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Razor Energy Corp.

Property Divestiture
Bid Deadline: December 17, 2020 12:00 PM
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OVERVIEW

Razor Energy Corp. (“Razor” 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 the Chin Coulee, Enchant/Retlaw, Badger, Majorville and Jumpbush areas of southern Alberta (the “Properties”). Razor acquired the Properties in 2019 and has since refocused its corporate efforts and strategic direction to its core areas.
 
Average daily production net to Razor in August 2020 from the Properties consists of approximately 1.9 MMcf/d of natural gas and 297 barrels of oil and natural gas liquids per day (620 boe/d). Earlier this year, the Company voluntarily shut-in production with the onset of the COVID-19 pandemic. Prior to the shut-in, average daily production net to Razor from the Properties in January 2020 was approximately 659 boe/d (339 barrels of oil and natural gas liquids and 1.9 MMcf/d of natural gas).
 
Net operating income from the Properties for July and August 2020 averaged approximately $155,000/month, or $1.9 million per on an annualized basis. Net operating income from the Properties in 2019 totaled approximately $3.1 million.
 
The Properties have high-return, low-risk reactivation potential as well as new drilling opportunities. Additional upside exists in waterflood programs as well as power generation potential.
 
Razor completed two reactivations in October 2020 at Badger, for a production increase of approximately 40 boe/d. Six more reactivations are planned in 2021, including one at Enchant, two at Badger and three at Jumpbush for a total production increase of approximately 80 boe/d.
 
Waterflood optimization projects are underway at Badger, Jumpbush, and Chin Coulee. Further details on the waterflood optimization projects will be made available to parties that execute a confidentiality agreement.
 
The Company has identified pump upsize projects ongoing with workovers on the Properties. Razor also has a yearly swabbing program which is executed each November to increase production through the higher natural gas price winter months. The program swabs up to 30 wells for the total cost of approximately $8,000 resulting in incremental production of approximately 120 Mcf/d of natural gas.


Overview Map Showing the Location of the Divestiture Properties


Production Overview
 
Average daily production net to Razor from the Properties in August 2020 consisted of approximately 1.9 MMcf/d of natural gas and 297 barrels of oil and natural gas liquids per day (620 boe/d) as outlined below.

 


Earlier this year, the Company voluntarily shut-in production with the onset of the COVID-19 pandemic. Prior to the shut-in, average daily production net to Razor from the Properties in January 2020 was approximately 659 boe/d (339 barrels of oil and natural gas liquids and 1.9 MMcf/d of natural gas).
 

Gross Production Group Plot of Razor’s Oil and Natural Gas Wells


Map Showing the Location of the Divestiture Properties


LMR as of October 3, 2020

As of October 3, 2020, Razor’s net deemed asset value for the Properties was ($8.2 million) (deemed assets of $19,534,684 and deemed liabilities of $27,765,766), with an LMR ratio of 0.70.
 
The LMR for each of the Properties as of October 3, 2020 is summarized below.

 

Summary of LMR by Property


Site Rehabilitation Program Funding
 
Razor has been approved for approximately $830,000 of asset retirement work under the Site Rehabilitation Program (“SRP”). The Company estimates a resulting deemed liability decrease of approximately $670,000.
 
In the event of the acquisition of the Properties, the SRP grant funding would remain with the respective site after the SRP application has been approved, assuming the purchaser continues with Razor’s existing rehabilitation plans.
 
Razor was awarded $407,000 for reclamation with the scope of activity including environmental site assessments, site reclamation and reclamation certificate applications. Approximately $320,000 is intended to be employed by the end of 2020 with remainder by year-end 2022. Razor anticipates the receipt of 17 reclamation certificates resulting from this work.
 
Razor received $423,000 of SRP funding for 15 well abandonments at Chin Coulee. The Company is also applying for additional well abandonment funding in round three of SRP funding. Razor plans to execute these abandonments during the first half of 2021.


Seismic Overview

The Company has a total of 94.0 km2 of trade 3D and 72 km of trade 2D seismic data over the Properties. Details relating to the Company’s trade seismic data will be made available to parties that execute a confidentiality agreement.

Reserves Overview

Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Razor’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing.

Sproule estimates that, as of December 31, 2019, the Properties contained remaining proved plus probable reserves of 1.5 million barrels of oil and natural gas liquids and 4.6 Bcf of natural gas (2.3 million boe), with an estimated net present value of $34.9 million using forecast pricing at a 10% discount.
 



Well List

Click here for the complete well list in Excel.

CHIN COULEE PROPERTY

Township 7-8, Range 14-15 W4

At Chin Coulee, Razor holds a 100% working interest in three sections of land with low-decline oil production from the Chin Coulee Sawtooth “B” Pool and the Chin Coulee Sawtooth “C” Pool. Both pools are currently under waterflood. Oil production at Chin Coulee goes through Razor’s operated battery at 06-01-008-15W4.

