TORONTO, Dec. 19, 2011 /CNW/ - Sprott Resource Corp. (TSX: SCP) - Sprott Resource Corp. ("SRC") today announced the 2012 capital expenditure program for its 81% (basic interest) owned subsidiary Waseca Energy Inc. ("Waseca" or the "Company") and the conclusion of a previously announced process to review strategic alternatives available to the Company.
2012 Capital Expenditure Program
The Company has approved its 2012 capital budget of $36 million which will be directed toward the drilling of up to 60 wells and to the accumulation of additional lands that position Waseca for long-term growth in production and reserves. The production base of the Company delivers positive cash flow and fully achieves a self-funded capital program for 2012. Waseca's 2012 exit rate guidance is estimated at between 4,600 and 5,000 barrels per day ("bbl/d").
Strategic Review Process
On October 18, 2011, SRC announced the commencement of a process to consider a range of strategic alternatives available to Waseca, with a view to maximizing shareholder value. Since that time, the Board of Directors of Waseca has considered corporate sale proposals, proposals for a material portion of Waseca's assets and a corporate reorganization among other alternatives. After careful analysis, consideration and advice from its financial advisor, RBC Rundle, a division of RBC Capital Markets, the Board has concluded that the most beneficial outcome for all shareholders is for the Company to continue to operate independently and pursue its existing business plan which has achieved significant organic production growth.
With current production in excess of 3,500 bbl/d, positive monthly cash flow and a strong balance sheet, the Company is well positioned to continue building on its current success.
About Waseca Energy Inc.
Founded in 2008, Waseca is a privately-owned company with approximately 47,000 net acres and in excess 3,500 bbl/d of cold flow heavy oil production in Lloydminster area of Saskatchewan. Waseca also holds a 100% working interest in the Golden Lake SAGD project. Waseca is majority owned by Sprott Resource Corp.
About Sprott Resource Corp.
SRC is a Canadian-based company, the primary purpose of which is to invest and operate in natural resources. Through acquisitions, joint ventures and other investments, SRC seeks to provide its shareholders with exposure to the natural resource sector for the purposes of capital appreciation and real wealth preservation. SRC is well positioned to draw upon the considerable experience and expertise of both its Board of Directors and Sprott Consulting Limited Partnership (SCLP), of which Sprott Inc. is the sole limited partner. Pursuant to a management services agreement between SCLP and SRC, SCLP provides day-to-day business management for SRC as well as other management and administrative services. SRC invests and operates through Sprott Resource Partnership (SRP), a partnership between SRC and Sprott Resource Consulting Limited Partnership, an affiliate of SCLP which is the managing partner of SRP.
Advisory Regarding Forward Looking Information
This news release includes forward-looking information relating to Waseca's 2012 capital program and 2012 exit rate of production. Forward-looking information looks into the future and provides an opinion as to effect of certain events and trends on the business of SRC and Waseca. The forward-looking information contained in this news release is based on current expectations and various estimates, factors and assumptions including, among others: future commodity prices, production and development costs, royalties and capital expenditures; initial production rates; production decline rates; ultimate recovery of reserves; success of future exploitation activities; marketability of production; effects of government regulation; and other government levies that may be imposed over the producing life of reserves.
All forward-looking information is inherently uncertain and subject to a variety of risks, uncertainties and other factors that may cause SRC's and Waseca's actual results, performance or achievements to be materially different from those expressed or implied from such information, including: general economic, market and business conditions; fluctuation in market prices for petroleum and natural gas; fluctuations in foreign exchange rates; changes in laws and regulations; geological, technical, drilling and processing problems and other difficulties in producing petroleum and natural gas reserves; uncertainties associated with estimating petroleum and natural gas reserves; and risks associated with oil and gas operations generally.
SRC has attempted to identify important factors that could cause its and Waseca's actual results, performance and achievements to differ materially from those contained in the forward-looking information contained in this news release. However, there can be other factors that cause results, performance and achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on the forward-looking information contained in this news release. SRC does not intend, and does not assume any obligation, to update these forward-looking information contained in this news release except as required by law.
