Headwater Exploration Inc. has closed a deal to purchase Marten Hills area assets from Cenovus Energy Inc., Alberta. Headwater acquired a 100% working interest in 2,800 b/d of medium gravity oil production (average 22˚ API) and 270 net sections of Clearwater play rights. Total land acquisition is 189,000 acres with 172,800 acres with Clearwater rights. Marten Hills lies 250 km north of Edmonton, Alta.
In November, Headwater noted a 2021 preliminary pro forma outlook that included expected capital expenditures of $60-70 million (Can.) and average production of 6,000-6,500 boe/d (90% oil). Headwater has committed to spend $100 million on the acquired lands by Dec. 31, 2022.
Headwater said it plans to continue Cenovus’ efforts to de-risk the 250 sections of exploration acreage. The six historical exploration wells drilled by Cenovus have established four potential development areas, which Headwater intends to follow-up on using a methodical delineation approach.
Total consideration paid by Headwater consists of $35 million (Can.) in cash, 50 million common shares, and 15 million purchase warrants exercisable at $2.00/common share with a 3-year term.
As a result of the transaction, Cenovus owns, through Cenovus Marten Hills Partnership, 50 million Headwater shares representing 25.6% of the company’s issued and outstanding common shares. Including the common shares issuable if the warrants are fully exercised, Cenovus would own 65 million Headwater shares representing 30.9% of the company’s issued and outstanding shares.
