NG ENERGY ANNOUNCES PLANS TO ACCELERATE SINU-9 DEVELOPMENT AND BROKERED PRIVATE PLACEMENT FOR AGGREGATE GROSS PROCEEDS OF C$30 MILLION
/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/
CALGARY, AB, September 3, 2024 – NG Energy International Corp. (“NGE” or the “Company”) (TSXV: GASX) (OTCQX: GASXF) is pleased to announce, as operator of the Joint Operating Agreement signed with its partners Clean Energy Resources, Desarrolladora Oleum and First Global (the “JOA Partners”), that it has entered into a non-binding Memorandum of Understanding (the “MOU”) with its infrastructure partner, INFRAES, for the completion of up to an additional 76 MMcf/d of pipeline capacity from Sinu-9 to be constructed in two stages, over the course of 15 months, following the execution of a definitive agreement.
Sinu-9 Accelerated Infrastructure Development
In accordance with the MOU, the next stage of the Company’s Sinu-9 infrastructure development is expected to be contracted under a Build, Own, Operate and Maintain (“BOOM”) agreement, whereby INFRAES intends to build two pipelines each with up to 38 MMcf/d of capacity and cover 100% of the project cost. The first 38 MMcf/d pipeline will have a construction timetable of nine months following the signed definitive agreement, expected to be signed in Q4 2024. The second pipeline will be a twin pipeline and have a 6-month timetable following the completion of the first stage and the necessary development drilling at Sinu-9, expected to occur throughout 2025.
INFRAES has received permits and easements for 60% of the 16.9 km pipeline route to the receiving station at Recolectora Norte. Over the coming months, the Company, its JOA Partners and INFRAES will evaluate the most optimal location for its second Central Processing Facility (the “CPF”) and finalize plans for the logistics of the pipeline infrastructure.
Accelerated Development Drilling and 3D Seismic at Sinu-9
As part of the next phase of development of Sinu-9, the Company is expected to drill the Hechicero-1 well in Q1 2025, at the latest, and, subsequently, management believes that eight additional exploration and development targets in the area north of Magico-1 need to be drilled in order to fill this infrastructure capacity. This drilling program is anticipated to take up to 24 months to complete, once commenced. The Company is expected to also complete 185 km2 of 3D seismic to enhance and de-risk its development of the southeast portion of the block and its exploration drilling up to Hechizo, while the Company and its partners continue to advance through the exploration phases of its E&P contract with the ANH. The private consultation of 3D seismic is expected to begin in Q4 2024 and should take roughly 12 months to complete.
Don Sewell, President and Director of NGE commented. “As we commence natural gas sales imminently and complete the first stage of infrastructure projects at Sinu-9, we are taking proactive steps to expedite the exploration and development of the block at this pressing time in Colombia as the natural gas shortage in the country is upon us. We are grateful for the swiftness of our JOA Partners in getting this first step done and are thrilled to again work with INFRAES through the planning and execution of the next phase of infrastructure projects at Sinu-9, which, once complete, will enable a production capacity of up to 116 MMcf/d, bringing total gross production capacity for the Company to 136 MMcf/d or roughly 14% of the country’s current daily demand, making NG Energy one of the top independent natural gas producers in Colombia.”
Brokered Private Placement
In conjunction with the acceleration of the Phase II development plan, the Company is pleased to announce that it has entered into an agreement with Eight Capital and Clarus Securities Inc., as co-lead agents and joint bookrunners, on behalf of a syndicate of agents (together, the “Co-Lead Agents”) pursuant to which the Company has launched a proposed private placement, on a “best efforts” basis, of up to 28,572,000 common shares of the Company (the “Offered Shares”), at an offering price of C$1.05 per Offered Share (the “Offer Price”), for gross proceeds of up to C$30,000,600 (the “Offering”) to qualified accredited investors.
The Company has granted the Co-Lead Agents the option, exercisable in whole or in part at any time until 48 hours prior to the closing of the Offering, to offer for sale an additional 15% of the Offered Shares in the Offering, at the Offer Price (the “Co-Lead Agents Option”).
Upon closing of the Offering, the Company will pay to the Co-Lead Agents a cash commission equal to 6% (3% for president’s list orders) of the gross proceeds of the Offering (including any exercise of the Co-Lead Agents Option), all payable in cash.
The net proceeds of the Offering will be primarily used for the Company’s next phase of drilling and 3D seismic at Sinu-9, flowlines connecting wells to the first and second CPFs at Sinu-9, drilling of Aruchara-4 at Maria Conchita, completion of reservoir studies at both Sinu-9 and Maria Conchita, and any remaining balance will be used for working capital and general corporate purposes.
