consideration Shares will be subject to a twelve-month escrow period.

For further information please contact:

Tenth Avenue Petroleum Corp.
Cameron MacDonald, President & CEO
Phone: (403) 585-9875
Email: [email protected]
www.tenthavenuepetroleum.com