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Crew to sell 22% of B.C. gas processing facilities

2020-01-17 07:37 ET - News Release

Mr. Dale Shwed reports

CREW ENERGY INC. ANNOUNCES STRATEGIC DEBT AND COST REDUCTION TRANSACTIONS

Crew Energy Inc. has entered into a purchase and sale agreement with a third party mid-stream company for the disposition of a 22-per-cent net working interest in each of its Septimus gas processing facility and West Septimus gas processing facility located in northeast British Columbia for aggregate consideration of $70.0-million. In conjunction with completion of the transaction, Crew and the purchaser will form a strategic alliance to participate collaboratively in future value creation opportunities. Separately, Crew has exercised its option to acquire an approximate 16-per-cent net interest in the NEBC facilities for $11.7-million.

Transaction terms and metrics

The Septimus facility currently has a nameplate capacity of 60 million cubic feet per day, while the West Septimus facility currently has a nameplate capacity of 120 mmcf/d. The transaction is structured with two closings, whereby half the interest to be disposed of (11 per cent for $35-million) is expected to close in the first quarter of 2020 and the remaining half interest (11 per cent for $35-million) is expected to close in the fourth quarter of 2020. As part of this transaction, Crew will enter into a 20-year processing arrangement with a commitment of approximately $6.4-million per year to be paid to the purchaser. Closing of the transaction remains subject to receipt of third party consents and satisfaction of customary closing conditions.

In a separate transaction, Crew has exercised its option to acquire an approximate 16-per-cent net interest in the NEBC facilities for approximately $11.7-million, with an expected closing and effective date of Nov. 1, 2020, subject to customary closing conditions. The purchase of this interest will mark the termination of a 10-year processing agreement resulting in the elimination of $5.9-million per year in processing fees that Crew has been paying over the term of the agreement.

After closing these transactions, Crew will remain as operator of the NEBC facilities and will thereafter own an approximate 22-per-cent net interest in the NEBC facilities.

Option for future potential disposition

Pursuant to the terms of the transaction, Crew has an option to dispose of up to an additional 11.43-per-cent net interest in the NEBC facilities to the purchaser for consideration of up to $37.5-million exercisable from Jan. 1, 2021, to June 1, 2023. If the option is exercised, Crew would be required to enter into a 20-year processing commitment with the purchaser and pay up to $3.4-million per year in processing fees.

Use of proceeds

Upon closing of the transaction, proceeds from the disposition will be used to reduce outstanding indebtedness under Crew's $235-million credit facility, which had drawings of approximately $53.0-million at Dec. 31, 2019. The company continues to retain ample liquidity and unutilized credit capacity with no material debt maturities until 2024.

Crew expects to release the company's full year 2020 budget later in the first quarter.

Crew is a growth-oriented oil and natural gas producer, committed to pursuing sustainable per share growth through a balanced mix of financially responsible exploration and development complemented by strategic acquisitions. The company's operations are primarily focused in the vast Montney resource, situated in northeast British Columbia, and include a large contiguous land base. Crew's liquids-rich Greater Septimus area features an ultra condensate-rich (UCR) zone, which offers significant development and value creation potential over the long term. The company has access to diversified markets with operated infrastructure and access to multiple pipeline egress options.

We seek Safe Harbor.

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