CALGARY, AB, Aug. 5, 2021 /CNW/ - (TSX:
PMT) – Perpetual Energy Inc. ("Perpetual" or the
"Company") is pleased to announce the management information
circular (the "Information Circular") with respect to the
previously announced Plan of Arrangement involving Rubellite Energy
Inc. ("Rubellite") has been filed on SEDAR at www.sedar.com. On
July 16, 2021, Perpetual announced
the creation of Rubellite, approximately $73
million in equity financings, the settlement of the majority
of its second lien term loan (the "Second Lien Loan Settlement")
and new credit facilities (the "Rubellite Transactions"). The
Special Meeting of Shareholders to consider the Plan of Arrangement
and other related matters is scheduled to be held on August 31, 2021. Perpetual shareholders are
encouraged to carefully review the Information Circular as it
contains important deadlines and information with respect to the
exercise of warrants to be received by Perpetual shareholders in
connection with the Plan of Arrangement and for Perpetual
shareholders to participate in the equity financings.
The Rubellite Transactions offer a "full capital solution" for
Perpetual by reducing Perpetual's net debt, normalizing the balance
sheet leverage ratios and surfacing incremental value from the
development of its assets. Perpetual believes that the Rubellite
Transactions will materially improve its liquidity and
significantly improve both its ability to operate as a going
concern and meet its obligations as they become due, including the
flexibility to make cash payments of second lien and third lien
interest which has recently been paid in-kind. At the same time,
completion of the Rubellite Transactions will enhance Perpetual's
ability to capture the inherent value in its asset base by funding
investment opportunities to grow and sustain production and
adjusted funds flow.
Perpetual will realize net cash proceeds from the Rubellite
Transactions of approximately $53.2
million which it will use to reduce net debt. The maturity
of the Company's new $17 million
Credit Facility has been extended to May 31,
2023 subject to the completion of the Rubellite Transactions
at which time Perpetual expects to be less than 25% drawn. As part
of the Second Lien Loan Settlement, the maturity of a new second
lien term loan of approximately $2.7
million has been extended to December
31, 2024. Total net debt is forecast to decline by 45% from
$107.4 million at March 31, 2021 to approximately $59 million at closing of the Rubellite
Transactions, inclusive of estimated capital spending at
East Edson and other forecast
corporate revenues and expenses during the third quarter of 2021.
Interest cost savings alone will improve Perpetual's liquidity by
approximately $4 million annually.
The general and administrative cost recoveries under the management
services agreement with Rubellite will further enhance Perpetual's
liquidity by approximately $2 to
$3 million annually.
Following completion of the Rubellite Transactions, Perpetual is
expected to have sufficient liquidity to invest capital in its
assets to grow production and adjusted funds flow and convert
proved and probable undeveloped reserves to proved developed
producing reserves which serves to support the Company's borrowing
capacity, increases the fair market value of Perpetual's assets,
and generally enhances the Company's ability to meet its
obligations as they become due. In addition, with the committed
extension to the first lien credit facility, Perpetual anticipates
it will be better positioned to enter into risk management
contracts to mitigate commodity price risk.
Rubellite will initially be exclusively focused on Clearwater oil exploration and development
utilizing multi-lateral horizontal drilling technology. The
Clearwater is a high rate of
return play with compelling economics at current forward market
prices for Western Canadian Select crude oil. Rubellite is expected
to begin operations with zero debt and positive working capital of
approximately $13 million. In the
context of current strip pricing, Rubellite's organic growth
business plan is expected to be fully funded, drive material
adjusted funds flow growth over the next two years and has the
potential to generate significant free funds flow by 2022.
CFO SUCCESSION
Ryan Shay was appointed Vice
President Finance and Chief Financial Officer ("CFO") of the
Company on May 4, 2021, succeeding
Mark Schweitzer. Mr. Schweitzer
remained an employee of Perpetual and extended his planned
retirement to the end of July to assist Perpetual through the
announcement of the Rubellite Transactions.
