CALGARY, ALBERTA / ACCESSWIRE / September 20, 2020 / Halo Exploration Ltd. (the 'Company' or 'Halo') is pleased to announce test results from its HALO HZ MCKINLEY 5-21-65-22 ('5-21') upper Montney well, as well as confirmation of tranche 2 funding of the Company's $10.7 million term loan, and the Company's preliminary plans for its Q4 development program.
- Montney Well Results: 5-21 has been on production since July 29th, 2020 and has averaged 640 Boe/d (500 Bbls/d) through its first 51 days of production. The last 48 hours of that period have averaged 949 Boe/d (725 Bbls/d).(1)(2)
- Term Debt Tranche 2 Funding Commitment: Confirmation of accelerated tranche 2 funding by Proof Capital Inc. to provide an additional CAD $7.7 million of term debt.
- Q4 Development Program: Confirmed funding to support a 2 well development plan in Q4 2020.
- Updated Estimated Productive Capacity: the 5-21 well, plus volumes behind pipe, bring Halo's current productive capacity to greater than 1,800 Boe/d (>1,000 Bbls/d).
'The 5-21 upper Montney test result firmly establishes the commercial nature and running room of Halo's oil weighted asset base. Horizontal drilling and fracture stimulation of more conventional Montney reservoirs (with higher porosity & permeability than typical unconventional reservoirs) has placed Halo on a development path to meaningful free cash flow. The highly economic nature of the Company's inventory combined with an active risk management program will allow Halo to navigate this unprecedented time of low prices and market volatility, as will support by Proof Capital through its election to fund tranche 2 of its term loan on an accelerated basis. We wish to thank our shareholders, stakeholders and lenders for their support through 2020, as well as Premier Kenney for his encouragement as we build towards Alberta's economic recovery.' said Geoff Cain, President and CEO of Halo Exploration.
Alberta Premier Jason Kenney commented: 'Alberta has always relied on innovators and entrepreneurs who work to make ideas into reality. Halo Exploration is a testament to that Alberta spirit. The last five years have been among the most challenging that our resource sector has faced. But, because of the hard work and determination of Halo and their leadership team, including their President and CEO, Geoff Cain, they are demonstrating that Alberta's energy industry will continue to create jobs and opportunities for years to come. It's companies like Halo that are leading the way in Alberta's Economic Recovery. This is a great day for Halo, a great day for our resource industry and a great day for Alberta.'
HALO HZ MCKINLEY 5-21-65-22 Initial Results
Halo has now drilled, completed, tested and tied-in its 100/05-21-65-22W5/02 upper Montney well located in the McKinley strike area near Fox Creek, AB. The 5-21 well is co-located with the HALO MCKINLEY 3-22-65-22 upper Montney vertical well and the HALO HZ MCKINLEY 13-16-65-22 lower Montney horizontal well on the Halo McKinley Multi-well Battery (3-22 surface).
The 5-21 Montney oil well was opened to flow post fracture simulation on July 26th following a 3-day flow test. The well was tied-in to the Halo McKinley Multi-well Battery and has now been on continuous production for 51 days. To September 17, 2020, the well flowed at a restricted rate that averaged 1,044 Bbls/d of total fluid and 640 Boe/d (78% of 40 API oil) with a 52% water cut. In the last 48 hours the well averaged 949 Boe/d (76% of 40 API oil) with a 38% water cut. To date, Halo has recovered 65% of the load fluid used during fracture stimulation.(1)(2)
Total drill and completion costs for the 5-21 well were CAD $4.4 million. Halo expects future drill and completion costs to average CAD $4.0 million.
$10.7 Million Debt Financing
Halo closed the first tranche ($3.0 million) of the CAD $10.7 million Term Loan on June 12th, 2020. As of September 15th, Proof Capital Inc. ('Proof') confirmed its intention to deliver the remaining CAD $7.7 million of principal ahead of schedule ('Tranche 2'). Tranche 2 funding was originally scheduled to follow the 60-day production milestone. Tranche 2 is expected to close on or before October 15th, 2020. Proof Capital Inc. ('Proof') acted as agent and financial advisor to Halo with respect to the Term Loan (www.proofcapital.ca).
