Journey Energy Inc. Announces Closing of Strategic Acquisition, Divestment of Non-Core Property, Increase to Credit Facility and Hedging Update
Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") is pleased to announce it has closed on its previously announced strategic acquisition in its Central Alberta core area (the "Acquisition").
The Acquisition consists of approximately 2,000 boe/d (average for 2017; 28% oil & NGL's) of high value; long life; operated; high working interest (75% average); and liquids-rich gas production. This low-decline (16%) production base provides annual, net operating income of approximately $8-9 million. Journey has also acquired high working interests in two strategic gas plants as well as a network of more than 250 kilometers of pipelines. Journey has identified a number of low-risk, low-capital cost, development opportunities, which will allow the Company to maintain production on the assets over the remainder of the year for approximately 30% of forecasted funds flow. The base purchase price (before closing adjustments) was $35.6 million.
Journey also announces today that it has disposed of a non-core property in the Sylvan Lake Area for approximately $5.0 million (before closing adjustments), which was producing approximately 185 boe/d (83% oil and NGL's) at closing.
The Acquisition is consistent with Journey's expansion strategy within its Central Alberta core area by building on its extensive network of strategic infrastructure and further expanding its portfolio of low-risk multi-zone liquids focused horizontal drilling opportunities.
The $30.6 million net acquisition cost (before adjustments) for the two deals was funded through:
To maintain financial flexibility Journey has entered into additional hedges of 5.0 mmcf/d on gas and 500 bbl/d of oil for the second half of 2017, and is planning to shift approximately $5.0 million of capital expenditures from the second and third quarters to the fourth quarter.
Concurrently with the closing of the two transactions above, Journey concluded the annual review of its credit facility with its syndicate of banks. The new credit facility is $125 million (previously $90 million) comprised of a $15 million working capital facility and a $110 million revolving borrowing base production based facility. After closing both the Acquisition and the divestment, the amount drawn on the bank line was approximately $65 million.
Journey's revised 2017 forecasted funds flow from operations of $46-50 million is based upon the following average prices: WTI of US$52/bbl; AECO gas of CDN$2.90/mcf; and a foreign exchange rate of $0.75 US$/CDN$. The Company will operate substantially all of its 2017 capital program with an average working interest in excess of 90%. Because of this, Journey can remain flexible with its budget by increasing or decreasing its spending levels should commodity prices change materially. Although Journey has the ability to provide additional growth within funds flow, Journey remains steadfast in its commitment to preserve financial flexibility during volatile times.
Journey currently has 56% of its oil and 57% of its natural gas volumes hedged for the remaining three quarters of 2017. This is expected to provide a high level of confidence for the funding of the capital program, while maintaining significant financial capability and security to pursue future acquisition opportunities.
About the Company
Journey is a Canadian exploration and production company focused on conventional oil and liquids-rich natural gas operations in western Canada. Journey's strategy is to grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.
SOURCE: Journey Energy Inc.
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