In connection with its announced strategic review process, Chinook set out to create a stronger Montney focused company which would be better positioned to pursue a more aggressive drilling program on its core Birley/Umbach acreage while maintaining a sound balance sheet. In furtherance of this objective, Chinook is pleased to announce that it has entered into a letter of intent to sell, effective February 1, 2017, certain of its assets located in the Gold Creek area of Alberta (the “Divested Assets“) for net consideration of approximately $10.5 million, subject to customary closing adjustments. The proposed disposition is anticipated to close on or before February 20, 2017 and is highly accretive to Chinook. The Divested Assets include 15.6 net sections of land and related pipelines and production facilities. As at December 31, 2015, Chinook had total proved and total proved plus probable reserves associated with these properties of 151.8 thousands of barrels of oil equivalent (“mboe”) and 223.1 mboe, respectively, with associated estimated net present values of approximately $1.84 million and $2.48 million using forecast pricing at a 10% discount. Chinook’s average production from the Divested Assets for the first three quarters of 2016 was 99 boe/d (65% natural gas and 35% oil and natural gas liquids). The Company expects the proposed disposition to have minimal impact on its funds flow.
“We are pleased to have executed the asset disposition proposal as the funds received, together with our new credit facility, further strengthens our financial position and provides us with improved financial flexibility throughout 2017 to support an increased level of activity on our Birley/Umbach property.” stated Walter Vrataric, President and Chief Executive Officer of Chinook. “Upon closing of the proposed disposition, we will focus solely on our Montney acreage at Birley/Umbach where we hold 55,090 acres (44,733 net) of Montney rights with an upper Montney drilling inventory of over 270 (227 net) management identified locations along with additional potential to reduce inter-well spacing in the upper Montney (from four to five or six horizontal wells per section) and also develop middle and lower Montney layers throughout a 250 meter thick Montney interval”, added Mr. Vrataric.
Chinook is continuing to investigate opportunities to maximize the value of its remaining Alberta Montney acreage at Knopcik/Pipestone where it holds approximately 21,280 acres (12,070 net) of Montney rights in this emerging area which has witnessed an increased level of industry drilling activity over the last several years.
Chinook’s current production, (excluding volumes from the proposed Gold Creek disposition) is approximately 3,030 boe/d and the Company expects to exit the first quarter of 2017 at approximately 5,300 boe/d. Chinook will provide its full year 2017 capital spending and production guidance upon closing of the proposed asset disposition.