Average daily production net to Razor from Chin Coulee in August 2020 was approximately 26 barrels per day of oil (average 24° API).
 


 


The Chin Coulee Sawtooth “B” Pool and the Chin Coulee Sawtooth “C” Pool have average porosity of 23% and average pay thickness of approximately 3.5 metres. The oil/water contact in the pools is seen at resistivity of 30 Ohms on well logs. Average water saturation in the pools is 31%.
 

VH1 ChinCo 02/11-01-008-15W4
100% W.I.
Sawtooth Formation Type Log


Both pools have tilted oil/water contacts caused by the active hydrodynamics of the oil and water moving within the reservoir. The oil is then structurally trapped.

The pool outlines are defined by the top of the sand structure and the offsetting oil/water interface below.


Sawtooth "B" Pool Net Pay Map


Sawtooth "C" Pool Net Pay Map


Sawtooth "B" Pool Porosity Structure Map


Sawtooth "C" Pool Porosity Structure Map


Chin Coulee Seismic

The Company has a total of 23.59 km of trade 2D seismic data at Chin Coulee. Details relating to the Company’s trade seismic data will be made available in the virtual data room for parties that execute a confidentiality agreement.

Chin Coulee Marketing

Razor has a marketing contract in place with Forty Mile Gas Co-op Ltd. at Chin Coulee.

Chin Coulee Facilities

At Chin Coulee, the Company holds a 100% working interest in a multi-well oil battery at 06-01-008-15W4 which includes a pipeline connected sales LACT unit.

Razor also owns 14 injection wells at Chin Coulee

Chin Coulee LMR as of October 3, 2020

As of October 3, 2020, Razor’s net deemed asset value for Chin Coulee was ($1.6 million) (deemed assets of $2,663,217 and deemed liabilities of $4,216,146), with an LMR ratio of 0.63.
 


Chin Coulee Reserves

Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Razor’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing.

Sproule estimates that, as of December 31, 2019, the Chin Coulee property contained remaining proved plus probable reserves of 96,000 barrels of oil, with an estimated net present value of $1.7 million using forecast pricing at a 10% discount.
 


Chin Coulee Well List

Click here to download the complete well list in Excel.

ENCHANT/RETLAW PROPERTY

Township 11-15, Range 16-22 W4

At Enchant/Retlaw, the Company holds various working interest in certain P&NG rights in 78 sections of land. Razor also holds a 36.84108210% working interest in the Retlaw Glauconite Unit No. 1.

Average daily production net to Razor from Enchant/Retlaw in August 2020 was approximately 1.2 MMcf/d of natural gas and 122 barrels of oil and natural gas liquids per day (323 boe/d).

Oil is produced from the Mannville Group and natural gas is produced from the Mannville and the Second White Speckled Shale Formation. Razor operates the natural gas gathering and compression facilities at Enchant/Retlaw.

 


 


 


The chart below outlines a workover which the Company has planned for 2021.
 


Enchant/Retlaw Upside
 
Upper Mannville lithic channels are being exploited with horizontal multi-stage frac wellbores adjacent to Razor’s lands at Enchant/Retlaw. There is opportunity to develop these lithic channel trends on Razor’s lands with potential for up to 10 locations. The following isopach map shows the general areas for these locations.

 


Enchant/Retlaw Seismic
 
The Company does not have ownership in and seismic data over its lands at Enchant/Retlaw.
 
Enchant/Retlaw Marketing
 
At Enchant/Retlaw, Razor has marketing contracts in place with Canadian Natural Resources Limited, Campus Energy Partners, Husky Oil Operations Limited, SanLing Energy Ltd. and TAQA North Ltd.
 
Enchant/Retlaw Facilities
 
At Enchant/Retlaw, the Company holds a 100% working interest in compressor station at 16-22-013-17W4. Razor also holds a 100% working interest in a booster compressor at 14-11-014-17W4 and a natural gas gathering system.
 
Razor holds an 80% working interest and operates a natural gas compressor located at 11-23-014-17W4, a 78.68% working interest in a natural gas compressor station at 03-34-013-17W4 and a 43.47% working interest in a natural gas gathering system.
 
The Company also holds a 25% (overall facility participation) working interest in a natural gas transmission line from 11-23-14-17W4 to 11-35-13-17W4 operated by Canadian Natural Resources Limited, and a 50% working interest in a pipeline from 13-13-014-17W4 to 11-23-014-17W4 operated by Razor.


Enchant/Retlaw Reserves
 
Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Razor’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing.
 
