Pieridae Energy
Limited (“Pieridae”, “PEL”,
or the
“Company”) (TSX: PEA) is pleased
to announce that its wholly-owned subsidiary Pieridae Alberta
Production Ltd. (“PAPL” or the “Borrower”) has successfully
completed a debt refinancing transaction, resulting in new credit
facilities with Prudential Private Capital (“Prudential”) and Voya
Investment Management (“Voya”) (together, the “Noteholders”),
totaling USD $150 million (the “Financing”). The Financing retires
Pieridae’s existing debt in advance of its upcoming maturity and
materially reduces the Company’s cost of capital while providing
significant flexibility and liquidity to enable execution of the
Company’s strategic objectives. The Financing consists of:
- A USD $120 million 45-month senior secured credit facility (the
“Senior Facility”) that bears interest at Secured Overnight
Financing Rate (“SOFR”) + 6.75%, consisting of (i) a USD $25
million revolving loan, (ii) a USD $85 million amortizing term
loan, and (iii) a USD $10 million delayed-draw amortizing term
loan.
- A USD $30 million 51-month subordinated term loan (the
“Subordinated Notes”) that bears interest at a 13% fixed rate.
PEL has also secured a CAD $20 million senior
secured 18-month term loan (the “Bridge Term Loan”) from Third Eye
Capital Corporation (“TEC”), the proceeds of which have been
contributed to PAPL for general corporate purposes and repayment of
indebtedness.
Concurrent with completion of the Financing and
the Bridge Term Loan, the Company fully extinguished its previous
15% fixed rate senior secured term loan (the “Previous Term Loan”),
also held by TEC, in advance of its October 2023 maturity date.
PAPL settled these outstanding obligations for CAD $184.7 million
including principal and accrued interest.
“Pieridae is pleased to have completed this
refinancing transaction with our new lenders Prudential and Voya,”
said Adam Gray, CFO. “The terms of this new loan structure will
materially benefit Pieridae by lowering our cost of capital, adding
flexible repayment features, improving liquidity, and providing
credit for a commodity price hedging strategy aligned with our risk
management program. The successful conclusion of this transaction
is a key step in our previously announced strategy to improve
financial flexibility and reduce leverage.”
Alvarez & Marsal Canada Securities ULC acted
as exclusive financial advisor to Pieridae.
STRUCTURE OF THE
FINANCING1 USD $120 million,
45-month Senior Facility:
- Borrower:
PAPL
- Noteholders:
Prudential and Voya
- USD $25 million
revolving loan (USD $12 million drawn at close)
- USD $85 million
amortizing term loan (fully drawn at close)
- USD $10 million
amortizing delayed draw term loan (undrawn at close) available
between Q3 2023 and Q4 2024 to partially fund the upcoming Waterton
Plant Turnaround
- Maturity date:
March 13, 2027
- Variable
Interest: SOFR + 6.75%, per annum, payable monthly or
quarterly
- Amortization: 2%
quarterly (USD $1.7-$1.9 million per quarter), plus excess cash
sweep (after capex) to accelerate debt repayment
USD $30 million, 51-month Subordinated
Notes:
- Borrower:
PAPL
- Noteholder:
Prudential
- Maturity date:
September 13, 2027
- Fully drawn at
close
- Fixed Interest:
13%, per annum, payable quarterly
- Amortization:
none
- Includes
18,596,322 common share purchase warrants issued by PEL at exercise
price of $0.49 per common share with a term of 7 years
Key Senior Facility Financial Covenants
(PAPL):
- Ratio of Senior
Debt : EBITDAX2 < 2.0x
- Ratio of Total
Debt : EBITDAX < 2.5x
- Ratio of
Adjusted PDP Value3 : Total Debt > 2.0x
- Ratio of EBITDAX
: Interest Expense > 2.0x
Senior Facility Rolling Hedge
Requirement: % forecast Proved Developed Producing (“PDP”)
natural gas and condensate production, net of annualized
royalties.
