Calgary, Alberta, Canada-based oil and gas exploration and production company Equal Energy Ltd. has entered into a definitive agreement to sell several of its Canadian properties for a total cash consideration of $17.4 million. The Asset Disposition includes Equal's interests in the Halkirk, Wainwright, Alliance and Clair areas of Alberta. The Asset Disposition excludes Equal's Cardium assets in the Lochend area and certain royalty interests.
The Asset Disposition is the second step in Equal's ongoing strategic review process. Equal's management and Special Committee of the Board of Directors continue to review opportunities with the company's portfolio which now consists primarily of the Cardium oil play in the Lochend area of Alberta, certain royalty interests in Canada and the liquids rich natural gas asset in Central Oklahoma.
The company has determined that these Asset Disposition properties provide the least attractive future returns among its portfolio of properties. Drilling prospects on these properties cannot economically compete for capital that is limited annually to cash flow.
The Asset Disposition also includes substantially all of Equal's non-producing, suspended and abandoned wells in Alberta, Saskatchewan and BC, such that Equal's remaining decommissioning liabilities will be reduced significantly. Equal estimates that its overall decommissioning provision on its balance sheet will drop by approximately two thirds when the Asset Disposition is closed.
The assets sold have current production of approximately 745 boe/day (July average), consisting of 85% medium and light oil with estimated annualized operating cash flow of $7.8 million based on the first six months of 2012. Adjusting for this sale and the previously announced sale of Northern Oklahoma, Equal's current corporate production is approximately 8,300 boe/day consisting of 48% natural gas, 45% NGL's and 7% oil. Equal will use the proceeds of the sale to reduce amounts outstanding on its credit facility to approximately $53 million and total debt including its convertible debentures to approximately $98 million.
The Asset Disposition is anticipated to be completed on October 12, 2012 and has an effective date of July 1, 2012.