Delphi
Energy Corp.
TSX: DEE
August 31,
2009
Delphi Announces Closing of Wapiti/Gold Creek
Acquisition and Mailing of Takeover Bid Circular for Fairmount Energy Inc.
CALGARY,
ALBERTA –- Delphi Energy Corp. is pleased to report that it has closed the
previously announced acquisition and disposition of natural gas weighted
properties located in the Gold Creek/Wapiti areas ("the Properties")
of North West Alberta, strategically located between the Company's Hythe and
Bigstone core properties. The following acquisition details represent Delphi's
net 60 percent working interest after the disposition, unless otherwise
indicated.
The
total net purchase price, after interim closing adjustments, is approximately
$11.8 million and includes undeveloped land and seismic. The acquisition has
primarily been funded by the Company's credit facilities.
Transaction Highlights
As
previously reported, the acquisition provides the following financial and
operating benefits to shareholders:
·
Incremental production of 400 barrels of oil equivalent per day (boe/d)
and Proven plus Probable reserves effective May 31, 2009 of 1,431,000 barrels
of oil equivalent (boe);
·
Ownership in strategic infrastructure including three natural gas
processing plants with a combined through-put capacity of 720 million cubic
feet per day, ten compressor stations and 393 kilometres of gathering and
transportation pipelines;
·
Attractive reserves and production acquisition costs, excluding
approximately $1.0 million allocated to undeveloped land, as follows:
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$/BOE
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Proved reserves excluding future development capital
("FDC"):������� $12.61
Proved reserves including FDC��������������������������������������� $19.82
Proved Plus Probable reserves excluding FDC�������������������������� $7.43
Proved Plus Probable reserves including FDC������������������������� $12.48
Production addition costs per flowing boe�������������������������� $26,600
·
Significant development opportunities on the Properties, providing
Delphi with an increased inventory and the ability to continue its strategy of
adding low cost production and reserves through multi-zone exploitation;
·
Increase in Delphi's undeveloped land position by eight percent to
approximately 135,000 net acres. Delphi has internally ascribed approximately
$1.0 million of value to the undeveloped land; and
·
Provides additional leverage to rising natural gas prices.
Acquired
Properties
The Company's net acquisition will
be approximately 400 boe/d comprised of 77 percent natural gas and 23 percent
oil and natural gas liquids. Proven reserves of approximately 843,000 boe and
Proven plus Probable reserves of 1,431,000 boe have been evaluated by an
independent third party in accordance with NI 51-101.
Key gas plant infrastructure being
acquired includes a working interest in the Devon Wapiti Deep Cut Gas Plant,
Devon Wapiti Shallow Cut Gas Plant and the BP South Wapiti Gas Plant, ten
compression stations and approximately 393 kilometres of pipelines that gather
and transport natural gas from an extensive land base and interconnect the
three natural gas plants. In addition to the owned capacity, the three natural
gas plants have excess processing capacity to accommodate significant growth
opportunities that the Company has identified in the area.
To view a map of the acquired
properties, please visit the following link: http://cnrp.marketwire.com/cnrp_files/20090831-821DEE_MAP.pdf
The acquisition is consistent with
Delphi's strategy of acquiring multi-zone, sweet gas and natural gas liquids
production in the Deep Basin with significant low risk development potential
coupled with ownership in key gas infrastructure to support future growth. The
Properties are characterized by the same producing zones Delphi is currently
exploiting at the Bigstone and Hythe core properties including the Doe Creek -
Dunvegan, Paddy - Cadotte, Spirit River - Falher, Bluesky - Gething and
Nikanassin formations. The acquisition complements the Company's successful
exploitation track record of production growth which includes the use of
leading technologies to access underdeveloped reservoirs in North West Alberta.
An internal review of the acquired properties has identified numerous drilling,
completion and optimization projects which have the potential to double the
current production and reserve levels.
The Properties are situated on
approximately 50,800 (20,360 net) acres of land (excluding near-term expiries),
of which approximately 22,000 (9,930 net) acres are undeveloped. The Company
believes upside potential exists on the 9,930 net acres of undeveloped land, an
eight percent increase to Delphi's undeveloped land position. There are an
additional 55,300 (29,200 net) acres of undeveloped land that expire within the
next 12 months that the Company is evaluating for upside and continuation
opportunities.
Takeover
Bid Circular for Fairmount Energy Inc.
In addition, Delphi has mailed its
takeover bid circular to the shareholders of Fairmount Energy Inc. ("Fairmount")
in connection with its offer to purchase all of the issued outstanding common
shares of Fairmount on the basis of 0.3571 of a common share of Delphi for each
common share of Fairmount. The offer is conditional on, among other things, not
less than 66 2/3 percent of the outstanding Fairmount common shares (calculated
on a diluted basis) being validly deposited and not withdrawn under the Offer. The
Offer will be open for acceptance until October 5, 2009 unless extended by
Delphi.
