CALGARY, ALBERTA--(Marketwire - March 15, 2013) -
(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)
Suroco Energy Inc. (TSX VENTURE:SRN) ("Suroco" or the "Corporation") is pleased to announce that it has entered into an agreement with Macquarie Bank Limited ("Macquarie"), who is acting as lender, to obtain a US$21 million senior secured credit facility (the "Credit Agreement"). The Corporation is also providing guidance on its planned 2013 drilling activity, capital spending and forecast production in addition to an update on its operational activities in Colombia.
Mr. Alastair Hill, the Corporation's President and Chief Executive Officer commented, "We are delighted to enter into this credit facility with Macquarie which is a significant milestone for the Corporation. The credit facility provides us an enhanced financial ability to develop the growing reserve base now identified in the Cohembi oilfield and also enables us to effectively pursue new exploration and appraisal opportunities that we have developed through our enhanced knowledge of the Villeta 'N' sand play in the Putumayo Basin."
"In 2013 we expect our annualized production to be between 1,500 to 1,900 barrels of oil per day net before royalty interest and to fund virtually all of our drilling and seismic programs from internally generated cashflow. The majority of our capital program will be focused on the Cohembi oilfield where some facilities expansion and four appraisal wells are planned during the first half of the year, which will bring the total number of Cohembi wells to fourteen. Also in the Suroriente Block we plan to drill a 'Cohembi lookalike' feature with multi-zone potential which, if successful, could be immediately appraised from the same surface pad. Building new surface pads and drilling additional appraisal wells in the Cohembi oilfield beyond those identified herein requires a modified environmental license which was applied for in May 2012. Once the license is in place, new multi-well pads will be constructed and, depending upon the timing of the license award, drilling may recommence at Cohembi in the latter part of the year."
MACQUARIE CREDIT FACILITY
As mentioned above, the Corporation has entered into the Credit Agreement to obtain a US$21 million senior secured credit facility, with the potential to increase such credit facility to US$100 million upon compliance by the Corporation with certain conditions and at the discretion of Macquarie. The credit facility is available in multiple tranches, with funding of the first drawdown of US$20 million, subject to customary conditions precedent, expected to take place on March 18, 2013, and the remaining US$1 million in committed funds being available to fund letters of credit required for existing and future properties of the Corporation. The term of the credit facility will be three years, provides for the grant of various security interests and bears interest at a rate of LIBOR plus eight percent (8%) in the case of the US$20 million that comprises the first drawdown.
The credit facility will be used to further develop the Corporation's interests in the Cohembi oilfield and for new business opportunities and general working capital purposes.
Also, in consideration for entering into the Credit Agreement, the Corporation will issue non-transferable common share purchase warrants to Macquarie (the "Warrants") entitling Macquarie to purchase up to 5,316,456 common shares of the Corporation at a price of $0.47 per share until March 15, 2017, subject to reduction or cancellation in accordance with Policy 5.1 - Loans, Bonuses, Finder's Fees and Commissions of the TSX Venture Exchange. The issuance of the Warrants is subject to the approval of the TSX Venture Exchange.
2013 DRILLING AND CAPITAL SPENDING PROGRAM
In 2013, the Corporation expects to drill 7 gross wells. At least 4 appraisal and development wells are anticipated to be drilled in the Cohembi oilfield in the Suroriente Block during the first half of the year and 3 exploration and stepout wells are anticipated to be drilled in the Alea 1848A and Suroriente Blocks. Capital expenditure for appraisal and development drilling is expected to total approximately $9 million net with an additional $7 million net for infrastructure and facilities development in the Suroriente Block. Exploration and stepout drilling plus seismic capital expenditure is expected to be approximately $8 million net. In the second half of 2013, it is anticipated that a new environmental license will be issued for certain areas within the Suroriente Block which should allow for the construction of several new multi-well drilling pads and an expansion of the existing production, storage and offtake facilities in the Cohembi oilfield. Consequently it is anticipated that the capital spending program, drilling activity and guidance for the second half of the year will be modified once there is more certainty regarding the timing of the award of this modified license.