$3.4 Million Equity Financing
On June 12th, 2020, Halo closed a concurrent equity financing for proceeds of CAD $3.4 million. The financing was completed by way of a private placement of units comprised of one Common Share and 0.66 of a Common Share purchase warrant ('Warrant'). Each Warrant shall expire on the earlier of (i) the Corporation achieving sixty (60) days of production of the 5-21-65-22W5 well (expected to be October 15th, 2020) or (ii) March 31, 2021. If exercised, total potential proceeds from outstanding Warrants would be up to an incremental CAD $3.4 million.
Estimated Monthly Sales Volume & Productive Capacity
In addition to production from the 5-21 well, Halo estimates an incremental 1,193 Boe/d (538 Bbls/d) of Montney productive capacity as illustrated in the table below:
Q4 Development & Montney Inventory
Prior to the drilling of the 5-21 well, McDaniel & Associates, the Company's independent reserves evaluator, had granted Halo 32 booked locations in addition to 350 contingent/prospective locations in the Montney.(3) The initial 5-21 results have further validated the Company's Montney inventory. Fourth quarter capital spending requirements for Halo's two well development program will be met by cash flow from operations, the Company's $10.7 million term loan, and $3.4 million of potential warrant proceeds.
In addition to the Company's 61.25 net sections of Montney acreage, Halo has another 37 net sections of contiguous prospective acreage in the Duvernay.
Halo Exploration Ltd. is a private oil and gas exploration & production company focused on the Montney oil window in the Greater Kaybob, McKinley and Ante Creek strike areas near Fox Creek, Alberta. For more information please visit our website at www.haloexp.com or contact:
Halo Exploration Ltd.
President & CEO
- All Volumes reflect a producing day average over 49.5 of 51 days. Calendar and Producing day averages may differ by approximately 36 hours over the course of the 51-day period as a result of various interruptions related to production management and data collection, including running of downhole recorders.
- Details on 51-day production period to September 17th, 2020 - Average rates: 640 BOE/d, 500 bopd (79.5 m3/d), 544 bwpd (86.5 m3/d), 0.838 MMscfd (23.5 e3m3/d). The composition of the oil & gas phase is 78% oil and 22% gas at a gas oil ratio (GOR) of 1679 scf/bbl. The well is flowing up 2 3/8ths inch tubing at 490 psi (3380 kPa) with a casing pressure of 1346 psi (9,280 kPa). The Company cautions that test rates are not necessarily indicative of long-term well or reservoir performance, or of ultimate recovery. See 'Test Rates' in the below forward-looking statements and information.
- McDaniel & Associates reserve and resource report dated May 31, 2019
Certain statements included in this news release, to the extent that they are not historical fact, may constitute 'forward-looking information' under applicable securities legislation. Such forward-looking information is used in this news release for the purpose of providing information about management's current expectations and plans relating to the future development of Halo's business. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information is typically, but not always, identified by the use of words such as 'anticipate', 'believe', 'expect', 'plan', 'intend', 'estimate', 'propose', 'project', 'should', 'target', 'will', 'may', 'potential' or similar words suggesting future outcomes or statements regarding an outlook.
Forward-looking statements or information in this news release includes, but is not limited to, statements or information with respect to: the future drill and completion costs; the closing date of Tranche 2 Senior First Lien Term Loan; Halo's future production capacity; the capital expenditures planned from Q3 2020 onward and the timing of thereof; the wells to be drilled from Q3 2020 onward; expected type curves; reserve estimates; the timing of bringing wells into production; the exercise of any outstanding Warrants; the development, drilling, exploration, and acquisition opportunities and plans for Halo; the anticipated performance of Halo's properties; potential quantities and characteristics of reserves; future production with respect to current assets, business strategy and objectives; the source of funding for Halo's activities including development cost, drilling, completion and tie-in plans; future capital expenditures; cash flow; and operating and other costs. In addition, statements relating to reserves and future production are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.
