Griffiths Energy International Inc. (“Griffiths Energy” or the “Company”) is pleased to announce it has arranged a $125 million private placement equity financing (the “Private Placement”) on a best-efforts basis through a syndicate of investment dealers. Griffiths Energy has also executed a term sheet in respect of a $75 million credit facility (the “Credit Facility”) with a syndicate of lenders. Griffiths Energy is also pleased to provide an update on its oil exploration, development and production activities in the Republic of Chad.
“Since the new management team arrived in July, 2011, we have made considerable progress in the critical areas of exploration, asset management, engineering/project management and in-country operations,” said Gary Guidry, President and CEO. “The new capital announced today, which will augment the $80 million we have been in the process of deploying since July, 2011, will sustain the momentum of our operations in Chad.”
Details regarding new capital
Under the Private Placement, the Company anticipates it will issue approximately 20.8 million common shares of the Company at $6.00 per share. Following the successful completion of the Private Placement, Griffiths Energy will have approximately 112.4 million shares issued and outstanding.
It is anticipated the Private Placement will close on or about March 13, 2012 and the credit facility will close approximately three weeks thereafter. The Private Placement is being co-led by Canaccord Genuity Corp.., Dundee Securities L.P. and GMP Securities L.P., and also includes First Energy Capital Corp.
Proceeds of the Private Placement and Credit Facility will be used to advance the Company’s operations in the Republic of Chad. Upon closing of the Private Placement and the Credit Facility, Griffiths Energy will have the capital necessary for its capital program and accordingly no longer intends to proceed in the near-term with the initial public offering (“IPO”) that it announced in November, 2011. However, the Company may consider an IPO on a senior global exchange in the future.
Griffiths Energy continues to advance operations in the Republic of Chad, including the installation of pipeline infrastructure to its Mangara/Badila concession, the advance of feasibility studies on four light oil exploration discoveries at its Doseo/Borogop concession, and the evaluation and prioritization of new and existing exploration prospects. Griffiths Energy expects to conduct extensive exploration and development drilling over the near term. As operations in the Republic of Chad accelerate, Griffiths Energy will continue to focus on adding more quality employees to the Company’s already strong team.
As previously disclosed, in 2011 Griffiths Energy acquired three Production Sharing Contracts (the “PSCs”) from the government of the Republic of Chad. These PSCs provide exclusive rights to explore and develop reserves and resources over a combined area of 26,103 km2 in southern Chad.
The area covering the PSCs was historically held by a consortium of super-majors and has been subject to more than 30 years of exploration work, to which the Company has access. The aggregate of proved, probable and possible (“3P”) reserves are 77,378 Mbbl gross and 33,167 Mbbl net, according to a report dated effective August 31, 2011 and prepared in accordance with the COGE Handbook by GLJ Petroleum Consultants Ltd. (“GLJ”), the Company’s independent reserves and resources evaluator.
During 2011 and early 2012, Griffiths Energy has made progress with regard to the development of a 120 kilometre pipeline project (“Mangara Pipeline”). The Mangara Pipeline will allow the Company to tie-in future production from the Mangara and Badila discoveries into the existing export pipeline.
The pipeline routings have been surveyed to the planned sales terminal located near the export pipeline. The pipeline crossing of the Logone River is scheduled for completion by the end of May, 2012. The front-end engineering and design is underway in-house with the assistance of third party contractors who are working on detailed engineering deliverables. Preliminary engineering and commercial discussions with the export pipeline operator are reaching a conclusion with commercial agreements pending.
Mangara/Badila Concession update
In the fourth quarter of 2011, Griffiths Energy began development planning and operations on the 1,446 km2 DOB (Mangara) block. The Mangara field, located on the northern end of the Mangara block, has three wells drilled by previous operators. All of the three wells encountered oil with unstimulated test rates ranging from 300 bbls/d to 1,600 bbls/d of light sweet crude oil.
Also, in the fourth quarter of 2011, Griffiths Energy completed a comprehensive integrated surface and sub-surface development planning document for the Mangara field. The wells are expected to be capable of flowing initially without the need for artificial lift. The Company plans to install electrical submersible pumps at the time of initial production. This will enable the potential for higher/optimized flow rates sooner in the production phase and will better handle anticipated water production.
The Company also built a geo-modeling and integrated dynamic reservoir simulation. Using the available 2D seismic as the basis, the Company has now built a comprehensive geo-model for the primary target – the Lower Cretaceous ‘C’ sand package, and completed advanced dynamic simulations for a range of potential development scenarios and possible reservoir drive mechanisms.
Preliminary results indicate an expected oil in-place of 400-450 MMbbls for the ‘C’ sand package and expected ultimate recovery from the ‘C’ sand package of 70-80 MMbbls (approximately 15% above GLJ’s 3P gross reserves for the Mangara field).
While Mangara is Griffiths Energy’s initial focus, additional work is ongoing concurrently for other field development opportunities on the concession, which also includes the 1,419 km2 DOI (Badila) block. The objective is to leverage the initial infrastructure investment that will result from the Mangara development.
It is anticipated a service rig will be mobilized to one of the Mangara wells in the next week. The well will be flow tested and sampled to obtain data necessary for required oil export planning. The Company expects to complete the project by the end of March, 2012. The same rig will then be mobilized to the Badila-1 discovery well for flow testing and sampling data which is expected to be completed by the end of April, 2012. This discovery well is approximately 30 kilometres from the oil export pipeline custody transfer point and will be just a few kilometres from the proposed Griffiths Energy International Sales Terminal.
