The CP Properties are high working interest, largely operated interests, similar to those that Pengrowth has extensive experience in managing. These properties currently produce approximately 21,625 barrels of oil equivalent (boe) per day (before royalties), comprised of 42 percent crude oil, 52 percent natural gas and six percent natural gas liquids. The transaction is expected to be strongly accretive to the unitholders of Pengrowth on a per unit basis in terms of distributable cash flow, production and reserves.
Based upon an independent evaluation by GLJ Petroleum Consultants Ltd. (GLJ) dated November 1, 2006, the CP Properties have proved plus probable reserves of 65.8 million boe and proved reserves of 51.4 million boe (on a company interest before royalties basis using escalated prices). The purchase price of $1.0375 billion represents attractive transaction metrics of $47,975 per boe per day based on current levels of production, $15.77 per boe of proved plus probable reserves and $20.17 per boe of proved reserves.
The CP Properties are expected to provide Pengrowth with a wide range of opportunities to add value through effective deployment of capital, including opportunities identified by Pengrowth on developed lands and approximately 375,000 additional net acres of undeveloped land.
Following completion of the recent business combination with Esprit Energy Trust and the acquisition of the Carson Creek property from ExxonMobil Canada Energy, Pengrowth had unused credit capacity of over $500 million on a syndicated bank credit facility of $950 million. The material terms and conditions of Pengrowth's bank credit facility remain unchanged.
The acquisition will be supported by a committed senior bank facility fully underwritten by the Royal Bank of Canada in the full amount of the purchase price with a term of 12 months commencing on the scheduled closing of the transaction on or about January 18, 2007.
The acquisition is effective as of November 1, 2006, and is subject to customary conditions and regulatory approvals. Pengrowth was advised in respect to the transaction by RBC Capital Markets and Scotia Waterous.
The transaction also provides Pengrowth with an opportunity to optimize the value of its core holdings through selective property sales. Pengrowth expects to pursue a comprehensive asset rationalization program on its entire portfolio of oil and natural gas properties through independent industry agents. In total, Pengrowth expects to divest of assets producing approximately 7,700 boe per day (before royalties) with proved plus probable reserves of 25 million boe (on a company interest before royalties basis using escalated prices). This includes properties Pengrowth currently has listed for sale through a third party sales agent. The terms of reference in respect to this disposition process have been established and several initial expressions of interest have been received representing approximately 4,300 boe per day of production (before royalties) and 17 million boe of proven plus probable reserves (on a company interest before royalties basis using escalated prices). The assets marked for divestiture are located in non-core areas or tend to have higher operating costs or a shorter reserve life and total proceeds from asset divestments are expected to be approximately $300 to $400 million.
The purchase of the CP Properties is the largest property acquisition made to date by a Canadian energy royalty trust. The agreement followed a competitive bidding process and close cooperation with management of ConocoPhillips. Pengrowth has an established history of completing transactions with major oil and gas companies based upon its long-term relationships, financial strength and experience in effective negotiations.