- 75% months
1-24
- 65% months
25-36
- 45% months
37-48
BRIDGE TERM LOAN CAD
$20 million, 18-month Bridge Term Loan
- Borrower: PEL
(no recourse against PAPL)
- Lender: TEC
affiliated entities
- Maturity date:
December 13, 2024
- Fixed Interest:
18% per annum, accrued and payable at maturity
- Amortization:
none
- Optional
Prepayment: 30-day notice without penalty
- Optional
Conversion Right: convertible to common shares of PEL, subject to
required regulatory and shareholder approvals
It is intended that proceeds from the
disposition of certain non-core assets of the Company will be
sufficient to satisfy the repayment of the Bridge Term Loan;
however, to provide increased flexibility, PEL has agreed, pursuant
to a letter agreement with TEC dated June 13, 2023, to seek
disinterested shareholder approval to amend the Bridge Term Loan
credit agreement to permit the conversion of the Bridge Term Loan
into common shares of PEL. Disinterested shareholder approval of
the amendment will be sought at a special meeting of shareholders
of the Company to be held within 6 months of the Bridge Term Loan.
If disinterested shareholder approval is obtained, and subject to
receipt of required regulatory approvals and opinions, the Bridge
Term Loan credit agreement will automatically be amended to provide
for the option of PEL or TEC, on behalf of the Bridge Term Loan
lenders, to convert the outstanding principal amount and accrued
and unpaid interest thereon and a conversion fee equal to 20% of
the principal amount still outstanding, into common shares in the
capital of PEL, at any time after such shareholder approval and
prior to the maturity date of the Bridge Term Loan, at a conversion
price equal to the five day volume weighted average trading price
prior to the date of the notice of conversion. If disinterested
shareholder approval is not obtained, the Bridge Term Loan will
continue to be repayable in cash in accordance with its original
terms, and along with the Subordinated Notes, will be subject to an
interest premium.
Multilateral Instrument 61-101
– Protection of Minority Security Holders in
Special Transactions (“MI 61-101”)
An affiliate of TEC currently controls
23,255,813 common shares of PEL, representing approximately 14.6%
of the issued and outstanding common shares of PEL, and 5,000,000
common share purchase warrants of PEL, with an exercise price of
$0.70. As a result of TEC’s participation, the Bridge Term Loan
constitutes a “related party transaction” within the meaning of MI
61-101. The Company was exempt from the requirements to obtain a
formal valuation or minority shareholder approval in connection
with the Bridge Term Loan in reliance on sections 5.5(c) and
5.7(1)(f) of MI 61-101, as the Bridge Term Loan was obtained by the
Company from a related party, which: (i) involved only cash
consideration in the nature of a loan on reasonable commercial
terms that are not less advantageous than if the loan were obtained
from an arm’s length person; and (ii) the Bridge Term Loan is not
convertible into, or repayable (as to principal or interest) in,
directly or indirectly, equity or voting securities of the Company
or its subsidiaries. The Company did not file a material change
report 21 days before completion of the Financing and the Bridge
Term Loan as the final terms and provisions of the Financing and
the Bridge Term Loan were not known at that time.
WARRANT ISSUANCE Pieridae has
issued 18,596,322 common share purchase warrants (the “Warrants”)
to Prudential (the “Holder”) as additional consideration for the
Subordinated Notes. Each Warrant shall be exercisable to purchase
one common share in the capital of the Company at an exercise price
of $0.49 per common share. As an alternative to payment of the
aggregate exercise price of the Warrants upon exercise, the
Warrants permit the Holder to exercise on a net basis without the
exchange of any funds. The expiration date of the Warrants is June
13, 2030. The Warrants represent 9.9% of the issued and outstanding
common shares of PEL on a fully diluted basis and 11.7% of basic
shares currently outstanding. Prior to the Financing, the Holder
did not own any of Pieridae’s share purchase warrants.
