CALGARY, AB, March 16, 2021 /CNW/ - Gear Energy Ltd.
("Gear" or the "Company") (TSX: GXE) is pleased to
announce that today it is issuing a notice of redemption to holders
of its currently outstanding $12.7 million 7.0% Convertible Unsecured
Subordinated Debentures due November 30,
2023 (the "Debentures"). As set out in the
notice of redemption, the redemption date of the Debentures will be
April 26, 2021 (the "Redemption
Date"). The Debentures are redeemable for an amount equal
to the principal amount of the Debentures plus accrued unpaid
interest up to, but excluding, the Redemption Date.
With current strength in oil markets, this redemption will
further enhance Gear's exceptional balance sheet providing
strategic optionality to consider future acquisitions or
development capital expansions to take advantage of the Company's
deep inventory of drilling and waterflood opportunities. The
redemption is anticipated to save the Company annualized interest
costs of approximately $0.9 million
or $0.45 per boe.
Utilizing existing guidance, no change to existing capital
budget and current strip prices of approximately US$62.00 WTI and a US$11.50 WCS differential, the redemption is
anticipated to improve forecasted 2021 exit net debt from
approximately $21 million to
approximately $8 million. This is
forecast to provide Gear a 2021 ratio of net debt to funds from
operations of 0.2 times.
Pursuant to the terms of the Debentures, the Company has elected
to satisfy its obligation to pay all of the principal amount of the
Debentures to be redeemed by issuing and delivering to the holders
that number of common shares of the Company (the "Common
Shares") obtained by dividing such principal amount by 95% of
the current market price of the Common Shares on the Redemption
Date. For this purpose, the current market price will be calculated
based on the volume weighted average trading price of the Common
Shares on the Toronto Stock Exchange (the "TSX") for the 20
consecutive trading days ending on the fifth trading day
preceding the Redemption Date. The Company anticipates announcing
the current market price to be used to calculate the number of
Common Shares that each holder of Debentures will receive on the
redemption of the Debentures on or about April 20, 2021. The accrued and unpaid interest
on the Debentures up to (but excluding) the Redemption Date shall
be paid in cash.
Prior to the redemption of the Debentures, each holder will have
the right to convert their Debentures into Common Shares at a
conversion price of $0.32 per Common
Share (the "Conversion Price") at any time on or prior
to April 23, 2021. A holder electing
to convert the principal amount of their Debentures will receive
3,125 Common Shares for each $1,000
principal amount of Debentures converted plus a cash payment for
accrued unpaid interest up to, but excluding, the Conversion Date.
No fractional shares will be issued on redemption or conversion
but, in lieu thereof, the Company shall pay the cash equivalent
thereof determined on the basis of the current market price of the
Common Shares on the Redemption Date or conversion date, as
applicable (less any tax required to be deducted, if any).
As the Debentures were issued in "book-entry only" form and
are held by CDS Clearing and Depository Services Inc., beneficial
holders of Debentures must contact their broker, dealer, bank,
trust company or other nominee to exercise their right to convert
their Debentures. Beneficial holders who intend to convert their
Debentures should ensure that they contact their broker, dealer,
bank, trust company or other nominee well in advance of the
Redemption Date to ensure that they understand the procedure
required to exercise their right of conversion. All holders of
Debentures who fail to deliver a notice of conversion on or prior
to April 23, 2021 (or such other
earlier time as may be indicated by their broker, dealer, bank,
trust company or other nominee) shall have their Debentures
redeemed on the Redemption Date and shall receive that number of
Common Shares obtained by dividing the Redemption Price by 95% of
the current market price of the Common Shares on the Redemption
Date, with such current market price calculated as indicated
above.
All amounts in this press release are in Canadian dollars unless
otherwise identified.
Forward-looking Information and Statements
This press release contains certain forward-looking information
and statements within the meaning of applicable securities laws.
