Perpetual Energy Inc. announces exercise of option for Warwick Gas Storage, approval of IETP funding for Panny Bitumen Project and credit facility renewal
CALGARY, April 29, 2013 /PRNewswire/ - (TSX:PMT) - Perpetual Energy Inc. ("Perpetual" or the "Company") is pleased to announce:
1) The exercise of its option to purchase an additional 20 percent
interest in Warwick Gas Storage ("WGS LP");
2) Confirmation of funding for the Panny Bitumen Project through the Government of Alberta's Innovative Energy Technologies Program ("IETP"); and
3) Renewal of Perpetual's credit facility with a revised borrowing base of $125 million.
Warwick Gas Storage
On April 25, 2012, Perpetual sold a 90 percent interest in WGS LP for cash proceeds of $80.9 million. As part of the sale Perpetual continued to provide management and operational services to WGS LP for an annual fee. The Company also retained an option, exercisable within one year of closing, to buy back from the purchaser up to a 30 percent additional ownership interest in WGS LP at the same price as the initial sale plus working capital and other adjustments, less any dividends paid, for a final ownership interest post any exercise of the buy-back option of up to 40 percent ("WGS Call Option").
In the fourth quarter of 2012, WGS LP drilled and completed two new horizontal wells to increase the working gas capacity of the storage facility from 17 Bcf to 19 Bcf. In addition, delta pressuring of the storage reservoir has now been approved to further increase the working gas capacity of the facility to 22 Bcf.
On April 25, 2013, Perpetual exercised the WGS Call Option to buy back an additional 20 percent interest in WGS LP for a total interest in the gas storage facility upon closing of 30 percent.
Perpetual's Low-Pressure Electro-Thermally Assisted Drive ("LEAD") project has been approved for funding through the Government of Alberta's Innovative Energy Technologies Program ("IETP"). The project is designed to develop bitumen in the Bluesky reservoir in the Panny area of Northeast Alberta that is too viscous for conventional cold production, but does not require as much heat as most current commercial thermal projects. The pilot will use three parallel horizontal wells with electrical cables to conduct heat throughout the targeted bitumen formation. Water and/or solvent will be injected concurrent with the electrical heating. This process requires less energy and less water than typical steam assisted gravity drainage (SAGD) operations. The total pilot project is estimated to cost $18.2 million, including capital and operating costs. Approved funding through the IETP allowance is 30 percent of actual eligible costs, to a maximum of $5.46 million. Perpetual intends to initiate the pilot project with the drilling of a water source well in the second half of 2013, with the majority of the capital spending on the pilot currently planned for 2014.
Additional information regarding the LEAD project is available at Perpetual's website at:
Credit Facility Borrowing Base Review
Perpetual further advises that its semi-annual credit facility borrowing base review was completed April 26, 2013 as scheduled. As a result of this review, the lenders have established total availability under the credit facility of $125 million. A further revision to $110 million is scheduled to occur on July 31, 2013. The reduction from the previous borrowing base of $127.5 million is due to dispositions and lower natural gas price forecasts used in lender evaluations, offset by increased lending values attributable to higher oil and NGL reserves. Following completion of the first quarter capital program of approximately $40 million, current drawings on the Corporation's credit facility are approximately $45 million. The next semi-annual redetermination of the Corporation's borrowing base remains scheduled for October 31, 2013.
Certain information regarding Perpetual in this news release including management's assessment of future plans and operations may constitute forward-looking statements under applicable securities laws. The forward-looking information includes, without limitation, statements regarding prospective drilling activities; forecast debt levels and credit facility draws; forecast and realized commodity prices; expected funding and timing of capital expenditures; projected use of funds flow; planned drilling and development and the results thereof; expected dispositions and the use of proceeds therefrom; effects of dispositions on production, cash flow, debt levels, liquidity and financial flexibility; commodity prices; and estimated interest expense. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Perpetual and described in the forward looking information contained in this press release. Undue reliance should not be placed on forward-looking information, which is not a guarantee of performance and is subject to a number of risks or uncertainties, including without limitation those described under "Risk Factors" in Perpetual's management's discussion and analysis for the year ended December 31, 2012 and those included in reports on file with Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com and at Perpetual's website www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not exhaustive. Forward-looking information is based on the estimates and opinions of Perpetual's management at the time the information is released and Perpetual disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or otherwise, other than as expressly required by applicable securities laws.
SOURCE Perpetual Energy Inc.
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