Offering Details
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Under Review / Road 53 Resources Inc.
Road 53 Resources Inc.
Corporate DivestitureBid Deadline: February 23, 2023
12:00 PM
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OVERVIEW
Road 53 Resources Inc. (“Road 53” or the “Company”) has engaged Sayer Energy Advisors to assist Road 53 with a sale of the shares of the Company.
Road 53 is a private junior oil and natural gas company with assets located in the Leckie area of Alberta (the “Property”). Road 53 is a tightly-held private company with only six shareholders and no debt or severance costs. The Company currently has positive working capital of $1.0 million.
The Property consists of a long-life, shallow natural gas production base from the Milk River and Medicine Hat formations with continued development of the coalbed methane (“CBM”) production base. The Property is located near the town of Brooks, Alberta, where the Company has a 100% working interest.
Average daily sales production net to Road 53 from Leckie for the eleven months ended November 30, 2022 was approximately 4.4 MMcf/d of natural gas (4.8 MMcf/d gross production) and three barrels of oil and natural gas liquids per day (733 boe/d).
With almost half of the well inventory available for future CBM recompletions, Road 53’s strategy is to maintain current production levels for at least the next four years while optimizing existing facilities and maintaining operating cost discipline. Operating cash flow is protected with an active hedging program to ensure costs are covered in the short term. At present, Road 53 has roughly 25% of sales for winter natural gas hedged at $7.46 per GJ until March 31, 2023.
Operating income net to Road 53 for the eleven months ended November 30, 2022 was approximately $4.5 million or $4.9 million annualized, with operating costs averaging $1.29 per Mcf equivalent. Royalties are payable to Heritage Royalty Resources Corporation at 8%.
As of January 7, 2023, Road 53 had total deemed assets of $18.8 million, deemed liabilities of $10.9 million (net deemed assets of $7.9 million) with an LMR of 1.73. The Company has reviewed actual abandonment and reclamation costs of offset operations and believes that the procedures can be completed for less than the AER estimates.
Additional corporate information relating to Road 53 will be provided to parties upon execution of a confidentiality agreement.
Road 53 is a private junior oil and natural gas company with assets located in the Leckie area of Alberta (the “Property”). Road 53 is a tightly-held private company with only six shareholders and no debt or severance costs. The Company currently has positive working capital of $1.0 million.
The Property consists of a long-life, shallow natural gas production base from the Milk River and Medicine Hat formations with continued development of the coalbed methane (“CBM”) production base. The Property is located near the town of Brooks, Alberta, where the Company has a 100% working interest.
Average daily sales production net to Road 53 from Leckie for the eleven months ended November 30, 2022 was approximately 4.4 MMcf/d of natural gas (4.8 MMcf/d gross production) and three barrels of oil and natural gas liquids per day (733 boe/d).
With almost half of the well inventory available for future CBM recompletions, Road 53’s strategy is to maintain current production levels for at least the next four years while optimizing existing facilities and maintaining operating cost discipline. Operating cash flow is protected with an active hedging program to ensure costs are covered in the short term. At present, Road 53 has roughly 25% of sales for winter natural gas hedged at $7.46 per GJ until March 31, 2023.
Operating income net to Road 53 for the eleven months ended November 30, 2022 was approximately $4.5 million or $4.9 million annualized, with operating costs averaging $1.29 per Mcf equivalent. Royalties are payable to Heritage Royalty Resources Corporation at 8%.
As of January 7, 2023, Road 53 had total deemed assets of $18.8 million, deemed liabilities of $10.9 million (net deemed assets of $7.9 million) with an LMR of 1.73. The Company has reviewed actual abandonment and reclamation costs of offset operations and believes that the procedures can be completed for less than the AER estimates.
Additional corporate information relating to Road 53 will be provided to parties upon execution of a confidentiality agreement.
Overview Map Showing the Location of Road 53's Interests
Corporate Overview
Seismic
The Company does not have ownership in any seismic data.
Marketing Overview
At Leckie, the Company holds interests in a central processing facility which is linked to the NOVA Gas Transmission Line system.
Natural gas is sold through BP Canada Energy Group ULC. Road 53 has a hedge contract in place with BP for 1,000 GJ per day at $7.46/GJ until March 31, 2023.
The Company does not have ownership in any seismic data.
Marketing Overview
At Leckie, the Company holds interests in a central processing facility which is linked to the NOVA Gas Transmission Line system.
Natural gas is sold through BP Canada Energy Group ULC. Road 53 has a hedge contract in place with BP for 1,000 GJ per day at $7.46/GJ until March 31, 2023.
