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Under Review   /   Alvarez & Marsal Canada Inc. - Strategic Oil & Gas Ltd.



Alvarez & Marsal Canada Inc. - Strategic Oil & Gas Ltd.

Receivership Sale
Bid Deadline: September 23, 2021 12:00 PM
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OVERVIEW

On January 28, 2020, the Alberta Court of Queen’s Bench (the “Court”) made an order (the “Receivership Order”) appointing Alvarez & Marsal Canada Inc. ("A&M") as receiver and manager (“the Receiver”) over all of Strategic Oil & Gas Ltd.’s and Strategic Transmission Ltd.’s (together “Strategic” or the “Company”) current and future assets, undertakings and properties of every nature and kind whatsoever situated in the Northwest Territories, including all proceeds thereof and including, without limiting the generality of the foregoing, any letters of credit issued in respect of assets situated in the Northwest Territories (the "NWT Property").
 
Additionally, Strategic holds legal title to, and is the licensee of, a pipeline which crosses the border between Alberta and the Northwest Territories (the “Interprovincial Pipeline”).  While the Receiver does not have possession of this Interprovincial Pipeline, nor is it in care and custody of such pipeline, on July 19, 2021, the Receiver obtained an order from the Court (the “Sales Process Order”), permitting the Receiver to conduct a sale solicitation process (“SSP”) respecting the NWT Property and the Interprovincial Pipeline.  For the purposes of this SSP, all references to NWT Property shall include reference to the Interprovincial Pipeline.
 
The Receiver has engaged Sayer Energy Advisors to assist with the sale of Strategic’s interests in the Cameron Hills area of the Northwest Territories as well as Strategic’s Interprovincial Pipeline.
 
Under the SSP, all qualified interested parties will be provided with an opportunity to participate in the SSP.  The SSP is intended to solicit interest in a sale of the NWT Property. Any agreement arising from the SSP will be subject to approval by the Court in Strategic's receivership proceedings.  A copy of the SSP is found here. All capitalized terms used but not otherwise defined herein shall have the meaning given to them in the SSP. In the event of any conflict between the marketing information and the terms of the SSP, the terms of the SSP shall prevail.

 

Overview Map Showing Location of the Divestiture Property

CAMERON HILLS

W117, N60:00 -W118 N60:20 

Strategic holds an average 86% working interest in 86,223 acres (74,207 net acres) in the Cameron Hills area of the Northwest Territories just north of the border with Alberta.  Strategic also holds a 100% interest in an Interprovincial Pipeline which connects the gathering system at the central battery in Cameron Hills to a natural gas plant located in the Bistcho Lake area of Alberta at 06-32-122-02W6 owned by Tallahassee Exploration Inc. 
 
Production has been shut-in since 2015 due to commodity prices.  Production consisted primarily of oil and natural gas from the Keg River and Sulphur Point formations, and natural gas from the Slave Point Formation.
 
Prior to being shut-in, average daily production for calendar 2014 net to Strategic from Cameron Hills was approximately 571 boe/d consisting of 2.2 MMcf/d of natural gas and 200 barrels of oil and natural gas liquids per day.  Natural gas from Cameron Hills was processed at the Bistcho Lake facility in Alberta.  
 
The main compressor facility at Cameron Hills at H-03 60-10 117-30 is connected via pipeline to the sour natural gas plant and oil battery in the Bistcho area of Alberta at 06-32-122-02W6.There is also a water injection well at 300/A03 60-10 117-30/0.

 



Cameron Hills, Northwest Territories
Gross Production Group Plot of Strategic’s Oil & Natural Gas Wells

Regulatory Update

In 2019, a large abandonment program was commenced including a draft site wide monitoring plan.  All wells which were capable of production have been plugged and cemented above the productive zone.  In connection with the abandonment program, 12 wells are having a phase one environmental assessment completed.

All available regulatory and environmental information relating to the NWT Property is in the virtual data room for parties that sign a confidentiality agreement.

