African Discovery (PK) (USOTC:AFDG)
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ABC Funding, Inc. (“ABC”
or the “Company”) (OTCBB:AFDG)
announced today that it has entered into a definitive Stock Purchase and
Sale Agreement (“SPA”)
to acquire all of the outstanding capital stock of Voyager Gas
Corporation (“Voyager”)
for total consideration of $42 million. Such consideration will consist
of $35 million in cash (subject to adjustment) and 17.5 million shares
of ABC’s common stock, having an agreed upon
value of $7 million. ABC will own an approximate 100% working interest
in the oil and gas properties of Voyager and will operate all of the
properties. The Company expects to close the acquisition on or before
August 20, 2008.
Upon signing the SPA, ABC delivered an $800,000 earnest money deposit to
the selling shareholder of Voyager, which will be credited against the
purchase price at closing. ABC obtained the earnest money through a loan
advanced to ABC by two institutional investors immediately prior to the
entry into the SPA.
The proposed acquisition is subject to customary closing conditions. ABC
intends to utilize a combination of debt and equity in order to fund the
acquisition. Therefore, ABC’s ability to close
the transaction is contingent upon ABC raising sufficient capital, and
the failure to do so could result in the selling shareholder of Voyager
terminating the SPA and retaining the earnest money deposit.
The Voyager assets consist of approximately 14,300 net contiguous acres
located in three substantial lease blocks within the prolific Frio and
Yegua producing trends in Duval County, south Texas, at depths ranging
from 4,000 to 7,500 feet. As of April 1, 2008, the properties had
independently engineered net proved reserves of 16.2 Bcfe. By category,
this includes 5.2 Bcfe of proved developed producing (PDP), 5.6 Bcfe of
proved developed non-producing (PDNP), and 5.4 Bcfe of proved
undeveloped (PUD) reserves. Approximately 69% of total proved reserves
are natural gas, and 31% is crude oil and condensate. In addition to
proved reserves, the Company’s independent
engineers have identified an additional 7.4 Bcfe of net, unrisked
probable reserves, for a 2P total of 23.6 Bcfe. The net investment
required to develop the proved plus probable reserves is estimated at
$13.2 million. The purchase price includes comprehensive 3-D seismic
data which covers the properties.
Based on the independent engineer’s report,
the properties to be acquired have an SEC PV10 value of $75.6 million
for the proved component, and an additional $47.3 million for probable
reserves, or a total proved and probable PV10 value of $122.9 million.
This calculation used April 1, 2008 pricing of $105.56 per Bbl of crude
oil and $9.59 per Mmbtu of natural gas. Based upon total consideration
to the Voyager shareholder of $42 million, the implied cost for proved
reserves only is $2.59 per Mcfe, and $1.78 per Mcfe should probable
reserves be included. On a cash component basis alone, the implied cost
for proved reserves is reduced to $2.16 per Mcfe, and $1.48 per Mcfe
should probable reserves be included. The Company anticipates allocating
additional value to the proved and probable reserves over a period of
time.
Presently, the properties to be acquired consist of 15 producing wells,
9 drilled behind pipe opportunities, plus 6 undeveloped and 7 probable
locations. A typical well may have between 0.3 and 1.5 Bcfe of gross
reserves per completion. All of the wells have multiple pay potential,
reducing the risk of dry hole loss. The cost to drill and complete a
typical well ranges between $0.8 million to $1.2 million, depending upon
location and horizon completed. The producing area is connected to
multiple gas gathering systems, mitigating or eliminating initial
production delays.
The “new” ABC
Funding, after accounting for the transaction:
Properties generate significant sustainable cash flow via established
crude oil and natural gas production;
High degree of operational control: ABC will own approximately 100% WI
in all of Voyager’s oil and gas properties
and will operate all of the properties;
Multi-year drilling inventory, numerous low risk PDNP, PUD and
Probable opportunities can meaningfully ramp production and cash flow;
A large position of 14,300 net contiguous acres provides expansion
potential outside of the core area via bolt-on acquisitions;
Low cost basis of $2.59 per Mcfe based upon total consideration, and
$2.16 per Mcfe based upon cash consideration only;
R/P ratio of approximately 10 years; relatively long half life of 6.4
years; and
Experienced management team.
Robert P. Munn, ABC’s newly appointed
President and Chief Executive Officer, stated: “This
is an important step in the evolution of ABC Funding. The Company will
become a focused, cash flow positive E&P company, with the ability to
meaningfully increase our pro forma production via the organic
development of our substantial acreage position. In addition, management
intends to utilize this transaction as a platform for future accretive
acquisitions. Our commitment will always be the enhancement of long term
shareholders’ value.”
FORWARD-LOOKING STATEMENTS: This document includes forward-looking
statements. Forward-looking statements include, but are not limited to,
statements concerning estimates of expected results from drilling
exploratory and development wells and associated costs, statements
relating to estimates of, and increases in, production, cash flows and
values, statements relating to the continued advancement of ABC Funding,
Inc’s projects and other statements which are
not historical facts. When used in this document, the words such as “could,”
“plan,” “estimate,”
“expect,” “intend,”
“may,” “potential,”
“should,” and
similar expressions are forward-looking statements. Although ABC
Funding, Inc. believes that its expectations reflected in these
forward-looking statements are reasonable, such statements involve risks
and uncertainties and no assurance can be given that actual results will
be consistent with these forward-looking statements. Important factors
that could cause actual results to differ from these forward-looking
statements include the potential that the Company’s
projects will experience technological and mechanical problems, that
geological conditions in the reservoir may not result in commercial
levels of oil and gas production, that changes in product prices could
occur, and other risks may be realized as may be disclosed in ABC’s
company reports filed with the U.S. Securities and Exchange Commission.