About Delphi:
Delphi is a Calgary-based company
that explores, develops and produces oil and natural gas in Western Canada. The
Company is managed by a proven technical team. Delphi trades on the Toronto
Stock Exchange under the symbol DEE.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Delphi
Energy Corp.
David J.
Reid
President
& CEO
(403)
265-6171
Fax: (403)
265-6207
or
Delphi
Energy Corp.
Brian P. Kohlhammer
V.P. Finance & CFO
(403) 265-6171
Fax: (403) 265-6207
or
Delphi Energy Corp.
300, 500 - 4 Avenue S.W.
Calgary, Alberta T2P 2V6
Email: info@delphienergy.ca
Website: www.delphienergy.ca
Forward-Looking Statements. This release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws. The use of any of
the words "expect", "anticipate", "continue",
"estimate", may", "will", "should",
believe", "intends", "forecast", "plans",
"guidance" and similar expressions are intended to identify
forward-looking statements or information.
More particularly and
without limitation, this release contains forward looking statements and
information relating to the Company's risk management program, petroleum and
natural gas production, future funds from operations, capital programs,
commodity prices, costs and debt levels. The forward-looking statements and
information are based on certain key expectations and assumptions made by
Delphi, including expectations and assumptions relating to prevailing commodity
prices and exchange rates, applicable royalty rates and tax laws, future well
production rates, the performance of existing wells, the success of drilling
new wells, the capital availability to undertake planned activities and the
availability and cost of labour and services.
Although the Company
believes that the expectations reflected in such forward-looking statements and
information are reasonable, it can give no assurance that such expectations
will prove to be correct. Since forward-looking statements and information
address future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results may differ materially from
those currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and gas
industry in general such as operational risks in development, exploration and
production, delays or changes in plans with respect to exploration or
development projects or capital expenditures, the uncertainty of estimates and
projections relating to production rates, costs and expenses, commodity price
and exchange rate fluctuations, marketing and transportation, environmental
risks, competition, the ability to access sufficient capital from internal and
external sources and changes in tax, royalty and environmental legislation.
Additional information on these and other factors that could affect the
Company's operations or financial results are included in reports on file with
the applicable securities regulatory authorities and may be accessed through
the SEDAR website (www.sedar.com). The
forward-looking statements and information contained in this press release are
made as of the date hereof for the purpose of providing the readers with the
Company's expectations for the coming year. The forward-looking statements and
information may not be appropriate for other purposes. Delphi undertakes no
obligation to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events or
otherwise, unless so required by applicable securities laws.
Basis of
Presentation.
For the purpose of reporting production information, reserves and calculating
unit prices and costs, natural gas volumes have been converted to a barrel of
oil equivalent (boe) using six thousand cubic feet equal to one barrel. A boe
conversion ratio of 6:1 is based upon an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. This conversion conforms with the Canadian
Securities Administrators' National Instrument 51-101 when boes are disclosed. Boes
may be misleading, particularly if used in isolation.
Non-GAAP
Measures. The
release contains the terms "funds from operations", "funds from
operations per share", "net debt", "cash operating costs"
and "netbacks" which are not recognized measures under Canadian
generally accepted accounting principles. The Company uses these measures to
help evaluate its performance. Management considers netbacks an important
measure as it demonstrates its profitability relative to current commodity
prices. Management uses funds from operations to analyze performance and
considers it a key measure as it demonstrates the Company's ability to generate
the cash necessary to fund future capital investments and to repay debt. Funds
from operations is a non-GAAP measure and has been defined by the Company as
net earnings plus the addback of non-cash items (depletion, depreciation and
accretion, stock-based compensation, future income taxes and unrealized
gain/(loss) on risk management activities) and excludes the change in non-cash
working capital related to operating activities and expenditures on asset
retirement obligations and reclamation. The Company also presents funds from
operations per share whereby amounts per share are calculated using weighted
average shares outstanding consistent with the calculation of earnings per
share. Delphi's determination of funds from operations may not be comparable to
that reported by other companies nor should it be viewed as an alternative to
cash flow from operating activities, net earnings or other measures of
financial performance calculated in accordance with Canadian GAAP. The Company
has defined net debt as the sum of long term debt plus working capital
excluding the current portion of future income taxes and risk management
asset/liability. Net debt is used by management to monitor remaining
availability under its credit facilities. Cash operating costs have been
defined as the sum of operating expenses, transportation expenses, general and
administrative expenses and interest costs.
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