CALGARY, April 27, 2020 /CNW/ - Journey Energy Inc. (JOY – TSX; JRNGF - OTCQX) ("Journey" or the "Company") announces an update to its operations and credit facility. 

The world oil price took a sharp turn downward in mid-March with the onset of the COVID 19 pandemic and systematic shutdowns of global economies. WTI oil prices have recently declined below USD $20/bbl making several of Journey's properties uneconomic to operate at these levels. Consequently, Journey has shut-in approximately 1,500 boe/d (73% oil and NGL) of its production effective the first week of April. Journey continues to evaluate all of its oil properties as candidates for shut-in.

In addition, Journey's JV partner in the East Shale basin Duvernay resource play, has also shut in all production.  In this play in particular, the recent announcement by the Alberta government, regarding the extension of all mineral leases for an additional year, will provide substantial benefits to Journey allowing us to preserve the future opportunity value of this world class resource even though the wells are currently shut in.

Journey has also implemented a number of other cost-cutting measures in both the field and in its head office.  Most notably, fourteen employees (three in the field and eleven in the head office) and nine field consultants have been temporarily laid off.   In addition, all remaining employees' compensation has been reduced by approximately 10%, which is in addition to the previous compensation reductions achieved through the implementation of four-day work weeks in 2019.   All non-essential services were curtailed while preserving the safe operation of our wells and facilities.  All remaining employees in the head office have undertaken a work-at-home program to help protect themselves and the community from the pandemic. 

Capital expenditures have been reduced to maintenance capital where deemed necessary as well as the completion of its power generation project.  As a result, the Company anticipates spending approximately $2 million for the first half of 2020.  The power project is still slated to begin operation in the third quarter of this year.  Journey continues to work with purchasers on certain non-core asset dispositions.  The dispositions are not expected to generate material proceeds for the Company, however, they will allow Journey to shed certain higher operating costs assets that are not material to its operations.

Journey has oil production hedged at the following levels:

Banking Update

As previously disclosed, pursuant to the fall 2019 borrowing base review and the reduction in commodity prices used by Journey's syndicate in that review, Journey's credit facility of $80 million was expected to be reduced by $1 million per month starting on December 31, 2019 until it reached $75 million at April 30.  The turmoil in the oil and gas industry resulting from COVID -19 and the Saudi-Russia oil price war caused disarray for the worldwide economy and especially Canadian oil and gas producers.  This turmoil resulted in a liquidity squeeze for Journey going into the annual borrowing base review in April.  Pursuant to a series of short term amendments to the credit facility, the maximum bank line of credit was held constant at $77 million.  On April 24, 2020 Journey and its syndicate of banks entered into a forbearance agreement, the terms of which include holding the bank line at $77 million until the termination of the agreement on May 29, 2020, at which time the forbearance will be re-evaluated.   During this intervening period, it is currently anticipated that the industry will receive more clarity around the Federal Government loan support programs for the oil and gas sector announced on April 17, 2020. 

About the Company 

Journey is a Canadian exploration and production company focused on oil-weighted operations in western Canada.  Journey's strategy is to grow its production base by drilling on its existing core lands, implementing waterflood projects, and by executing on accretive acquisitions.  Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods. Journey is also in the early phases of advancing development of an unconventional shale resource play in the oil window of the Duvernay, in the western shale basin of our central core area.

FORWARD LOOKING STATEMENTS AND OTHER ADVISORIES

Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on March 30, 2020. Forward-looking information may relate to Journey's future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, the benefits of lease extensions resulting from shut ins, potential non-core asset dispositions, the temporary nature of staff and compensation reductions and the potential for further forbearance by Journey's banking syndicate. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective funds flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on current estimates, expectations and projections, which Journey believes to be reasonable as of the current date. No assurance can be given that the expectations set out herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.

Readers are cautioned that the above list of risks and factors are not intended to be exhaustive. Additional information on these and other factors that could affect operating and financial results are, or will be, included in reports filed with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

No securities regulatory authority has either approved or disapproved of the contents of this press release.

SOURCE Journey Energy Inc.

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