Offering Details

Petrocapita Income Trust
Strategic Alternatives Process
Bid Deadline: 3/14/2019 12:00 PM

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OVERVIEW

Petrocapita Income Trust and its wholly owned subsidiaries, Petrocapita GP 1, Petrocapita GP 2, Petrocapita Oil & Gas L.P., and Petrocapita Processing L.P. (“Petrocapita” or the “Company”) has engaged Sayer Energy Advisors to assist with a strategic alternatives process.  The Company is open to reviewing all alternatives which include, but are not limited to, a sale of the Company for cash, a merger of the Company with another oil and natural gas entity, or a sale of some or all of the Company’s assets.

The Company’s main assets consist of high working interests in heavy oil properties focused in the Lloydminster area of Alberta and the Edam, Landrose and Manitou Lake areas of Saskatchewan.  Petrocapita also has assets located in the Derwent, Granlea and Provost areas of Alberta and the Dulwich, Lashburn, Maidstone, Northminster and Turtleford areas of Saskatchewan (the “Properties”).

A majority of Petrocapita’s production was shut-in in December 2018, with the exception of seven wells in the Lloydminster area of Alberta producing a total of 131 barrels of oil per day net to Petrocapita and four wells in the Manitou Lake area of Saskatchewan producing approximately 52 barrels of oil per day net to Petrocapita.  Prior to the production shut-ins, total production net to Petrocapita from the Properties was approximately 552 boe/d (522 barrels of heavy oil per day and 177 Mcf/d of natural gas).

The majority of Petrocapita’s production potential is from the Lloydminster area of Alberta, where the Company holds various working interests in 63 sections of land.  Production potential from Lloydminster is approximately 231 barrels of heavy oil per day.  Current production from the property is approximately 131 barrels per of oil per day gross from the five currently producing wells.

In the Manitou Lake area, Petrocapita holds mainly 100% working interests in eight sections of land.  Current production at Manitou Lake is approximately 52 barrels of oil per day net to Petrocapita.  Prior to being shut-in, total production net to the Company was approximately 81 barrels of heavy oil per day.

At Edam, Petrocapita has a 100% working interest in approximately 10 sections of land.  The Edam property has production capability of approximately 50 barrels of heavy oil per day.

At Landrose, the Company holds a 100% working interest in 3.5 sections of land.  The Company has produced heavy oil from the Mannville Group including the McLaren Sand, the Waseca Sand and the Lloydminster Sand as well as from the Dina Member.  Prior to being shut-in, production from Landrose was approximately 34 barrels of heavy oil per day.

Petrocapita has a detailed list of all reactivations and possible recompletions on the Properties which is available in the data room for parties which sign a confidentiality agreement.  The workover list contains 62 wells in Alberta and 62 wells in Saskatchewan and includes specific estimated capital requirements for each workover.

The Company estimates capital costs of approximately $2.4 million for workovers in Alberta would result in a net production uplift of approximately 932 barrels of oil per day.  In Saskatchewan, the Company estimates capital costs of approximately $4.3 million for workovers which would result in a net production uplift of over 1,000 barrels of oil per day.  The Company lacks the required capital to perform the workovers.

Additionally, the Company has unused production equipment associated with the Properties.  Past equipment rentals generated revenue of approximately $7,500 per month.

The Company operates the majority of the Properties and owns numerous facilities that are valuable in effectively handling Petrocapita’s production and water disposal.  The facilities also have potential to handle third party oil and water.  Recent water disposal revenue has totaled approximately $67,000 net to Petrocapita (averaging approximately $6,000 per month from third parties).  Note that the depressed revenue numbers are a result of historically low WCS prices and resulting low activity levels.  Full facilities lists can be found under each detailed property description on our website.  Most of the Company’s oil and water is trucked to a central facility for disposal or sales.

The Company has saltwater disposal facilities at Lloydminster, Dulwich, Manitou Lake, Maidstone, Edam, Landrose and Turtleford which generate third party revenue.

Petrocapita has three future heavy oil blending projects in the Manitou Lake, Edam and Landrose areas.  With estimated capital of approximately $1.5 million, the blending facilities could be upgraded to operate as midstream facilities with total estimated capacity of 10,000 barrels per day.

Most of the wells which were acquired from Palliser Oil & Gas Corporation are connected to a central facility by pipeline to transport water for disposal, and clean oil is trucked directly to a sales point.  A full list of the Company’s pipelines is available in the data room for parties which sign a confidentiality agreement.  The Company sells its oil and NGLs though Shell Trading Canada, Husky Crude Oil and Repsol Canada Energy Partnership.

Petrocapita requests that any proposal submitted to purchase all of the Properties must include a purchase price split between each Province.

Overview Map Showing Location of the Company's Main Properties

Overview Map Showing Location of the Company's Focus Area Properties

Corporate Overview

Reserves Overview

Chapman Petroleum Engineering Ltd. (“Chapman”) prepared an independent reserves evaluation of Petrocapita’s properties as part of the Company’s year-end reporting (the “Chapman Report”).  The Chapman Report is effective December 31, 2017 using Chapman’s January 1, 2018 forecast pricing.

Chapman estimates that, as of December 31, 2017, the Properties contained remaining proved plus probable reserves of 8.8 million barrels of oil and natural gas liquids and 825 MMcf of natural gas (8.9 million boe), with an estimated net present value of $125.0 million using forecast pricing at a 10% discount.


Corporate LLR

Alberta: As of February 2, 2019, Petrocapita’s Alberta LLR was 0.75, with deemed assets of $11.3 million and deemed liabilities of $15.1 million.  This includes a security deposit of approximately $60,000.  Note that this LLR includes several of Petrocapita’s wells and facilities which are held under Canstone Energy Ltd. 

Saskatchewan: As of January 28, 2019, Petrocapita’s Saskatchewan LLR was 0.72, with deemed assets of $5.8 million and deemed liabilities of $8.0 million.  This includes a security deposit of $140,000.

Seismic Overview

Petrocapita has ownership in several seismic lines located in various areas of Alberta and Saskatchewan.  Details of the seismic are located in the data room and can be reviewed by parties that sign a confidentiality agreement.