Athabasca Oil Announces Creation of “Duvernay Energy Corporation” with Cenovus Energy to Accelerate Value in the Prolific Kaybob Duvernay Play

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• Athabasca and Cenovus mix Kaybob property to create pure-play Duvernay entity
• Publicity to ~200,000 gross acres together with a newly operated 100% WI place of ~46,000 acres
• Leverages vital prior de-risking exercise up to now on Athabasca’s Duvernay property  
• Debt-free entity seeded with $40 million money and a $50 million credit score facility
• Manufacturing of ~2,000 boe/d with a self-funded growth plan to ~25,000 boe/d (~75% Liquids)
• Athabasca Thermal Oil price range & Return of Capital dedication of 100% Free Money Movement stay intact
• Athabasca and Duvernay Power can be positioned as two separate corporations with impartial capital allocation frameworks

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CALGARY, Alberta, Dec. 19, 2023 (GLOBE NEWSWIRE) — Athabasca Oil Company (TSX: ATH) (“Athabasca” or “the Firm”) is happy to announce it has entered into transaction agreements (“Transaction”) to create Duvernay Power Company (“Duvernay Power”) with Cenovus Power Inc. (“Cenovus”). Duvernay Power can be a standalone self-funded entity that may drive robust, excessive netback money circulation and manufacturing progress and is predicted to unlock vital worth. The transaction is aligned with Athabasca’s technique to maximise money circulation per share progress and return capital to shareholders.

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Transaction Overview

Athabasca and Cenovus will collectively contribute property into Duvernay Power. Athabasca will personal a 70% fairness curiosity in Duvernay Power with Cenovus proudly owning the remaining 30% fairness curiosity. Athabasca will handle Duvernay Power by way of a administration and working providers settlement. Duvernay Power’s Board of Administrators will embody three members nominated by Athabasca and one member nominated by Cenovus.

On inception, Duvernay Power may have robust Liquidity together with seed capital of $40 million and a $50 million new credit score facility led by ATB Monetary. Athabasca’s $22 million seed capital contribution to Duvernay Power can be inside its earlier $175 million 2024 capital steering ($135 million Thermal Oil and $40 million Mild Oil). Athabasca can also be contributing ~$20 million in expenditures associated to This fall 2023 drilling operations on a 100% working curiosity multi-well pad and lengthy lead stock for future exercise.

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The Transaction may have an efficient date of January 1, 2024, is predicted to shut within the first quarter of 2024 and is topic to customary closing circumstances and regulatory approvals, together with Competitors Act approval. On closing the Firm will present up to date steering for Duvernay Power and Athabasca.

Duvernay Power Belongings

Duvernay Power can be positioned with unparalleled pure-play publicity to the prolific Kaybob Duvernay useful resource play. Duvernay Power’s property can be primarily situated within the unstable oil area.

Along with the Firm’s current three way partnership property, Duvernay Power has publicity to ~46,000 acres of 100% working curiosity operated lands contiguous to its current Duvernay property. This acreage contains new lands strategically acquired by Athabasca by way of Crown land gross sales over the past 18 months and Cenovus’s contribution of Kaybob acreage. In whole, Duvernay Power may have publicity to ~200,000 gross acres within the liquids wealthy and oil home windows with ~500 gross future effectively areas. The property are serviced by current infrastructure together with two operated oil batteries with a fuel pipeline community related to each the Pembina Gasoline Infrastructure KA facility and the Keyera Simonette facility. Liquids are instantly related to the Pembina Peace liquids system. Duvernay Power may also personal an 8.1% working curiosity within the 7-4-63-16W5 fuel facility.

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Present manufacturing from Duvernay Power is ~2,000 boe/d (~75% Liquids) with an outlined and self-funded growth plan outlined within the part under.  

Duvernay Power Land Map

Duvernay Power Growth Plans

Duvernay Power’s growth plans will leverage off vital de-risking exercise on its acreage (74 horizontal wells) and on adjoining competitor exercise. Duvernay Power will execute a self-funded growth plan that may goal progress to ~25,000 boe/d (~75% Liquids) within the late 2020s with a list to assist a steady manufacturing profile thereafter for about twenty years.

