Prairie Provident Resources Inc. (TSX:PPR) (“Prairie Provident") is pleased to announce that it has entered into an agreement with Research Capital Corporation, as lead agent and sole bookrunner, on behalf of a syndicate of agents including Haywood Securities Inc. (collectively, the “Agents”), for a brokered “best efforts” equity financing for aggregate gross proceeds of up to approximately $9,100,000, comprised of:
(a) an offering up to 96,470,589 units of the Company (“Units”) at a price of $0.0425 per Unit for gross proceeds of up to $4,100,000, on a prospectus-exempt basis pursuant to the ‘listed issuer financing exemption’ (LIFE) under applicable Canadian securities laws (the “LIFE Offering”), with (i) each Unit consisting of one common share of the Company (“Common Share”) and one Common Share purchase warrant (“Warrant”), and (ii) each Warrant to entitle the holder to subscribe for and purchase one Common Share at an exercise price of $0.05 for a period of 36 months following closing; and
(b) a private placement of up to 117,647,059 Common Shares at a price of $0.0425 per Common Share for gross proceeds of up to $5,000,000, pursuant to available exemptions from the prospectus requirements of applicable Canadian securities laws (the “Private Placement” and, together with the LIFE Offering, the “Offerings”). Warrants will not be issued to purchasers under the Private Placement.
The Company’s principal and largest shareholder, PCEP Canadian Holdco LLC (“PCEP”), along with certain directors and officers of the Company, have indicated an intention to participate in the Offerings in an aggregate amount of approximately $7,350,000 (collectively, the “Lead Orders”). It is expected that the Private Placement will be fully subscribed through the Lead Orders, and that the balance of the Lead Orders not fulfilled under the Private Placement will be fulfilled under the LIFE Offering. All subscriptions on account of Lead Orders will be subject to insider participation limits under applicable Toronto Stock Exchange (“TSX”) rules.
Prairie Provident intends to use the net proceeds from the Offerings to drill two additional Basal Quartz horizontal wells in the first quarter of 2025 and for working capital and general corporate purposes, including expenses related to the Offerings. Including the above two Basal Quartz horizontal wells, the Company anticipates drilling a total of three Basal Quartz horizontal wells in the first quarter of 2025.
Prairie Provident’s Basal Quartz Play in Michichi: A Unique Publicly Traded BQ Junior
Prairie Provident has established its Basal Quartz (“BQ”) play in the Michichi core area as a significant growth driver, supported by robust well economics, an extensive drilling inventory, and strategic infrastructure. In December 2024, Prairie Provident reported strong initial results from its first two BQ wells, effectively proving the play concept. The first horizontal well achieved an IP30 (initial 30-day average production) rate of approximately 415 boe/d (66% liquids)1 and the second delivered an IP21 (initial 21-day average production) rate of approximately 375 boe/d (64% liquids).2 Continued production in the weeks following has yielded IP60 (initial 60-day average production) rates of approximately 333 boe/d (66% liquids)3 and approximately 305 boe/d (62% liquids)4, respectively. A focus on operational efficiency brought both wells on-stream within 25 days of their respective spud dates.
Prairie Provident has a Michichi-area land position of approximately 153,000 net acres (239 net sections) on which it has identified over 40 horizontal BQ drilling opportunities, providing ample room for growth. None of the Company's BQ drilling opportunities are booked locations to which any reserves were attributed in the most recent independent evaluation of Prairie Provident’s reserves data, effective December 31, 2023, by Sproule Associates Limited.
Activity in the BQ play is primarily led by private operators. Prairie Provident has a unique position as the only publicly-traded company actively drilling in this play.
Basal Quartz: A Top-Tier Play in the WCSB
The BQ fairway, extending from Brooks to Drumheller (Michichi) in central Alberta, has rapidly become, in the Company’s view, one of the premier oil-producing plays in the Western Canadian Sedimentary Basin (WCSB). The availability of extensive 2D and 3D seismic data, along with legacy vertical wells penetrating the Mannville group, has significantly de-risked this play. Modern horizontal drilling techniques combined with enhanced frac completion designs have unlocked substantial economic potential, making the BQ competitive with other leading plays in the WCSB, including the Montney and Clearwater. Publicly-available industry data indicates that production along the BQ trend has surpassed 40,000 boe/d (77% liquids), with operators having drilled over 100 horizontal wells in 2024 alone, further de-risking the play. Offset competitor wells in analogous zones have demonstrated peak production rates exceeding 1,200 bbl/d, further validating the play’s potential.
Basal Quartz Well Economics: High Returns, Quick Payouts
The Company estimates that the average drill, complete, equip, and tie-in cost for a single BQ horizontal well in Michichi is approximately $3.5 million. The BQ play offers attractive returns and payouts, making it, in the Company’s view, one of the most competitive plays in the WCSB. Based on internal estimates, the Company’s BQ wells have the potential to deliver impressive internal rates of return (“IRRs”) greater than 300% (based on WTI US$70/bbl and AECO C$3.00/mcf) with payout periods of approximately eight months or less.
Strategic Land Base with Multi-Year Inventory
Prairie Provident holds a strategic and concentrated approximately 153,000 net acre (239 net sections) land base in Michichi and with multi-zone potential. In addition to the BQ, the acreage offers development opportunities in the Banff and other formations. With over 40 identified BQ drilling opportunities, Prairie Provident has the scalability to support long-term growth, benefiting from the de-risked nature of its lands due to offsetting competitor activity.
Company-Owned Infrastructure and Significant Tax Pool Coverage
Prairie Provident benefits from a combination of legacy and third-party infrastructure in the Michichi area, providing advantageous egress solutions. The Company owns two oil batteries (one LACT-connected) and two gas plants with a combined inlet capacity of 10 MMscf/d. Year-round access, existing surface leases and on-site facilities combine to facilitate cost-efficient operations with reduced downtime, supporting Prairie Provident’s development strategy.
Prairie Provident has significant tax pool coverage with approximately $590 million in tax pools, including approximately $330 million of non-capital losses.
Additional Financing Details
The Agents will be granted an option to increase the size of the LIFE Offering by up to an additional 14,470,589 Units (up to $615,000), exercisable in whole or in part up to two business days before closing.
Closing of the Offerings is expected to occur on or about February 24, 2025, or such other date or dates as Prairie Provident and the Agents may agree, and is subject to certain conditions including receipt by Prairie Provident of all necessary approvals from the TSX.
The LIFE Offering will be made in accordance with the ‘listed issuer financing exemption’ in Part 5A of National Instrument 45-106 – Prospectus Exemptions (“NI 45-106”), to purchasers in any province of Canada, except Québec. The Units issued and sold under the LIFE Offering will not be subject to a ‘hold period’ pursuant to applicable Canadian securities laws.
There is an offering document related to the LIFE Offering that can be accessed under the Company’s issuer profile at www.sedarplus.ca and on the Company’s website at www.ppr.ca. Prospective investors should read this offering document before making an investment decision.
The Private Placement will be made in reliance on available exemptions from the prospectus requirements of applicable Canadian securities laws, and the Common Shares issued and sold thereunder will subject to a hold period of four months and one day from the date of issuance.
In consideration for their services, the Agents will receive a cash commission of 8.0% of the aggregate gross proceeds of the Offerings (reduced for Lead Orders) and non-transferable broker warrants equal to 8.0% of the total number of Units sold under the LIFE Offering (except for Lead Orders). Each broker warrant will entitle the holder to purchase one Unit at an exercise price of $0.0425 per Unit for a period of 36 months following closing.