REG - Canadian O'Seas Petr - COPL Completes Acquisition of Cuda Energy

Canadian Overseas PetroleumAnnouncement

26/07/2022 07:00

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RNS Number : 7371T  Canadian Overseas Petroleum Ltd  26 July 2022

 

COPL Completes Acquisition of Cuda Energy

London, United Kingdom; Calgary, Canada: July 26, 2022 - Canadian Overseas
Petroleum Limited ("COPL" or the "Company") (XOP: CSE) & (COPL: LSE), an
international oil and gas exploration, production and development company with
production and development operations focused in Converse and Natrona
Counties, Wyoming, USA, is pleased to announce that the acquisition of the
United States assets of Cuda Energy LLC ("Cuda") by its affiliate, COPL
America Inc., will close today.

 

Acquisition immediately transformative:

 

·      COPL America becomes the majority owner of its Wyoming assets
with increased operated interests of 85-100% across three oil producing units

·      From Q3 2022 it adds unhedged production and exposure to the
current high oil price environment and will significantly increase COPL
America's operating cash flow

·      Increases COPL's 2P reserves by 47% from 25.8 million (COPL
December 31, 2021 NI-51-101 Reserves) to 38.2 million barrels

·      Provides significant leverage to COPL increasing the Company's
NPV10 (47% working interest adjusted) by US$122 million from US$258 million
(COPL December 31, 2021 NI-51-101 Reserves) to US$380 million.

·      Cuda assets will now be consolidated into COPL America's
asset-backed borrowing base, for its current senior loan, and for the Company
to secure a Reserves Based Lending ("RBL") facility with a commercial bank.

·      The cash consideration for the acquisition is US$19.15 million,
plus assumed liabilities at closing which are estimated to be approximately
US$1.6 million consisting primarily of Cuda's outstanding Joint Interest
Billing obligations.

·      The Cuda acquisition has a highly attractive valuation of c. 81%
of the working interest adjusted Atomic Oil and Gas LLC acquisition announced
last year

 

This news follows COPL's announcement on Friday 22 July of a Convertible Bond
which provided proceeds of $19.7 million used to finance the cash component of
the Cuda acquisition and which also allows for the implementation of a planned
RBL facility. The Convertible Bond is anchored by the Company's largest
institutional shareholder which is a UK based fund.

 

Arthur Millholland, President & CEO, commented:

"I am delighted we have finally completed this acquisition. The market
continues to misunderstand the full potential of our Wyoming assets. In my
near forty years within the oil industry I have seldom come across assets with
such prolific oil and gas potential. We now have full ownership which we have
secured when the assets are at an early stage in development with everything
to play for. With the financing arrangements we also now have in place we look
to the future with confidence."

 

Ryder Scott Resource Report

 

Earlier this year, COPL commissioned Ryder Scott to conduct a Canadian NI
51-101 compliant resource assessment of the major discovery the Company
announced to the market in January 2022 its assessment of an estimated total
reservoir volume of 1.5-1.9 billion barrels of Oil in Place ("OIP"), of which
1.2-1.6 billion barrels of OIP underlays COPL lands. The Company expects Ryder
Scott to confirm these findings when it publishes the report next week.

 

COPL's Strategic Focus

 

The acquisition of Cuda concludes one of the Company's publicly stated
strategic objectives and means COPL is positioned with an increased interest
in its currently operated United States assets.

 

The optimization and associated increase in oil production is expected to
occur from August 2022 with a ramp up in activity at the Barron Flats Shannon
Unit involving well optimization, selective gas flaring for short term
pressure reduction, staged facilities upgrades and ultimately additional
development drilling.