The Firm has prolonged manufacturing historical past with effectively outcomes persistently supporting kind curve expectations. At Kaybob East and Two Creeks, IP365’s have averaged ~550 boe/d per effectively (85% Liquids) on the final 12 wells. Newest effectively design will embody lateral lengths as much as 4,500 meters which are anticipated to yield stronger preliminary charges, bigger reserves and improved capital efficiencies. Particular person effectively prices are estimated to be $10 – 14 million, relying on pad dimension, lateral size and proppant loading.

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The 2024 growth program will embody 12 gross wells (7.1 internet wells) with a capital price range of ~$82 million. This system is predicted to be funded from the $40 million seed capital contribution and money circulation from Duvernay Power. The plan is predicted to drive robust manufacturing momentum with manufacturing forecasted to common ~6,000 boe/d in 2025. 2024 exercise consists of:

• 100% working curiosity exercise: A just lately spudded two-well pad at Kaybob East can be positioned on manufacturing in Q2 2024. A further two multi-well pads will spud mid-year and are anticipated to be positioned on-stream in early 2025.
• 30% working curiosity Joint Enterprise exercise: A 3-well pad at Kaybob West is predicted to spud in Q1 2024 and can be positioned on manufacturing in Q2 2024. A further four-well pad at Kaybob East is predicted to spud in This fall 2024 and can be positioned on manufacturing in 2025.

Lengthy-term growth is predicted to be funded inside money circulation and is versatile for a spread of commodity costs. The plan can be weighted to exercise on Duvernay Power’s 100% working curiosity acreage and augmented by growth inside its 30% working curiosity three way partnership acreage.

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Strategic Rationale

Transaction Accelerates Worth in Standalone Self-Funded Duvernay Power. The brand new entity will speed up worth seize for Athabasca’s shareholders by offering a transparent path for accretive manufacturing and money circulation progress with out sacrificing Athabasca’s capability to fund capital in its Thermal Oil division or Athabasca’s return of capital technique. The Transaction consolidates Athabasca’s and Cenovus’s 100% working curiosity operated property, offering flexibility and efficiencies of scale for impactful growth, together with Athabasca’s current 30% working curiosity Duvernay three way partnership property which are ruled by a robust joint growth settlement. Manufacturing and money circulation progress will shortly exceed the volumes related to the Montney non-core disposition accomplished in September 2023.  

Throughout 2024, Duvernay Power is forecasting capital expenditures of $82 million, funded by money circulation from the entity and seed capital of $40 million from Athabasca ($22 million) and Cenovus ($18 million). Duvernay Power may also profit from ~$20 million in expenditures associated to Athabasca’s This fall 2023 drilling operations on a 100% working curiosity multi-well pad and lengthy lead stock for future exercise.

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Footnote: Refer to the “Reader Advisory” part inside this information launch for extra info on Non‐GAAP Monetary Measures (e.g. Adjusted Funds Movement, Free Money Movement, Web Money, Liquidity) and manufacturing disclosure.

¹ Pricing Assumptions: 2024 US$80 WTI, US$15 Western Canadian Choose “WCS” heavy differential, C$3 AECO, and $0.75 C$/US$ FX. 2025-26 US$85 WTI, US$12.50 WCS heavy differential, C$3 AECO, and $0.75 C$/US$ FX.

Athabasca Thermal Oil Finances Maintained: Athabasca’s Thermal Oil division underpins the Firm’s robust free money circulation outlook, with an unchanged $135 million capital price range. At Leismer, manufacturing is predicted to extend to ~28,000 bbl/d by mid-year by way of a facility growth mission and the ramp-up of eight behind pipe wells that just lately commenced steaming operations. This manufacturing stage might be held with modest sustaining capital (~$6/bbl) for a few years into the long run. At Hangingstone, sustaining drilling will assist base manufacturing in 2025 and past with the target of guaranteeing the asset continues to ship significant money circulation contributions.

