In a move to fast-track its drilling projects in northeastern Colorado, Canadian-based Shoreline Energy Corp. (TO: SEQ) is moving forward with plans for a joint venture (JV) with Acceleration Resources LLC, a U.S.-based oil and gas investment firm, the company announced Oct. 1.
Shoreline Energy has signed a letter of intent for the JV that would provide a principal loan of up to $2.7 million, and up to $50 million of investment over time into Shoreline’s Niobrara assets.
With the joint venture in place, Shoreline plans to dramatically reduce its debt, fully repaying an existing high-interest debt of $4 million. The JV will allow the company to achieve a debt-to-cash flow ratio of between 1.8 and 2.5 in 12 months.
The infusion of cash also would allow Shoreline to complete short-term drilling projects in the Wattenberg Field and to further develop its high-impact Montney discoveries in Canada. Acceleration will provide technical resources to identify other projects for development via horizontal drilling and hydraulic fracturing.
Under terms of the agreement, Shoreline Holdings and Acceleration will jointly develop assets in the heart of the Wattenberg Field in Colorado.
Acceleration will acquire up to a 50% interest of all of Shoreline’s existing Wattenberg assets, for up to 50% of Shoreline’s acquisition cost plus a premium of between 2% and 20% depending on the production state of each lease.
The transaction is expected to close by Dec. 31, 2013.
Trevor Folk, Shoreline Energy’s chief executive officer, sees the JV as a win-win proposition.
“The partnership with Acceleration Resources provides Shoreline with a long-term capital solution allowing Shoreline to focus on further asset development and expansion, increasing cash flow and shareholder value by developing our portfolio of low-risk, profitable, light oil projects,” Folk said in prepared remarks.
Acceleration’s Laurance Narbut is on the same page.
“We are pleased to be able to partner with the Shoreline team and help to accelerate realizing the full potential of their Niobrara assets,” Narbut, Acceleration’s managing member, stated in a press release. “The Wattenberg Field is a world-class oil and gas field, providing the opportunity to deploy capital into high rate of return projects with rapid buyout.”
Calgary, Alberta-based Shoreline is focused on exploration, development and production of petroleum and natural gas. In 2013, between 116 and 200 new horizontal wells have either been drilled, permitted or await permit approval on its royalty lands, the company said.