The Company also has a water licence through the Mackenzie Valley Land and Water Board at Cameron Hills which is valid until 2025.  The Mackenzie Valley Land and Water Board also provides land use permits; the Company’s land use permit is due for renewal in 2022.

The SSP provides further details regarding the various Energy Regulators who play a role in regulating Strategic’s NWT Property.  Any Successful Bidder under the SSP will be required to comply with all regulatory requirements of the applicable Energy Regulator.  Nothing in the SSP shall constitute any “pre-approval” of any transfers of applicable licenses, permits or approvals by the applicable Energy Regulator, nor shall it fetter the discretion of the Energy Regulators in any way.  The Energy Regulators shall in each instance retain their discretion to approve the transfer of any applicable licenses, permits or approvals required under any Successful Bid pursuant to their governing legislation.  The Receiver may assist with facilitating meetings between Qualified Bidders and the applicable Energy Regulators upon request.

Upside

The main prospective reservoir at Cameron Hills is the Sulphur Point Formation.  Strategic believes there is vast upside in using unconventional completions in the conventional reservoir at Cameron Hills.

The Sulphur Point dolomite at Cameron Hills is found at a depth of approximately 1,420 metres and comprises a 12-15 metre-thick light (33.5°API) oil column.  Recent estimates for drilling, equipping and tie-in costs are approximately $3.0-$4.0 million per well, including approximately $250,000-$300,000 for access costs, $1.0-$1.5 million for drilling costs and $1.0-$1.5 million for completion costs.  Anticipated initial production from a Sulphur Point well is approximately 630 barrels of oil per day.

Strategic has used the interpretations of its proprietary and partnered seismic data to identify large upside in the Sulphur Point with potential for over 66 horizontal wells on its land.  This includes 60 horizontal wells targeting the Sulphur Point regional dolostone prospect with 1,500 metre laterals and six horizonal wells targeting the high-permeability Sulphur Point karst prospect.

Prior to being shut-in, the Sulphur Point oil well Strategic Et Al Cameron 300/K74 60-10 117-15/0 was producing at a rate of approximately 125 boe/d (110 barrels of oil and natural gas liquids per day and 87 Mcf/d of natural gas).  The K74 well had cumulative production of approximately 1.6 million barrels of oil.

The well Strategic Et Al Cameron 300/A73 60-20 117-30/0 was a prolific Sulphur Point natural gas well with cumulative production of over 6.7 Bcf of natural gas.

The Company has reservoir studies and petrophysical analysis including core data which are available in the virtual data room for parties which sign a confidentiality agreement.

 

Paramount et Al Cameron 00/J76 60-10 117-00/0
Sulphur Point Formation



Paramount et Al Cameron 00/A05 60-10 117-30/0
Slave Point Formation


 

In addition to the Sulphur Point, the Company believes the Keg River Basin Oil is prospective for future oil development.
 

Paramount et Al Cameron 00/A05 60-10 117-30/0
Keg River Formation


 

The Company believes additional upside is possible in the form of cogeneration.  With the large amount of natural gas production capability from the NWT Property, natural gas could be converted and sold into the power grid.

Cameron Hills Interprovincial Pipeline

Strategic owns a 12” Interprovincial Pipeline which ties the gathering system at the H-03 central battery at grid area 60° 10’ N, 117° 30’ W at Cameron Hills to the Bistcho Lake natural gas plant 06-32-122-02W6 located in Alberta.  The pipeline runs approximately 75 kilometres south of Cameron Hills through a pipeline header at 05-24-126-22W5M.  Strategic’s oil and natural gas production was transported to sales through the Interprovincial Pipeline.
 


 

The Interprovincial Pipeline has been fully suspended, discontinued and properly cleaned and purged.  Cathodic protection has been maintained on the pipeline.  Information on the discontinuation and maintenance of the pipeline is available in the virtual data room for parties that execute a confidentiality agreement.The Company acknowledged that there is an option to tie-in to the Enbridge Inc. pipeline in the Norman Wells area in the Northwest Territories.

The Company acknowledged that there is an option to tie-in to the Enbridge Inc. pipeline in the Norman Wells area in the Northwest Territories.

