New Stratus Energy Announces Consolidation of Final Partner Interest in BLOCKS 16 & 67
October 24, 2022
NEW STRATUS ENERGY ANNOUNCES CONSOLIDATION OF FINAL PARTNER INTEREST IN BLOCKS 16 & 67
Calgary, Alberta, October 24, 2022 – New Stratus Energy Inc. (TSX.V - NSE) (“New Stratus” or the “Corporation”) is pleased to announce it has entered into a share purchase agreement (the “Agreement”) with the Corporation’s third and final working interest partner (the “Vendor”) in Blocks 16 and 67 in Ecuador (the “Blocks”) to acquire the Vendor’s entire working interest in the Blocks, held by the Vendor’s wholly owned subsidiary (the “Target”). Pursuant to the Agreement, the Corporation will acquire all of the issued and outstanding common shares of the Target from the Vendor such that the Corporation will indirectly acquire the final undivided 20% working interest (the “Acquired Interest”) in the service contracts (the “Service Contracts”) for the Blocks (the “Transaction”). The Transaction follows the Corporation’s other recently announced consolidation transactions (collectively, and together with the Transaction, the “Consolidation Transactions”) with its two other working interest partners in the Blocks. Pursuant to the Consolidation Transactions, the Corporation will fully consolidate its working interest in the Blocks, increasing to 100%, upon statutory sanctioning of the Consolidation Transactions.
The total consideration for the Transaction will be approximately US$9.31 million cash, subject to adjustment, which total consideration is comprised of the following amounts:
- a base purchase price of US$0.25 million;
- an estimated carryforward recovery payment of US$0.42 million; and
- an estimated working capital adjustment of approximately US$8.64 million.
Completion of the Consolidation Transactions is subject to prior regulatory approvals, including authorization by the Ecuadorian Ministry of Energy and Mines and antitrust authorities. The Consolidation Transactions will increase New Stratus’ current production and cash flow while maintaining the Corporation’s financial flexibility.
The Acquired Interest has the following characteristics:
- Gross production as of September 1, 2022 was approximately 3,032 barrels of oil per day (bopd).1
- Proved developed producing reserves: 0.660 million barrels of oil.1
(1) See “Reserves Advisory”.
Blocks 16 and 67
Upon completion of the Consolidation Transactions, the Corporation will hold a 100% operated working interest in the Service Contracts for the Blocks, which are located in the Orellana Province in the prolific Oriente Basin in Ecuador. The Blocks have a long history of production, with a total of 262 wells drilled, and excellent seismic coverage. This has contributed to substantial knowledge of the area’s characteristics, properties, distribution of reservoirs, production mechanisms, and additional exploration opportunities.
The Blocks are comprised of 9 fields, with total working interest production as at September 2, 2022 of approximately 15,159 bopd at an average gravity of 15.5° API.
Existing infrastructure includes two oil and water processing centers with a capacity of 75,000 bopd and 900,000 barrels of water per day, with all the water production being reinjected into 30 wells. Additional area infrastructure includes electricity generation plants and a topping plant which produces diesel used to power operations.
The oil produced in the fields is moved by a 16-inch pipeline to Lago Agrio, where it is loaded into the Oleoducto de Crudos Pesados Ecuador S.A. pipeline and transported to a port on the Pacific Ocean.
Tariffs are governed by the Service Contracts and a portion of such tariffs is indexed to US CPI/PPI. While the existing Service Contracts expire in December 2022, significant production potential remains in the Blocks.
New Stratus continues to negotiate with the Government of Ecuador, specifically the Ministry of Energy and Mines on the extension of the rights to the Blocks through a production sharing contract where the Corporation has committed to a capital expenditure program in excess of C$250 million.
The Blocks include commitments to minimize the environmental impact of operations, to maintain high standards of safety, and to undertake long-term investments for the benefit of local communities.
Pursuant to the terms of the Agreement, the total consideration consists of a cash payment of approximately US$9.31 million (C$12.75 million) subject to adjustment for working capital and carryforward payments under the Service Contracts. The Transaction is subject to customary closing conditions and is expected to close on or before November 30, 2022.
Jose Francisco Arata
Chairman & Chief Executive Officer
President & Director
Chief Financial Officer
ygrene.sutartswen@adnarimm – (416) 363-4900
Certain information set forth in this news release constitutes “forward-looking statements”, and “forward-looking information” under applicable securities legislation (collectively, “forward-looking statements”). All statements other than statements of historical fact are forward-looking statements. Forward-looking statements may be identified by the use of conditional or future tenses or by the use of words such as “will”, “expects”, “intends”, “may”, “should”, “estimates”, “anticipates”, “believes”, “projects”, “plans”, and similar expressions, including variations thereof and negative forms. Forward-looking statements in this news release include the closing of the Transaction on the terms described or at all, the expected purchase price for the Transaction, the timing of the closing of the Transaction, the satisfaction of the conditions to closing the Transaction, the operational characteristics attributable to the Acquired Interest, including production and reserves volumes, the effect of the Transaction on the Corporation’s operational and financial performance, the extension of the term of the Blocks and entering into a production sharing contract with the Government of Ecuador in respect of the Blocks instead of the Service Contracts, and expectations regarding capital investment in the Blocks, and are based on the Corporation’s current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Forward-looking statements are not guarantees of future performance and undue reliance should not be placed on them.
In respect of the forward-looking statements contained herein, the Corporation has provided them in reliance on certain assumptions that it believes are reasonable at this time, including, without limitation, assumptions as to the ability of the Corporation to receive, in a timely manner, the necessary regulatory approvals, the ability of the Corporation to satisfy, in a timely manner, the conditions to closing the Transaction, and the ability of the Corporation to negotiate an extension to the rights to the Blocks through a production sharing contract with the Government of Ecuador, some or all of which may prove to be incorrect. Accordingly, readers should not place undue reliance on the forward-looking statements contained herein. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, without limitation, risks and uncertainties relating to the closing of the Transaction as described herein; the ability to successfully integrate operations and realize the anticipated benefits of the Transaction; incorrect assessments of the value of the Transaction; changes in commodity prices; currency and interest rate fluctuations; the ability to secure adequate financing; and management’s ability to anticipate and manage the foregoing factors and risks. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. New Stratus undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws.
New Stratus has included the above summary of assumptions and risks related to forward-looking statements contained in this news release in order to provide readers with a more complete perspective on the Transaction and such information may not be appropriate for other purposes. Actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forwardlooking statements will transpire or occur, or if any of them do so, what benefits may be derived therefrom.
This news release includes reserves information attributable to the Blocks effective as of March 31, 2022 prepared by Petrotech Engineering Ltd., which is an independent qualified reserves evaluator. The reserves information was prepared in accordance with the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities.
Statements relating to reserves and resources are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated. The reserve and resource estimates described herein are estimates only. The actual reserves and resources may be greater or less than those calculated.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.