"We thank Mark for his exceptional leadership and strategic
insights that have positioned Perpetual for future success,
especially over the past six months during our balance sheet
refinancing process through to the creation of Rubellite and wish
him well in his retirement." said President and CEO Sue Riddell Rose.
ADDITIONAL INFORMATION
About Perpetual
Perpetual is an oil and natural gas exploration, production and
marketing company headquartered in Calgary, Alberta. Perpetual owns a diversified
asset portfolio, including liquids-rich conventional natural gas
assets in the deep basin of West Central Alberta, heavy crude oil
and shallow conventional natural gas in Eastern Alberta, undeveloped bitumen leases in
Northern Alberta and prospective
undeveloped acreage in the emerging Clearwater play fairway through its wholly
owned subsidiary, Rubellite Energy Inc. Additional information on
Perpetual can be accessed at www.sedar.com or from the Company's
website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved
the information contained herein.
Non-GAAP Measures
This news release contains the terms "adjusted funds flow",
"free funds flow" and "net debt" which do not have standardized
meanings prescribed by GAAP. Management believes that in addition
to net income (loss) and net cash flows from (used in) operating
activities as defined by GAAP, these terms are useful supplemental
measures to evaluate operating performance. Users are cautioned
however that these measures should not be construed as an
alternative to net income (loss) or net cash flows from operating
activities determined in accordance with GAAP as an indication of
Perpetual's performance and may not be comparable with the
calculation of similar measurements by other entities.
For additional reader advisories in regards to non-GAAP
financial measures, including Perpetual's method of calculation and
reconciliation of these terms to their corresponding GAAP measures,
see the section entitled "Non-GAAP Measures" within the Company's
MD&A filed on SEDAR.
Adjusted funds flow: Adjusted funds flow is calculated based
on cash flows from (used in) operating activities, excluding
changes in non-cash working capital and expenditures on
decommissioning obligations since Perpetual believes the timing of
collection, payment or incurrence of these items is variable.
Expenditures on decommissioning obligations may vary from period to
period depending on capital programs and the maturity of the
Company's operating areas. Expenditures on decommissioning
obligations are managed through the capital budgeting process which
considers available adjusted funds flow. The Company has added back
non-cash oil and natural gas revenue in-kind, equal to retained
East Edson royalty obligation
payments taken in-kind, to present the equivalent amount of cash
revenue generated. The Company has also deducted payments of the
gas over bitumen royalty financing from adjusted funds flow to
present these payments net of gas over bitumen royalty credits
received. These payments are indexed to gas over bitumen royalty
credits and are recorded as a reduction to the Company's gas over
bitumen royalty financing obligation in accordance with IFRS.
Additionally, the Company has excluded payments of restructuring
costs associated with employee downsizing costs, which management
considers to not be related to cash flow from (used in) operating
activities. Management uses adjusted funds flow and adjusted funds
flow per boe as key measures to assess the ability of the Company
to generate the funds necessary to finance capital expenditures,
expenditures on decommissioning obligations, and meet its financial
obligations.
Free funds flow: Free funds flow is defined as adjusted funds
flow less total net capital expenditures. Total net capital
expenditures is defined as total capital expenditures before
acquisitions and non-core dispositions.
Net bank debt and net debt: Net bank debt is measured as
current and long-term revolving bank debt, including the net
working capital deficiency. Net debt includes the carrying value of
net bank debt, the principal amount of the term loan, and the
principal amount of senior notes. Net debt and net bank debt are
used by management to assess the Company's overall debt position
and borrowing capacity.
Forward-Looking Information and Statements
Certain information and statements contained in this news
release including management's assessment of future plans and
operations, and including the statements relating to the timing for
the upcoming special meeting of shareholders and the completion of,
and the anticipated benefits to be derived from, the Rubellite
Transactions including providing Perpetual with a "full capital
solution", materially improving its liquidity and its ability to
operate as a going concern, enhancing its ability to capture the
inherent value in its assets by funding investment opportunities to
grow and sustain production and adjusted funds flow, reductions in
total net debt, the ability to convert proved and probable
undeveloped reserves to proved developed producing reserves and the
benefits to be derived therefrom, the ability to enter into risk
management contracts, the timing of Rubellite to commence
operations and its business focus and debt and working capital
levels and the ability of Rubellite to generate significant free
funds flow by 2022 may constitute forward-looking information and
statements within the meaning of applicable securities laws. This
information and these statements relate to future events or to
future performance. All statements other than statements of
historical fact may be forward-looking information and statements.
