Kiwentinohk consolidates Montney assets, plans increased drilling

CALGARY, AB — Kiwetinohk Energy Corp. has agreed to acquire an additional 28.5 per cent average working interest in Kiwetinohk-operated Montney assets in the Placid area.

The acquired assets are in the Company’s Montney and Duvernay core area near Fox Creek, Alberta.

The agreement has a total cash payment of $61.4 million.

The acquisition includes 1,200 barrels of oil equivalent per day (boe/d) of current Montney production. It increases Kiwetinohk’s Placid area natural gas processing and handling capacity to 100 million cubic feet per day (MMcf/d) and 5,000 barrels a day (bbl/d), respectively. This is an increase of 30 mmcf/d and 1,750 bbl/d.

Kiwetinohk will reportedly obtain an incremental 14.12 per cent ownership in the 14-28 Bigstone sweet natural gas processing facility, which brings its total working interest to 39.31 per cent.

The total owned processing capacity at the Bigstone sweet natural gas processing facility will increase from 20 MMcf/d to 31 MMcf/d.

The acquisition is expected to close around September 15th, 2022, effective as of July 1st, 2022.

According to Kiwetinohk Energy, this acquisition increased its working interest to 100 per cent in 53,000 Montney acres in the area where all its new Montney drilling has happened in the past two years.

This acquisition consolidates Kiwetinohk’s position in the Placid Montney area and increases its average working interest across 79,000 acres in the region to 88.2 per cent.

Kiwetinohk is now 45 per cent weighted to the Montney on current production and 43 per cent on total proved plus probable (TPP) reserves as reported in Mcdaniel’s independent report at year-end 2021.

This will be funded through Kiwetinohk’s bank facilities and will contribute to an increase in all per-share metrics.

Kiwetinohk says a redetermination for lending was not required due to ample borrowing capacity.

Kiwetinohk’s next routine lending redetermination is scheduled for the fourth quarter.

Kiwetinohk expects to have $210 million of available borrowing capacity, 56 per cent of its current $375 million bank facility.

Kiwetinohk’s Montney position consists of 153,000 net acres throughout the Simonette and Placid areas.

Through the acquisition, Kiwetinohk will increase its working interest in the Place area acreage from 59.7 per cent to 88.2 per cent.

This will increase Kiwetinohk’s total Montney drilling inventory by 42.2 net locations to a total of 346.5 net locations.

Specifically, the company now has 216 net Montney locations in the Simonette area and 130.5 net Montney locations in the Placid area.

According to Kiwetinohk, the Placid area has been historically underdeveloped. Now that it has regional control, Kiwetinohk reportedly plans to accelerate its Montney development program with a drilling program that is anticipated to start at the end of 2022 or early 2023.

Kiwetinohk plans to drill up to six wells annually on the recently consolidated Placid area Montney position.

This program will use a similar approach Kiwetinohk has announced for its Simonette area, which is filling its available production facilities to achieve strong capital efficiencies on new production and reduce per unit operating costs.

Kiwetinohk’s Place area production is currently 7,000 boe/d (45 per cent oil and liquids) and is expected to increase to 11,500 to 13,000 boe/d by the end of 2023.

Kiwetinohk has reportedly had success moderating the existing production decline in the Placid area through low-cost development and expects to continue slowing it down with this ownership.

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