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Athabasca Managing for Sturdy Free Money Movement: Professional forma the Transaction, Athabasca forecasts Adjusted Funds Movement of ~$460 million in 2024 (US$80/bbl WTI & US$15/bbl WCS heavy differential)¹, excluding its 70% fairness curiosity in Duvernay Power. The capital forecast is $135 million for Thermal Oil, a $40 million discount in capital spending that beforehand included Duvernay growth. The Transaction doesn’t scale back Athabasca’s 2024 Free Money Movement forecast which is maintained at ~$325 million. The Firm’s low sustaining capital necessities are absolutely funded inside money circulation to US$55/bbl WTI. In the course of the timeframe of 2024 – 2026, Athabasca forecasts >$1 billion in Free Money Movement¹, representing over 50% of its present fairness market capitalization. Athabasca anticipates tightening of the WCS heavy differentials from present ranges because the Trans Mountain Enlargement pipeline (590,000 bbl/d) commences operations in 2024. Each $5/bbl WTI change impacts Adjusted Funds Movement by ~$55 million yearly and each $5/bbl WCS change impacts Adjusted Funds Movement by ~$85 million yearly.

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Return of Capital Commitments Intact: Athabasca maintains its 2024 return of capital commitments outlined in its price range launch on December 6, 2023. The Firm intends to allocate 100% of Free Money Movement to shareholders by way of share buybacks. The Firm anticipates finishing its present Regular Course Issuer Bid on March 15, 2024 with the intention to resume this system thereafter with the Toronto Inventory Change for one more 12-month interval.

Monetary Power Stays: The Firm estimates 2023 year-end Liquidity of ~$455 million, together with money of ~$370 million. The principal steadiness on the Firm’s senior secured second lien notes is US$157 million with an estimated year-end Web Money place of ~$155 million. The Firm has ~$2.8 billion in tax swimming pools, together with ~$2.3 billion of instantly deductible non‐capital losses and exploration swimming pools. The Firm doesn’t anticipate paying money taxes till 2030 ($85/bbl WTI & $12.50/bbl WCS differential flat long-term pricing).

Differentiated Belongings: Duvernay Power’s funded progress profile enhances the Firm’s Thermal property by producing a diluent high quality liquid product and making a pure hedge for diluent sourcing. The Thermal Oil division’s robust margins and Free Money Movement are supported by a pre-payout Crown royalty construction, with royalty charges between 5 – 9% anticipated to final into 2027¹. Leismer has regulatory authorized capability of 40,000 bbl/d. Athabasca additionally has a totally de-risked asset at Nook which additionally has regulatory approval for 40,000 bbl/d with reservoir high quality equal or higher than Leismer.

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Athabasca Govt Replace

Along side the Transaction, Athabasca is happy to announce the appointment of Mr. Bruce Beynon as Vice President Mild Oil, with major duty for the event of the property inside Duvernay Power. Mr. Beynon is knowledgeable geologist with over 30 years of oil and fuel trade expertise. Mr. Beynon is presently the President of Tiburon Exploration Corp., a non-public consulting firm. Prior thereto, Mr. Beynon was Govt Vice President, Exploration and Company Growth at Baytex Power Company. Previous to the merger between Baytex and Raging River Exploration, Mr. Beynon held a number of positions with Raging River together with President. Mr. Mike Wojcichowsky will assume the function of Vice President, Drilling Completions Companies and Mild Oil Operations.

Mr. Robert Broen, President and CEO of Athabasca Oil Company, may also assume the function of Chairman, President and CEO of Duvernay Power. The Board of Duvernay Power will encompass Mr. Rob Broen, Mr. Matt Taylor, Chief Monetary Officer of Athabasca, Mr. Cam Danyluk, Common Counsel and Vice President Company Growth Athabasca, and Mr. Jeff Lawson, Senior Vice-President Company Growth, Cenovus.

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Convention Name

Athabasca can be internet hosting a convention name for the funding group to debate the Transaction on Tuesday, December 19, 2023 at 4:30 pm (MT).