An early warning report relating to this warrant
issuance will be filed by the Holder on SEDAR, under the Company’s
profile at www.sedar.com. A copy of that report may be obtained by
contacting William H. Bulmer at william.bulmer@prudential.com, by
telephone at (214) 720-6204, or by mail at PCEP Canadian Holdco,
LLC, 2200 Ross Avenue, Suite 4300W, Dallas, Texas, 75201.
REPAYMENT OF PREVIOUS TERM
LOANOn October 16, 2019, PAPL entered a senior secured
fully drawn non-revolving long-term loan facility with a fixed
interest rate of 15.0% per annum, repayable in full on October 16,
2023. The Company may repay the principal at any time prior to
October 16, 2023, upon 90 days’ written notice, without penalty.
The outstanding principal, accrued interest, and deferred fee due
at maturity on the Previous Term Loan was repaid in full on June
15, 2023 in the amount of CAD $184.7 million, fully extinguishing
these obligations.
HEDGE POSITIONThe Company
continues to execute a risk management program governed by its
hedge policy and in compliance with the thresholds required by the
Financing. Pieridae hedges to mitigate commodity price, interest
rate and foreign exchange volatility to protect the cash flow
required to fund the Company’s maintenance capital requirements and
debt service obligations, while allowing the Company to participate
in future commodity price upside.
PAPL has already satisfied the minimum hedging
requirements of the Financing and entered several new senior
secured financial commodity hedge contracts with terms ranging from
5 to 48 months, augmenting the Company’s previously disclosed
physical and financial hedge positions. PAPL’s consolidated hedge
position as at June 15, 2023 is summarized below:
Physical Forward Sales Hedging
Contracts
Contract Type |
Hedged Quantity |
Time Period |
Weighted Avg Fixed Price |
Fixed Price - Natural Gas Sales |
50,000 GJ/d |
Jun 2023 – Oct 2023 |
CAD $4.38/GJ |
Fixed Price - Natural Gas Sales |
5,000 GJ/d |
Nov 2023 – Oct 2026 |
CAD $3.31/GJ |
Fixed Price – AECO/Nymex Differential |
7,500 MMbtu/d |
Jun 2023 |
USD $(0.88)/MMbtu |
Fixed Price – AECO/Nymex Differential |
7,500 MMbtu/d |
Jul 2023 – Oct 2023 |
USD $(1.18)/MMbtu |
Fixed Price - Power Purchases |
52 MW/h |
Jun 2023 – Dec 2023 |
CAD $71.86/MWh |
Fixed Price – Power Purchases |
53 MW/h |
Jan 2024 – Dec 2024 |
CAD $68.38/MWh |
Fixed Price – Power Purchases |
52 MW/h |
Jan 2025 – Dec 2025 |
CAD $79.05/MWh |
Fixed Price – Power Purchases |
47 MW/h |
Jan 2026 – Dec 2026 |
CAD $75.88/MWh |
Financial Derivative Hedging
Contracts
Contract Type |
Hedged Quantity |
Time Period |
Contract Price |
AECO Natural Gas Swap |
2,500 GJ/d |
Jun 2023 |
CAD $3.94/GJ |
AECO Natural Gas Swap |
30,000 GJ/d |
Jun 2023 – Oct 2023 |
CAD $1.89/GJ |
AECO Natural Gas Swap |
30,000 GJ/d |
Jun 2023 – May 2026 |
CAD $3.10/GJ |
AECO Natural Gas Swap |
50,000 GJ/d |
Nov 2023 – May 2026 |
CAD $3.30/GJ |
AECO Natural Gas Swap |
25,000 GJ/d |
Nov 2023 – May 2027 |
CAD $3.62/GJ |
AECO Natural Gas Swap |
35,000 GJ/d |
Jun 2026 – May 2027 |
CAD $3.95/GJ |
WTI Crude Oil Swap |
500 bbl/d |
Jun 2023 – Sep 2023 |
CAD $107.64/bbl |
C5 to WTI Basis Differential Swap |
500 bbl/d |
Jun 2023 – Sep 2023 |
CAD $(4.67)/bbl |
WTI Crude Oil Collar |
