CALGARY, AB, Oct. 18, 2023 /CNW/ – Tuktu Resources Ltd. (“Tuktu” or the “Company“) (TSXV: TUK) is pleased to announce that on October 17, 2023 it entered into a purchase and sale agreement (the “PSA“) with an arm’s length company (the “Vendor“) to purchase certain oil assets located in southern Alberta (the “Assets“) from the Vendor (the “Acquisition“).
In connection with the Acquisition, the Company entered into an engagement agreement with Research Capital Corporation, as the sole agent and sole bookrunner (the “Agent“), on a commercially reasonable efforts basis to conduct a brokered private placement of equity units of the Company (the “Units“) at a price of $0.06 per Unit (the “Issue Price“) for aggregate gross proceeds of up to $2,500,000 (collectively, the Offering and the Concurrent Placement, as each term is defined herein, being the “Private Placements“). Each Unit shall be comprised of one common share in the capital of the Company (a “Common Share“) and one Common Share purchase warrant of the Company (a “Warrant“). Each Warrant shall entitle the holder thereof to purchase one Common Share at an exercise price of $0.0975 for a period of 36 months from closing of the Private Placements. Further, the Company entered into a non-binding term sheet with the Lender (as defined below) to establish a credit facility.
Large Concentrated Land Positions within Economic Banff Light Oil Resource Play
- Land position of 29,685 gross (29,396 net) hectares in southern Alberta near to the Foothills.
- Highly synergistic with the acquired lands building on the Company’s strategic land position in the southern Alberta Deep Basin and Foothills.
Large Drilling Inventory Provides Years of Growth Opportunity
- Targeting the Banff formation within mappable Enhanced Permeability Fairway (“EPF“) located close to regional scale faults.
- Certain wells within the EPF have achieved IP30 rates of >400 bbl/d of light oil, with a cumulative production of 450 Mbbls(1).
- Tuktu has identified at least 30 gross unrisked drilling locations within this EPF on the lands being acquired pursuant to the Acquisition. This is in addition to 20+ inventory of unrisked drilling locations within the Company’s current land holdings(2).
High Quality Low Decline Light Oil Production
- Stable base production of approximately 165 bbl/d(4); 100% light oil with an average 33° API gravity.
- Estimated annual decline of 16%.
- Immediate low risk production growth with several well recompletion opportunities.
Long-Term Reserve Development Upside
- Estimated Acquisition Reserves and Net Present Value of Future Net Revenue(3)
- PDP 0.31 MMbbl, $5.5 million NPV10%
- TPP 2.1 MMbbl, $19.6 million NPV10%
- Southern Alberta acquisition announced March 21, 2023(8)
- PDP 727 MBoe ,$3.7 million NPV10%
- TPP 1,449 Mboe, $6.2 million NPV10%
- Southern Alberta oil acquisition, announced December 8, 2022(7)
- PDP 27 MBoe ,$0.6 million NPV10%
- TPP 1,329 Mboe, $35.1 million NPV10%
Establishes a Growth Platform
- Combined production on a pro forma basis of 565 BOE/d(4).
- Pro forma land position in southern Alberta core area of 41,048 gross (40,118 net) hectares.
Recompletion and Workover Program Targeting Increase in Corporate Production
Tuktu has assembled a portfolio of opportunities, including well recompletions and production optimization projects which are anticipated to occur late Q4 2023, or early 2024(6). These projects are targeted at increasing the Company’s production and may include some or all of the following:
- Artificial lift installation on a Foothills oil well which is currently producing unassisted in a “free flow” state.
- A single standing well is contemplated to be completed for sweet gas. The targeted reservoir is in a structurally favourable position, and the log response is analogous to those of our current producing Foothills gas wells. A successful operation could add significant net production to the Company and delineate further offset drilling locations.
- Optimizations, recompletions and re-entries on the newly acquired assets have the potential to substantially increase the acquisition volumes being acquired. By utilizing existing wellbores for these opportunities, Tuktu is expecting to further decrease inactive liability and extend the life of the Assets.
While subject to further technical due diligence and planning, the Company is high grading projects with <1 year payout(5). Together, low-cost completion and optimization initiatives have the potential to double the Company’s total production.