The use of any of the words "anticipate", "continue", "estimate",
"expect", "may", "will", "project", "should", "believe", "outlook",
"guidance", "objective", "plans", "intends", "targeting", "could",
"potential", "strategy" and any similar expressions are intended to
identify forward-looking information and statements.
Various assumptions were used in drawing the conclusions or
making the forecasts and projections in the forward-looking
information contained in this news release, which assumptions are
based on management's analysis of historical trends, experience,
current conditions and expected future developments pertaining to
Perpetual and Rubellite, the completion of the Rubellite
Transactions and the receipt of all required approvals in
connection therewith, and the industry in which it operates as well
as certain assumptions regarding the matters outlined above.
Forward-looking information is based on current expectations,
estimates and projections that involve a number of known and
unknown risks, including, without limitation, the ability to
continue to operate on a going concern basis if the Rubellite
Transactions are not completed in a timely manner or at all, the
impact of COVID-19 as further described below, which could cause
actual results to vary and in some instances to differ materially
from those anticipated by Perpetual and described in the
forward-looking information contained in this news release and in
the Information Circular. Neither Perpetual nor Rubellite can
accurately predict the impact COVID-19 will have on their abilities
to execute their business plans in response to government public
health efforts to contain COVID-19, to obtain financing or third
parties' ability to meet their contractual obligations due to
uncertainties relating to the geographic spread of the virus, the
length of travel and quarantine restrictions imposed by governments
of affected jurisdictions, and on the current and future demand for
oil and gas. In the event that the prevalence of COVID-19 increases
(or fears in respect of COVID-19 increase), governments may
increase regulations and restrictions regarding the flow of labour
or products, travel bans, and Perpetual and Rubellite's operations,
service providers and customers, and ability to advance their
business plans or carry out their top strategic priorities, could
be adversely affected. In particular, should any employees,
consultants or other service providers of Perpetual become infected
with COVID-19 or similar pathogens, it could have a material
negative impact on Perpetual and Rubellite's operations, prospects,
business, financial condition and results of operations. Undue
reliance should not be placed on forward-looking information, which
is not a guarantee of performance and is subject to a number of
risks or uncertainties, including without limitation those
described herein, in the Information Circular and under "Risk
Factors" in Perpetual's Annual Information Form and MD&A for
the year ended December 31, 2020 and
in other reports on file with Canadian securities regulatory
authorities which may be accessed through the SEDAR website
(www.sedar.com) and at Perpetual's website
(www.perpetualenergyinc.com).
The forward-looking information and statements contained in
this news release reflect several material factors, expectations
and assumptions of the Company and Rubellite including, without
limitation, that the Rubellite Transactions will be completed, that
each of Perpetual and Rubellite will conduct its operations in a
manner consistent with its expectations and, where applicable,
consistent with past practice; the general continuance of current
or, where applicable, assumed industry conditions; the ability of
Perpetual to obtain equipment, services, and supplies in a timely
manner to carry out its activities; the accuracy of the estimates
of Perpetual's reserve and resource volumes; certain commodity
price and other cost assumptions; the continued availability of
adequate debt and/or equity financing and adjusted funds flow to
fund the Company's capital and operating requirements as needed;
and the extent of Perpetual's liabilities. 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.
Readers are cautioned that the foregoing list of risk factors
is not exhaustive. Forward-looking information is based on the
estimates and opinions of Perpetual's management at the time the
information is released, and Perpetual disclaims any intent or
obligation to update publicly any such forward-looking information,
whether as a result of new information, future events or otherwise,
other than as expressly required by applicable securities
law.
SOURCE Perpetual Energy Inc.
