Logan Energy Corp. (TSXV: LGN) (“Logan” or the “Company”) is pleased to announce that it has entered into a definitive agreement today to acquire an operated 50% working interest in certain assets located in the Company’s core area at Simonette, Alberta, for a cash purchase price of $52.0 million, before closing adjustments (the “Acquisition”).
Logan is also pleased to announce an equity financing to be offered on a bought deal, private placement basis, led by National Bank Financial Inc. and Eight Capital as joint bookrunners and co-lead underwriters, for aggregate gross proceeds of $35.0 million (the “Equity Offering”).
ACQUISITION HIGHLIGHTS
Logan has entered into an asset purchase agreement with a subsidiary of Gran Tierra Energy Inc., a publicly-traded oil and gas company (the “Vendor”), pursuant to which the Company will acquire an operated 50% working interest in certain assets in the Simonette area, primarily targeting the Montney, and 100% of the Vendor’s interest in certain Simonette gross overriding royalties (the “GORRs”) (collectively, the “Acquired Interest”) for cash consideration of $52.0 million, before closing adjustments. The Acquisition has an effective date of September 1, 2024, and is expected to close on or around December 17, 2024, subject to the satisfaction or waiver of customary closing conditions.
The Acquisition includes current production of approximately 795 BOE/d (48% liquids), 25 net (52.5 gross) sections of highly prospective Montney acreage including 45 net identified Montney drilling locations, 16 gross 5-10% GORR sections, and interests in important infrastructure including a 50% working interest in a 9 million barrel water reservoir and an oil battery at 06-09-061-27W5.
The Acquisition augments Logan’s long term organic growth plan and is consistent with its stated strategy. Pro forma the Acquisition, Logan plans to achieve production growth to between 24,000 to 27,000 BOE per day by 2028, up from its previously stated target of 20,000 to 25,000 BOE per day by 2028. The high-quality oil weighted inventory being acquired is accretive to Logan’s inventory and drives compelling full cycle returns on the Acquisition.
VALUE PROPOSITION AND ACCRETION
- 2025 accretion of 11% to AFF per share (moderated by cycle time to add production)
- 2026-2029 accretion of 13-18% to AFF per share relative to Logan on a standalone basis
- Top tier Montney oil drilling locations add to Logan’s inventory depth and provide torque to strong crude oil prices; South Simonette Lower Montney TPP forecast type curve of 520 mbbl of oil expected to deliver a NPV of approximately $14 million discounted at 10% before-tax
- Removes 5-10% GORRs from 38 of Logan’s net Montney locations, improving project economics
- Two-layer co-development of Lower and Middle Montney improves capital efficiencies and reduces proportionate infrastructure spending
- The strong synergies with Logan’s existing owned gathering and processing will result in operating cost savings of over $7.5 million in the first five years of development on the acquired assets
- Eliminates approximately $13.0 million in near-term infrastructure capital from Logan’s current five-year plan
- Expected to improve Logan’s realized pricing due to the increase in liquids weighting, while maintaining Logan’s long term cost structure (operating expenses are forecast to be less than $8.00/BOE by 2027)
EQUITY OFFERING
Logan has entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by National Bank Financial Inc. and Eight Capital as joint bookrunners and co-lead underwriters (the “Lead Underwriters”), pursuant to which the Underwriters have agreed to purchase for resale on a private placement, bought deal basis, 47,946,000 common shares (“Common Shares”) at a price of $0.73 per Common Share for aggregate gross proceeds of approximately $35.0 million. It is anticipated that certain directors, officers and employees of the Company will subscribe for approximately $2.8 million of the Equity Offering.
Closing of the Equity Offering will be conditional on the completion of the Acquisition. Logan intends to use the net proceeds from the Equity Offering to repay indebtedness incurred to fund a portion of the purchase price for the Acquisition. The completion of the Equity Offering is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange (“TSXV”). Closing of the Equity Offering is expected to occur immediately following the Acquisition, on or around December 17, 2024. The Company has agreed to pay a cash commission of 4.0% of the gross proceeds of the Equity Offering to the Underwriters, except with respect to subscribers to be included on the president’s list for which no commission will be paid.
The Common Shares will be subject to a statutory hold period that extends four months from the Closing Date; provided that any Common Shares issued in the United States will be subject to a 1 year hold period, subject to the ability to resell the Common Shares on the TSXV prior to 1 year in accordance with U.S. securities laws.
ADVISORS
National Bank Financial Inc. and Eight Capital are acting as financial advisors to Logan in respect of the Acquisition and the Equity Offering.
Stikeman Elliott LLP is acting as legal counsel to Logan in respect of the Acquisition and the Equity Offering.
Burnet, Duckworth & Palmer LLP is acting as legal counsel to the underwriters in respect of the Equity Offering.