Another option to transport natural gas production from Cameron Hills to sales could be connecting to the Tallahassee owned natural gas plat at 13-29-125-19W5 in the Jackpot area of Alberta, north of Steen River, as access to the natural gas plant at Bistcho Lake is limited to winter access only.  It is estimated that this could be achieved by constructing approximately 17 kilometres of pipeline.


The additional pipeline required would connect from the Interprovincial Pipeline at the Alberta border to the 13-29 pipeline system.  From 13-29 to the 9-17 Steen River Gas Plant there is approximately 36 kilometres and four segments of 12” pipeline owned by Strategic.
 

Cameron Hills Seismic

Strategic has proprietary and partnered seismic over a portion of its lands at Cameron Hills, as identified by SeisInfo and as illustrated on the following plats.  The Company’s interpretations of the seismic are available for viewing on a workstation, by parties which have executed a confidentiality agreement.
 

Cameron Hills, Northwest Territories
Proprietary Seismic Coverage


 

As a member of The Association of Professional Engineers and Geoscientists of Alberta (“APEGA”), Sayer Energy Advisors adheres to the “Guidelines for Ethical Use of Geophysical Data” which APEGA first published in May 2010.  The complete document summarizing the APEGA guidelines can be downloaded from APEGA’s website, where it can be found at https://www.apega.ca/assets/PDFs/geophysical-data.pdf.  In order to ensure that the rights of all data owners are recognized and respected, the copying of data and the opportunity to view uninterpreted licensed data are activities that are not permitted in a Sayer Data Room.
 

Cameron Hills, Northwest Territories
Partnered Seismic Coverage


 

As a member of The Association of Professional Engineers and Geoscientists of Alberta (“APEGA”), Sayer Energy Advisors adheres to the “Guidelines for Ethical Use of Geophysical Data” which APEGA first published in May 2010.  The complete document summarizing the APEGA guidelines can be downloaded from APEGA’s website, where it can be found at https://www.apega.ca/assets/PDFs/geophysical-data.pdf.  In order to ensure that the rights of all data owners are recognized and respected, the copying of data and the opportunity to view uninterpreted licensed data are activities that are not permitted in a Sayer Data Room.

Cameron Hills Facilities

At Cameron Hills, the Company owns a natural gas gathering system and the main compressor located at H-03 60-10 117-30 which is connected via pipeline to the sour natural gas plant in the Bistcho area of Alberta at 06-32-122-02W6.  Strategic’s oil and natural gas production was transported to sales through the Interprovincial Pipeline.  There is also a water injection well at 300/A03 60-10 117-30/0.  Detailed information on the facilities is available in the virtual data room for parties that execute a confidentiality agreement.

Cameron Hills Reserves

McDaniel & Associates Consultants Ltd. (“McDaniel”) prepared an independent reserves evaluation of Strategic’s properties as part of the Company’s year-end reporting in 2015 (the “McDaniel Report”).  The McDaniel Report is effective December 31, 2015 using McDaniel’s January 1, 2016 forecast pricing. 

McDaniel estimates that, as of December 31, 2015, the Cameron Hills property contained remaining proved plus probable reserves of 498,000 barrels of oil (498,000 boe), with an estimated net present value of $6.1 million using forecast pricing at a 10% discount.

Note that all natural gas from Cameron Hills was previously processed at the Bitscho Lake facility in Alberta, which was shut-in. As a result, no natural gas reserves have been assigned to the NWT Property.

 


Cameron Hills Well List

Click here to download the complete well list in Excel.

PROCESS & TIMELINE

Sayer Energy Advisors is accepting offers to acquire the NWT Property until 12:00 pm on Thursday, September 23, 2021.    


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

Sayer Energy Advisors is accepting proposals from interested parties until
noon on Thursday
, September 23, 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 access to the Confidential Information 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 is the following: summary land information, historical financial information, the McDaniel Report and other relevant technical information.
 
Download Confidentiality Agreement
 
To receive further information on the NWT Property please contact Ben Rye, Tom Pavic or Grazina Palmer at 403.266.6133.
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