LECKIE
Township 18-19, Range 16-17 W4
At Leckie, Road 53 holds a 100% working interest in certain P&NG rights in 35.5 sections of Crown land. The Property is located near the town of Brooks, Alberta.
The Property consists of a long-life, shallow natural gas production base from the Milk River and Medicine Hat formations with continued development of the CBM production base.
Average daily sales production net to Road 53 from Leckie for the eleven months ended November 30, 2022 was approximately 4.4 MMcf/d of natural gas (4.8 MMcf/d gross production) and three barrels of oil and natural gas liquids per day (733 boe/d).
Operating income net to Road 53 for the eleven months ended November 30, 2022 was approximately $4.5 million or $4.9 million annualized, with operating costs averaging $1.29 per Mcf equivalent. Royalties are payable to Heritage Royalty at 8%.
Road 53 believes there is potential for electrical power generation at Leckie. The Company’s sales pipeline runs from its natural gas compressor station at 16-24-018-17W4 to 04-12-018-17W4 where the AltaLink Transmission lines are located.
At Leckie, Road 53 holds a 100% working interest in certain P&NG rights in 35.5 sections of Crown land. The Property is located near the town of Brooks, Alberta.
The Property consists of a long-life, shallow natural gas production base from the Milk River and Medicine Hat formations with continued development of the CBM production base.
Average daily sales production net to Road 53 from Leckie for the eleven months ended November 30, 2022 was approximately 4.4 MMcf/d of natural gas (4.8 MMcf/d gross production) and three barrels of oil and natural gas liquids per day (733 boe/d).
Operating income net to Road 53 for the eleven months ended November 30, 2022 was approximately $4.5 million or $4.9 million annualized, with operating costs averaging $1.29 per Mcf equivalent. Royalties are payable to Heritage Royalty at 8%.
Road 53 believes there is potential for electrical power generation at Leckie. The Company’s sales pipeline runs from its natural gas compressor station at 16-24-018-17W4 to 04-12-018-17W4 where the AltaLink Transmission lines are located.
Leckie, Alberta
Gross Production Group Plot of Road 53's Milk River/Medicine Hat CBM Wells
Leckie Upside
In the Leckie area, Road 53 has identified up to 112 additional recompletion candidates in the CBM and believes that substantial additional locations could add 2.0 MMcf/d of natural gas production. A listing of the recompletion candidates is available in the virtual data room for parties that execute a confidentiality agreement.
The following production plot for the well Houston Countess 100/04-29-018-16W4/0 shows the typical response from a recompletion. The 04-29 well was recompleted in 2016 and produced CBM at a rate of approximately 100 Mcf/d for the following 36 months.
In the Leckie area, Road 53 has identified up to 112 additional recompletion candidates in the CBM and believes that substantial additional locations could add 2.0 MMcf/d of natural gas production. A listing of the recompletion candidates is available in the virtual data room for parties that execute a confidentiality agreement.
The following production plot for the well Houston Countess 100/04-29-018-16W4/0 shows the typical response from a recompletion. The 04-29 well was recompleted in 2016 and produced CBM at a rate of approximately 100 Mcf/d for the following 36 months.
Road 53 estimates an average cost of $4,000 per recompletion as only perforation is required. No fracture stimulation is needed. This results in a finding and development cost for CBM of less than $0.20 per boe.
Leckie Facilities
At Leckie, the Company holds interests in a central processing facility which is linked to the Nova Gas Transmission Line system.
Road 53 holds a 100% working interest in two natural gas compressors located at 16-24-018-17W4 and 08-32-018-17W4.
No third-party processing or compression is required to sell the natural gas from the Property.
Leckie Reserves
Road 53 prepared an internal reserves evaluation of the Property (the “Reserve Report”). The Reserve Report is effective January 1, 2023 using an average of Deloitte LLP, GLJ Ltd., McDaniel & Associates Consultants Ltd., Ryder Scott Company - Canada, Sproule Associates Limited and Trimble Engineering Associates Ltd. forecast pricing as of January 1, 2023.
Road 53 estimated that, as of January 1, 2023, the Property contained remaining proved plus probable reserves of 39.3 Bcf of natural gas (6.6 million boe), with an estimated net present value of $31.6 million using forecast pricing at a 10% discount.
Leckie Facilities
At Leckie, the Company holds interests in a central processing facility which is linked to the Nova Gas Transmission Line system.
Road 53 holds a 100% working interest in two natural gas compressors located at 16-24-018-17W4 and 08-32-018-17W4.
No third-party processing or compression is required to sell the natural gas from the Property.