To take part by way of the web webcast:

https://edge.media-server.com/mmc/p/6wqn4ts7

To take part by way of a dial-in convention name:

https://register.vevent.com/register/BI6d50c66745394c03aa5095a2fd470d92

An archived recording of the decision can be made obtainable on Athabasca’s web site at:

https://www.atha.com/traders/presentation-events.html

Advisors

ATB Capital Markets is performing as monetary advisor for Athabasca in reference to the Transaction. ATB Monetary will lead Duvernay Power’s new $50 million credit score facility. Norton Rose Fullbright Canada LLP is performing as authorized advisor for Athabasca.

About Athabasca Oil Company

Athabasca Oil Company is a Canadian vitality firm with a targeted technique on the event of thermal and lightweight oil property. Located in Alberta’s Western Canadian Sedimentary Basin, the Firm has amassed a big land base of in depth, top quality assets. Athabasca’s frequent shares commerce on the TSX beneath the image “ATH”. For extra info, go to www.atha.com.

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For extra info, please contact:

Reader Advisory:

This Information Launch incorporates forward-looking info that includes varied dangers, uncertainties and different elements. All info aside from statements of historic truth is forward-looking info. The usage of any of the phrases “anticipate”, “plan”, “forecast”, “proceed”, “estimate”, “count on”, “might”, “will”, “mission”, “goal”, “ought to”, “consider”, “predict”, “pursue”, “potential”, “view” and “ponder” and related expressions are meant to determine forward-looking info. The forward-looking info will not be historic truth, however reasonably relies on the Firm’s present plans, goals, objectives, methods, estimates, assumptions and projections concerning the Firm’s trade, enterprise and future working and monetary outcomes. This info includes recognized and unknown dangers, uncertainties and different elements which will trigger precise outcomes or occasions to vary materially from these anticipated in such forward-looking info. No assurance might be provided that these expectations will show to be right and such forward-looking info included on this Information Launch shouldn’t be unduly relied upon. This info speaks solely as of the date of this Information Launch and, besides as required by relevant securities legal guidelines, the Firm undertakes no obligation to replace any forward-looking assertion to mirror occasions or circumstances after the date on which such assertion is made or to mirror the prevalence of unanticipated occasions. Particularly, this Information Launch incorporates forward-looking info pertaining to, however not restricted to, the next: the Firm’s 2024 capital expenditures, manufacturing and monetary steering, Free Money Movement outlook, monetary metrics, timing for growth initiatives in Thermal Oil and Mild Oil Divisions, return of capital technique, royalty charges, timing for future money taxes, and different issues.

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With respect to forward-looking info contained on this Information Launch, assumptions have been made relating to, amongst different issues: commodity costs; the regulatory framework governing royalties, taxes and environmental issues within the jurisdictions through which the Firm conducts and can conduct enterprise and the consequences that such regulatory framework may have on the Firm, together with on the Firm’s monetary situation and outcomes of operations; the Firm’s monetary and operational flexibility; the Firm’s monetary sustainability; Athabasca’s funds circulation, and free money circulation outlook; the Firm’s capability to acquire certified workers and gear in a well timed and cost-efficient method; the applicability of applied sciences for the restoration and manufacturing of the Firm’s reserves and assets; future capital expenditures to be made by the Firm; future sources of funding for the Firm’s capital packages; the Firm’s future debt ranges; future manufacturing ranges; the Firm’s capability to acquire financing and/or enter into three way partnership preparations on acceptable phrases; working prices; compliance of counterparties with the phrases of contractual preparations; affect of accelerating competitors globally; assortment danger of excellent accounts receivable from third events; geological and engineering estimates in respect of the Firm’s reserves and assets; recoverability of reserves and assets; the geography of the areas through which the Firm is conducting exploration and growth actions and the standard of its property. Sure different assumptions associated to the Firm’s Reserves are contained within the report of McDaniel & Associates Consultants Ltd. (“McDaniel”) evaluating Athabasca’s Proved Reserves, Possible Reserves and Contingent Sources as at December 31, 2022 (which is respectively referred to herein because the “McDaniel Report”).

