Vermilion Energy Inc., Calgary, has signed an agreement with a private southeast Saskatchewan producer to acquire light oil producing assets in the Northgate region of southeast Saskatchewan for $400 million.
The assets include 57,000 net acres of land, of which 80% is undeveloped, along with seven oil batteries and preferential access to 50% or greater capacity at a solution gas facility that is currently under construction.
Production from the assets this year is projected at 3,750 boe/d, of which 97% is crude oil. More than 90% of the current production base will be operated by Vermilion.
Total proved and proved-plus-probable reserves attributed to the assets by GLJ Petroleum Consultants Ltd. as of Feb. 28 are 10.3 million boe, of which 81% is crude oil and natural gas liquids; and 16.5 million boe, of which 81% crude oil and natural gas liquids.
Vermilion has found 175 (152 net) potential drilling locations targeting the Midale, Frobisher, Bakken, and Three Forks-Torquay formations. The majority of production and development drilling opportunities are from the Midale formation, with additional opportunities identified in the Frobisher, Bakken, and Three Forks-Torquay formations.
Vermilion said the assets demonstrate a low annual decline of 18% and are expected to provide cash flow that will fully fund the assets’ continued growth.
The deal creates a new core area for Vermilion in the Williston basin, providing assets that are geographically complementary to recent leasing activity it has conducted for Mississippian development in southwest Manitoba.
The company said the multihorizon, horizontal well techniques employed in the area are suited to the knowledge it has gained during development of the Pembina area assets in Alberta.
With the purchase, Vermillion is revising its production guidance for this year to 47,500-48,500 boe/d, assuming 8 months of contribution from the assets, and revising the company’s guidance for exploration and development capital expenditures by $35 million from the current level of $555-590 million for the year.
The deal, expected to close Apr. 29, is comprised of cash and share consideration of $345 million plus the assumption of $55 million in debt.