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EXECUTIVE OVERVIEW
MEC Operating Company ULC (“Merit” or “the Company”) has retained RBC Rundle as the exclusive agent for the disposition of the Company’s oil and gas properties (the “Properties”) in Canada. Merit is a private firm specializing in direct investments in oil and gas assets and has been active in Canada since 2001. The Company’s Properties are concentrated in three main operating areas; Central Alberta, West Central Alberta and Northwest Alberta (each, a “Property Group”). The Company intends to structure the disposition(s) as one or more corporate transactions (but will not materially impact a purchaser’s tax pool coverage), but may also be willing to divest the Northwest Alberta assets as an asset transaction.
In aggregate the Company’s Properties averaged 7,956 boe/d during January 2011. Current oil and NGL production weighting is 46% but is over 50% on a reserve basis. Current April 2011 production is over 9,000 boe/d. Net Operating Income for the year ending December 31, 2010 was $69,234,000. A recent Sproule and Associates Ltd. report dated May 31, 2011 assigned 2P reserves totalling 28,092 Mboe to the Properties.
As a PDP focused investment fund, Merit has averaged capital re-investment of less than 25% of annual operating income on this portfolio. The Company’s conservative approach has positioned the Canadian assets for significant production and reserve growth for a new purchaser based on an extensive multi-year inventory of capital projects, many of which have been recognized in the Sproule report. The majority of identified opportunities are directed to oil development including infill drilling, recompletions, pump optimizations, and water flood projects.
