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CALGARY, Alberta, Sept. 12, 2024 (GLOBE NEWSWIRE) -- Logan Energy Corp. (TSXV:LGN) ("Logan" or the "Company") is pleased to announce the details of its Duvernay land position, which represents a new play type comprised of highly economic drilling inventory, and the acceleration of full field development at Pouce Coupe, including the construction of a 40 mmcf/d gas plant and associated infrastructure. In addition, the Company is pleased to announce its expanded 2024 budget and a fully funded preliminary budget for 2025, which will deliver 82% growth in Adjusted Funds Flow per share.
Logan is also pleased to announce an equity financing to be offered on a bought deal, private placement basis, with National Bank Financial Inc. as sole bookrunner and co-lead underwriter and Eight Capital as co-lead underwriter, for aggregate gross proceeds of $30.0 million (the "Equity Offering").
In connection with the accelerated capital expenditure budget and construction of the Pouce Coupe infrastructure, Logan has also received a commitment letter from National Bank of Canada (the "Lender") pursuant to which the Lender has agreed to provide the Company with new committed credit facilities in the aggregate principal amount of $125.0 million (the "New Credit Facilities").
DUVERNAY POSITION
Logan has assembled a ~152 section position within the greater Kaybob Duvernay oil play. Logan's position is comprised of blocks located in North Simonette (the "Simonette Duvernay") and Ante Creek (the "Ante Creek Duvernay", and collectively, the "Duvernay Assets"). Underpinned by thorough geotechnical evaluation, the Duvernay Assets add over 140 extended reach horizontal Duvernay oil locations1. The Duvernay Assets provide incremental development opportunities to complement Logan's organic development plans for its existing Pouce Coupe and Simonette Montney assets. The Company believes growth to 20,000 to 25,000 BOE/d by 2028 will be achievable from the development of its existing Montney assets alone. Logan plans to continually rationalize and expand its Duvernay position over this period.
Simonette Duvernay
The Simonette Duvernay asset is comprised of ~56 net sections with 50 net locations1.
Development of these lands will utilize existing Logan infrastructure and will benefit from co-development of the Company's North Simonette Montney assets.
The Simonette Duvernay lands are largely delineated with previous drilling and offer highly economic oil inventory. A 1,568 meter horizontal Duvernay well (13-01-064-26W5) completed in 2015 on Logan lands will yield an expected oil EUR of over 210 mbbl of oil; normalizing this to a 3,500 meter horizontal would yield an expected oil EUR of over 468 mbbl.
Within the 2025 budget, Logan plans to drill and place onstream one net Simonette Duvernay well to demonstrate the asset productivity with a modern full length well.
________________________1 Assuming a conservative 600 meter inter well spacing, average length of ~3,500 meter horizontal. See "Reader Advisories - Drilling Locations".
Ante Creek Duvernay
The Ante Creek Duvernay asset is comprised of ~96 net sections with over 90 net locations1.
The Ante Creek Duvernay land base is a northern extension of the Kaybob Duvernay trend. Logan believes the Ante Creek Duvernay will deliver similar results as Simonette and other areas in Kaybob of similar thickness.
Logan believes the Sturgeon Creek area Duvernay wells in TWP70-22 to be the low case for the Ante Creek Duvernay, which has higher pressures (>45 MPa), less carbonate material and better fluid properties (more gas drive) than the Sturgeon area.
Logan drilled an initial Ante Creek Duvernay well in the second quarter of 2024 that will be completed and put on production as part of the 2025 program.
Logan Duvernay Lands
ACCELERATED POUCE COUPE DEVELOPMENT
With the funding announced herein, Logan is pleased to announce the accelerated full field development of its Pouce Coupe assets, including the construction of a 40 mmcf/d gas plant, compressor station and oil battery. This infrastructure will enable the asset to grow from its current constraint of ~3,500 BOE/d to ~10,000 BOE/d.