The Company expects to receive participation from several premier Canadian and international institutions. Additionally, the Company expects that insiders and current stakeholders will participate in the Offering and, to date, has received interest from potential investors for the balance of the Offered Shares in the Offering.
The securities being offered have not, nor will they be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons in the absence of U.S. registration or an applicable exemption from the U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.
The Offering is scheduled to close on or about September 18, 2024, or such other date as the Company and the Co-Lead Agents may agree and is subject to certain conditions including, but not limited to, the execution of an agency agreement and the receipt of all necessary regulatory and other approvals including that of the TSX Venture Exchange. The Offered Shares shall be subject to a four-month plus one day hold period commencing on the day of the closing of the Offering, under applicable Canadian securities laws.
Brian Paes Braga, CEO of NGE commented, “We are very pleased to announce our brokered private placement and the strong investor interest received; the Offering is expected to bring tier-1 global and premier Canadian institutions on board as shareholders, as well as existing strategic partners and insiders. This timely investment coincides with Colombia's urgent need for reliable domestic natural gas supply as the country faces a rapidly approaching gas shortage. We are confident that our accelerated development of Sinu-9, which has already demonstrated significant resource growth in its initial stages, will play a vital role in bridging this supply gap. As we enter the next phase of development, we are well-positioned to drive production growth, deliver conversion of our large resource base into reserves, and create value for all stakeholders as we continue to execute on our strategic plan. I would like to extend my sincere gratitude to all parties involved for their tireless efforts, as we strive to make a meaningful impact on Colombia's energy landscape.”
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
About NG Energy International Corp.
NG Energy International Corp. is a growth-oriented natural gas exploration and production company focused on delivering long-term shareholder and stakeholder value through the discovery, delineation and development of large-scale natural gas fields in developing countries, supporting energy transition and economic growth. NGE’s team has extensive technical and capital markets expertise with a proven track record of building companies and creating significant value in South America. In Colombia, the Company is executing on this mission with a rapidly growing production base and an industry-leading growth trajectory, delivering natural gas into the premium-priced Colombian marketplace (~US$8/MMBtu) with projected triple digit production growth over the next 2-3 years towards a production goal of 200 MMcf/d. The Company produces conventional natural gas expects to achieve >150% increase in production in 2024 and has seen a 551% year-over-year increase in 3P reserves, 314% year-over-year increase in 2P reserves and 241% increase in 1P reserves. To date, over US$100 million has been invested in the exploration and development of Sinu-9 and Maria Conchita with significant contributions from insiders who currently own approximately 34% of the Company. Recently, Macquarie Group provided financing of up to US$100 million, including initial committed funding of US$50 million, resulting in a fully-funded 2024/2025 development plan and aligning NGE with a global financial institution. For more information, please visit SEDAR+ (www.sedarplus.ca) and the Company’s website (www.ngenergyintl.com).
On Behalf of the Board of Directors
Brian Paes-Braga, Chairman & CEO
+1 (604) 404-4335
Cautionary Statement Regarding Forward-Looking Information
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release, including, without limitation, the information contained in this news release regarding the timetables for completing either of the two pipelines, the expected contracting for the two pipelines, the timing of the finalization of the optimal location of the CPF, the timing of the development drilling and seismic at Sinu-9 (including the commencement of drill of Hechicero-1 and the need for eight additional exploration or development wells and the duration of the drilling program once commenced), , the percentage of Colombia’s gas production that NGE will produce upon completion of both stages at Sinu-9, the Company’s ability to drive production growth, deliver conversion of its large resource base into reserves and create value for all stakeholders, reserves growth, the use of proceeds of the Offering, strong investor interest in the Offering (and the make-up of the investors), and the completion of the Offering. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements are described under the caption “Risk Factors” in the Company's most recent Management Discussion and Analysis and its Annual Information Form dated April 26, 2024, which are available for view on SEDAR+ at www.sedarplus.ca. These risks include but are not limited to, the risks associated with the oil and natural gas industry, such as exploration, production and general operational risks, the volatility of pricing for oil and natural gas, the inability to market natural gas production and changes in natural gas sale prices, changing investor sentiment about the oil and natural gas industry, any delays in production, marketing and transportation of natural gas, drilling costs and availability of equipment, regulatory approval risks and environmental, health and safety risks. Forward-looking statements contained herein are made as of the date of this news release, and the Company disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. Although management believes that these forward-looking statements have a reasonable basis, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.
