/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES
OR DISSEMINATION IN THE UNITED
STATES/
CALGARY, AB, Oct. 5, 2021 /CNW/ - (TSX: PMT) – Perpetual
Energy Inc. ("Perpetual" or the "Company") is pleased to announce
the closing of the previously announced financings of Rubellite
Energy Inc. ("Rubellite"), the repayment of its second lien term
loan and credit facility extension, and provide an operations
update.
Rubellite Financings
Rubellite has raised $83.5 million
in equity, all priced at $2.00 per
share, through a combination of: (i) a $33.5
million arrangement warrant financing (the "Arrangement
Warrant Financing") whereby shareholders of Perpetual were provided
the opportunity to purchase Rubellite common shares ("Rubellite
Shares") in addition to those Rubellite Shares issued under
the reorganization of the Company, which was approved by the
shareholders on August 31, 2021; (ii)
the issuance of Rubellite Shares in exchange for subscription
receipts previously issued under a $30
million brokered private placement to a number of arm's
length investors, which funds have been held in escrow since
closing on July 13, 2021 (the
"Brokered Private Placement"); and (iii) a $20 million non-brokered private placement (the
"Non-Brokered Private Placement" and collectively with the
Arrangement Warrant Financing and Brokered Private Placement, the
"Rubellite Financings"). The Rubellite Financings closed
concurrently on October 4, 2021 and
approximately 41.7 million Rubellite Shares were issued.
Approximately $53.6 million in
funds from the Rubellite Financings will today repay promissory
notes owed to Perpetual in connection with Rubellite's acquisition
of its Clearwater assets from
Perpetual. Perpetual previously received additional non-cash
consideration in the form of a five-year option to purchase
4.0 million Rubellite Shares at $3.00
per share (the "Rubellite Share Purchase Options"), providing an
opportunity for Perpetual to remain exposed to potential value
appreciation of the Clearwater
assets sold to Rubellite.
With payments enabled through the closing of the Rubellite
Financings, Perpetual's total net debt will decline by an estimated
46% from $110 million at June 30, 2021 to approximately $59 million, inclusive of estimated capital
spending at East Edson and other
forecast corporate revenues and expenses during the third quarter
of 2021. Interest cost savings will improve Perpetual's liquidity
by approximately $4 million annually.
The general and administrative cost recoveries under the management
services agreement with Rubellite are expected to further enhance
Perpetual's liquidity by approximately $2 to $3 million
annually.
Second Lien Term Loan Repayment
Pursuant to the terms of the second lien debt repayment
agreement with Alberta Investment Management Corporation, Perpetual
has settled its $45 million second
lien term loan principal plus outstanding interest with the payment
of approximately $38.5 million in
cash, delivery of 680,485 Rubellite Shares and later today will
enter into a new second lien term loan of $2.7 million (the "New Second Lien Term Loan").
The New Second Lien Term Loan bears interest at 8.1% annually,
which Perpetual may elect to pay-in-kind, and will mature on
December 31, 2024. Perpetual has the
ability to repay any or all of the New Second Lien Term Loan at any
time without penalty. Perpetual is also committed to pay up to
$4.5 million in contingent payments
in the event that Perpetual's annual average realized crude oil and
natural gas prices exceed certain thresholds over the three year
period ended December 31, 2023.
Credit Facility Extension
On July 15, 2021, Perpetual
entered into an agreement with its syndicate of lenders to extend
its revolving bank debt facility ("First Lien Credit Facility")
upon closing of the Rubellite Financings. The First Lien Credit
Facility established a borrowing limit of $17 million, with an initial term to November 30, 2022 unless the revolving period is
extended for a further six months subject to approval by the
syndicate. If not extended on or before November 30, 2022, all outstanding advances will
be repayable on May 31, 2023. The
next Borrowing Limit redetermination is scheduled on or before
November 30, 2021.
