The majority of the Alberta assets are located east of the City of Medicine Hat with some minor assets in Central Alberta near the City of Wetaskiwin. The Saskatchewan assets are located near the Town of Maple Creek.

The cash consideration to be paid by Pine Cliff is expected to be financed by a combination of working capital and debt, details of which will be subsequently announced.

The Proposed Transaction will have an effective date of July 1, 2014 and is presently expected to close on or before November 1, 2014. Although the Agreement is binding between the parties, completion of the Proposed Transaction is subject to numerous conditions, including negotiation and execution of definitive agreements, due diligence, title and environmental review and board of directors and regulatory approvals. No assurances can be given that the Proposed Transaction will be completed as proposed or at all.

Transaction Highlights

  • The Assets possess a predictable production profile, long reserve life and a geographically focused asset base which is 100% weighted to natural gas. The Assets are 85% operated, high working interest properties (averaging 93%) and include ownership in key strategic infrastructure. Assuming completion of the Proposed Transaction, Pine Cliff has identified a number of potential low risk growth opportunities on the Assets including infill drilling, recompletions and well reactivations.
  • Subsequent to the closing of the Proposed Transaction Pine Cliff is expected to have a combined base asset production of over 11,000 barrels of oil equivalent ("boe") per day with a combined decline rate of approximately 13%.

Strategic Rationale

Pine Cliff has been actively seeking accretive opportunities to enhance shareholder value by adding low cost and low decline natural gas production. This Proposed Transaction consists of these attributes.

The successful completion of the Proposed Transaction is currently expected to result in:

  • Increased funds flow from operations on a per share basis;
  • Pine Cliff raising its 2014 production guidance at closing;
  • Pine Cliff having a strong balance sheet with an expected net debt to projected cash flow ratio of less than 1.5:1; and
  • Significant free cash flow which is anticipated to enable Pine Cliff the opportunity to pursue further accretive gas acquisitions and repay debt.