NEWS RELEASE TRANSMITTED BY CCNMatthews
FOR: NAL OIL & GAS TRUST
TSX SYMBOL: NAE.UN
JANUARY 18, 2005 - 15:29 ET
NAL Oil & Gas Trust Acquires 70 Percent Of Addison
Energy's Oil And Gas Assets And Announces Bought-Deal
Financing
CALGARY, ALBERTA--(CCNMatthews - Jan. 18, 2005) - NOT FOR DISTRIBUTION
TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.
NAL Oil & Gas Trust ("NAL" or the "Trust") (TSX:NAE.UN) today announced
it has entered into an agreement to acquire all of the outstanding
shares of Addison Energy Inc. ("Addison"), a wholly-owned subsidiary of
a private U.S. company, for $550 million. The Trust has also entered
into an agreement with a wholly-owned subsidiary of Manulife Financial
Corporation ("MFC") to sell an undivided 30% interest in the Addison
properties for $165 million immediately upon closing of the share
purchase. The Addison acquisition is effective February 1, 2005; the
transactions are expected to close on or about February 10, 2005 and are
subject to customary conditions and regulatory consents. The net
purchase price to the Trust of $385 million will be funded with the
proceeds of a concurrent bought-deal equity financing and an increase in
the Trust's revolving credit facility.
Acquisition Highlights (Trust's 70% Share of Addison)
- The acquisition is expected to be highly accretive on a per unit basis
to cash flow, production, and reserves.
- Current production is approximately 7,700 barrels of oil equivalent
(boe)(a) per day, weighted 62% to natural gas. As a result, NAL's
production mix will become more balanced at approximately 57% oil and
liquids and 43% natural gas.
- The natural gas is predominantly sweet and liquids-rich, commanding a
heating value premium.
- The majority of the acquired assets are located in central Alberta
near NAL's existing core areas of Sylvan Lake/Medicine River and Joffre.
This will ensure a smooth integration of the new properties.
- Almost 90% of the properties are operated, with an average working
interest of 87%.
- NAL is acquiring 29.1 million boe of proved and probable reserves.
- The assets have a long reserve life index ("RLI") of 10.6 years on a
proved plus probable ("P+P") basis. As a result, the Trust's RLI will
increase (as at December 31, 2003 the Trust's P+P RLI was 8.6 years).
- Numerous low-risk development opportunities exist throughout the
properties in addition to significant Horseshoe Canyon coalbed methane
potential in the Nevis/Lacombe area.
The sale of a portion of the assets to our strategic partner, MFC,
allowed the Trust to successfully negotiate this transaction and
demonstrates the benefit of the relationship with MFC as it allows NAL
to complete large acquisitions.
"We are very excited about this highly accretive acquisition as the
properties fit very nicely with our existing operations, increase our
reserve life index and add significant gas production to our portfolio,"
stated Don Driscoll, President and CEO of NAL. He further stated: "The
high operatorship and working interest percentages will allow us to use
our proven operational skills to extract significant value for our
unitholders. Given our history of finding opportunities in addition to
those identified at the time of purchase, we are confident we will do so
again on these new properties."
/T/
Accretion Summary(1)(3)
Metric Accretion (per Trust unit)
------- ---------------------------
2005 Cash flow 16 %
2005 Production 21 %
Proved Reserves(2) 25 %
Proved plus Probable Reserves(2) 29 %
Net Asset Value (2) 29 %
/T/
(1) Assumptions: one-year (2005) commodity prices, derived from the
January 10, 2005 forward strip, of $6.64 per thousand cubic feet (Mcf)
of natural gas, US$43.85 per barrel of WTI crude oil, and a US$/Cdn$
exchange rate of 82 cents.
(2) Based on NAL's December 31, 2003 reserves.
(3) Assumes the acquisition is financed with a net $221 million in Trust
units and $164 million in debt.
The Trust will maintain its current monthly distribution to Unitholders
at $0.16/unit for the next three months after which time the Board will
re-evaluate its distribution policy.
Reserves
Gilbert Laustsen Jung Associates Ltd. conducted an independent appraisal
of Addison's assets in accordance with National Instrument 51-101. The
following table represents the gross company interest reserves being
acquired by the Trust as of February 1, 2005(1).
/T/
Natural Gas Oil
Crude Oil Liquids Natural Gas Equivalent
(Mbbl) (Mbbl) (MMcf) (Mboe)
-----------------------------------------------------
PROVED
Developed
Producing 3,082 4,053 67,485 18,382
Developed
Non-Producing 202 725 10,225 2,631
Undeveloped 159 119 4,448 1,019
-----------------------------------------------------
TOTAL PROVED 3,443 4,896 82,158 22,032
PROBABLE 706 1,534 29,236 7,113
-----------------------------------------------------
TOTAL PROVED
+ PROBABLE 4,149 6,430 111,394 29,145
-----------------------------------------------------
/T/
Abbreviations used in this table: Mbbl equals thousand barrels; MMcf
equals million cubic feet; Mboe equals thousand barrels of oil equivalent
(1)Based on the January 10, 2005 forward strip prices.
