Crew Energy Inc. (Toronto: CR.TO) of Calgary has completed an acquisition of certain strategic Montney liquids rich natural gas properties in northeast British Columbia for approximately $105 million. The acquired assets include 75 net sections of land that are either contiguous with existing Crew land or increase Crew's working interest in joint interest lands.

In a separate transaction, Crew has entered into an agreement to sell certain petroleum and natural gas assets (75% natural gas) focused primarily in the Deep Basin of Alberta in exchange for approximately $222 million in cash before closing adjustments plus approximately 400 bbls per day of heavy oil production. Upon completion of the disposition, Crew plans to expand its previously announced 2014 exploration and development capital program by $39 million to $285 million to accelerate the company's Montney development.

Northeast British Columbia Acquisition

In two transactions completed in late March 2014 Crew purchased approximately 75 sections of highly prospective Montney rights in the Septimus and Groundbirch areas of operation in northeast British Columbia for approximately $105 million. Pursuant to these transactions, the company acquired:

  • Current production of 1,400 boe per day (98% natural gas) based on field estimates;
  • Total proved reserves of 4.7 million boe (94% natural gas);
  • Total proved plus probable reserves of 8.5 million boe (93% natural gas);
  • Significant resource to be evaluated in the near term; and
  • 48,100 net acres (75 net sections) of highly prospective Montney lands.

The majority of the existing reserve estimates and production are from the Halfway and Belloy formations with only four Montney locations included in the reserve assessment. Crew also acquired underutilized strategic infrastructure consisting of 130 kilometers of pipelines and over 6,200 hp of field compression. All of the acquired lands are in what Crew has identified as the "wet" gas hydrocarbon window. Crew now owns 544 (452 net) Montney sections in northeast British Columbia of which an estimated 138 net sections are located in the Montney "oil" window, 238 net sections are located in the Montney "wet" gas window and 76 net sections are located in the Montney "dry" gas window.

The strategic importance of aggregating this large contiguous block of land is expected to result in optimal operating efficiencies through:

  • Consolidating working interest in 54 sections to 100% which were previously 50%;
  • Ability to drill longer horizontal wells at preferred orientations;
  • Economies of scale from optimized pad drilling;
  • Control of timing and pace of development; and
  • Additional infrastructure access and ownership.

Alberta Gas Disposition

Crew has entered into an agreement to dispose of certain petroleum and natural gas assets focused in the Deep Basin area of Alberta. Total consideration to be received for the disposition consists of $222 million in cash, before customary closing adjustments, plus approximately 400 bbls per day of heavy oil production which is located in Crew's Lloydminster operating area. The disposition is scheduled to close on or about May 30, 2014 with an effective date of April 1, 2014, subject to satisfaction of customary industry closing conditions.

The assets to be sold consist of:

  • Current production of 7,000 boe per day (75% natural gas) based on field estimates;
  • Total proved reserves of 34.1 million boe (71% natural gas);
  • Total proved plus probable reserves of 60.4 million boe (71% natural gas); and
  • 254,000 net acres of land.

The heavy oil assets to be acquired by Crew as consideration consist of:

  • Expected production at closing of 400 boe per day (99% oil) based on field estimates;
  • Total proved reserves of 0.6 million boe (99% oil);
  • Total proved plus probable reserves of 0.8 million boe (99% oil); and
  • 2,750 net acres of land.