Further details explaining the 2013 program are contained in a new corporate presentation on the Corporation's website at www.suroco.com
Production, Suroriente Block
Average production from the Suroriente Block for the first two months of this year has been 8,823 barrels of oil per day (1,285 barrels of oil per day net to the Corporation after royalty). During the fourth quarter of 2012, average production was 7,559 barrels of oil per day (1,101 barrels of oil per day net to the Corporation after royalty). Daily offtake rates and oil trucking volumes have reached record levels up to 12,634 barrels of oil per day (1,840 barrels of oil per day net to the Corporation after royalty).
From February 28 to March 9 of 2013, drilling and production operations in the Suroriente Block were temporarily suspended due to civil demonstrations and road transport blockages in the vicinity of the Corporation's producing fields which were partly associated with a national coffee grower's strike. Normal operations resumed as of March 10 for both the drilling of the Cohembi-9 well and oil production from the Suroriente Block.
Cohembi-6 Well, Suroriente Block
The Cohembi-6 well is the first well to appraise the southwestern quadrant of the Cohembi oilfield. The well encountered one of the thickest net oil pay intervals yet seen from the ten previously drilled wells. The well is expected to be tied in to the central production facility in late March.
Cohembi-9 Well, Suroriente Block
The Cohembi-9 well is currently being drilled and is expected to be completed and tied-in in late March. Two further wells are planned from the same surface pad after Cohembi-9.
Water Injection & Pressure Maintenance Program
Since water injection commenced in Cohembi-1 in mid-December 2012, injection has averaged approximately 3,300 barrels of water per day to the end of February 2013. This has resulted in an overall reduction in the rate of pressure decline in the Cohembi field, with an observed increase in oil rate and producing pressure in the wells closest to the Cohembi-1 injection well.
The Corporation is a Calgary-based junior oil and gas company, which explores for, develops, produces and sells crude oil, natural gas liquids and natural gas in Colombia. The Corporation's common shares trade on the TSX Venture Exchange under the symbol SRN.
This press release contains forward-looking statements relating to the funding date of the first tranche of the credit facility, the operational and exploration activities for Suroco, business strategy, priorities and plans, expected production, the evaluation of certain prospects in which the Corporation holds an interest, estimated number of drilling locations, expected capital program (including its allocation), production growth, reserves growth, the receipt of and the timing of receipt of environmental licenses, the ability of the Corporation to sell its crude volume and other statements, expectations, beliefs, goals, objectives assumptions and information about possible future events, conditions, results of operations or performance. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, estimates, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. The Corporation's priorities disclosed herein are objectives only and their achievement cannot be guaranteed. Indicative capital estimates for 2013, which are provided herein, are subject to change.
These assumptions, risks and uncertainties include, among other things, assumptions inherent in current guidance; projected capital investment levels; the state of the economy in general and capital markets in particular; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; changes in environmental and other regulations; risks associated with oil and gas operations and future exploration activities; the uncertainty of reserves estimates; the uncertainty of estimates and projections relating to production, costs and expenses; the need to obtain required approvals from regulatory authorities; product supply and demand; market competition; risks in conducting foreign operations (for example, civil, political and fiscal instability and corruption); and other factors, many of which are beyond the control of the Corporation. You can find an additional discussion of those assumptions, risks and uncertainties in Suroco's Canadian securities filings.
Readers should also note that even if the 2013 drilling program as proposed by Suroco is successful, there are many factors that could result in production levels being less than anticipated or targeted, including without limitation, greater than anticipated declines in existing production due to poor reservoir performance, mechanical failures or inability to access production facilities, among other factors. The Corporation's production forecast for 2013 as set out herein is derived using a number of assumptions, including risking the production rate and chance of success of the three exploration and stepout wells referenced herein; and that the 2013 development activity which contemplates the successful drilling of the four appraisal wells in the Cohembi oilfield referenced herein and installation of expanded infrastructure including water injection facilities in connection therewith, increases oil production (it should be noted that in the continuing appraisal of the Cohembi oilfield, in order to manage the natural reservoir pressure decline, that one or more of the wells that are expected to be drilled in 2013 in this oilfield may ultimately be water injection wells).
The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by law, Suroco disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Suroco undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed above.
- Investment & Company Information
President and Chief Executive Officer
Suroco Energy Inc.
VP Finance and Chief Financial Officer