Logan is budgeting approximately $32 million for the gas plant, battery and compression (inclusive of $10 million of 2024 long lead capital). Incremental to the facility capital, Logan is budgeting approximately $15 million for gathering and sales pipelines in 2025 but will look to partner with third parties to jointly own and develop certain sales pipelines where beneficial to reduce capital costs. The facility is expected to be commissioned by mid-2025, with eight new wells to be brought onstream concurrently. The facility will be designed to handle 40 mmcf/d of gas, 7,000 bbl/d of oil and 11,000 bbl/d of water and the asset NGL yield will increase to ~17 bbl/mmcf from ~10 bbl/mmcf presently.
The decision for Logan to build an owned fit-for-purpose facility was compelling because of Logan's highly competitive cost structure driven by in-house engineering and an entrepreneurial approach to procurement. The compression and battery portion of the facility would have been required whether gas was to be processed via third party or a new Logan owned plant. The payout on the incremental capital to expand the battery to also being a gas plant will be under fifteen months. This facility is a key element in Logan's plan to reduce its corporate operating cost to below $8.00 per BOE by 2028 and will enable Logan to accelerate drilling in Pouce Coupe which is the Company's highest liquid weighted drilling inventory.
Accelerating this development initially planned for 2026 was enabled by the availability of gas egress, which allows Logan to deliver on its five year growth plan more quickly. By the fourth quarter of 2025, Logan expects its Pouce Coupe asset to be producing over 7,300 BOE/d through owned infrastructure and over a decade of tier one oil weighted inventory remaining.
EQUITY OFFERING
Logan has entered into an agreement with a syndicate of underwriters (the "Underwriters") with National Bank Financial Inc. as sole bookrunner and co-lead underwriter and Eight Capital as co-lead underwriter (the "Lead Underwriters"), pursuant to which the Underwriters have agreed to purchase for resale on a private placement, bought deal basis, 41,096,000 common shares ("Common Shares") at a price of $0.73 per Common Share for aggregate gross proceeds of approximately $30.0 million. Certain directors, officers and employees of the Company will subscribe for approximately $5.0 million of the Equity Offering.
Logan intends to use the net proceeds from the Equity Offering to fund a portion of its accelerated development program in the Montney and Duvernay and for general corporate purposes. Timed with the construction of the Pouce Coupe facility, the Company believes the incremental value it can create with the proceeds of the Equity Offering more than offsets the small amount of dilution resulting from the Equity Offering and positions the Company well for accelerated future growth.
The completion of the Equity Offering is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange ("TSXV"). Closing of the Equity Offering is expected to occur on or around October 3, 2024. The Company has agreed to pay a cash commission of 4.0% of the gross proceeds of the Equity Offering to the Underwriters, except with respect to subscribers to be included on the president's list for which no commission will be paid.
The Common Shares will be subject to a statutory hold period that extends four months from the Closing Date; provided that any Common Shares issued in the United States will be subject to a 1 year hold period, subject to the ability to resell the Common Shares on the TSXV prior to 1 year in accordance with U.S. securities laws.
NEW CREDIT FACILITIES
In connection with the accelerated capital expenditure budget and construction of the Pouce Coupe infrastructure, the Company has received a commitment letter from the Lender, pursuant to which the Lender has agreed to commit, on a bilateral basis, to provide the Company with the New Credit Facilities in the aggregate principal amount of $125.0 million. The New Credit Facilities are comprised of a $50.0 million delayed draw term facility with a maximum initial tenor of up to 2.5 years from closing (the "Term Facility"), and a $75.0 million senior secured revolving committed term credit facility with an initial tenor of 2.0 years from closing (the "Revolving Credit Facility"), which will, in aggregate, replace the Company's existing $75.0 million demand credit facility upon closing.
Closing of the New Credit Facilities is expected to occur on or around October 3, 2024 and is subject to closing of the Equity Offering and other customary conditions.
The Term Facility and the Revolving Credit Facility will each be secured by all of the assets of the Company, bear interest at market rates that fluctuate plus a margin based on the net debt to EBITDA ratio of the Company and include customary debt covenants for lending arrangements of this nature.
The Term Facility is available to draw after January 1, 2025 and prior to May 31, 2025, to a maximum principal amount of up to $50.0 million and will be used to fund the Company's Pouce Coupe infrastructure and accelerated development in the area. The Term Facility matures at the earlier of 2.5 years from closing and 2.0 years from the date of the initial draw and is prepayable anytime without penalty. Repayments of principal are not required until the maturity date, provided the Company is in compliance with all covenants, representations and warranties.