The use of any of the words "expect", "anticipate", "continue",
"estimate", "objective", "ongoing", "may", "will", "project",
"should", "believe", "plans", "intends", "strategy" and similar
expressions are intended to identify forward-looking information or
statements. In particular, but without limiting the foregoing, this
press release contains forward-looking information and statements
pertaining to the following: the potential for the redemption
to further enhance Gear's balance sheet; the availability and
suitability of acquisitions or development capital expansions to
the Company going forward; the ability of Gear to take advantage of
drilling and waterflood opportunities; the improvement of
forecasted 2021 exit net debt as a result of the redemption; and
Gear's 2021 ratio of net debt to funds from operations. The
forward-looking information and statements contained in this press
release reflect several material factors and expectations and
assumptions of the Company including, without limitation: that the
Company will continue to conduct its operations in a manner
consistent with past operations; the general continuance of current
industry conditions; the continuance of existing (and in certain
circumstances, the implementation of proposed) tax, royalty and
regulatory regimes; the accuracy of the estimates of the Company's
reserves and resource volumes; certain commodity price and other
cost assumptions; that all counterparties to contracts and
transactions including hedges will comply with their obligations
pursuant to such contracts and transactions; and the continued
availability of adequate debt and equity financing and funds from
operations to fund its planned expenditures. The Company believes
the material factors, expectations and assumptions reflected in the
forward-looking information and statements are reasonable, but no
assurance can be given that these factors, expectations and
assumptions will prove to be correct. To the extent that any
forward-looking information contained herein may be considered a
financial outlook, such information has been included to provide
readers with an understanding of management's assumptions used for
budgeting and developing future plans and readers are cautioned
that the information may not be appropriate for other purposes. The
forward-looking information and statements included in this press
release are not guarantees of future performance and should not be
unduly relied upon. Such information and statements involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking information or statements
including, without limitation: changes in commodity prices; changes
in the demand for or supply of the Company's products;
unanticipated operating results or production declines; changes in
tax or environmental laws, royalty rates or other regulatory
matters; changes in development plans of the Company or by third
party operators of the Company's properties, increased debt levels
or debt service requirements; inaccurate estimation of the
Company's oil and gas reserve and resource volumes; limited,
unfavorable or a lack of access to capital markets; increased
costs; a lack of adequate insurance coverage; the impact of
competitors; the risk that counterparties to contracts and
transactions including hedges will not comply with their
obligations pursuant to such contracts and transactions; the risk
that the Company's lenders take actions that reduce availability
of, or require repayment of, borrowings under the Company's credit
facilities; the risk that the COVID-19 pandemic will continue to
seriously adversely impact demand for oil; the risk that actions
taken by OPEC and other will result in erosion of commodity prices;
and certain other risks detailed from time to time in the Company's
public documents including in the Company's most current annual
information form which is available on SEDAR at www.sedar.com. The
forward-looking information and statements contained in this press
release speak only as of the date of this press release, and the
Company does not assume any obligation to publicly update or revise
them to reflect new events or circumstances, except as may be
required pursuant to applicable laws.
NON-GAAP Measures
This press release contains the terms funds from operations and
net debt, which do not have standardized meanings under Canadian
generally accepted accounting principles ("GAAP") and
therefore may not be comparable with the calculation of similar
measures by other companies. Management believes that these key
performance indicators and benchmarks are key measures of financial
performance for Gear and provide investors with information that is
commonly used by other oil and gas companies. Funds from operations
is calculated as cash flow from operating activities before changes
in non-cash operating working capital and decommissioning
liabilities settled. Net debt is calculated as debt less current
working capital items, excluding risk management contracts.
Additional information relating to certain of these non-GAAP
measures, including the reconciliation between funds from
operations and cash flow from operating activities, can be found in
Gear's public documents including in Gear's most current management
discussion and analysis, which is available on SEDAR at
www.sedar.com.
SOURCE Gear Energy Ltd.