1,424 bbl/d |
Jun 2023 – Dec 2023 |
CAD $80.00/bbl - $90.75/bbl |
WTI Crude Oil Collar |
1,405 bbl/d |
Jan 2024 – Dec 2024 |
CAD $80.00/bbl - $90.75/bbl |
WTI Crude Oil Collar |
1,235 bbl/d |
Jan 2025 – Dec 2025 |
CAD $80.00/bbl - $90.75/bbl |
WTI Crude Oil Collar |
917 bbl/d |
Jan 2026 – Dec 2026 |
CAD $80.00/bbl - $90.75/bbl |
WTI Crude Oil Collar |
761 bbl/d |
Jan 2027 – May 2027 |
CAD $80.00/bbl - $90.75/bbl |
LONG TERM DEBT AND
LIQUIDITYWith the success of this refinancing, Pieridae’s
balance sheet has been significantly improved and the Company
expects to benefit from a lower cost of capital, greater financial
flexibility, lower revenue volatility and enhanced overall
stability.
The table below summarizes the debt obligations
of the Company as of June 15, 2023 as compared to March 31, 2023,
our most recently reported fiscal quarter:
Debt Capital Structure (CAD$ million)4 |
June 15, 2023 |
March 31, 2023 |
Previous Term Loan (including
fully amortized deferred fee) |
- |
189.2 |
Senior Term Loan (USD $85
million) |
113.1 |
- |
Senior Delayed Draw Term Loan
(USD $10 million) |
- |
- |
Senior Revolver (USD $12
million drawn - $25 million capacity) |
16.0 |
- |
Subordinated Term Loan (USD $30 million) |
39.9 |
- |
PAPL Total Debt |
169.0 |
189.2 |
Bridge Term Loan |
20.0 |
- |
PEL Total Debt |
189.0 |
189.2 |
As a result of the Financing, Pieridae’s
liquidity is significantly improved, with access to a revolving
credit facility (48% utilized) and a delayed draw term loan. The
table below summarizes the available liquidity of the Company as of
June 15, 2023 as compared to March 31, 2023, our most recently
reported fiscal quarter:
Available Liquidity (CAD$ million)3 |
June 15, 2023 |
March 31, 2023 |
Cash and Cash Equivalents |
5.0 |
8.8 |
Undrawn Delayed Draw Term Loan
(USD $10 million) |
13.3 |
- |
Undrawn
Senior Revolver (USD $13 million undrawn - $25 million
capacity) |
17.3 |
- |
Total Available Liquidity |
35.6 |
8.8 |
ABOUT PIERIDAEPieridae is a
Canadian energy company headquartered in Calgary, Alberta. Through
corporate and asset acquisitions, we have grown into a significant
upstream and midstream producer with assets concentrated in the
Canadian Foothills, producing conventional natural gas, NGLs,
condensate and sulphur. Pieridae provides the energy to fuel
people’s daily lives while supporting the environment and the
transition to a lower-carbon economy. Pieridae’s common shares
trade on the TSX under the symbol “PEA”.
For further information please contact:
Alfred Sorensen,
Chief Executive
Officer |
Adam
Gray, Chief Financial Officer |
Telephone: (403) 261-5900 |
Telephone: (403) 261-5900 |
|
|
Investor Relations |
|
investors@pieridaeenergy.com |
|
FORWARD-LOOKING
STATEMENTSCertain statements contained herein may
constitute "forward-looking statements" or "forward-looking
information" within the meaning of applicable securities laws
(collectively "forward-looking statements"). Words such as "may",
"will", "should", "could", "anticipate", "believe", "expect",
"intend", "plan", "potential", "continue", "shall", "estimate",
"expect", "propose", "might", "project", "predict", "forecast" and
similar expressions may be used to identify these forward-looking
statements.