Notes:
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(1) |
Source: Geoscout. See “Oil and Gas Advisories – Initial Production Rates” and “Oil and Gas Advisories – Analogous Information“. |
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(2) |
See “Oil and Gas Advisories – Drilling Locations“. |
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(3) |
Reserves information is based on the Acquisition Reserves Report (as defined below). |
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(4) |
Current production for the Assets of 165 BOE/d is based on average production from May to July 2023, based on the Vendor’s lease operating statements. Current production for the Company’s current assts is 400 BOE/d. |
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(5) |
See “Oil and Gas Advisories – Oil and Gas Metrics“. |
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(6) |
See “Forward-Looking Information Advisories – Recompletion Plan“. |
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(7) |
Reserves information is based on a report prepared by independent reserves evaluator, Chapman Petroleum Engineering Ltd. (the “Chapman Report“) dated effective June 30, 2022 prepared in accordance with COGEH (as defined below) and National Instrument 51-101 (“NI 51-101“). The Chapman Report was based on the average forecast pricing of Chapman Petroleum Engineering Ltd. and inflation rates and foreign exchange rates as at July 1, 2022. |
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(8) |
Reserves information is based on a report prepared by independent reserves evaluator, GLJ Ltd. (the “GLJ Report“) dated effective January 1, 2023 prepared in accordance with COGEH and NI 51-101. The GLJ Report was based on the average forecast pricing of GLJ, McDaniel & Associates Consultants Ltd. and Sproule Associates Ltd. as at January 1, 2023. |
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Purchase Price (“P“)(1,5) |
$3 million |
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Adjusted Purchase Price(2) |
$1.5 million |
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12 Month Trailing Operating Expenses(3) |
$33.95/bbl |
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2023E Production(4) |
165 bbl/d |
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2023 Est. Annualized NOI(3,6) |
$2.2 million |
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Cost Per Flowing Barrel (P/(bbls/d))(4,9) |
$18,182 |
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Trailing production decline |
16 % |
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Reserves |
MMbbl(7,9,10) |
NPV10% ($MM) (7,8,10,11) |
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PDP |
0.3 |
$5.50 |
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Proven |
0.3 |
$5.60 |
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Proven + Probable |
2.1 |
$19.60 |
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Reserves |
P/MMbbl(7,9,10) |
P/NPV10%(7,8,9,10,11) |
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PDP |
$9.75 |
55 % |
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Proven |
$9.75 |
55 % |
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Proven + Probable |
$1.44 |
15 % |
Notes:
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(1) |
Prior to interim or final adjustments. |
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(2) |
The Adjusted Purchase Price is the Purchase Price of $3.0 million less estimated interim adjustments of $1.5 million, based on nine months of adjustments. |
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(3) |
Based on Vendor’s books and records or a projection of such records, as applicable, with an asset decline of 16% and September 20, 2023 strip pricing. |
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(4) |
May to July 2023, average production, based on the Vendor’s lease operating statements. |
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(5) |
The components of the Purchase Price (prior to any adjustments) are allocated as follows: (i) $2.4 million to petroleum and natural gas rights; (ii) $599,990 to tangibles; and (iii) $10.00 to miscellaneous interests and seismic rights. |
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(6) |
Non-GAAP Financial Measure. Non-GAAP financial measures do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures“. |
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(7) |
Based on the Acquisition Reserves Report. Assumes unadjusted Purchase Price. See “Oil and Gas Advisories – Reserves Information“. |
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(8) |
Before tax net present value is based on a 10% discount rate and the price deck set forth under “Pricing Assumptions” below. |
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(9) |
Supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures“. |
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(10) |
See “Abbreviations” below. |
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(11) |
NPV10% means the net present value of future net revenue before income tax discounted at 10%. The discounted net present value of future net revenues attributable to reserves do not represent fair market value. See “Oil and Gas Advisories – Reserves Information“. |
Pursuant to the PSA, Tuktu has agreed to purchase the Assets from the Vendor for aggregate consideration of $3.0 million (the “Purchase Price“), subject to customary adjustments. Concurrent with the execution of the PSA, the Company paid a $150,000 deposit which will be credited towards the Purchase Price (the “Deposit“).
The Acquisition is expected to close in escrow on or about December 1, 2023 (the “Escrow Closing“). The Escrow Closing is subject to and conditional upon, among other things: (i) Tuktu obtaining sufficient funds to satisfy the Interim Purchase Price; and (ii) other customary conditions and approvals, including the approval of the TSX Venture Exchange (the “TSXV“).
On Escrow Closing, the Company anticipates that the Purchase Price, after interim adjustments and after deducting the Deposit, will be approximately $1.35 million (the “Interim Purchase Price“). The Interim Purchase Price will be held in escrow following the Escrow Closing and will be releasable to the Vendor upon receipt of AER approval for the licence transfers related to the Assets, at which time the Acquisition will be completed and Tuktu will obtain full and clear title to the Assets (the “Acquisition Closing“). The Company anticipates that the Acquisition Closing may occur on or about 60 business days following the Escrow Closing.
THE PRIVATE PLACEMENTS
Concurrent with the execution of the PSA, the Company entered into an agreement with the Agent to conduct the Private Placements, which are comprised of Offering and the Concurrent Placement, as described further below.
The Offering is a brokered private placement of 16,666,667 Units at a price of $0.06 per Unit to be issued under the financing exemption under Part 5A (the “Listed Issuer Financing Exemption“) of National Instrument 45-106 – Prospectus Exemptions (“NI 45-106“) for aggregate gross proceeds of $1,000,000 (the “Offering“). Each Unit will consist of one Common Share and one Warrant. Each Warrant will entitle the holder thereof to purchase one Common Share at an exercise price of $0.0975 for a period of 36 months from Closing (as defined below).