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Precise outcomes may differ materially from these anticipated on this forward-looking info on account of the chance elements set forth within the Firm’s Revised Annual Info Kind (“AIF”) dated Could 11, 2023 and Administration’s Dialogue and Evaluation dated October 31, 2023, obtainable on SEDAR at www.sedarplus.ca, together with, however not restricted to: weak point within the oil and fuel trade; exploration, growth and manufacturing dangers; costs, markets and advertising; market circumstances; continued affect of the COVID-19 pandemic; capability to finance capital necessities; local weather change and carbon pricing danger; regulatory atmosphere and adjustments in relevant regulation; gathering and processing amenities, pipeline techniques and rail; statutes and rules relating to the atmosphere; political uncertainty; state of capital markets; anticipated advantages of acquisitions and inclinations; abandonment and reclamation prices; altering demand for oil and pure fuel merchandise; royalty regimes; international change charges and rates of interest; reserves; hedging; operational dependence; working prices; mission dangers; monetary assurances; diluent provide; third social gathering credit score danger; indigenous claims; reliance on key personnel and operators; earnings tax; cybersecurity; superior applied sciences; hydraulic fracturing; legal responsibility administration; seasonality and climate circumstances; surprising occasions; inner controls; insurance coverage; litigation; pure fuel overlying bitumen assets; competitors; chain of title and expiration of licenses and leases; breaches of confidentiality; new trade associated actions or new geographical areas; and dangers associated to our debt and securities.

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Additionally included on this Information Launch are estimates of Athabasca’s 2024 Outlook that are based mostly on the assorted assumptions as to manufacturing ranges, commodity costs, forex change charges and different assumptions disclosed on this Information Launch. To the extent any such estimate constitutes a monetary outlook, it was authorized by administration and the Board of Administrators of Athabasca, and is included to supply readers with an understanding of the Firm’s outlook. Administration doesn’t have agency commitments for all the prices, expenditures, costs or different monetary assumptions used to arrange the monetary outlook or assurance that such working outcomes can be achieved and, accordingly, the entire monetary results of all of these prices, expenditures, costs and working outcomes usually are not objectively determinable. The precise outcomes of operations of the Firm and the ensuing monetary outcomes might fluctuate from the quantities set forth herein, and such variations could also be materials. The monetary outlook contained on this New Launch was made as of the date of this Information launch and the Firm disclaims any intention or obligations to replace or revise such monetary outlook, whether or not on account of new info, future occasions or in any other case, until required pursuant to relevant regulation.

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Oil and Gasoline Info

“BOEs” could also be deceptive, significantly if utilized in isolation. A BOE conversion ratio of six thousand cubic toes of pure fuel to 1 barrel of oil equal (6 Mcf: 1 bbl) relies on an vitality equivalency conversion technique primarily relevant on the burner tip and doesn’t symbolize a worth equivalency on the wellhead. As the worth ratio between pure fuel and crude oil based mostly on the present costs of pure fuel and crude oil is considerably totally different from the vitality equivalency of 6:1, using a conversion on a 6:1 foundation could also be deceptive as a sign of worth.
Preliminary Manufacturing Charges

Preliminary Manufacturing Charges: The preliminary manufacturing charges offered on this Information Launch needs to be thought-about to be preliminary, besides as in any other case indicated. Take a look at outcomes and preliminary manufacturing charges disclosed herein might not essentially be indicative of lengthy‐time period efficiency or of final restoration.