Sproule estimates that, as of December 31, 2019, the Enchant/Retlaw property contained remaining proved plus probable reserves of 198,000 barrels of oil and natural gas liquids and 2.3 Bcf of natural gas (587,000 boe), with an estimated net present value of $6.9 million using forecast pricing at a 10% discount.

 


Enchant/Retlaw LMR as of October 3, 2020
 
As of October 3, 2020, Razor’s net deemed asset value for Enchant/Retlaw was ($1.9 million) (deemed assets of $8,815,611 and deemed liabilities of $10,762,765), with an LMR ratio of 0.82.

 


Enchant/Retlaw Well List

Click here to download the complete well list in Excel.

BADGER PROPERTY

Township 16-17, Range 18-20 W4

At Badger, the Company holds mainly 100% working interest in approximately 9.25 sections of land. Razor produces oil and natural gas from the Glauconitic Sandstone Formation in the Upper Mannville B Pool and production goes through Razor’s operated battery and natural gas plant at 13-19-016-17W4.

Average daily production net to Razor from Badger in August 2020 was approximately 105 barrels of oil and natural gas liquids per day and 519 Mcf/d of natural gas (191 boe/d).
 


Production at Badger is low-decline and stable as shown on the group plot below.
 


Razor completed two reactivations in October 2020 for a production increase of approximately 40 boe/d as outlined in the chart below.
 


The chart below outlines the workover targets which the Company has planned for 2021.
 


Upper Mannville B Pool
 
The Upper Mannville B Pool is comprised of thick, quartzose glauconitic sand with average porosity of 24%. The average original gas/oil contact is determined to be at approximately 307 metres subsea and the average original oil/water contact is determined to be at approximately 318 metres subsea.
 
The first well in the Badger pool was drilled in May 1980 at 100/14-18-16-17W4 and initially produced natural gas. This 14-18 well was drilled in the structurally highest part of the pool, updip of the large oil accumulations in the pool. Drilling activity in the pool continued, followed by the commencement of a waterflood in March 1992. This was followed by the next phase of drilling which began in 1993 which kept the daily production stable at approximately 1,200 boe/d. In 2003, four horizontal wells were drilled into the pool, bringing production to approximately 1,500 boe/d for the field.

 


The following map for the Upper Mannville B Pool shows net oil pay using 15% porosity cut-off, 6 ohm-metres resistivity. Razor has core data from four wells within the pool boundaries.
 


Badger Upside
 
Open-hole horizontal re-entry sidetracks achieved strong results at Badger during early 2000’s. The 09-24 well shown in the following chart produced an incremental 138,000 barrels of oil.
 
There is opportunity to apply this method to the Badger and Jumpbush properties with the potential for up to ten locations.

 


Badger Seismic
 
The Company has a total of 20.53 km2 of trade 3D seismic data at Badger. Details relating to the Company’s trade seismic data will be made available in the virtual data room for parties that execute a confidentiality agreement.
 
Badger Marketing
 
At Badger, Razor has marketing contracts in place with Canadian Natural Resources Limited, Husky Oil Operations Limited and SanLing Energy Ltd.
 
Badger Facilities
 
At Badger, the Company holds a 100% working interest in a multi-well battery, a source water well and a natural gas plant at 13-19-016-17W4. Razor also has a 100% working interest in a natural gas gathering system at Badger.
 
Badger Reserves
 
Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Razor’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing.
 
Sproule estimates that, as of December 31, 2019, the Badger property contained remaining proved plus probable reserves of 615,000 barrels of oil and natural gas liquids and 1.6 Bcf of natural gas (886,000 boe), with an estimated net present value of $13.7 million using forecast pricing at a 10% discount.

 



Badger LMR as of October 3, 2020
 
As of October 3, 2020, Razor’s net deemed asset value for Badger was $1.7 million (deemed assets of $4,618,817 and deemed liabilities of $2,946,936), with an LMR ratio of 1.57.

 

Badger Well List

Click here to download the complete well list in Excel.

MAJORVILLE PROPERTY

Township 18-19, Range 19-24 W4

At Majorville, the Company holds various operated and non-operated working interests in approximately 34.5 sections of land producing from the Mannville and Belly River formations.

Average daily production net to Razor from Majorville in August 2020 was approximately 169 Mcf/d of natural gas and 13 barrels of oil and natural gas liquids per day (41 boe/d).
 


 


Majorville Seismic
 
The Company does not have ownership in any seismic data over its lands at Majorville.
 
Majorville Marketing
 
At Majorville, Razor has a natural gas handling agreement in place with Canadian Natural Resources Limited where it sells its natural gas to the Queenstown 04-22-019-21W4 natural gas plant. 
 