 

The acquisitions of Atomic Oil & Gas and Cuda have been transformative for
the Company. COPL now operates four assets within approximately 48,000
contiguous acres of leasehold in the Powder River Basin in Converse and
Natrona Counties Wyoming which have a 40+ year reserve life and inclining oil
production from gas miscible flood, with facilities built and commissioned in
2019. The assets are:

 

·    Barron Flats Shannon Unit (miscible flood): (85% Working Interest) -
previously 58%

·    Cole Creek Unit: (100% WI) - previously 66.667%

·    Barron Flats Federal (Deep) Unit ("BFFDU"): (85% WI) - previously 58%

Non-Unitized Lands: (100% WI) - previously 58%

 

At the time the Atomic transaction completed, the assets produced 1,100
barrels of light oil. After the implementation of a works programme by COPL,
the asset has since then far exceeded original expectations and current
production (gross) of approximately 1,600 barrels a day is restricted due to
ongoing facility constraints. The Company is commencing its production
optimization program which will unlock the current production restrictions
increasing production in the short term, and in the future, through well
optimization strategies, staged facility upgrades and additional development
drilling. The asset has identified 2P reserves of approximately 38 million
barrels (net to COPL America) of light oil, before the payment of royalties.

 

COPL has completed its first stated 2022 objective, and now focused on its
second and third objectives for 2022.

 

COPL's objectives for 2022:

 

ü Complete the acquisition of the Wyoming assets of Cuda

·    Re-finance COPL America Inc's credit facility to reduce COPL's cost
of capital;

·    Optimize and increase oil production at the operated Barron Flats
Shannon Unit miscible flood;

·    Commence phase 1 of the delineation of the Barron Flats Deep oil
discovery;

·    Maintain the Company's ESG operating credentials.

 

About the Company:

 

COPL is an international oil and gas exploration, development and production
company actively pursuing opportunities in the United States with operations
in Converse County Wyoming, and in sub-Saharan Africa through its ShoreCan
joint venture company in Nigeria, and independently in other countries.

 

The Company's Wyoming operations are one of the most environmentally
responsible with minimal gas flaring and methane emissions combined with
electricity sourced from a neighbouring wind farm to power production
facilities.

 

For further information, please contact:

 

Mr. Arthur Millholland, President & CEO

Mr. Ryan Gaffney, CFO

Canadian Overseas Petroleum Limited

Tel: + 1 (403) 262 5441

 

Cathy Hume

CHF Investor Relations

Tel: +1 (416) 868 1079 ext. 251

Email: cathy@chfir.com

 

Charles Goodwin

Yellow Jersey PR Limited

Tel: +44 (0) 77 4778 8221

Email: copl@yellowjerseypr.com

 

Peter Krens

Equity Capital Markets, Tennyson Securities

Tel: +44 (0) 20 7186 9033

 

Alex Wood & Keith Dowsing

Joint Broker

Alternative Resource Capital

AW: +44 (0) 7559 910872

KD: +44 (0) 7559 910873

 

Andrew Chubb / Neil Passmore

Advisors/Joint Brokers

Hannam & Partners

+44 (0) 20 7907 8500

 

 

The Common Shares are listed under the symbol "XOP" on the CSE and under the
symbol "COPL" on the London Stock Exchange.

 

 

Caution regarding forward looking statements

This news release contains forward-looking statements. The use of any of the
words "initial, "scheduled", "can", "will", "prior to", "estimate",
"anticipate", "believe", "should", "forecast", "future", "continue", "may",
"expect", and similar expressions are intended to identify forward-looking
statements. The forward-looking statements contained herein are based on
certain key expectations and assumptions made by the Company, including, but
not limited to, the ability to raise the necessary funding for operations,
delays or changes in plans with respect to exploration or development projects
or capital expenditures. Although the Company believes that the expectations
and assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the forward-looking
statements since the Company can give no assurance that they will prove to be
correct since forward-looking statements address future events and conditions,
by their very nature they involve inherent risks and uncertainties most of
which are beyond the control of Canadian Overseas Petroleum Ltd. For example,
the uncertainty of reserve estimates the uncertainty of estimates and
projections relating to production, cost overruns, health and safety issues,
political and environmental risks, commodity price and exchange rate
fluctuations, changes in legislation affecting the oil and gas industry could
cause actual results to vary materially from those expressed or implied by the
forward-looking information.  Forward-looking statements contained in this
news release are made as of the date hereof and Canadian Overseas Petroleum
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.

 

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