Paramount Resources Ltd. announced it has entered into a purchase and sale agreement with Strath Resources Ltd. (“Strath”) pursuant to which Strath will acquire Paramount’s oil and gas properties and related infrastructure at Resthaven/Jayar in the Kakwa region in Alberta for $340 million.
Upon closing, Paramount will hold a 16% equity interest in Strath and Jim Riddell, Paramount’s President and Chief Executive Officer, will join Strath’s Board of Directors.
The assets include 201 (152 net) sections of land, with proved reserves of approximately 6.3 MMBoe (95% developed producing) and proved plus probable reserves of approximately 8.1 MMBoe (94% developed producing), as of December 31, 2017. Sales volumes from these lands were approximately 5,300 Boe/d (36% liquids) in April 2018 on a restricted basis. Paramount had minimal capital spending planned for the Assets for the balance of the year.
Strath is a Waterous Energy fund-backed private oil and gas exploration and production company with a liquids-rich Montney land base that is immediately adjacent to the assets.
The Transaction allows Paramount to capture the upside of Resthaven/Jayar through Strath’s development of the combined Montney asset-base in the area, while Paramount continues to focus on developing its core Montney assets at Karr and Wapiti in the Grande Prairie Region and Montney and Duvernay assets in the Kaybob Region. Cash proceeds from the sale will be used to partially fund Paramount’s 2018 capital expenditure program. Upon closing, Paramount will have achieved its 2018 disposition target, and as a result, the Company is evaluating whether to continue with its process to sell all or a portion of its fee simple and royalty lands in southern Alberta. Paramount also continues to evaluate other non-core dispositions.
“We believe this transaction provides our shareholders with a compelling opportunity to realize meaningful value on our assets in the Resthaven / Jayar area. The cash consideration being received will be re-deployed to continue to develop and grow production from our core assets and further strengthens our already strong balance sheet and liquidity position. In addition, our shareholders will participate in the upside of Strath’s combined Montney asset-base at Kakwa, through our significant shareholdings in Strath. We have tremendous respect for the Strath team, including their financial sponsors, and are excited to be partnering with them as they execute their development plan,” said Jim Riddell. “The cash proceeds from this transaction not only satisfies our disposition target for 2018, but affords us the flexibility to be selective for the remainder of the year. Our focus remains on value maximization and we will continue to opportunistically pursue non-core dispositions in the context of evolving commodity prices and market conditions,” said Rodrigo Sousa, Vice President, Corporate Development.
The Transaction is expected to close in early July and is subject to customary closing conditions.