Abbreviations
The abbreviations set forth below have the following meanings:
| Natural Gas | ||
| MMcf/d | million cubic feet per day | |
| MMBtu | one million British thermal units | |
| Other | ||
| 3P reserves | Proved + Probable + Possible reserves | |
| 2P reserves | Proved + Probable reserves | |
| 1P reserves | Proved reserves | |
Information Regarding the Preparation of Reserves and Resource Information
Sproule International Limited (“Sproule”), an independent qualified reserves and resources evaluator, has conducted the reserves and resource evaluation for the Maria Conchita Block and the Sinú-9 Block in accordance with the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”). It adheres in all material aspects to the principles and definitions established by the Calgary Chapter of the Society of Petroleum Evaluation Engineers regarding annual reserve and resource reports that are being released in the public domain. The COGE Handbook is incorporated by reference in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
The Company’s Form 51-101F1 – Statement of Reserves Data and Other Oil and Gas Information for the fiscal year ended December 31, 2023, prepared by Sproule in accordance with the COGE Handbook with an effective date of December 31, 2023 (the “2023 51-101F1”) was filed on SEDAR+ on April 26, 2024. As per the requirements of Form 51-101F1, since the Maria Conchita Block and the Sinú-9 Block are both located in Colombia, the Company has disclosed its reserves in the 2023 51-101F1 on an aggregated basis. The reserves in the 2023 51-101F1, which are attributed to the Sinú-9 Block are based on the Sinú-9 Report (as defined below) and the reserves in the 2023 51-101F1, which are attributed to the Maria Conchita Block are based on the Maria Conchita Report (as defined below). The Company uses natural gas liquids and conventional natural gas as the two product types to report the Company’s reserves.
The report entitled “Evaluation of the P&NG Reserves and Resources of NG Energy International in the Sinú-9 Block, Colombia” (the “Sinú-9 Report”) was prepared by Sproule with an effective date of December 31, 2023 and a preparation date of December 21, 2023. The Sinú-9 Block is located in the Department of Córdoba, Colombia. The Company’s working interest in the Sinú-9 Block is 72%, subject to payment of ANH sliding scale royalties. Reserves and resources attributed to the Hechizo, Brujo, Magico, Mago, Hechicero, Encanto, Milagroso, Porquero, Embrujo, Ensalmo and Sortilegio zones have been included in the Sinú-9 Report. Contingent Resources for the Sinú-9 Block are petroleum and natural gas classified as “development pending” and are attributed a chance of development of 80%. The Prospective Resources assigned to the Brujo-Porquero, Hechicero-Porquero and Milagroso fields are subclassified as “prospects” and are attributed a chance of discovery of 58-60% and a chance of development of 66%. The Prospective Resources assigned to the Embrujo, Ensalmo and Sortilegio fields are subclassified as “lead” and are attributed a chance of discovery of 25-30% and a chance of development of 66%. The product type reasonably expected from the Contingent Resources and Prospective Resources is conventional natural gas.
The report entitled “Evaluation of the P&NG Reserves and Resources of NG Energy International in the Maria Conchita Block, Colombia” (the “Maria Conchita Report”) was prepared by Sproule with an effective date of December 31, 2023 and a preparation date of December 20, 2023. The Company holds an 80% working interest in the Maria Conchita Block, which is located in the Department of La Guajira, Colombia. Reserves and resources attributed to the H1, H1A, H1A1, H1B, H2, H2B, H3, H4 and LM2 zones have been included in the Maria Conchita Report. Contingent Resources for the Maria Conchita Block are petroleum and natural gas classified as “development pending” and are attributed a chance of development of 0.73. The Prospective Resources for the Maria Conchita Block are subclassified as “prospect” and are attributed a chance of discovery of 0.41 and chance of development of 0.73. The product type reasonably expected from the Contingent Resources and Prospective Resources is conventional natural gas.
For additional information regarding the Sinú-9 Report, the Maria Conchita Report and the reserves and resources information contained in this news release please see the 2023 51-101F1 filed on SEDAR+ on April 26, 2024, and the Company’s news release dated December 27, 2023 entitled “NG Energy Announces 551% YOY Increase to 3P Reserves”.
Caution Respecting Reserves Information
The determination of oil and natural gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of Proved, Probable and Possible reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of recovery. The estimation and classification of reserves requires the application of professional judgement combined with geological and engineering knowledge to assess whether or not specific reserves classification criteria have been satisfied. Knowledge of concepts including uncertainty and risk, probability and statistics, and deterministic and probabilistic estimation methods is required to properly use and apply reserves definitions.
The recovery and reserve estimates of natural gas liquids and natural gas reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein. The estimated future net revenue from the production of the disclosed natural gas reserves, whether calculated without discount or using a discount rate, does not represent the fair market value of these reserves. Estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
Information Regarding Reserves
Reserves are estimated remaining quantities of commercially recoverable oil, natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are further classified according to the level of certainty associated with the estimates and may be subclassified based on development and production status.
“Proved reserves” are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated Proved reserves.
