BlackPearl Resources Inc. (“BlackPearl” or the “Company”) (TSX:PXX)(OMX:PXXS) is pleased to announce it has completed the sale of a minor gross overriding royalty interest on its Onion Lake property for $55 million.
Under the terms of the agreement BlackPearl sold an approximate 1.75% royalty on production from substantially all of its Onion Lake lands. BlackPearl currently has conventional and thermal production of approximately 8,000 barrels of oil per day at Onion Lake and is planning a 6,000 barrel per day second phase expansion of its thermal operations in the area.
The proceeds of the sale will initially be used to re-pay bank indebtedness, which will free up borrowing capacity on our credit facilities that is expected to be used to partially fund the expansion of our thermal operations at Onion Lake in addition to continued development of our other core projects. The Onion Lake phase two expansion is estimated to cost approximately $180 million.
Additionally, the Company’s banking syndicate recently completed its semi-annual review of our credit facilities and has agreed to maintain the amount available under these facilities at $117.5 million. With the completion of the royalty sale our net debt at the end of the year is expected to be nil.
John Festival, President of BlackPearl commenting on the sale indicated that “the proceeds received from the sale is an excellent initial step in financing the continued development of our thermal operations at Onion Lake and is much less dilutive to shareholders than issuing common shares. The significant value we received for the royalty sale reflects the long life and growth potential of the asset. Our thermal operations at Onion Lake have some of the best operating metrics in industry and we believe the sale of a small royalty interest will not have a material impact on the overall economics of the project. In the next few months we look forward to completing the remaining steps that will allow us to fully sanction the expansion of our Onion Lake thermal project.”