Logan Energy (TSXV: LGN) is expanding its holdings in the Montney region of Alberta. The oil and gas producer has entered into a transaction with Gran Tierra Energy (TSX: GTE) to acquire a 50% working interest within certain assets near to Simonette, Alberta.
The transaction will see Logan pay $52.0 million in cash for a 50% working interest in certain assets, along with 100% of Gran Tierra’s interest in certain gross overriding royalties in the Simonette region.
The acquisition, which has an effective date of September 1, 2024, includes current production of 795 BOE/d, 48% of which is liquids, 25 net sections of Montney acreage including 45 net identified drilling locations, 16 gross 5-10% gross overriding royalty sections, and a 50% working interest in a 9 million barrel water reservoir and an oil battery. Total proved plus probable reserves are 13,958 mBOE.
Production in 2025 is estimated to grow to 1,440 BOE/d at the purchased assets, with an operating netback of $34.51 per BOE.
It’s currently expected that 2025 accretion from the purchase will amount to 11% AFF per share, which grows to 13-18% from 2025 through to 2029. The purchase also removes 5-10% gross overriding royalties from 38 of Logan’s net Montney locations, which improves economics. It also removes an estimated $13.0 million in near-term infrastructure capital from the current five year plan, and is expected to improve realized pricing due to the increase in liquids weighting.
The purchase is expected to enable production to grow to between 24,000 to 27,000 BOE per day by 2028, which is an increase from the prior 20,000 to 25,000 BOE per day estimate.
To fund the purchase, a $35 million bought deal financing has been announced, with shares priced at $0.73 per each. 47.9 million shares are expected to be sold under the offering, which is being led by National Bank and Eight Capital.
Despite the purchase however, Logan has cut its guidance for 2024 as a result of voluntary shut-in of uneconomic natural gas production, while capital expenditures have expanded as a result of the acquisition. Average production guidance has been cut from 8,700 BOE/d to 8,400 BOE/d, a 3% decline, while capital expenditures are now expected to come in at $157 million, versus prior guidance of $140 million. Net debt will move from a surplus of $1 million, to debt of $47 million.
Guidance for 2025 however has increased, with average production slated to improve from prior guidance of 12,800 BOE/d to 13,650 BOE/d, a 7% increase. Production in the second half is meanwhile forecasted to improve from the prior estimate of 14,500 BOE/d to 15,750 BOE/d, a 9% improvement. Capital expenditure guidance meanwhile has increased 15% to $195 million, while net debt estimates have grown 85%, jumping from $66 million to $122 million.
Logan Energy last traded at $0.78 on the TSX Venture.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
