General News | Deals - Acquisition, Mergers, Divestitures

Arcan Exploring Potential Sale of Swan Hills Light Oil Properties

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Arcan Resources Ltd. has engaged RBC Capital Markets and Scotia Waterous Inc. as its financial advisors to examine the sale of certain light oil, early-stage properties in the Swan Hills region of Alberta.

Doug Penner, President of Arcan, commented: "Over the past four years we have focused on efficiently developing these light oil reservoirs and we are now looking to capture a return that will help strengthen our balance sheet. The assets total approximately one third of Arcan's production and reserves and a sale would provide financial flexibility, allowing Arcan to drive cash flow into the further development of our inventory of long-life, light oil properties. We believe the divestiture of these assets and further investment in our remaining core assets will be accretive to shareholder value."

The Company has engaged RBC, as its lead advisor, to solicit interest in Deer Mountain Unit No. 2 and its adjacent non-unit leases, Deer Mountain West and Virginia Hills. In June 2013, the Offered Properties produced approximately 1,482 barrels of oil equivalent per day. This production was 97 percent light oil or 1,431 barrels of oil and liquids per day of 37° to 40° sweet API oil plus approximately 307 thousand cubic feet per day of natural gas from the established Beaverhill Lake Swan Hills production platform.

Arcan has invested in core infrastructure in Deer Mountain Unit No. 2 and on some of its adjacent non-unit leases to implement fully enhanced waterflood recovery and stabilize production, while Deer Mountain West and Virginia Hills are offered as development stage properties. These properties produce light oil from the Swan Hills region capturing strong prices and attractive netbacks. The Company believes that the Offered Properties are long-life production assets where a defined well inventory has been de-risked by recent industry activity and Arcan drilling. Arcan believes that the Offered Properties hold significant potential for production growth, with additional water flood and infill development drilling locations.

The Offered Properties

1. Deer Mountain Unit No. 2 and its Adjacent Non-Unit Leases

• 1,119 BOE per day, low decline light oil production
• Operated position of 8,960 gross (7,573 net) acres
• Arcan 80.8742 percent unit and 80.0 percent non-unit working interest
• Waterflood at Deer Mountain Unit No. 2 has been implemented across entire unit
• Arcan estimates 66 million bbls of discovered oil initially in place
• Total proved plus probable reserves of 9,040 thousand BOE
• 3D seismic across asset
• Additional potential infill drilling locations
• Newly constructed oil battery supporting 8,000 bbls per day
• High grade road system for year-round well access

1. Deer Mountain West

• 201 BOE per day net production from two wells
  • 00/14-28 - peak initial 30 day gross production of 281 bbls per day; cumulative oil production to date of 20 thousand bbls in three months
  • 00/06-28 - peak initial 30 day gross production of 282 bbls per day; cumulative oil production to date of 56 thousand bbls in eight months
  • Operated position of 2,880 gross (1,440 net) acres
  • Arcan 50.0 percent working interest
  • Arcan estimates 27 million bbls of DOIIP
  • Total proved plus probable reserves of 1,017 thousand BOE
  • Potential to drill up to 14 additional infill horizontal drilling locations
  • Established infrastructure capacity capable to support growth
  • Believed to be a strong waterflood candidate for enhanced oil recovery

1. Virginia Hills

• 162 bbls per day from one well which has been on production since March, 2012
• Arcan 100 percent working interest
• Arcan estimates 2.5 million bbls DOIIP
• Total proved plus probable reserves of 537 thousand BOE
• Additional location licensed on the existing lease