Majorville Facilities
 
At Majorville, the Company holds a 46.93% (overall facility participation) working interest in a natural gas plant at 04-31-018-19W4 operated by Canadian Natural Resources Limited. The facility consists of three functional units with different working interests. Razor also holds a 45.04% (overall facility participation) working interest in a natural gas gathering system operated by Canadian Natural.
 
The Company also holds a 50% working interest in an oil battery at 14-32-018-19W4 and a 75% working interest in an oil battery at 14-30-018-19W4 operated by Canadian Natural.
 
Majorville Reserves
 
Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Razor’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing.
 
Sproule estimates that, as of December 31, 2019, the Majorville property contained remaining proved plus probable reserves of 101,000 barrels of oil and natural gas liquids and 633 MMcf of natural gas (206,000 boe), with an estimated net present value of $2.0 million using forecast pricing at a 10% discount.

 



Majorville LMR as of October 3, 2020
 
As of October 3, 2020, Razor’s net deemed asset value for Majorville was ($1.3 million) (deemed assets of $682,565 and deemed liabilities of $1,951,114), with an LMR ratio of 0.35.

 

Majorville Well List

Click here to download the complete well list.

JUMPBUSH PROPERTY

Township 20, Range 19-23 W4

At Jumpbush, the Company holds a 100% working interest in approximately seven and one-quarter sections of land. Razor has a 100% working interest in the Jumpbush Upper Mannville Unit. Oil production is from the Glauconitic Sandstone Formation and flows through Razor’s operated battery at 14-13-020-20W4.

Average daily production net to Razor from Jumpbush in August 2020 was approximately 32 barrels of oil and natural gas liquids per day and 42 Mcf/d of natural gas (39 boe/d).
 


The following production plot is annotated with the history of the production at Jumpbush.
 


Jumpbush Upside
 
The Company has identified upside in the Upper Mannville A Pool, Upper Mannville E Pool and Upper Mannville O Pool on its lands at Jumpbush.
 
At Jumpbush, the previous operator reactivated four horizontal wells and four vertical wells in 2017. There are 12 additional reactivation opportunities and five multi-lateral horizontal drilling locations which have been identified as shown on the image below.

 


The chart below outlines the workover targets at Jumpbush which the Company has planned for 2021.
 


The Upper Mannville A Pool is comprised of thick, quartzose glauconitic sand with average porosity of 24%. The average original gas/oil contact is determined to be at approximately 430.5 metres subsea and the average original oil/water contact is determined to be at approximately 444 metres subsea.
 


 


Razor believes it is possible that the Upper Mannville E Pool is two separate pools based on differences in structure, waterflood response, and lithology between the east and west sides of the pool. Average porosity of the net pay is approximately 23%. The average original gas/oil contact is determined to be at approximately 429.8 metres subsea and the average original oil/water contact is determined to be at approximately 439 metres subsea.
 


 


The Company believes that the primary production in the Upper Mannville O Pool is from the 00/08-14-020-20W4 and 00/05-13-020-19W4 wells and that the waterflood scheme in the pool will capture more of the original oil in place. Average porosity of the net pay is approximately 22%. The average original gas/oil contact is determined to be at approximately 435.8 metres subsea and the average original oil/water contact is determined to be at approximately 445.2 metres subsea.
 


 


Jumpbush Seismic
 
The Company has a total of 73.47 km2 of trade 3D and 49.11 km of trade 2D seismic data at Jumpbush. Details relating to the Company’s trade seismic data will be made available in the virtual data room for parties that execute a confidentiality agreement.
 
Jumpbush Marketing
 
At Jumpbush, Razor consumes its natural gas for battery operations. Oil is currently delivered to Taber or West Drumheller depending on market conditions
 
Jumpbush Facilities
 
At Jumpbush, Razor also holds a 100% working interest in a battery facility at 14-13-020-20W4 including a sweet gas inlet separator, natural gas compressors, sweetening facility, dehydrator and sales line. The Company also holds a 100% working interest in eight disposal wells at Jumpbush.
 
Jumpbush Reserves
 
Sproule Associates Limited (“Sproule”) prepared an independent reserves evaluation of Razor’s properties as part of the Company’s year-end reporting (the “Sproule Report”). The Sproule Report is effective December 31, 2019 using Sproule’s December 31, 2019 forecast pricing.
 
Sproule estimates that, as of December 31, 2019, the Jumpbush property contained remaining proved plus probable reserves of 478,000 barrels of oil, with an estimated net present value of $10.6 million using forecast pricing at a 10% discount.

 



Jumpbush LMR as of October 3, 2020
 
As of October 3, 2020, Razor’s net deemed asset value for Jumpbush was ($5.1 million) (deemed assets of $2,754,474 and deemed liabilities of $7,888,805), with an LMR ratio of 0.35.

 

Jumpbush 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 December 17, 2020. 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
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 December 17, 2020.

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 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 Sproule 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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