Reserves Info

The McDaniel Report was ready utilizing the assumptions and methodology tips outlined within the COGE Handbook and in accordance with Nationwide Instrument 51-101 Requirements of Disclosure for Oil and Gasoline Actions, efficient December 31, 2022. There are quite a few uncertainties inherent in estimating portions of bitumen, mild crude oil and medium crude oil, tight oil, standard pure fuel, shale fuel and pure fuel liquids reserves and the long run money flows attributed to such reserves. The reserve and related money circulation info set forth above are estimates solely. Typically, estimates of economically recoverable reserves and the long run internet money flows therefrom are based mostly upon quite a lot of variable elements and assumptions, akin to historic manufacturing from the properties, manufacturing charges, final reserve restoration, timing and quantity of capital expenditures, marketability of oil and pure fuel, royalty charges, the assumed results of regulation by governmental companies and future working prices, all of which can fluctuate materially. For these causes, estimates of the economically recoverable reserves attributable to any specific group of properties, classification of such reserves based mostly on danger of restoration and estimates of future internet revenues related to reserves ready by totally different engineers, or by the identical engineers at totally different occasions, might fluctuate. The Firm’s precise manufacturing, revenues, taxes and growth and working expenditures with respect to its reserves will fluctuate from estimates thereof and such variations could possibly be materials. Reserves figures described herein have been rounded to the closest MMbbl or MMboe. For extra info relating to the consolidated reserves and data in regards to the assets of the Firm as evaluated by McDaniel within the McDaniel Report, please confer with the Firm’s AIF.

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Reserve Values (i.e. Web Asset Worth) is calculated utilizing the estimated internet current worth of all future internet income from our reserves, earlier than earnings taxes discounted at 10%, as estimated by McDaniel efficient December 31, 2022 and based mostly on common pricing of McDaniel, Sproule and GLJ as of January 1, 2023.

The five hundred gross whole Duvernay drilling areas referenced embody: 5 proved undeveloped areas and 77 possible undeveloped areas for a complete of 82 booked areas with the steadiness being unbooked areas. Proved undeveloped areas and possible undeveloped areas are booked and derived from the Firm’s most up-to-date impartial reserves analysis as ready by McDaniel as of December 31, 2022 and account for drilling areas which have related proved and/or possible reserves, as relevant. Unbooked areas are inner administration estimates. Unbooked areas would not have attributed reserves or assets (together with contingent or potential). Unbooked areas have been recognized by administration as an estimation of Athabasca’s multi-year drilling actions anticipated to happen over the subsequent 20 years based mostly on analysis of relevant geologic, seismic, engineering, manufacturing and reserves info. There isn’t a certainty that the Firm will drill all unbooked drilling areas and if drilled there is no such thing as a certainty that such areas will lead to extra oil and fuel reserves, assets or manufacturing. The drilling areas on which the Firm will truly drill wells, together with the quantity and timing thereof is in the end dependent upon the supply of funding, commodity costs, provincial fiscal and royalty insurance policies, prices, precise drilling outcomes, extra reservoir info that’s obtained and different elements.

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Non-GAAP and Different Monetary Measures, and Manufacturing Disclosure

The “Adjusted Funds Movement”, “Free Money Movement”, and “sustaining capital” monetary measures contained on this Information Launch would not have standardized meanings that are prescribed by IFRS and they’re thought-about to be non-GAAP monetary measures. These measures is probably not akin to related measures introduced by different issuers and shouldn’t be thought-about in isolation with measures which are ready in accordance with IFRS. Liquidity is a supplementary monetary measures.

Adjusted Funds Movement and Free Money Movement are non-GAAP monetary measures and usually are not meant to symbolize money circulation from working actions, internet earnings or different measures of monetary efficiency calculated in accordance with IFRS. The Adjusted Funds Movement and Free Money Movement measures enable administration and others to judge the Firm’s capability to fund its capital packages and meet its ongoing monetary obligations utilizing money circulation internally generated from ongoing working associated actions. Adjusted Funds Movement is calculated by adjusting for adjustments in non‐money working capital and settlement of provisions from money circulation from working actions. The Free Money Movement measure is calculated by subtracting Capital Expenditures from Adjusted Funds Movement.

Liquidity is outlined as money and money equivalents plus obtainable credit score capability.

A photograph accompanying this announcement is offered at https://www.globenewswire.com/NewsRoom/AttachmentNg/df0b2141-7be0-46b3-9e24-30b71e684834

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