JOY Journey Energy Inc

CALGARY, AB, June 24, 2021 /CNW/ - Journey Energy Inc. (TSX; JOY) (OTCQX: JRNGF) ("Journey" or the "Company") reports that it has today entered into a definitive agreement for the acquisition of a private company.  

ACQUISITION OF PRIVATE COMPANY

Journey today entered into a definitive agreement to purchase a private company producing approximately 610 boe/d (76% natural gas) primarily in the Nordegg and Grande Cache areas of Alberta.  The acquisition price will be paid for through the issuance of 3.5 million Journey shares plus $2.9 million of cash.  The acquisition comes with significant development drilling upside over an extensive land base.  In addition, the acquisition comes with a projected working capital surplus at closing of approximately $0.8 million.  As part of the definitive agreement, the private company will provide lock-up agreements so that all officers and directors of the company will vote in favor of the transaction.  A customary reciprocal break-fee has also been agreed to and will be payable if either party terminates the arrangement under specified circumstances.  The acquisition will require the private company to obtain a two-thirds majority shareholder approval and is currently anticipated to close in mid-August.  A summary of the relevant metrics for the acquisition are as follows:

Notes:

1. Excludes transaction costs. Journey share consideration is based on the 20 day, volume weighted average price per share preceding todays date or $1.06/share.
2. Reserve volumes are based on the private company's independent reserve evaluator's report with an effective date of December 31, 2020 and adjusted by Journey to reflect estimated production and other adjustments to May 31, 2021.

AMENDMENTS AND REPAYMENT OF AIMCO TERM DEBT

Journey has executed an amendment to its credit agreement with Alberta Investment Management Corporation ("AIMCo") to facilitate the acquisition.  AIMCo has consented to the acquisition and has also agreed to extend the maturity date of the $15 million tranche of term debt from June 30, 2021 to December 31, 2021.  In further support of the transaction, AIMCo has agreed to capitalize the interest that would normally be payable on June 30, 2021 for four of the six tranches of term debt.

Contemporaneously with the capitalization of interest on certain tranches of term debt, Journey will be making a principal repayment of $4 million with respect to the $15 million tranche on June 30, 2021.  This payment, along with the $6.75 million in payments already made to date in 2021, will bring the amount owing on this tranche to $4.25 million as at June 30.  Given the strong performance from Journey's existing production base; its electricity generation assets running at or near their full capacity of 4 MW/H; cash flows from the acquired assets; and the stronger commodity prices so far to date in 2021, Journey forecasts sufficient funds from operations to repay all of the $25 million of AIMCo term debt that is due in 2021. This positions Journey to return to growth, through an active drilling program, beginning in January 2022.

2021 GUIDANCE

Journey has updated its 2021 guidance to take into account the corporate acquisition and projected term debt repayments. Journey's updated 2021 guidance is presented in the table below:

Journey's 2021 forecasted funds flow is based upon the following revised assumed annual, average prices: WTI of $63/bbl USD; Company differentials of $4.50/bbl USD for oil from Edmonton light sweet prices; realized natural gas price of CDN$2.95/mcf CDN; and a foreign exchange rate of $0.81 US$/CDN$.  Previously, Journey's annual, average prices were: WTI of $59/bbl USD; Company differentials of $5/bbl USD for oil from Edmonton light sweet prices; realized natural gas price of CDN$2.70/mcf CDN; and a foreign exchange rate of $0.80 US$/CDN$.

Over the course of 2021, we look forward to updating you on our progress.

FORWARD LOOKING STATEMENTS AND OTHER ADVISORIES

Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on March 23, 2021. Forward-looking information may relate to Journey's future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, and long-term objectives. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective funds flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on current estimates, expectations and projections, which Journey believes to be reasonable as of the current date. No assurance can be given that the expectations set out herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.

Readers are cautioned that the above list of risks and factors are not intended to be exhaustive. Additional information on these and other factors that could affect operating and financial results are, or will be, included in reports filed with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Non-IFRS Measures

The Company uses the following non-IFRS measures in evaluating corporate performance. These terms do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.

Barrel of Oil Equivalents and Volumes

Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent at six (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term BOE may be misleading particularly if used in isolation. The boe conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

Other than in the highlight table, where the Company uses the term "crude oil" it is referring to the aggregate of light, medium and heavy crude oil volumes or dollars as is required. Where the Company uses the term "natural gas" it is referring to the aggregate of conventional natural gas and coal-bed methane natural gas volumes or dollars as is required.

All volumes in this press release refer to the sales volumes of crude oil, natural gas and associated by-products measured at the point of sale to third-party purchasers. For natural gas, this occurs after the removal of natural gas liquids.

Oil and Gas Measures and Metrics

All reserves information in this press release was prepared by an independent reserve evaluator, effective December 31, 2020, using the reserve evaluators December 31, 2020 forecast prices and costs in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook"). All reserve references in this press release are "Company gross reserves". Company gross reserves are the Company's total working interest reserves before the deduction of any royalties payable by the Company and before the consideration of the Company's royalty interests. It should not be assumed that the present worth of estimated future cash flow of net revenue presented herein represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of the Oxbow Assets and Saturn's crude oil, NGLs and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and NGLs reserves may be greater than or less than the estimates provided herein.

All future net revenues are stated prior to provision of general and administrative expenses, interest, but after the deduction of royalties, operating costs, estimated abandonment and reclamation cost for wells with reserves attributed to them; and estimated future capital expenditures to book those reserves. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein are not representative of fair market value.

The Company uses the following metrics in assessing its performance and comparing itself to other companies in the oil and gas industry. These terms do not have a standardized meaning and therefore may not be comparable with the calculation of similar measures by other companies:

Corporate decline ("Decline") is the rate at which production from a grouping of assets falls from the beginning of a fiscal year to the end of that year.

Select Abbreviations and Definitions

No securities regulatory authority has either approved or disapproved of the contents of this press release.

SOURCE Journey Energy Inc.