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Properties   /   Knowledge Energy Inc.



Knowledge Energy Inc.

Property Divestiture
Bid Deadline: February 18, 2021 12:00 PM
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OVERVIEW

KNOWLEDGE HAS SOLD ALL OF THE PROPERTIES IN THIS OFFERING WITH THE EXCEPTION OF THE BONANZA PROPERTY.


Knowledge Energy Inc. (“Knowledge” or the “Company”) has engaged Sayer Energy Advisors to assist the Company with the sale of certain non-core oil and natural gas interests located in Alberta, specifically in the Provost, Wildmere, Veteran and Morningside areas west of the Fourth Meridian and in the Mirage, Sneddon and Bonanza areas west of the Sixth Meridian (the “Properties”). The Properties consist of both oil and natural gas producing wells along with high-quality prospective drilling locations for oil. Knowledge is selling the Properties in order to focus its operations on its core assets. The Company’s preference is to sell all of the Properties in one transaction.
 
Average daily production net to Knowledge from the Properties in October 2020 consists of approximately 1.0 MMcf/d of natural gas and 67 barrels of oil and natural gas liquids per day (241 boe/d) as outlined below.
 
Net operating income from the Properties for October 2020 on an annualized basis was approximately $425,000, or $35,400 per month. Net operating income from the Properties for calendar 2019 totaled approximately $670,000.


Overview Map Showing the Location of the Divestiture Properties

Production Overview
 
Average daily production net to Knowledge from the Properties in October 2020 consists of approximately 1.0 MMcf/d of natural gas and 67 barrels of oil and natural gas liquids per day (241 boe/d) as outlined below.
 


Gross Production Group Plot of Knowledge's Oil and Natural Gas Wells

LMR as of January 2, 2021

As of January 2, 2021, Knowledge’s net deemed asset value for the Properties was $5.5 million (deemed assets of $7.1 million and deemed liabilities of $1.6 million), with an LMR ratio of 4.46.
 
The LMR for each of the Properties as of January 2, 2021 is summarized below.

 

Summary of LMR by Property


Additional information relating to asset retirement obligations will be made available to parties that execute a confidentiality agreement.

Seismic Overview

The Company has certain trade 2D seismic data over the Provost (Sounding Lake, Klein and Monitor) properties, trade 2D and 3D at Mirage, as well as a proprietary 3D over its lands at Wildmere. Details relating to the Company’s seismic data will be made available to parties that execute a confidentiality agreement.

Reserves Overview


McDaniel & Associates Consultants Ltd. (“McDaniel”) prepared an independent reserves evaluation of the Provost (Sounding Lake, Klein and Monitor) and Wildmere properties (the “McDaniel Report”). The McDaniel Report is effective June 1, 2017 using McDaniel’s April 1, 2017 forecast pricing. As part of its 2020 annual reporting requirements, the Company mechanically updated the McDaniel Report (the “Internal Report”) for the Provost and Wildmere Properties effective June 30, 2020 using Sproule’s June 30, 2020 forecast pricing.
 
Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Knowledge’s Mirage property (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing. The Internal Report also includes a mechanically updated Sproule Report for the Mirage property effective June 30, 2020 using Sproule’s June 30, 2020 forecast pricing.
 
The reserves and net present values for the Bonanza and Sneddon properties have also been internally estimated in the Internal Report as of June 30, 2020 using Sproule’s June 30, 2020 forecast pricing.
 
The Company estimates that, as of June 30, 2020, the Properties contained remaining proved plus probable reserves of 1.5 million barrels of oil and natural gas liquids and 7.0 Bcf of natural gas (2.7 million boe), with an estimated net present value of $19.3 million using forecast pricing at a 10% discount.

 


BONANZA

Township 81, Range 11-12 W6

At Bonanza, the Company holds an average 38% working interest in approximately two sections of land. Knowledge operates and holds a 50% working interest in one vertical well producing oil from the Boundary Lake Formation at 16-18-081-12W6.
 
Average daily production net to Knowledge from Bonanza in October 2020 was approximately seven barrels of oil per day.

 


Birchcliff (2-19) Doe 00/16-18-081-12W6/0
Boundary Lake Oil Well Gross Production Plot


Bonanza Seismic
 
The Company does not have ownership in any seismic data over its lands at Bonanza.
 
Bonanaza Marketing
 
Knowledge sells its oil through Trafigura Canada General Partnership on a 30-day contract at the 08-10-079-10W6 Pembina Gordondale terminal.
 
Bonanza Facilities
 
The Company owns a 50% working interest in one active single-well oil battery for the 16-18-081-12W6 well, as well as an 11.572% working interest in the Pouce Coupe Common Facility and Pipeline operated by Canadian Natural Resources Limited.
 
Bonanza Reserves
 
The Bonanza property has been included in the Internal Report as of June 30, 2020 using Sproule’s June 30, 2020 forecast pricing.
 
The Company estimates that, as of June 30, 2020, the Bonanza property contained remaining proved plus probable reserves of 12,000 barrels of oil, with an estimated net present value of $194,000 using forecast pricing at a 10% discount.

 


Bonanza LMR as of January 2, 2021
 
As of January 2, 2021, Knowledge’s net deemed asset value for Bonanza was $372,680 (deemed assets of $467,338 and deemed liabilities of $94,658), with an LMR ratio of 4.94.

 


Bonanza Well List

Click here to download the complete well list in Excel.

PROCESS & TIMELINE

Sayer Energy Advisors is accepting cash offers to acquire the Properties until 12:00 pm on Thursday February 18, 2021. The Company's intent is to divest all of its interests in the Properties.
 

Sayer Energy Advisors does not conduct a "second-round" bidding process; the intention is to attempt to conclude a
transaction with the party submitting the most acceptable proposal at the conclusion of the process.

Sayer Energy Advisors is accepting cash offers from interested parties until
noon on Thursday February 18, 2021.

NOTE REGARDING A SAYER PROCESS

On each and every offering brochure generated by Sayer, you will note the sentence “Sayer Energy Advisors does not conduct a “second-round” bidding process; the intention is to attempt to conclude a sale of the Property with the party submitting the most acceptable proposal at the conclusion of the process.”  What this means is that Sayer will not go back to multiple parties at the same time after bids are received, asking them all for a second bid.  We determine which party submitted the most acceptable proposal and then we attempt to negotiate acceptable terms with that party in a “one-off” situation.

If the process involves a cash sale of a property or company and the party which submitted the most acceptable proposal has met our client’s threshold value, that offer will be accepted.  If this proposal does not meet our client’s threshold value, then we will advise that party that the offer is not quite what our client was expecting, and we will ask them to increase the offer.  If that offer is not acceptable to our client, we will then move down to the party which submitted the next most acceptable proposal and we will then work with that party to attempt to meet our client’s threshold value.

In the extremely rare circumstance where two or more parties submit virtually identical proposals, we will contact all  parties, we will advise them of this situation and we will ask them to submit a revised proposal.  Once these are received, we will work with the party which has submitted the most acceptable proposal.

CONFIDENTIALITY AGREEMENT

Parties wishing to receive a detailed confidential information binder with detailed technical information relating to this opportunity should execute the Confidentiality Agreement and return one copy to Sayer Energy Advisors by courier, email (brye@sayeradvisors.com) or fax (403.266.4467).
 
Included in the confidential information binder is the following: summary land information, the internal Report, LMR information, most recent net operations summary, detailed facilities information and other relevant technical information.
 
Download Confidentiality Agreement
 
To schedule a time to visit the Data Room, which is situated at Sayer’s office, please contact Ben Rye, Tom Pavic or Grazina Palmer at 403.266.6133.
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