Tenth Avenue Petroleum Corp. (“TPC” or the “Company”) is pleased to announce that the Company has signed a non-binding Letter of Intent (“LOI“) to acquire (the “Acquisition“) approximately 82 boe/d (492 mcf/d) of low decline, long-life producing natural gas assets located north east of Brooks, Alberta from an arm’s length party.
The Company is also pleased to announce a non-brokered private placement of up to 17,000,000 units (“Units“) of the Company, at an offering price of $0.10 per Unit, with each Unit being made up of one common share and one-half (1/2) common shares purchase warrant (“Warrant“) for gross proceeds of up to C$1,700,000 (the “Offering“). Closing of the Offering is expected to occur on or about October 25, 2024.
KEY ACQUISITION HIGHLIGHTS
Increase scale and efficiency. The Acquisition is a non-operated interest and is expected to add approximately 82 boe/d(1) (492 mcf/d) of natural gas production, increasing production by approximately 88%, while providing an attractive land and inventory base to support future growth opportunities. The Company will benefit from economies of scale as these assets can be integrated without an increase to general and administrative expenses.
Low decline production base. Annual base production decline of approximately 8% with long-life proved reserves.
Expanding operating area in Southern Alberta. The Acquisition further expands our multi-zone development, exploration and optimization opportunities in Southern Alberta, adding approximately 32.23 gross (15.67 net) sections of contiguous lands.
Accretive transaction. The Acquisition is expected to be immediately accretive on key metrics, including 64% higher on production per share basis(3), enhanced funds flow and increased future reserves.
Future Production Additions. Approximately 250 mcf/d of low-risk production additions, currently behind pipe due to egress issues.
Acquisition is based on estimated production of acquired production 82 boe/d (100% gas).
Specified financial measure that does not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information.
Production per share assumes the full Offering of 17M shares will be issued in addition to those issued in the Acquisition, resulting in approximately 56.9M shares issued and outstanding (post Offering and Acquisition).
“This Acquisition of two non-operated Units (49% working interest) and 8 non-unit wells (25% working interest) is comprised of low decline natural gas production currently producing from the Milk River, Second White Specs and Medicine Hat zones. The Acquisition provides multi-zone upside over 32.23 gross (15.67 net) section of contiguous land at Patricia and Dinosaur areas located northeast of Brooks, Alberta. These areas have seen significant drilling and M&A activity with operators targeting the Mannville formation, developing the play with horizontal exploitation of vertically defined targets to identify high-porosity channels with large original oil in place (“OOIP”). Recent high-intensity completion technology has unlocked the full Basal Quartz stack resulting in wells paying out in less than six months with production IP30 rates in the ranging from 400 to 800 bbls/d. Field infrastructure with gas egress to allow for uninterrupted production growth adjacent to natural gas sales receipt point is key to low-cost development in the general area as the Company looks to further expand its presence and support its existing operations in the Hays area.
“Along with the Acquisition, the Company plans to expand its Mannville waterflood development at Murray Lake, these activities are integral parts of our commitment to value creation to our shareholders.” said Cameron MacDonald, President and Chief Executive Officer of the Company. Assuming closing of the Acquisition and positive waterflood development at Murray Lake, the Company will increase production by 88% to approximately 175 boe/d(1), increase proved developed and producing reserves, while adding future multi-zone exploration and development drilling opportunities . The Acquisition is countercyclical to current AECO prices, improves our flexibility of capital allocation through future commodity cycles, expands our exploration and development inventory while further increasing our corporate production base and associated reserves. There are no finder’s fees due as part of the Acquisition.
Proceeds of the Offering will be used to partially finance the Acquisition, accelerate the Company’s infrastructure development plan at Murray Lake and for general working capital purposes. Based on the results of increased water injection rates at the 5-36 horizontal injection well at Murray Lake, the Company plans to increase its water handling & injection capacity at its main 7-36 treating facility. The Company will replace its high-pressure injection line going from the 7-36 treating facility to the 10-36 main injection header, which will further increase injection capacity at both the 5-36 horizonal and 5-31 vertical injection wells.
The Murray Lake Mannville “A” Pool has approximately 8.9 million barrels (Mbbls) of original oil in place (“OOIP”). The Company believes increased water injection in the north end of the pool, will lead to higher recovery factors beyond the existing ~9% recovered to date. The Company plans to commission an independent reservoir simulation that may lead to positive reserve additions as the most recent independent reserve report dated December 31, 2023, does not have any recovery benefits from the current voidage replacement program. This increase in injection capability will allow the Company to increase its current voidage replacement, accelerating pressure support, which the Company believes may lead to recovery of an additional 5-10% of OOIP and lead to an increase of approximately 20-40 bbls/d of oil production in the pool over time.
The purchase price for the Acquisition is $50,000 and will be provided to the vendor through the issuance of Common Shares of the Company (defined below) to be calculated and finalized at closing and in compliance with the TSX Venture Exchange policies.
Closing of the Acquisition is expected to occur on or about October 31, 2024, and is subject to customary conditions, including the closing of the Offering and approval of the TSX Venture Exchange.
THE OFFERING
The Offering is comprised of Units, with each Unit consisting of one common share (“Common Share“) of the Company and one-half (1/2) of one Common Share purchase warrant (“Warrant“). Each Warrant is exercisable into one Common Share at a price of $0.15 per Common Share at any time within 12 months following the date of issuance of the Warrant. The Company has the right to force conversion of the Warrants, if at any time from and after the date of issuance, the daily volume-weighted average trading price of the Company’s Common Shares on the TSV Venture Exchange, equals or exceeds $0.20 for ten (10) consecutive trading days.
The Offering will include an up to 20% over-allotment option, exercisable by the Company, which if fully exercised equates to an additional 3,400,000 Units and an additional $340,000 (“Greenshoe“). If the Greenshoe is fully exercised, the total proceeds of the Offering will be an aggregate of 20,400,000 Units for gross proceeds of $2,040,000.
There is no minimum number of Units or minimum aggregate proceeds required to close the Offering and the Company may, at its discretion, elect to close the Offering in one or more tranches.
The Company may pay a finder’s fee on the Offering. Closing of the Offering is subject to a number of conditions, including receipt of all necessary corporate and regulatory approvals and approval from the TSX Venture Exchange. All securities issued in connection with the Offering will be subject to a statutory hold period of four months plus a day from the closing of the Offering in accordance with applicable securities legislation.
The net proceeds of the Offering will be used by the Company, partially for the Acquisition, infrastructure and expanding development plan at Murray Lake, with any remaining balances to be used for future acquisitions and general corporate purposes.
There is no material fact or material change of the Company that has not been disclosed.
The Offering will be conducted on a private placement basis pursuant to applicable and available prospectus exemptions.
The Offering remains subject to approval by the TSX Venture Exchange.29dk2902l
None of the securities issued in connection with the Offering will be registered under the United States Securities Act of 1933, as amended (the “US Securities Act“), and none of them may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the US Securities Act.
This news release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there by any sale of the securities in any state where such offer, solicitation, or sale would be unlawful.
All dollar amounts are stated in Canadian dollars.
ANNUAL GENERAL MEETING
The Company is also pleased to announce that it has filed a notice to hold an annual general meeting of shareholders to be held on November 27, 2024.
A management information circular (“Circular“) containing information about the Company’s annual meeting matters, including the presentation of the audited financial statements, election of directors, appointment of the Company’s auditors and re-approval of the Company’s stock option plan will be mailed to shareholders of the Company on the record date and will include these items.
