Oil & Liquids Property Divestiture

Alberta – Oil and Liquids-Rich Natural Gas
Karr, Redwater & Sawn Lake Areas of Alberta
1,368 boe/d (76% liquids)
$18.6 million in annualized NOI
2.98 MMboe of PDP Reserves, 3.32 MMboe of TP Reserves & 5.82 MMboe of 2P Reserves

Bid Deadline: September 29, 2021 at 4:00 PM MST

Mancal Energy Inc. (“Mancal”, or the “Company”) has retained Earth Horse Energy Advisors (“Earth Horse”) as its exclusive financial advisor and agent to assist with the marketing of certain Oil & Liquids properties located in the Karr, Redwater and Sawn Lake areas of Alberta (the “Properties”).

Disposition Overview

  • Recent production of 1,368 boe/d, consisting of 934 bbl/d of oil & condensate, 108 bbl/d of natural gas liquids and
    approximately 1.96 MMcf/d of natural gas.

  • Production from the Dunvegan (Karr), Viking (Redwater) and Slave Point (Sawn Lake).

  • Mainly operated, high working interests.

  • High operating netbacks, yielding an aggregate net operating income of $18.6 million per year.(1)

  • PDP reserves of 2.98MMboe ,TP reserves of 3.32MMboe and 2P reserves of 5.82MMboe with a RLI of 6.0 years, 6.6 years and 11.6 years respectively.

  • Net Deemed Asset value of $55.4 million with a LLR ratio of 3.87.

  • Average working interest of 84.1% in 88 sections of land (56,328 gross acres) or 74 net sections or 47,371 acres. 

  • Drilling upside at Karr, Redwater and Sawn Lake, while the Sawn Lake property also has waterflood potential.

  • Current production is consistent with the 2021 forecasted PDP production of 1,339 boe/d for the second half of 2021.

(1) Based on the June 2021 Lease Operating Statements for the Properties.
(2) Based on a mechanical update as of July 1, 2021 from the December 31, 2020 evaluation and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price deck.

Property Overview and Land Summary

 

 

Karr, Alberta

  • 50-100% mainly Operated Working Interest
  • Township 63-69 Range 24-26W5-R4W6
  • Dunvegan Production
  • 777 boe/d, consisting of 397 barrels of oil per day, 103 barrels of natural gas liquids and 1.66MMcf/d of natural gas
  • Outside of the Dunvegan, the Karr area yields a number of attractive opportunities with both oil and gas upside, specifically in Cretaceous and Triassic formations including the Charlie Lake, Montney and Lower Mannville
  • 3 booked locations and 2 unbooked

Sawn Lake, Alberta

  • 75% Operated Working Interest
  • Township 91 Range 13W5
  • PNG in Slave Point
  • 102 bbl/d of 40o API Light Oil
  • Production is from the Slave Point “A” pool
  • Waterflood Potential

 

Redwater, Alberta

  • Varying Operated and Non-Operated Working Interests, though primarily Operated
  • Township 51-61 Range 14-27W4-Range 1W5
  • Viking Production
  • 489 boe/d, consisting of 435 barrels per day of oil, 5 bbl/d of natural gas liquids and 298 Mcf/d of natural gas
  • Active gas cap drive
  • Development Potential in the Lower Viking Formation using varying horizontal drilling techniques

Reserves Summary

Based on a mechanical update to an effective date of July 1, 2021, the Properties have aggregate reserves of 2.98MMboe on a PDP basis, 3.32MMboe on a total proved basis and 5.82MMboe in 2P reserves with net present values of $49.8 million, $50.4 million, and $69.3 million at a 10% discount rate using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price forecast.

GLJ Petroleum Consultants Ltd. provided an independent engineering reserves as at December 31, 2020 for the Properties. The GLJ reports are available in the virtual data room to all parties that execute a confidentiality agreement.

(1)Based on a mechanical update as of July 1, 2021 from the December 31, 2020 evaluation and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price deck..

Production Summary

During June 2021, production from the Properties averaged 1,368 boe/d, consisting of 934 barrels of oil & condensate per day, 108 barrels per day of natural gas liquids and approximately 2.0 MMcf Mcf/d of natural gas.

Net Operating Summary

During June 2021, the Properties had aggregate net operating cash flow of $1.6 million or $18.6 million on an annualized basis.

The Karr property had a field netback of $33.61/boe in June with net operating income of $9.4 million on annualized basis, while the Redwater property had a netback of $46.88/boe or $8.2 million in cash flow on annualized basis; the Sawn Lake property had a netback of $27.15/bbl providing annualized cash flow of $1.0 million. The breakdown of the net operating income for each of the property is outlined below. 

LLR Operating Summary

The LLR of the Properties consists of $74.7 million in deemed value, $16.6 million in deemed well liabilities and $2.7 million in deemed facility liabilities for a net deemed asset value of $55.4 million and an overall LLR of 3.87. 

Karr Property

Township 63-69 Range 24-26W5-Range 4W6

In the Karr area South of Grande Prairie, Mancal holds a 50-100% mainly operated working interest in 42.4 net sections of land (27,161 net acres).

Production from the Karr property averaged 777 boe/d in June 2021, consisting of 397 bbl/d of oil, 103 bbl/d of natural gas liquids and 1.7 MMcf/d of natural gas. Production is from the Dunvegan Formation of which the Dunvegan J Pool contributes the majority of the production from the area.

The LLR of the Karr property is 12.22 with a net deemed asset value of $40.5 million, consisting of $44.1 million in deemed assets and $3.6 million in deemed liabilities. Apart from a couple wells, Mancal operates all of the wells and the central oil battery at Karr.