Forward-looking statements involve significant
risk and uncertainties. A number of factors could cause actual
results to differ materially from the results discussed in the
forward-looking statements including, but not limited to, risks
associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, loss of markets,
volatility of commodity prices, currency fluctuations, imprecision
of resources estimates, environmental risks, competition from other
producers, incorrect assessment of the value of acquisitions,
failure to realize the anticipated benefits or synergies from
acquisitions, delays resulting from or inability to obtain required
regulatory approvals and ability to access sufficient capital from
internal and external sources and other risks and factors outlined
in reports on file with Canadian securities regulatory
authorities.
Forward-looking statements are based on a number
of factors and assumptions which have been used to develop such
forward-looking statements, but which may prove to be incorrect.
Although Pieridae believes that the expectations reflected in such
forward-looking statements are reasonable, undue reliance should
not be placed on forward-looking statements because Pieridae can
give no assurance that such expectations will prove to be correct.
In addition to other factors and assumptions which may be
identified in this document, assumptions have been made regarding,
among other things: the impact of increasing competition; the
general stability of the economic and political environment in
which Pieridae operates; the timely receipt of any required
regulatory and shareholder approvals; the ability of Pieridae to
obtain qualified staff, equipment and services in a timely and cost
efficient manner; the ability of the operator of the projects which
Pieridae has an interest in, to operate the field in a safe,
efficient and effective manner; the ability of Pieridae to obtain
financing on acceptable terms; the ability to replace and expand
oil and natural gas resources through acquisition, development and
exploration; the timing and costs of pipeline, storage and facility
construction and expansion and the ability of Pieridae to secure
adequate product transportation; future commodity prices; currency,
exchange, inflation and interest rates; the regulatory framework
regarding royalties, taxes and environmental matters in the
jurisdictions in which Pieridae operates; timing and amount of
capital expenditures, future sources of funding, acquisition and
divestiture activities, production levels, weather conditions,
success of exploration and development activities, access to
gathering, processing and pipeline systems, advancing technologies,
and the ability of Pieridae to successfully market its oil and
natural gas products.
Forward-looking statements contained herein
concerning the oil and gas industry and Pieridae's general
expectations concerning this industry are based on estimates
prepared by management using data from publicly available industry
sources as well as from reserve reports, market research and
industry analysis and on assumptions based on data and knowledge of
this industry which Pieridae believes to be reasonable. However,
this data is inherently imprecise, although generally indicative of
relative market positions, market shares and performance
characteristics. While Pieridae is not aware of any misstatements
regarding any industry data presented herein, the industry involves
risks and uncertainties and is subject to change based on various
factors.
Readers are cautioned that the foregoing list of
factors is not exhaustive. Additional information on these and
other factors that could affect Pieridae's operations and financial
results are included in reports on file with Canadian securities
regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com), and at Pieridae's website
(www.pieridaeenergy.com). Although the forward-looking statements
contained herein are based upon what management believes to be
reasonable assumptions, management cannot assure investors that
actual results will be consistent with these forward-looking
statements. Investors should not place undue reliance on
forward-looking statements. These forward-looking statements are
made as of the date hereof and Pieridae assumes no obligation to
update or review them to reflect new events or circumstances except
as required by applicable securities laws.
___________________1 Transaction documents were entered into on
June 13, 2023 in furtherance of completion of the refinancing on
June 15, 2023.2 EBITDAX: Earnings before interest, taxes,
depreciation, depletion, amortization, and exploration expense.3
Adjusted PDP value: PV10 value of Proved Developed Producing
(“PDP”) reserves adjusted for cash on hand and mark to market of
hedge position.4 USD denominated amounts converted to CAD at
1.33
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