“Probable reserves” are those additional reserves that are less certain to be recovered than Proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable reserves.
“Possible reserves” are those additional reserves that are less certain to be recovered than Probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated Proved plus Probable plus Possible reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of Proved plus Probable plus Possible reserves.
The qualitative certainty levels referred to in the definitions above are applicable to “individual reserves entities” (which refers to the lowest level at which reserves calculations are performed) and to “reported reserves” (which refers to the highest-level sum of individual entity estimates for which reserves estimates are presented). Reported reserves should target the following levels of certainty under a specific set of economic conditions:
A qualitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates will be prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods.
Each of the reserve categories (Proved and Probable) may be divided into developed and undeveloped categories as follows:
“Developed Producing reserves” are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
“Developed Non-Producing reserves” are those reserves that either have not been on production, or have previously been on production, but are shut-in, and the date of resumption of production is unknown.
“Undeveloped reserves” are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g., when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (Proved, Probable and Possible) to which they are assigned and expected to be developed within a limited time.
In multi-well pools it may be appropriate to allocate total pool reserves between the developed and undeveloped subclasses or to subdivide the developed reserves for the pool between developed producing and developed nonproducing. This allocation should be based on the estimator’s assessment as to the reserves that will be recovered from specific wells, facilities and completion intervals in the pool and their respective development and production status.
Information Regarding Contingent Resources
“Contingent Resources” are those quantities of oil or natural gas estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies.
Contingent Resources are further categorised according to the level of certainty associated with the estimates and may be sub-classified based on a project maturity and characterised by their economic status. There are three classifications of Contingent Resources: low estimate, best estimate and high estimate. Best estimate is a classification of estimated resources described in the COGE Handbook as the best estimate of the quantity that will be actually recovered; it is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.
The project maturity subclasses include development pending, development on hold, development unclarified and development not viable. All of the Contingent Resources disclosed in this news release are classified as development pending. Development pending is defined as a contingent resource where resolution of the final conditions of development is being actively pursued. Chance of development is the likelihood that an accumulation will be commercially developed.
Conversion of the development pending Contingent Resources to reserves is dependent upon a final investment decision for the natural gas development of the Maria Conchita Block and the Sinú-9 Block.
There is no certainty that any portion of the Contingent Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Contingent Resources.
Information Regarding Prospective Resources
This news release discloses estimates of the Company's Prospective Resources. There is no certainty that it will be commercially viable to produce any portion of such Prospective Resources. Estimates of Prospective Resources involve additional risks over estimates of reserves. The accuracy of any resources estimate is a function of the quality and quantity of available data and of engineering interpretation and judgment. While resources presented herein are considered reasonable, the estimates should be accepted with the understanding that reservoir performance subsequent to the date of the estimate may justify revision, either upward or downward.
“Prospective Resources” are defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. The chance that an exploration project will result in the discovery of petroleum is referred to as the chance of discovery. The chance that an accumulation will be commercially developed is referred to as the chance of development
Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery:
Prospective Resources are not, and should not be confused with, reserves or Contingent Resources. "Prospective Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development.
There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources or that the Company will produce any portion of the volumes currently classified as Prospective Resources.
The estimates of Prospective Resources involve implied assessment, based on certain estimates and assumptions, that the resources described exists in the quantities predicted or estimated, as at a given date, and that the resources can be profitably produced in the future. Actual Prospective Resources (and any volumes that may be reclassified as reserves) and future production therefrom may be greater than or less than the estimates provided herein.
Information Regarding Condensate
“Condensate”, also called “gas condensate”, or “natural gas liquids”, is a low-density mixture of hydrocarbon liquids that are present as gaseous components in the raw natural gas produced from many natural gas fields. Some natural gas species within the raw natural gas will condensate to a liquid state if the temperature is reduced to below the hydrocarbon dew point temperature at a set pressure. Raw natural gas may come from any one of three types of natural gas wells:
(a) Crude Oil Wells: Raw natural gas that comes from crude oil wells is called “associated gas”. This natural gas can exist separate from crude oil in the underground formation or be dissolved in the crude oil. Condensate produced from oil wells is often referred to as “lease condensate”;
(b) Dry Gas Wells: These wells typically produce only raw natural gas that contains no hydrocarbon liquids. Such natural gas is called “non-associated gas”. Condensate from dry natural gas is extracted at natural gas processing plants and is often called “plant condensate”; and
(c) Condensate Wells: These wells produce raw natural gas along with natural gas liquids. Such natural gas is also called “associated gas” and is often referred to as “wet gas”.
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NG Energy International Corp.
Suite 800, 365 Bay Street
Toronto, ON
Canada M5H 2V1
[email protected]