CALGARY, Alberta, Sept. 13, 2023 (GLOBE NEWSWIRE) — Lycos Energy Inc. (“Lycos” or the “Company“) (TSXV: LCX) is pleased to announce that it has entered into a definitive agreement (the “Acquisition Agreement“) today to acquire Durham Creek Exploration Ltd. (“DCEL“), a privately-held, arm’s length, heavy oil producer, by way of a plan of arrangement for total consideration, prior to adjustments, of $22.5 million (the “Acquisition“), consisting of $12.5 million in cash and 2.8 million common shares of Lycos (“Lycos Shares”) at a deemed price of $3.55 per Lycos Share.
The Acquisition will be funded through a $25 million bought deal equity financing (the “Offering“).
Acquisition Highlights
- 35,382 net acres (55.93 net sections) of land suitable for multi-lateral development proximally located to the Company’s recent acquisition of Wyatt Resources Ltd. (“Wyatt”)
- With DCEL and the recently announced Wyatt acquisition, Lycos has increased its corporate land holdings by 31% to 147,956 net acres.
- The Company has identified over 70 net Mannville heavy oil multi-lateral drilling locations on DCEL lands dramatically increasing the current development portfolio to 210 locations
- Increases Tier 1 Mannville inventory (Rex, Waseca, GP and Cummings) by 77% to 55 total net locations. Tier 1 locations have an expected payout period of less than 6 months and an NPV-10% of $5.5 million(1).
- Increases Tier 2 Mannville inventory (Rex, Waseca, GP and Cummings) by 49% to 140.6 total net locations. Tier 2 locations have an expected payout period of under 12 months and an NPV-10% of $3.4 million(1).
(1) Payout and NPV-10% assumptions are based on pricing assumptions of; US$75/bbl WTI; (US$15) WCS differential; and $0.741 CAD/USD, operating expenses of $15.48/boe, royalty rate of 11.4% and capital expenditures of $1.6 million.
- Acquired production is expected to average ~180 boe/d (99% crude oil) at close from a multi-lateral well drilled at Lindbergh
- DCEL’s first well targeting the Waseca formation achieved an IP30 of 183 boe/d.
- The initial drilling results from this well support the Company’s expectation that it will be able to deploys its’ multi-lateral/fishbone drilling technique to further develop the acquired lands.
- Acquired land base to be developed using Lycos’ fishbone well designs
- Lycos has achieved an IP30 of 235 boe/d and an IP26 of 355 boe/d on its most recent two Swimming Rex wells using a half fishbone design and a substantially redesigned drilling fluid system.
- The Company believes this approach materially enhances deliverability and will be used to develop the DCEL’s inventory.
Summary of the Acquisition
Pursuant to the terms of the Acquisition Agreement, the Company will acquire DCEL for total consideration, prior to adjustments, of $22.5 million, consisting of $12.5 million in cash and 2.8 million Lycos Shares at a deemed price of $3.55 per Lycos Share.
Concurrent with the execution of the Acquisition Agreement, shareholders of DCEL representing approximately 83% of the outstanding common shares of DCEL executed written resolutions irrevocably approving the Acquisition. The Acquisition Agreement provides for, among other things, a non-solicitation covenant on the part of DCEL. A copy of the Acquisition Agreement will be filed on Lycos’ SEDAR+ profile at www.sedarplus.ca.
The Acquisition is expected to close on or before October 16, 2023, subject to the completion of the Offering and certain customary conditions and approvals, including the approval of the Court of King’s Bench of Alberta and the TSX Venture Exchange (the “TSXV“).
All of the Lycos Shares issued to the insiders of DCEL, representing approximately 81% of the outstanding shares of DCEL, will be subject hold periods and released as to one third on each of the dates that is three, six and nine months following the closing of the Acquisition.
Pro Forma Guidance for 2023
- Pro-forma the Acquisition, Lycos is expected to increase its 2023 capital spending program to $57 million with the drilling of an additional 2 to 3 wells targeting DCEL’s acreage in Q4/23.
- 2023 production guidance remains unchanged with additional drilling not expected to have a material impact on the Company’s 2023 average production.
- Despite the additional spending, Lycos is expected to maintain a clean balance sheet and significant liquidity, with Nil forecasted net debt at year-end 2023 and $35 million available under its existing credit facilities.(2)
(2) See “Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures“.
Equity Financing
Lycos has entered into an agreement (the “Underwriting Agreement“) with a syndicate of underwriters led by National Bank Financial Inc. (the “Underwriters“), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought-deal basis, 7.0 million Lycos Shares at a price of $3.55 per Lycos Share for gross proceeds of $25 million. The Underwriters will have an option to purchase up to an additional 15% of the Lycos Shares issued under the Offering at a price of $3.55 per Lycos Share to cover over-allotments exercisable in whole or in part at any time until 30 days after the closing of the Offering.
The Lycos Shares issued pursuant to the Offering will be distributed by way of a short form prospectus in all provinces of Canada (excluding Québec) and may also be placed privately in the United States to Qualified Institutional Buyers (as defined under Rule 144A under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“)) pursuant to an exemption under Rule 144A, and may be distributed outside Canada and the United States on a basis which does not require the qualification or registration of any of the Company’s securities under domestic or foreign securities laws.
The Offering is expected to close immediately prior to the completion of the Acquisition and is conditional on all conditions precedent to the completion of the Acquisition (other than the payment of the purchase price) having been satisfied or waived in accordance with the terms of the Acquisition Agreement and the Underwriting Agreement, and is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSXV. Closing of the Offering is expected to occur on or before October 16, 2023.
There are 40,404,140 Lycos Shares issued and outstanding as of the date hereof. Following the completion of the Acquisition and the Offering (prior to giving effect to the over-allotment), there will be 50,265,041 Lycos Shares issued and outstanding.
Advisors
National Bank Financial Inc. is acting as exclusive financial advisor to Lycos with respect to the Acquisition.
Stikeman Elliott LLP is acting as legal counsel to Lycos with respect to the Acquisition and the Offering.
Burnet, Duckworth & Palmer LLP is acting as legal counsel to DCEL with respect to the Acquisition and as legal counsel to the Underwriters in respect of the Offering.
About Lycos
Lycos is an oil-focused, exploration, development and production company based in Calgary, Alberta, operating high-quality, heavy-oil, development assets in the Lloydminster, Greater Lloydminster area and Gull Lake, Saskatchewan.
Additional Information
For further information, please contact:
| Dave Burton President and Chief Executive Officer T: (403) 616-3327 E: dburton@lycosenergy.com |
Lindsay Goos Vice President, Finance and Chief Financial Officer T: (403) 542-3183 E: lgoos@lycosenergy.com |
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