PrimeWest Enters Agreement to Acquire U.S. Oil and Gas Assets
JUN 24, 2006 - 19:01 ET
CALGARY, ALBERTA--(CCNMatthews - June 24, 2006) - PrimeWest Energy, (PrimeWest),
(TSX:PWI.UN) (TSX:PWX) (TSX:PWI.DB.A) (TSX:PWI.DB.B) (NYSE:PWI), through a U.S.
subsidiary, is pleased to announce that it has entered into an agreement to acquire
producing oil and gas assets located in Montana, North Dakota and Wyoming for total
consideration of approximately US$300 million (C$330 million using a Canadian to
U.S. dollar exchange rate of 0.90).
The transaction is expected to close on or about July 6, 2006. To finance the transaction,
PrimeWest will utilize its existing credit lines plus a supplementary credit line
of C$250 million.
This acquisition establishes a new operating area for PrimeWest within the Williston
Basin, with significant secondary and tertiary development potential. Current production
is approximately 3,200 barrels of oil equivalent (BOE) per day. Approximately 94%
of this production is crude oil, of which 70% is light crude oil produced primarily
from the Mississippian and Devonian formations. Currently, PrimeWest's production
is weighted 73% to natural gas and 27% to crude oil and other liquids. This acquisition
will change the weighting to 68% natural gas and 32% crude oil and other liquids.
These properties are long-life assets with a reserve life index (RLI) on a proved
plus probable (P+P) basis of 24.1 years and are therefore accretive to PrimeWest's
total P+P RLI, raising it from 11.2 years at the end of 2005, to 12.3 years. There
are a number of infill drilling and waterflood optimization opportunities on these
properties that comprise approximately 47,000 net acres of land. PrimeWest will
be the operator of the majority of the acquired properties and will hold an average
working interest of over 95%. Further highlights of the acquisition are discussed
in greater detail below.
Acquisition Highlights
- PrimeWest is acquiring approximately 3,200 BOE per day of production, of which
94% is crude oil and 6% is natural gas, representing an incremental 1,500 BOE per
day on an annualized basis in 2006. Approximately 70% of the oil production is conventional
light crude with an average 38-degree API and the remaining 30% has an average 20-degree
API. PrimeWest now estimates that its full year total production for 2006 will be
39,000 to 40,000 BOE per day.
- Approximately 20.4 million BOE of proved reserves and 28.9 million BOE of P+P
reserves are being acquired based upon an independent engineering assessment completed
by GLJ Petroleum Consultants Ltd. (GLJ) under National Instrument 51-101 guidelines.
Approximately two thirds of the reserves fall into the proven category and will
require up to US$100 million of additional future capital to fully develop.
- The assets being acquired have an RLI of 24.1 years on a P+P basis and 16.9 years
on a proved basis, derived using independent reserves estimates and current production
estimates.
- The major fields included in the acquisition are Flat Lake, Dwyer and Goose Lake
in Montana; Rival, Grenora, Alexander, Wiley, Glenburn and Sherwood in North Dakota;
and Rocky Point in Wyoming. The most prolific field is Flat Lake, which is geologically
similar to the producing fields found immediately north of the Canada/U.S. border
in the province of Saskatchewan.
- Operating costs for the acquired assets for the balance of 2006 are estimated
to be approximately C$11.50 per BOE.
- PrimeWest expects to invest approximately C$23 million of capital for the remainder
of 2006. A number of drilling opportunities have already been identified, most of
which are infill horizontal wells. Current well spacing on these properties ranges
from 80 to 160 acres, making them relatively undeveloped when compared to similar
pools in Saskatchewan. PrimeWest's total capital expenditures for 2006 are now forecast
to be approximately C$300 million.
- Additional upside opportunities in the form of higher density infill drilling,
waterflood optimization, and possible future enhanced oil recovery projects have
been delineated, based on preliminary mapping by PrimeWest and a separate study
conducted by an independent third party consultant. This upside would be in addition
to the P+P reserves identified by GLJ.
PrimeWest is a Canadian-based conventional oil and gas royalty trust, headquartered
in Calgary, Alberta. The Trust actively acquires, develops, produces and sells natural
gas, crude oil and natural gas liquids for the generation of monthly cash distributions
to Unitholders. Trust Units of PrimeWest are traded on the Toronto Stock Exchange
(TSX) under the symbol "PWI.UN" and on the New York Stock Exchange under the symbol
"PWI". Exchangeable Shares of PrimeWest Energy Inc. are listed on the TSX under
the symbol "PWX". Five-year Convertible Debentures of PrimeWest trade on the TSX
under the symbol "PWI.DB.A" and the Seven-year Convertible Debentures trade under
the symbol "PWI.DB.B".
FOR FURTHER INFORMATION PLEASE CONTACT:
PrimeWest Energy Trust
Diane Zuber
Investor Relations Advisor
(403) 699-7356 or Toll-Free: 1-877-968-7878
Email: investor@primewestenergy.com
Website: www.primewestenergy.com