Eagle Energy Trust (TSE: EGL-UN) announced Dec. 16 it entered Canada with the acquisition of producing properties in the Montney Shale in north central Alberta.
Eagle's newly established Canadian operating subsidiary, Eagle Energy Canada Inc., signed an agreement with Calgary's Spyglass Resources Corp. (TSE: SGL) to acquire a 50% nonoperated working interest in properties under horizontal waterflood in the Dixonville Montney "C" oil pool for about $86.2 million (C$100 million).
"We are pleased to enter Canada with a high quality, low decline, oil asset," said Richard Clark, Eagle president and CEO, in a statement.
Clark said the acquisition represents the successful redeployment of the company's proceeds of $150 million from its exit from the Permian Basin in August.
"Dixonville replaces more than 100% of the production we sold in the Permian and will generate almost 89% free cash flow at $70 WTI. An even higher percentage of free cash flow will be realized as commodity prices recover. Eagle has significantly reduced its sustaining capital requirements using only $100 million of the $150 million realized from the Permian sale," he said.
The Dixonville properties are characterized by single digit declines, a stable production base and a low ongoing sustaining capital requirement.
With this acquisition, Eagle, based in Calgary, adds about 1,250 barrels of oil equivalent per day (boe/d), 97% light sweet crude, to its existing production. The purchase includes 112 producing wells and 82 injector wells.
Eagle will fund the acquisition with about $47.4 million (C$55 million) of its available cash and the balance from its existing credit facility. Eagle expects an increase to its borrowing base as a result of the acquisition, which consists predominantly of proved developed producing reserves.
The acquisition is expected to close on Dec. 18.
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