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CALGARY, July 15 /CNW/ - Breaker Energy Ltd. ("Breaker" or the "Company") (TSX: WAV.A and WAV.B) is pleased to announce it has closed the previously announced acquisition of a 100% working interest operated property currently producing approximately 850 boe/d of natural gas and natural gas liquids in British Columbia. The current production consists of vertical wells producing from an extensive tight gas sand, with up to 55 meters of gross pay in the Triassic Doig formation. The Company plans to drill the property using horizontal multi-frac wells, similar to developments elsewhere in the Montney/Doig formations of British Columbia.
This property represents Breaker's third multi-frac horizontal resource play property, in addition to ongoing light oil success at Irricana and the Company's large tight gas resource play at Provost which will have its first horizontal well drilled later in 2008. Based on projected average recovery of approximately 1 BCF per historic vertical well at the new property, Breaker believes that horizontals may ultimately recover 2-5 BCF each, at a cost of approximately $5 million per well. Based on 500 meters inter-well spacing, Breaker sees approximately 16 horizontal well locations in substantially-undrained portions of the pool. Breaker plans to drill its first horizontal well on the property in late 2008. Additionally, Breaker has commenced the evaluation of the potential of the approximately 8,000 acres of undeveloped Montney rights included in the acquisition.
Breaker is also pleased to announce it has completed the previously announced issue of 3,000,000 subscription receipts for Class A Shares (the "Subscription Receipts") on a bought deal, private placement basis at an issue price of $11.50 per Subscription Receipt to raise gross proceeds of $34.5 million. All necessary conditions have been met and the proceeds of the offering of the Subscription Receipts have been released to Breaker and each Subscription Receipt has been exchanged for one Class A Share of Breaker without additional payment. The hold period on these shares expires on November 16, 2008. The Class A Shares were issued through a syndicate of underwriters led by FirstEnergy Capital Corp. and including Tristone Capital Inc., Wellington West Capital Markets Inc., Blackmont Capital Inc., BMO Capital Markets, CIBC World Markets Inc., Dundee Securities Corporation, Scotia Capital Inc., and GMP Securities L.P.
Breaker has also completed the syndication of its bank line which has been increased to $125 million. The bank syndicate is led by the Bank of Nova Scotia and includes the Bank of Montreal and the Canadian Imperial Bank of Commerce.
Operations Update
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Breaker has commenced drilling programs in most of its core areas targeting light oil and natural gas. Several new discoveries are being tested including two sweet light oil pools at Girouxville and natural gas wells at Medicine Hat and Provost. A recent well at Provost contains up to 7 potential pay zones based on log analysis, a Breaker record for the area. New 3D seismic acquisition is being planned to follow up this exciting well.
High-impact light oil multifrac development continues at Irricana, with the most recent well brought on production at instantaneous rates exceeding 800 boe/d, equivalent to the best wells ever tested in the pool. Two more light oil wells at Irricana will be fracced and brought onstream in the next two weeks. Water flood injection has commenced at the Company's significant medium oil pool at Provost, while injection is on track to begin later in the summer at the Company's large light oil pool discovery at East Prairie. Drilling activity is still ongoing at Irricana, Girouxville, and Provost, with imminent drilling programs at East Prairie and Millard Lake.
The company has chosen initial horizontal drilling locations at the new Fireweed property and has commenced preparations to drill the first well later in 2008.
New Breaker 2008 Guidance
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This acquisition increases Breaker's drilling inventory to over 400 locations. The increase in drilling inventory consists of long life horizontal natural gas development wells.
The guidance below assumes US$105.00/Bbl WTI, CDN$9.50/mcf AECO and US$/CDN$1.00 for 2008.
Average Production Rate 6,375 boe/d Exit Production Rate 7,700 boe/d Cash flow $104 million Cash flow per basic share $2.70 Operating Netback $48.48/boe Capital Program $174 million Year-End Debt $89 million Authorized Bank Line $125 million Unused Bank Line Capacity $36 million Q4 Annualized Debt to Cash Flow 0.7 times
Breaker Energy Ltd. is a junior oil and gas company focused on creating shareholder value by growing per share production and reserves through acquisitions and a focused exploration, development and exploitation plan.
Breaker Energy Ltd. now has 39,420,737 Class A shares and 900,000 Class B shares outstanding, and trades on the TSX under the symbols WAV.A and WAV.B.
Breaker's operating netback per boe is defined as revenue less royalties, operating and transportation expenses on a per boe basis.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities of Breaker within the United States. The securities of Breaker have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws. Accordingly, the shares may not be offered or sold in the United States or to U.S. persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under 1933 Act and applicable state securities laws or an exemption from such registration is available.
Forward-looking Statements
This press release contains forward-looking statements including management's assessment of anticipated future plans and operations, expectations of future capital expenditures, average and exit production, netback, average and year-end debt, annual and quarterly cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g. 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 reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses and health, safety and environmental risks), acquisitions, commodity price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other factors that could affect Breaker's operations and/or financial results are included in Breaker's reports on file with Canadian securities regulatory authorities.
The forward-looking statements contained in this press release are made as of the date hereof and Breaker 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.
Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
In this press release: (i) mmboe means million boe; (ii) boe/d or boepd means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic fee; (v) mmcf means million cubic feet; (vi) mcf/d or mcfd means thousand cubic feet per day; and (vii) mmcf/d or mmcfd means million cubic feet per day.
The TSX does not accept responsibility for the adequacy or accuracy of
this release.
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