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Vermilion Energy to buy oil assets in Canada

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Staff Writer | January 16, 2018
Vermilion Energy
Acquisition   High netback, low base decline

Vermilion Energy announced that we have entered into an arrangement agreement to acquire a private southeast Saskatchewan producer for total cash consideration of $90.8 million.

The board of directors of Privateco has unanimously approved the arrangement and recommended that Privateco shareholders vote in favour of the arrangement.

The arrangement remains subject to customary closing conditions, including receipt of applicable court, Privateco shareholder and regulatory approvals, and is expected to close on or about February 15th, 2018.

The acquisition is comprised of high netback, low base decline, light oil producing fields in the Sinclair and Fertile areas, straddling the Saskatchewan/Manitoba border, approximately 55 km northeast of Vermilion's existing operations in southeast Saskatchewan.

The assets include approximately 42,600 net acres of land (approximately 100% W.I.), three oil batteries, and associated pipelines, along with the necessary water infrastructure to facilitate the existing seven waterflood projects and initiate up to eight additional waterflood projects.

The assets produced approximately 1,150 bbl/d of 40° API oil during Q4 2017, sourced from the Bakken/Three Forks formation. All of the current production and infrastructure will be 100% owned and operated by Vermilion.

Total proved plus probable (2P) reserves attributed to the Assets at December 31, 2017 are 6.7(1) mmboe (100% crude oil), based on an independent evaluation by GLJ Petroleum Consultants Ltd.

The Assets demonstrate a low base decline rate of approximately 15% at present, and are expected to have even lower decline rates over time.

Areas under waterflood have decline rates of less than 10% with certain areas of flat or increasing production.

Approximately 45% of the production comes from active waterflood projects, leaving significant opportunity to expand the waterflood.

The acquisition is accretive on a fully-diluted per share basis for all pertinent metrics including production, fund flows from operations, reserves and net asset value.


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