Synergistic Deep Basin Acquisition
Bonavista today completed another synergistic acquisition in its Deep Basin area for a closing purchase price of $72.5 million. This acquisition is consistent with our strategy of acquiring high quality, multi-zone oil and liquids rich natural gas assets in a region proximal to existing operations where we have identified opportunities to optimize netbacks through lowering operating costs and utilizing proven technology to enhance the value of existing reservoirs.
Highlights of the acquisition include:
-- Increases our land position in the Deep Basin by approximately 18% (40,000 net acres) providing an excellent overlay with our existing land position;-- Increases production by 2,450 boe per day (77% natural gas weighted) of low decline production with the capability of increasing production by 350 boe per day by the end of January 2013 through the completion of an existing Rock Creek horizontal well;-- Adds approximately 12.5 mmboe of proven and probable reserves (54% proven);-- Increases our development portfolio by 19 gross (17.2 net) horizontal drilling locations, nine of which are targeting a Rock Creek light oil pool. This pool is currently underdeveloped with less than a 2% recovery factor to date, producing at a 15% decline rate. Four horizontal wells will be drilled in this pool in 2013;-- Adds two wholly-owned natural gas plants with approximately 24 mmcf per day of capacity and 130 kilometers of infrastructure augmenting Bonavista's existing operational presence in the area. This alignment of operations will result in a 25% reduction in the current operating costs of these properties;-- Adds $20.5 million in net operating income in 2013 with the capability of growing substantially in future years; and-- Collectively, acquisition metrics are attractive at $29,600 per boe per day, $12.00 per boe, including future development costs and 3.5 times 2013 cash flow based on forward commodity pricing.
2013 Capital Budget and Upwardly Revised Production Guidance
Bonavista's 2013 net capital spending plans remain consistent with prior guidance at $423 million; however, we have incorporated certain budget adjustments to accommodate approximately $20 million of development expenditures allocated to the Deep Basin properties we have just acquired. We expect our 2013 capital program will result in average production of between 73,500 and 74,500 boe per day representing a modest increase over prior guidance and resulting in 6-7% growth over 2012. Similarly, we expect our 2013 year-end debt to forward 2014 cash flow ratio to improve to 2.0:1 based on current strip commodity pricing.
Through the consistent application of our proven strategy, we are confident that the current measures we are taking will not only result in additional financial flexibility in the short-term but lead to a stronger and more profitable company in the long-term. As in prior years, we will continue to monitor the economic landscape, commodity prices and our drilling results and adjust our capital spending levels as conditions warrant. Additionally, we remain attentive to an increasing number of incremental acquisition opportunities which complement our core regions and enhance our capabilities to create value.
Forward Looking Statements
Corporate information provided herein contains forward-looking information. The reader is cautioned that assumptions used in the preparation of such information, particularly those pertaining to cash dividends, production volumes, commodity prices, operating costs and drilling results, which are considered reasonable by Bonavista at the time of preparation, may be proven to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein and the variations may be material. There is no representation by Bonavista that actual results achieved during the forecast period will be the same in whole or in part as those forecasts.
Keith A. MacPhail
Jason E. Skehar
President & CEO
Glenn A. Hamilton
Senior Vice President & CFO
Bonavista Energy Corporation
1500, 525- 8th Avenue SW
Calgary, AB T2P 1G1