REVISED 2024 GUIDANCE
The 2024 capital budget is being expanded from $120 million to $140 million. The increase is predominantly for certain long lead projects connected to the Pouce Coupe facility and to accelerate two drills in Simonette into 2024, which will enable the pad to be onstream before spring breakup in 2025.
After giving effect to the increase in capital expenditures, lower natural gas prices, the Equity Offering and the New Credit Facilities, Logan has revised its 2024 guidance as follows:
For the year ending December 31, 2024
Previous Guidance
UpdatedGuidance
Change
%
Average production (BOE/d) (1)
8,700
8,700
-
-
% Liquids
33%
34%
1%
3
Forecast Average Commodity Prices (2)
WTI crude oil price (US$/bbl)
75.49
75.67
0.18
0
AECO natural gas price ($/GJ)
1.76
1.48
(0.28
)
(16
)
Average exchange rate (CA$/US$)
1.365
1.356
(0.009
)
(1
)
Operating Netback, after hedging ($/BOE) (1)(3)
19.77
18.40
(1.37
)
(7
)
Adjusted Funds Flow ($MM) (1)(3)
55
52
(3
)
(5
)
AFF per share, basic (3)
0.12
0.11
(0.01
)
(8
)
Capital Expenditures before A&D ($MM) (3)
120
140
20
17
Net Debt (Surplus), end of year ($MM) (3)
24
18
(6
)
(25
)
Common Shares outstanding, end of year (MM) (4)
466
507
41
9
(1) Additional information regarding the assumptions used in the forecasts of average production, Operating Netback and Adjusted Funds Flow are provided under "Reader Advisories" below. (2) Forecast average commodity prices used in Updated Guidance are based on actual prices for the first six months of 2024 and forecast prices for the six months ending December 31, 2024, as follows: US$72.58/bbl WTI; CA$1.32/GJ AECO; and $1.353 CA$/US$ exchange rate. Refer to "Reader Advisories" for sensitivities.(3) "Operating Netback, after hedging", "Adjusted Funds Flow", "AFF per share", "Capital Expenditures before A&D" and "Net Debt (Surplus)" do not have standardized meanings under IFRS Accounting Standards, see "Non-GAAP Measures and Ratios" section of this press release.(4) Estimated basic Common Shares outstanding assuming closing of the Equity Offering. Refer to additional information regarding outstanding dilutive securities under the heading of "Share Capital" in this press release.
PRELIMINARY 2025 BUDGET
Logan is pleased to provide a fully funded preliminary budget for 2025, focused on delivering material liquids growth, an inaugural Duvernay program and accelerated Pouce Coupe development. The 2025 capital expenditure budget of $170 million is elevated relative to other years within Logan's five year plan due to the one-time Pouce Coupe infrastructure costs.
In addition to constructing and commissioning the Pouce Coupe infrastructure, the Company plans to bring onstream eight wells at Pouce Coupe, four Simonette Montney wells, and two Duvernay wells. Logan also plans to drill two DUC wells at Flatrock in 2025 which were deferred from 2024 and replaced with the land earning Duvernay well drilled at Ante Creek during the second quarter of 2024.
This 2025 budget delivers (from 2024E to 2025E):
47% average production growth;
61% oil and condensate growth;
24% decrease in average per unit operating and transportation costs;
98% Adjusted Funds Flow growth; and
82% Adjusted Funds Flow per share growth after giving effect to the Equity Offering.
For the year ending December 31, 2025
PreliminaryBudget
2025 Average Production (BOE/d) (1)
12,800
% Liquids
37%
H2 2025 Average Production (BOE/d)
14,500
% Liquids
38%
Forecast Average Commodity Prices (2)
WTI crude oil price (US$/bbl)
70.00
AECO natural gas price ($/GJ)
2.50
Average exchange rate (CA$/US$)
1.350
Operating Netback, after hedging ($/BOE) (1)(3)(4)
25.92
Adjusted Funds Flow ($MM) (1)(3)
102
AFF per share, basic
0.20
Capital Expenditures before A&D ($MM) (3)
170
DCET
125
Infrastructure, land and other
45
Net Debt, end of year ($MM) (3)
