Enerplus Corporation announces the acquisition of additional low decline, light oil interests in Montana.
Acquisition of Bakken Interests in Montana
Consistent with our strategy of consolidating core positions within our portfolio, Enerplus has agreed to enter into an agreement to acquire an additional 20% working interest in our operated leases in the Sleeping Giant area in the Elm Coulee field in Richland County, Montana for approximately US$131 million (approximately US$121 million after estimated closing adjustments of US$10 million). By investing approximately half of the proceeds from the sale of our Manitoba assets, we expect to replace the sold production, improve the concentration of our asset base and improve our operating metrics.
The acquisition is complementary to our existing operations in Sleeping Giant where we own an operated 70% working interest. This is a mature light oil property with an average decline rate of 14%. Our internal reserves assessment has identified a total of 6.2 million BOE of proved plus probable reserves associated with the acquisition and daily production of approximately 1,550 BOE/day (both of which are weighted 80% to light crude oil). The transaction has attractive acquisition metrics of 4.2 times annual funds flow after estimated closing adjustments, $23.00/BOE of proved plus probable reserves including future development capital and is expected to be 4% accretive to funds flow in 2013 (2% on a debt-adjusted basis). This light oil property has current netbacks of approximately $50/BOE with low operating costs averaging $5.50/BOE in 2012. We do not expect any increases in general and administrative costs as a result of the acquisition.
We believe there is additional upside potential in this field through production optimization, refracs and limited infill drilling. With approximately 400 million barrels of original oil in place on our operated leases, we are also evaluating the potential for enhanced oil recovery schemes as the current reserve bookings results in a 14% recovery factor. The total crude oil recovered to date is approximately 8%. We anticipate closing the acquisition mid-December, after which Enerplus will own a 90% working interest in the operated leases with production of approximately 7,300 BOE/day. We expect a modest level of capital spending at Sleeping Giant in 2013.