The Concurrent Placement is being conducted by the Company concurrently with the Offering and is a brokered private placement led by the Agent of up to 25,000,000 Units at the Issue Price (being a price of $0.06 per Unit) for aggregate gross proceeds of up to $1,500,000 (the “Concurrent Placement“). The Units issued pursuant to the Concurrent Placement will consist of one Common Share and one Warrant, and Warrants will be issued on the same terms and conditions as those issued under the Offering. The Company has granted the Agent an option (the “Agent’s Option“) to offer for sale up to an additional 15% of the number of Units sold in the Concurrent Placement, which Agent’s Option is exercisable, in whole or in part, at any time up to 48 hours prior to the closing of the Private Placements.
The net proceeds of the Private Placements are expected to be used to fund the Interim Purchase Price and, to the extent there are remaining net proceeds after the payment of the Interim Purchase Price, the Company may use such proceeds to fund development projects on its existing properties and the Assets and may reallocate certain funds, from time to time, to working capital purposes (which may include legal fees, customary AER deposit fees and other fees and expenses related to the Acquisition), as the Company deems necessary or appropriate. In the event that Escrow Closing or Acquisition Closing does not occur, the Company will use the net proceeds from the Offering and the Concurrent Placement to fund development projects on its existing properties, for working capital purposes and to finance any future property acquisitions.
It is expected that the closing (the “Closing“) of the Private Placements will occur on or about November 30, 2023, or on such other date as may be mutually determined by the Company and the Agent, acting reasonably, and, in any event, on or before a date not later than 45 days after the date of this press release.
Subject to compliance with applicable regulatory requirements and in accordance with NI 45-106, the Units issuable under the Offering will be offered for sale to purchasers resident in Canada other than Québec pursuant to the listed issuer financing exemption under Part 5A of NI 45-106. The Common Shares issuable from the sale of Units sold under the Offering are expected to be immediately freely tradeable under applicable Canadian securities legislation if sold to purchasers resident in Canada, subject to any hold period imposed by the TSXV on the securities issued to certain purchasers.
The minimum and maximum amounts to be raised pursuant to the Offering are each $1,000,000. In the event the Company does not raise the minimum gross proceeds of $1,000,000 pursuant to the Offering, the Offering will not be completed and no securities will be issued under the Listed Issuer Financing Exemption.
Units issuable in the Concurrent Placement are expected to be offered to purchasers pursuant to the accredited investor exemption under Section 2.3 of NI 45-106 and will be subject to the standard statutory four-month plus one day hold period.
In connection with the Private Placements, the Company will pay the Agent a cash commission equal to 8.0% of the gross proceeds of the Private Placements or $0.0048 per Unit, other than in respect of proceeds from the sale of Units to certain “president’s list” purchasers identified by the Company (the “President’s List Purchasers“), for which a 4.0% cash commission will be payable. In addition, the Agent will receive such number of broker warrants (the “Broker Warrants“) as is equal to 8.0% of the number of Units sold under the Private Placements, other than in respect of the Units sold to the President’s List Purchasers, for which the Agent shall receive Broker Warrants equal to 4.0% of the number of such Units. Each Broker Warrant shall entitle the holder thereof to purchase one Unit at an exercise price equal to $0.06 for a period of 36 months following the Closing.
There is an offering document relating to the Offering (the “Offering Document”) that can be accessed under the Company’s profile at www.sedarplus.ca and on the Company’s website at www.tukturesources.com. Prospective investors should read the Offering Document before making an investment decision.
THE DEBT FINANCING
Concurrent with the execution of the PSA, the Company entered into a non-binding term sheet (the “Term Sheet“) with a third-party lender (the “Lender“) for a credit facility up to USD $1,500,000. The Company expects to enter into a binding commitment with such Lender prior to or concurrent with the Acquisition Closing to provide a credit facility (the “Facility“) to Tuktu. If established, the funds available under the Facility may be drawn for development capital expenditures and AER deposit fees.
The Term Sheet was provided to Tuktu for discussion purposes only and does not contain all the terms, conditions, representations, warranties, and other provisions with respect to the Facility. The Term Sheet does not constitute a commitment or offer to provide financing by the Lender. No commitment or agreement exists or arises prior to the execution of a binding commitment letter. The indicative terms and conditions outlined in the Term Sheet are subject to the Lender’s review and approval process and are subject to change based on due diligence review and further analysis.
Completion of the Acquisition is expected to add to Tuktu’s existing assets in southern Alberta. With its multidecadal experience in this area, Tuktu intends to expand its holdings within this area, while it continues to evaluate Deep Basin and Foothills assets for further acquisitions. For additional information about Tuktu please contact:
Tuktu Resources Ltd.
501, 888 – 4th Avenue S.W.
Calgary, Alberta T2P 0V2
Attention: Tim de Freitas, President and Chief Executive Officer (phone 403-478-0141); or Mark Smith, CFO and VP Finance (phone 403-613-9661)
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