Bow Valley Energy Ltd. announces the acquisition, by its wholly owned subsidiary Bow Valley Petroleum (UK) Limited, of a 66.67% working interest in U.K. Block 9/15a and a 15.00% working interest in Block 9/10b West in the U.K. sector of the North Sea, for total consideration of (pnds stlg)34.65 million (C$78.9 million). The Company is also announces that it has entered into a bought deal financing agreement with a syndicate of underwriters, led by BMO Capital Markets, for the issuance of 11,000,000 subscription receipts at a price of $5.95 per subscription receipt on a bought deal basis, for gross proceeds of C$65,450,000. In addition, the Company has agreed to the terms of a (pnds stlg)17.5 million credit approved term debt facility with Bank of Scotland. Closing of the acquisition is expected by the end of May, 2007.
Block 9/15a contains a portion of the undeveloped Peik field, a Jurassic aged Brent sandstone natural gas/condensate field discovered in 1985 by well 24/6a-1 drilled in the Norwegian sector and appraised by well 9/15a-1 in the U.K. sector. The field straddles the U.K./Norway trans-median line, and unitization and development of the field across the median will be facilitated by the April, 2005 U.K./Norway Framework Agreement that recently advanced development of Bow Valley's Enoch and Blane fields. Existing infrastructure in the area provides four potential offtake routes; Bruce and Beryl in the U.K., and Heimdal and Alvheim in Norway, all within approximately 20 km of Peik. The field is expected to be developed by a sub-sea tie-back to one of these facilities.
Bow Valley engaged Senergy Limited to perform a NI 51-101 compliant oil and natural gas reserves evaluation of the Peik field (the "Senergy Report"). Based upon the Senergy Report, the interests in the Peik field being acquired contain total proved plus probable reserves of 13.0 million net boe (60.0 bcf of natural gas and 3.0 mmboe of condensate). Using the purchase price of C$78.9 million, the Company is acquiring these reserves at a price of approximately C$6.07 per boe of proved plus probable reserves. Including future development capital in the Senergy Report, the total cost of acquiring and developing these reserves is expected to be approximately C$16.05 per boe. No proved reserves are attributable to the field as it has not received development approval. The acquisition almost doubles the Company's 2006 year-end U.K. total proved plus probable reserves to over 26 million boe.
In the reserves report, Senergy evaluated the field as coming on production in 2009 at a rate of 4,863 boe/d (21.1 mmcf/d of natural gas and 1,342 b/d of condensate) net to Bow Valley. Although the Senergy Report shows first production in 2009, based on Bow Valley's recent experience with field developments, first production is expected sometime in the 2009-2011 period.
The 9/10b West Block contains the 9/10b-1 natural gas discovery, with substantial gas-in-place, but low reservoir permeability. It was not evaluated in the Senergy Report. Further work will be required to determine whether the discovery could form an economic addition to the Peik development.
After closing the acquisition, Bow Valley will work with the operator and the other co-venturer in advancing the Peik field through unitization and development plan approval, which could occur sometime in 2008. The Peik field will be the third cross-border unitization that Bow Valley has participated in, and its sixth North Sea field development.
R.G. Moffat, President and Chief Executive Officer of Bow Valley Energy stated: "This acquisition fits our strategy of acquiring and developing undeveloped assets in the North Sea. The Peik acquisition is expected to provide Bow Valley with a superior rate of return on our investment. With a development which could come on stream as early as 2009, the expected production profile fits well into our visible growth strategy, with the Enoch, Blane and Chestnut fields expected to come on stream in 2007, and the Ettrick field in 2008. The development costs for the Peik field are expected to be funded with cash flow generated by the current U.K. developments."