Term Sheet November 14 2020
Sacgasco Limited (Sacgasco) is planning to raise up
Xstate Resources Limited | ABN 96 009 217 154 |
Registered office | Postal address |
Level 1, 31 Cliff Street | PO Box 584 |
Fremantle WA 6160 | Fremantle WA 6959 |
Tel: +61 8 9435 3200 | Website |
www.xstateresources.com.au |
20 November 2020
ACQUISITION OF OIL PRODUCING ASSET IN CANADA
HIGHLIGHTS
- 15 % working interest in 1,000 BOPD from Producing Oil Fields in Alberta, Canada with 150 BOPD net to Xstate;
- Purchase Price is CAD $300,000 cash (AUD $320,000) and 58,333,333 XST shares at an issue price of 0.3 cents per share (AUD $175,000);
- Remaining Proved (1P) Reserves (net of Royalties) is 4.4 million barrels (100%) with 0.66 million barrels net to Xstate (Estimated by Independent Auditor at 31 December 2019);
- Production is Cash Flow positive at current oil price;
- Potential to grow production and reduce OPEX through early operational activity;
- Acquisition fully funded through placement of 362 million XST shares at 0.25c per share;
- Purchase price metrics:
- ~US$2,400 per flowing BOPD;
- ~US$0.55 per BO of Proved Reserves.
Xstate Resources Limited (ASX: XST) ("Xstate", "XST" or "the Company") is pleased to report that it has acquired a 15% Working interest in an oil producing asset in northern Alberta, Canada. The Red Earth assets consists of 6 oilfields and associated infrastructure, located 450 km north of Edmonton.
The vendor is Blue Sky Resources Limited which has recently acquired the Red Earth assets from the original owner.
A deposit of CAD $30,000 has been placed in an Escrow Account for the acquisition. The acquisition is subject to approval by the Alberta Energy Regulator (AER). The asset purchase is expected to close before 31 January 2021 with the same effective date.
The Joint Venture participants in the Red Earth assets are: | |
Xstate Resources Limited (ASX:XST) | 15% |
Sacgasco Limited (ASX: SGC) | 30% |
Blue Sky Resources Ltd (Operator) | 55% |
Blue Sky operates other oilfields in the vicinity and operational synergies are expected.
Cumulative oil production from the Red Earth fields over 30 years to date has been around 63 million barrels with a low 10% base decline rate. Approximately 160 producing wells are included in the assets. Current gross production is around 1,000 BOPD. Opportunities exist to return currently idle wells to production with the potential for an additional 300 BOPD in the short term. The oil is sweet light oil with an average oil quality of 39o API.
The purchase price to be paid by Xstate is CAD $300,000 cash (AUD $320,000) and 58,333,333 XST shares at a deemed price of 0.3 cents per share (AUD $175,000). This is equivalent to a purchase price of approximately US$2,400 per flowing BOPD. The issue of shares is subject to shareholder approval.
A total of 362 million shares are to be issued at 0.25cents each to raise $905,000. The balance of funds not utilised for the Red Earth acquisition will form working capital.
Remaining Reserves (net of Royalties) were estimated on a Deterministic Basis by independent Auditors for the previous Operator at 31 December,2019 as follows:
100% Working | Net Entitlement | |
Reserve Table (31 Dec 2019) | Interest Net of | to XST at 15% |
Royalties | Working Interest | |
(BO) | (BO) |
Proved Producing (PP) | 2,506,000 | 375,900 |
Proved Developed Not Producing (PDNP) | 1,411,000 | 211,650 |
Proved Undeveloped (PUD) | 452,000 | 67,800 |
Probable Reserves (Prob) | 2,305,000 | 345,750 |
Total Proved (1P) Reserve | 4,369,000 | 655,350 |
Total Proved plus Probable (2P) Reserves | 6,674,000 | 1,001,100 |
An updated independent Reserve Report is planned to be conducted as soon as practicable after Closing.
The purchase price is equivalent to around USD 0.55c per Barrel of Proved Oil Reserves (1P) and USD 0.36c per Barrel of Proved and Probable Oil Reserve (2P).
At current prices the assets are cash flow positive and are highly leveraged to increased oil prices.
The property includes extensive long-life oil and gas leases (covering a net area of 123,000 acres), oil wells and associated production facilities and oil flow lines, accommodation, produced water disposal facilities and wells and access roads. Additional revenues are received from third parties who use some of the facilities.
Subsurface well data and 3D and 2D seismic provides the basis for considerable development opportunity supported by the extensive infrastructure and facilities.
Xstate's Managing Director David McArthur commented: "This acquisition takes Xstate from an Explorer to an Oil Producer. We have purchased a meaningful portion of these productive fields at a very modest price. The fields are considered mid-life, with the potential to increase and extend their production. We
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