Mancal has identified a total of five drilling locations on its land at Karr which offset recent competitor activity with initial production rates greater than 1,000 bbl/d. Outside of the Dunvegan, the Karr area yields a number of attractive opportunities with both oil and gas upside, specifically in Cretaceous and Triassic formations including the Charlie Lake, Montney and Lower Mannville.

Karr Property Production Overview

During June 2021, the Karr property averaged 777 boe/d of production, consisting of 397 bbl/d of oil, 103 bbl/d of natural gas liquids and 1.7 MMcf/d of natural gas. Production is from the Dunvegan Formation of which the Dunvegan J Pool contributes the majority of the production from the area. Production has averaged approximately 64% towards liquids since the fourth quarter of 2019. Current production is in line with the 2021 forecasted PDP production for the second half of 2021 at 731 boe/d. The estimated average annual decline for the property to 2032 is approximately 14.9%.

Karr Reserves Summary

The Karr property has estimated remaining reserves on a PDP basis of 1.33MMboe, 1.66MMboe on a total proved basis and 2.74MMboe on a 2P basis, with NPV 10% values of $19.8 million, $20.4 million and $30.0 million respectively based on the mechanical update with an effective date of July 1, 2021 and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price forecast. 

(1)Based on a mechanical update as of July 1, 2021 from the December 31, 2020 evaluation and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price deck..

Karr Upside Overview

Mancal has identified a total of five drilling locations on its land at Karr which offset recent competitor activity with initial production rates greater than 1,000 bbl/d. Outside of the Dunvegan, the Karr area yields a number of attractive opportunities with both oil and gas upside, specifically in Cretaceous and Triassic formations including the Charlie Lake, Montney and Lower Mannville.

Redwater Property

Township 63-69 Range 14-27W4-Range 1W5

In the Redwater area North of Edmonton, Mancal holds working interests of 25%-100% in a total of 28.25 net sections of land (18,050 net acres).

Production from the Redwater property averaged 489 boe/d in June 2021, consisting of 435 bbl/d of oil, 5 bbl/d of natural gas liquids and 298 Mcf/d of natural gas from the Lower Viking Formation.

As of July 2021, the LLR of the Redwater property was 1.67 with net deemed assets of $9.0 million (deemed assets of $22.6 million and deemed liabilities of $13.5 million).

Redwater Property Production Overview

During June 2021, the Redwater property averaged 489 boe/d of production, consisting of 435 bbl/d of oil, 5 bbl/d of natural gas liquids and 298 Mcf/d of natural gas. Production is from the Lower Viking Formation. Production has averaged approximately 90% towards liquids since the first quarter of 2019. Current production is in line with the 2021 forecasted PDP production for the second half of 2021 at 481 boe/d. The estimated average annual decline for the property to 2032 is approximately 12.5%.

Redwater Reserves Summary

The Redwater property has estimated remaining reserves of 1.29MMboe on a PDP and TP basis and 1.94MMboe on a 2P basis, with NPV 10% values of $25.1 million and $32.2 million respectively based on the mechanical update with an effective date of July 1, 2021 and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price forecast. 

(1)Based on a mechanical update as of July 1, 2021 from the December 31, 2020 evaluation and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price deck..

Redwater Viking Upside Overview

Mancal has identified 7 Viking drilling locations on its land at Redwater.  Three locations are booked to the reserves while four are unbooked.

Sawn Lake Property

Township 91 Range 13W5

In the Sawn Lake area in Northern Alberta, Mancal holds a 75% working interest in four and a half sections of land (2,160 net acres). The Sawn Lake property is currently producing approximately 102 bbl/d of 40° API light oil per day from 11 producing wells from the Slave Point Formation. The decline rate of the Sawn Lake property is low, yielding a RLI of 9.6 years on a PDP and TP basis and 30.8 years of 2P reserves. The upside at Sawn Lake is the implementation of a horizontal Slave Point waterflood scheme, like other pools in the area.

As of July 2021, the LLR of the Sawn Lake property was 3.7. The deemed asset value of Sawn Lake is $8.0 million while the deemed liabilities are $2.1 million providing a net deemed value of $5.8 million. 

Sawn Lake Property Production Overview

During June 2021, the Sawn Lake property averaged 102 barrels of oil per day from the Slave Point Formation. Production fell in June 2021 due to the 102/14-14-91-13W5 going down for a workover for a bottom hole pump failure, which has since been repaired and put back on-stream.

Current production is below the forecasted 2021 PDP production for the second half of 2021 at 122 bbl/d. The property has had steady production prior to the 102/14-14-91-13W5 well going down.

Due to the implementation of a waterflood, production is estimated to increase to 500 barrels of oil per day in 2024.

Sawn Lake Reserves Summary

The Sawn Lake property has estimated remaining reserves on a PDP basis of 357.9 Mbbl and 1.15 MMbbl on a 2P basis, with NPV 10% values of $4.9 million and $7.1 million respectively based on the mechanical update with an effective date of July 1, 2021 and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price forecast. 

(1)Based on a mechanical update as of July 1, 2021 from the December 31, 2020 evaluation and using GLJ Petroleum Consultants Ltd.’s July 1, 2021 price deck..

As outlined in the graphs, the PDP volumes of the Sawn Lake property accounts for 31.22% of the 2P reserves while the NPV 10% value accounts for 68.95%.

Sawn Lake Reef Stages

Below illustrates the three reef stages (A, B, and C) in the Sawn Lake area.

Bid Deadline: September 29, 2021 at 4:00 PM MST