Leckie Reserves
Road 53 prepared an internal reserves evaluation of the Property (the “Reserve Report”). The Reserve Report is effective January 1, 2023 using an average of Deloitte LLP, GLJ Ltd., McDaniel & Associates Consultants Ltd., Ryder Scott Company - Canada, Sproule Associates Limited and Trimble Engineering Associates Ltd. forecast pricing as of January 1, 2023.
Road 53 estimated that, as of January 1, 2023, the Property contained remaining proved plus probable reserves of 39.3 Bcf of natural gas (6.6 million boe), with an estimated net present value of $31.6 million using forecast pricing at a 10% discount.
Leckie LMR as of January 7, 2023
As of January 7, 2023, Road 53 had total deemed assets of $18.8 million, deemed liabilities of $10.9 million (net deemed assets of $7.9 million) with an LMR of 1.73.
As of January 7, 2023, Road 53 had total deemed assets of $18.8 million, deemed liabilities of $10.9 million (net deemed assets of $7.9 million) with an LMR of 1.73.
Road 53’s plan is to reduce environmental liability and asset retirement obligations through cost-efficient remediation and reclamation practices.
The Company has reviewed actual abandonment and reclamation costs of offset operations and believes that the procedures can be completed for less than the Alberta Energy Regulator estimates.
Leckie Well List
Click here to download the well list in Excel.
Additionally, the Company holds a 35% working interest in the well 100/16-09-011-19W4/02 operated by i3 Energy PLC in the Carmangay area of Alberta. The 16-09 well is producing at a gross rate of approximately 11 barrels of oil per day and 30 Mcf/d of natural gas.
The Company has reviewed actual abandonment and reclamation costs of offset operations and believes that the procedures can be completed for less than the Alberta Energy Regulator estimates.
Leckie Well List
Click here to download the well list in Excel.
Additionally, the Company holds a 35% working interest in the well 100/16-09-011-19W4/02 operated by i3 Energy PLC in the Carmangay area of Alberta. The 16-09 well is producing at a gross rate of approximately 11 barrels of oil per day and 30 Mcf/d of natural gas.
PROCESS & TIMELINE
Sayer Energy Advisors is accepting proposals relating to this process until 12:00 pm on Thursday February 23, 2023.
Sayer Energy Advisors does not conduct a "second-round" bidding process; the intention is to attempt to conclude a
transaction(s) with the party(ies) submitting the most acceptable proposal(s) at the conclusion of the process.
transaction(s) with the party(ies) submitting the most acceptable proposal(s) at the conclusion of the process.
Sayer Energy Advisors is accepting proposals from interested parties until
noon on Thursday February 23, 2023.
NOTE REGARDING A SAYER PROCESS
On each and every offering brochure generated by Sayer, you will note the sentence “Sayer Energy Advisors does not conduct a “second-round” bidding process; the intention is to attempt to conclude a sale of the Company with the party submitting the most acceptable proposal at the conclusion of the process.” What this means is that Sayer will not go back to multiple parties at the same time after bids are received, asking them all for a second bid. We determine which party submitted the most acceptable proposal and then we attempt to negotiate acceptable terms with that party in a “one-off” situation.
If the process involves a cash sale of a property or company and the party which submitted the most acceptable proposal has met our client’s threshold value, that offer will be accepted. If this proposal does not meet our client’s threshold value, then we will advise that party that the offer is not quite what our client was expecting, and we will ask them to increase the offer. If that offer is not acceptable to our client, we will then move down to the party which submitted the next most acceptable proposal and we will then work with that party to attempt to meet our client’s threshold value.
In the extremely rare circumstance where two or more parties submit virtually identical proposals, we will contact all parties, we will advise them of this situation and we will ask them to submit a revised proposal. Once these are received, we will work with the party which has submitted the most acceptable proposal.If the process involves a cash sale of a property or company and the party which submitted the most acceptable proposal has met our client’s threshold value, that offer will be accepted. If this proposal does not meet our client’s threshold value, then we will advise that party that the offer is not quite what our client was expecting, and we will ask them to increase the offer. If that offer is not acceptable to our client, we will then move down to the party which submitted the next most acceptable proposal and we will then work with that party to attempt to meet our client’s threshold value.
CONFIDENTIALITY AGREEMENT
Parties
wishing to receive access to the confidential information with detailed
technical information relating to this opportunity should execute the
Confidentiality Agreement and return one copy to Sayer Energy Advisors by courier, email (tpavic@sayeradvisors.com) or fax (403.266.4467).
Included in the confidential information is the following: most net lease operating statements, summary land information, the Reserve Report, LMR information and other relevant corporate information.
Download Confidentiality Agreement
To receive further information on the Company please contact Tom Pavic, Ben Rye or Grazina Palmer at 403.266.6133.