Other activity at Mangara includes the following:
During the first quarter of 2012, an Environmental Impact Assessment, encompassing social, environmental, & archaeological considerations, was completed and submitted to the Government of Chad. The Company is working with the necessary authorities to obtain final approval;
The Company is in the process of acquiring approximately 147 km2 of 3D seismic information from the Mangara field and neighboring Krim exploration prospect; data acquisition will be complete by mid April;
During the fourth quarter of 2011, the Company commenced land acquisition and community consultations and these are ongoing in support of the planned field operations / right-of-way access requirements and the 3D seismic shoot; and
Civil earthworks are underway in regards to lease clearing, main road upgrades, and preliminary facility site clearing of the Central Processing Facility and Griffiths Energy Sales Terminal.
Doseo/Borogop Concession update
The Borogop and Doseo blocks cover approximately 22,414 km2, the largest PSC by area held by Griffiths Energy. The blocks include four light oil discovery fields drilled by the previous operator. Griffiths Energy is currently conducting sub-surface and surface development and infrastructure feasibility studies to determine the optimum commercial development of the four discovery fields considering the significant upside exploration potential based on numerous prospects.
This work is being completed in conjunction with the overall prospect evaluation and ranking work being undertaken by the Company’s exploration group. The studies began in the fourth quarter of 2011 and are scheduled for completion in the first quarter of 2012, after which it is anticipated that Griffiths Energy will commence exploration drilling.
DOH Concession update
Evaluation work continues on the DOH block, where the previous operator drilled the N’Donambo discovery well which was abandoned as a stratigraphic test. The DOH block is 824 km2 in size and has potential for both Upper and Lower Cretaceous sand reservoirs and structural traps.
Exploration team efforts are focused on the interpretation of an extensive 2D seismic database to build a prospect inventory for all three PSCs. This inventory is being assessed probabilistically, aggregated and ranked based on geologic, commercial and strategic considerations. A ranked list of drill-ready opportunities has been prepared for systematic execution by Griffiths Energy.
About Griffiths Energy International Inc.
Based in Canada, Griffiths Energy is an international exploration and development company focused on oil and gas exploration, development and production activities in the Republic of Chad, Africa. In 2011, the Company acquired the PSCs from the government of the Republic of Chad. These PSCs provide exclusive rights to explore and develop reserves and resources over a combined area of 26,103 km2 in southern Chad. The PSCs cover two world class oil basins with development opportunity, oil discoveries, and numerous exploration prospects.
Forward-Looking Statements and General Advisory
Certain information in this press release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as “may,” “should,” “anticipate,” “expects,” “seeks” and similar expressions. Specific forward-looking statements included in this press release include comments related to the completion of the Private Placement and the Credit Facility, the use of proceeds of the Private Placement and the Credit Facility, the timing of the IPO, the timing of completion of certain infrastructure projects, the timing of certain regulatory and government approvals in relation to the Company’s oil and gas assets, the timing and success of ongoing drilling plans, the reserve and resource potential of the Company’s properties and the Company’s 2012 expected operational performance.
Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with oil and gas production; marketing and transportation; loss of markets; volatility of commodity prices; currency and interest rate fluctuations; imprecision of reserve and resource estimates; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions or dispositions; inability to access sufficient capital from internal and external sources; political turmoil in certain regions of the world; changes in legislation, including but not limited to income tax, environmental laws and regulatory matters. Readers are cautioned that the foregoing list of factors is not exhaustive.
Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward looking statements contained in this news release are made as of the date of this news release, and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.
Certain disclosure in this presentation may constitute “anticipated results” for the purposes of National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators because the disclosure in question may, in the opinion of a reasonable person, indicate the potential value or quantities of resources attributable to assets. Without limitation, the anticipated results disclosed in this press release include certain disclosures with respect to estimated ultimate recoveries and future flow rates. Anticipated results are subject to numerous risks and uncertainties, including various geotechnical, geological, technical, operational, engineering, commercial and technical risks. In addition, the geotechnical analysis and engineering to be conducted in respect of such assets is incomplete. Such risks and uncertainties may render some such assets uneconomic or may cause the anticipated results disclosed herein to be inaccurate. Actual results may vary, perhaps materially.
In general, estimates of resources are based upon a number of factors and assumptions made as of the date on which the estimates were determined, such as geological, technological and engineering estimates and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in forward-looking estimates. These risks and uncertainties include but are not limited to: (1) the fact that there is no certainty that the zones of interest will exist to the extent estimated or that the zones will be found to have oil or gas with characteristics that meet or exceed the minimum criteria in terms of net pay thickness, or that the oil and/or gas will be commercially recoverable to the extent estimated; (2) risks inherent in the oil and gas industry; (3) the lack of additional financing to fund the Company’s exploration activities and continued operations; (4) fluctuations in foreign exchange and interest rates; (5) the number of competitors in the oil and gas industry with greater technical, financial and operations resources and staff; (6) fluctuations in world prices and markets for oil and gas due to domestic, international, political, social, economic and environmental factors beyond the Company’s control; (7) changes in government regulations affecting oil and gas operations and the high compliance cost with respect to governmental regulations; (8) potential liabilities for pollution or hazards against which the company cannot adequately insure or which the Company may elect not to insure; (9) the Company’s ability to hire and retain qualified employees and consultants; (10) contingencies affecting the classification as reserves versus resources which relate to the following issues as detailed in the COGE Handbook: ownership considerations, drilling requirements, testing requirements, regulatory considerations, infrastructure and market considerations, timing of production and development, and economic requirements; (11) the fact that there is no certainty that any portion of prospective resources will be discovered and if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources; and (12) other factors beyond the Company’s control.
SOURCE Griffiths Energy International Inc.