CALGARY, Oct. 13, 2011 /CNW/ - Ironhorse Oil & Gas Inc. ("Ironhorse" or the "Company") (TSX-V: IOG) is pleased to announce that it has entered into an agreement to sell its 50% working interest in the Shackleton, Saskatchewan gas property for cash consideration of $10.2 million effective August 1, 2011 with an anticipated closing date of October 26, 2011. Pursuant to the terms of the agreement, the purchaser has placed a cash deposit, equal to 10% of the purchase price, in trust with their legal advisers.
"The sale of our natural gas property gives us running room to pursue our opportunity rich oil prospects," said Larry Parks, Ironhorse's President & CEO. "This disposition allows us to complete the transition to an oil-based production and reserves growth platform".
Net proceeds from the sale of the Shackleton property will be used to pay down the Company's outstanding bank debt which is approximately $14.5 million. Subsequent to the sale of the Shackleton property the Company's lender has agreed to a $10.2 million credit facility comprised of a $6.1 million primary revolving facility and a $4.1 million bridge facility. The bridge facility is available to finance the on-stream development costs for the Company's proven oil reserves at Pembina, Alberta as well as the drilling of new oil opportunities at Leon Lake, Saskatchewan. The bridge facility matures on March 30, 2012 at which time the Company expects to have its Pembina oil wells on production. The Company is actively marketing its interest in the Pembina property in order to monetize the value of the property.
Ironhorse estimates its daily production rate after closing the sale of Shackleton property will be 75 boe per day. The daily production rate is expected to increase in March 2012 when the two (0.3 net) Pembina oil wells are placed on production at a gross rate of 2,000 (300 net) boepd. In October the Company participated in the drilling of a third well at Pembina which encountered significant Nisku oil pay. The latest Pembina well was drilled as a pressure maintenance well in anticipation of submitting an application to produce the two existing Pembina oil wells pursuant to good production practices ("GPP"). GPP will allow the Pembina oil wells to produce at higher daily rates while at the same time optimizing the recovery of oil reserves. The latest Pembina well supports Ironhorse's current independent reserves analysis dated April 13, 2011 which assigned to the Company recoverable proven plus probable reserves of 1.1 million boe and estimated cash flows before tax discounted at 10% of $37.5 million.
At Leon Lake the Company continued to develop its oil resource play with the drilling of two (1.5 net) oil wells in September. The two wells were cased for Upper and Lower Shaunavon oil and will be completed later this fall. Ironhorse has also commenced work on a three dimensional seismic program over the balance of its lands at Leon Lake. Results from the seismic program are expected to be interpreted by December 2011.
Ironhorse Oil & Gas Inc. is a Calgary-based junior oil and natural gas production company trading on the TSX Venture Exchange under the symbol "IOG."
Statements throughout this release that are not historical facts may be considered to be "forward looking statements." These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals, or future plans, including closing of the sale of the Shackleton property and management's assessment of future plans and operations, drilling plans and timing thereof, expected production rates and additions and the expected levels of activities may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with closing of the sale of the Shackleton property (including satisfaction of all conditions precedent), oil and gas exploration, development, exploitation, production, marketing and transportation, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, incorrect assessment of the value of acquisitions, failure to complete and/or realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and changes in the regulatory and taxation environment. As a consequence, the Company's actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; and field production rates and decline rates. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included elsewhere herein and in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this release are made as at the date of this release.
Boe Conversion - Certain natural gas volumes have been converted to barrels of oil equivalent ("boe") whereby six thousand cubic feet (mcf) of natural gas is equal to one barrel (bbl) of oil. This conversion ratio is based on an energy equivalency conversion applicable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, particularly if read in isolation
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