TORONTO, Nov. 6, 2012 /PRNewswire/ - Franco-Nevada Corporation (TSX: FNV, NYSE: FNV) ("Franco-Nevada") today announced that it has entered into a purchase and sale agreement with Penn West Petroleum Ltd. and Penn West Petroleum (collectively "Penn West") to acquire an approximate 11.7% net royalty interest ("NRI") in the Weyburn Oil Unit (the "Unit") for C$400 million in cash, prior to normal closing adjustments.
The Unit is a conventional unitized oil field encompassing approximately 53,360 acres located in southeast Saskatchewan. The Unit has been in production for approximately 50 years with production to date of approximately 460 million barrels ("MMbbl") out of an initial oil in place estimate of 1.4 billion barrels. Current production levels are approximately 26,000 barrels of oil per day of medium grade slightly sour crude. The reserve life index based on proven plus probable reserves is more than 20 years. Significant opportunity remains within the Unit for further increases in oil recovery through enhanced oil recovery technology. The Unit is operated by Cenovus Energy Inc.
The NRI is paid net of operating and capital costs similar to a mineral net profits interest royalty. This adds to Franco-Nevada's existing interests in the Weyburn Unit which include both a 0.44% overriding royalty and a 2.26% working interest. The NRI adds approximately 24 MMbbl (20.4 MMbbl net after crown royalties) to Franco-Nevada's proven plus probable oil equivalent reserves, based on an independent engineering report effective as of December 31, 2011. Based on the purchase price the cost of the acquired proven plus probable reserves is C$16.53 per barrel.
Closing is expected to occur on or about November 30, 2012 and will be funded through Franco-Nevada's existing working capital. Once closed, this acquisition is expected to be immediately accretive to Franco-Nevada's revenue, cash flow and earnings. It furthers the diversification of Franco-Nevada's royalty and stream portfolio with the addition of a known and proven cash-flowing asset in a safe jurisdiction. After this acquisition, Franco-Nevada expects that at least 80% of its future revenues will continue to be earned from precious metals assets. On this transaction, Scotia Waterous acted as an advisor on behalf of Franco-Nevada and CIBC World Markets acted as an advisor on behalf of Penn West.Conference call details Management of Franco-Nevada will host a conference call, in conjunction with the third quarter 2012 conference call, on November 7, 2012 at 10:00 a.m. Eastern Time to review this transaction. Analysts and interested investors are invited to participate as follows;
- Conference Call: Local: 647-427-7450; Toll-Free: 1-888-231-8191; Title: Franco-Nevada Corporation Third Quarter 2012 Financial Results .
- Conference Call Replay: A recording will be available until November 14, 2012 at the following numbers: Local: 416-849-0833; Toll-Free: 1-855-859-2056; Pass code: 58833221.
- Webcast: A live audio webcast will be accessible at www.franco-nevada.com under upcoming events.
- Slides: A presentation to accompany the conference call will be available on the Company's website prior to the call.
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