Although the Company believes that the assumptions and factors on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information as the Company can give no assurance that it will prove to be correct or that any of the events anticipated by such forward-looking information will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. Forward-looking information is 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 Halo believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements, actual results could differ materially from those currently anticipated. In addition to other factors and assumptions which may be identified in this news release, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Halo operates; the timely receipt of any required regulatory approvals; the ability of Halo to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability of the operator of the projects which Halo has an interest in to operate the field in a safe, efficient and effective manner, as applicable; the ability of Halo to obtain future financing on acceptable terms; field production rates and decline rates; the closing of Tranche 2 will proceed as expected; estimated reserves life; costs for drilling and other capital expenditures will be similar to current industry amounts; the ability to find, replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of Halo to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; potential proceeds from the exercise of any outstanding Warrants; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Halo operates; costs to drill, complete and tie-in wells; operating costs and royalty rates; the success that the Company will have in drilling its prospects and the results from such prospects, including initial production rates, reserve additions and related matters; that Halo will have sufficient capital to conduct its drilling program; and the ability of Halo to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Halo and described in the forward-looking information. These risks and uncertainties which may cause actual results to differ materially from the forward looking information include, among other things: the ability of management to execute its business plan; general economic and business conditions; the risk of instability affecting the jurisdictions in which Halo operates; the risks of the oil and natural gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas and market demand; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; risks and uncertainties involving geology of oil and natural gas deposits; the uncertainty of reserves estimates and reserves life; the ability of Halo to add production and reserves through acquisition, development and exploration activities; Halo's ability to enter into or renew leases; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production (including decline rates), costs and expenses; potential delays with respect to the closing of Tranche 2; fluctuations in oil and natural gas prices, foreign currency exchange rates and interest rates; risks inherent in Halo's marketing operations, including credit risk; potential proceeds from the exercise of any outstanding Warrants; production achieved in drilling prospects being different than management's estimate of production profile; uncertainty in amounts and timing of royalty payments; health, safety and environmental risks; risks associated with existing and potential future law suits and regulatory actions against Halo; uncertainties as to the availability and cost of financing; and risks related to the inability to obtain drilling rigs and other services as may be necessary. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.
Management has included the above summary of assumptions and risks related to forward-looking information provided in this document in order to provide investors with a more complete perspective on Halo's current and future operations and such information may not be appropriate for other purposes. Halo's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits Halo will derive. The information contained in this news release does not purport to be all-inclusive or to contain all information that prospective investors may require. Prospective investors are encouraged to conduct their own analysis and reviews of the Company and of the information contained in this news release. Without limitation, prospective investors should consider the advice of their financial, legal, accounting, tax and other advisors and such other factors they consider appropriate in investigating and analyzing the Company.
The forward-looking information contained in this news release are made as of the date hereof and Halo undertakes no obligation to update, publicly or otherwise, or revise any forward-looking information, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws. The forward-looking information contained in this press release are expressly qualified by this cautionary statement. All subsequent forward-looking information, whether written or oral, attributable to the Company or persons acting on its behalf of the Company, are expressly qualified in their entirety by these cautionary statements.
Any references herein to test rates or initial production rates (IP rates) and average rates (bbls/d) should be considered preliminary are not determinative of the rates at which such wells will continue production and decline thereafter, or the ultimate recovery associated with such wells. Additionally, such rates may also include 'load' fluids used in well completion stimulation. Test results and initial production rates disclosed herein may not necessarily be indicative of long term performance or of ultimate recovery. Readers are cautioned not to place reliance on such rates in calculating the aggregate production of the Company.
Oil and Gas Measures
Disclosure provided herein in respect of BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
SOURCE: Halo Exploration Ltd.
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