Key Properties
The Addison properties provide an excellent strategic fit with NAL's
existing core areas, particularly in the Sylvan Lake/Medicine River area
of central Alberta, where NAL Resources Management Limited ("NAL
Management"), the manager of the Trust, has made several property
acquisitions over the years and established a significant presence. This
acquisition will contribute long-life, high quality, high netback
properties to the Trust's operating areas. NAL's technical team has
reviewed the available data for the Addison properties and identified a
number of low-risk development opportunities.
The Central Alberta area includes major properties at Garrington, Sylvan
Lake/Medicine River, Nevis/Lacombe and Wilson Creek with current
production of approximately 6,300 boe/d. Approximately 59% of this
production is natural gas, the majority of which is sweet and rich in
natural gas liquids. In addition, multi-zone geology provides low-risk
growth potential.
The Pine Creek area includes properties at Pine Creek, Edson and Kaybob.
Current production in this area amounts to approximately 1,000 boed, 73%
of which is natural gas produced from relatively tight reservoirs. This
results in a long-life, low-decline production profile. Similar to
Central Alberta, this area has a multi-zone geology with current
production from six different formations.
The acquisition also includes approximately 117,000 gross acres of
undeveloped land (53,000 net to the Trust).
As is the case with all of our existing holdings, the new properties
will be managed by NAL Management.
Financing
The acquisition will be financed through a combination of bank debt and
an equity issue. NAL's credit facilities will be increased from $140
million to $300 million and will be provided by a syndicate arranged by
Bank of Montreal and including RBC Royal Bank, Canadian Imperial Bank of
Commerce and Bank of Nova Scotia.
In conjunction with this transaction, NAL has entered into an agreement
to sell, on a bought-deal basis, 17,000,000 Trust units at a price of
$13.70 each for gross proceeds of $232,900,000 to a syndicate of
underwriters co-led by RBC Capital Markets and BMO Nesbitt Burns Inc.
and also including CIBC World Markets Inc., Scotia Capital Inc., TD
Securities Inc., Canaccord Capital Corporation, National Bank Financial
Inc., Desjardins Securities Inc., Raymond James Ltd., Dundee Securities
Corporation and Peters & Co. Limited. The offering is expected to close
concurrently with the acquisition.
Related Party Considerations
The sale of the Addison properties to the wholly-owned subsidiary of MFC
may be considered a "related party" transaction for purposes of Ontario
Securities Commission Rule 61-501 (Rule 61-501) and Autorite des marches
financiers Policy Q-27 (Policy Q-27) as NAL Management, the manager of
the Trust, is also a wholly-owned subsidiary of MFC. The sale of the
Addison properties to the wholly-owned subsidiary of MFC was considered,
evaluated and approved by the independent directors of NAL Energy Inc.
("NAL Energy"), after discussions with legal and financial advisors. The
board of directors of NAL Energy oversees the acquisition and
disposition of oil and gas properties by the Trust. The majority of the
directors of NAL Energy are independent of NAL Management and are
elected directly by NAL's Unitholders. The sale of the Addison
properties to the wholly-owned subsidiary of MFC is exempt from the
valuation and securityholder approval requirements of Rule 61-501 and
Policy Q-27 in that, in the view of the directors of NAL Energy, neither
the fair market value of the Addison properties being sold nor the fair
market value of the consideration being received for such properties
exceeds 25% of the market capitalization of the Trust.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy the securities in any jurisdiction. The
trust units offered will not and have not been registered under the
United States Securities Act of 1933 and may not be offered or sold in
the United States absent registration or applicable exemption from the
registration requirement.
Forward-Looking Statements
This disclosure contains certain forward-looking statements that involve
substantial known and unknown risks and uncertainties, many of which are
beyond NAL's control, including: the impact of general economic
conditions in Canada and in the United States, industry conditions,
changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced, increased competition, the lack of
availability of qualified personnel or management, fluctuations in
foreign exchange or interest rates, stock market volatility and market
valuations of companies with respect to announced transactions and the
final valuations thereof, and obtaining required approval of regulatory
authorities. NAL's actual results, performance or achievement could
differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurances can be given
that any of the events anticipated by the forward-looking statements
will transpire or occur, or if any of them do so, what benefits,
including the amount of proceeds, that NAL will derive there from.
(a) When converting natural gas to equivalent barrels of oil within this
report, NAL uses the widely recognized standard of 6 thousand cubic feet
(Mcf) to one barrel of oil equivalent (boe). However, boes may be
misleading, particularly if used in isolation. A boe conversion ratio of
6 Mcf : 1 bbl is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
Contact Information:
FOR FURTHER INFORMATION PLEASE CONTACT:
NAL Oil & Gas Trust
Donald P. Driscoll
President & Chief Executive Officer
(403) 294-3600 Toll Free: (888) 223-8792
(403) 294-3699 (FAX)
or
NAL Oil & Gas Trust
Paul E. Belliveau
Vice President Finance & Chief Financial Officer
(403) 294-3600 Toll Free: (888) 223-8792
(403) 294-3699 (FAX)
or
NAL Oil & Gas Trust
Anne-Marie Buchmuller
Manager, Investor Relations
(403) 294-3600 Toll Free: (888) 223-8792
(403) 294-3699 (FAX)
E-mail: Investor.Relations@nal.ca
Web Site: www.nal.ca