Including cash proceeds received from the sale of the
Clearwater assets, Perpetual
expects to be less than 25% drawn on the $17
million First Lien Credit Facility. Furthermore, the First
Lien Credit Facility provides Perpetual with an enhanced ability to
enter into risk management contracts to mitigate commodity price
risk as appropriate.
Operations Update
The Rubellite transactions provide a full capital solution for
Perpetual by reducing Perpetual's net debt, normalizing the balance
sheet leverage ratios and enhancing 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.
Operationally, the Company is participating in an active capital
program at Perpetual's 50% working interest East Edson property. The last well of the
8-well carried interest commitment that formed part of the
consideration in the East Edson
transaction in April 2020 was spud on
July 26, 2021 and was drilled,
completed and brought onstream by our joint venture partner in
August. An additional six well (3.0 net) drilling program at
East Edson is well advanced with
the first two-well pad drilled, completed and on production in
mid-September, ahead of previous expectations. Drilling operations
are continuing on the final four-well pad, with production start-up
expected by early November, targeting to fill the West Wolf gas
plant to maximize natural gas and NGL sales through next
winter.
Activity in Mannville in
Eastern Alberta remains focused on
waterflood optimization and battery consolidation projects and
preparation for potential drilling projects in 2022.
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, including undeveloped bitumen
leases in Northern Alberta and
prospective undeveloped acreage in the emerging Clearwater play fairway through Rubellite
Energy Inc. Additional information on Perpetual can be accessed at
www.sedar.com or from the Corporation's website at
www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved
the information contained herein.
Forward-Looking Information
Certain information in this news release may constitute
forward-looking information or statements pertaining to Perpetual
("forward-looking information") under applicable securities laws.
The forward-looking information includes, without limitation,
statements with respect to: the Rubellite Share Purchase Options
providing an opportunity for Perpetual to remain exposed to
potential value appreciation of the Clearwater assets sold to Rubellite; total net
debt levels, capital spending at East
Edson and other forecast corporate revenues and expenses
during the third quarter of 2021; potential interest cost savings
and the improvement of Perpetual's liquidity and expected general
and administrative cost recoveries under the management services
agreement with Rubellite; the benefits of the Rubellite
transactions including providing a full capital solution for
Perpetual by reducing Perpetual's net debt, normalizing the balance
sheet leverage ratios and enhancing 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; planned drilling operations and the timing for production
start-ups and gas plant fills; planned waterflood optimization and
battery consolidation projects and preparation for potential
drilling projects in 2022; and other similar statements.
Forward-looking information is based on current expectations,
estimates and projections that involve a number of known and
unknown risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Perpetual
or Rubellite and described in the forward-looking information
contained in this news release. In particular and without
limitation of the foregoing, material factors or assumptions on
which the forward-looking information in this news release is based
include: anticipated benefits to Perpetual and Rubellite's
shareholders; the ability of Rubellite to successfully operate the
Clearwater assets; forecast
commodity prices and other pricing assumptions; forecast production
volumes based on business and market conditions; foreign exchange
rates; near-term pricing and continued volatility of the market;
Rubellite's and Perpetual's capacity and continued operations;
estimates of quantities of crude oil from properties and other
sources not currently classified as proved; accounting estimates
and judgments; future use and development of technology and
associated expected future results; the ability to obtain
regulatory approvals; the successful and timely implementation of
capital projects; ability to generate sufficient cash flow to meet
current and future obligations; estimated abandonment and
reclamation costs, including associated levies and regulations
applicable thereto; Rubellite's ability to operate under the
management of Perpetual pursuant to the management services
agreement; the ability of Rubellite and Perpetual to obtain and
retain qualified staff and equipment in a timely and cost-efficient
manner, as applicable; the retention of key properties; forecast
inflation and other assumptions inherent in Perpetual's current
guidance and estimates; the continuance of existing tax, royalty,
and regulatory regimes; the accuracy of the estimates of reserves
volumes; ability to access and implement technology necessary to
efficiently and effectively operate assets; and the ongoing and
future impact of the coronavirus on commodity prices and the global
economy, among others.
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 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). In addition, defence
costs of legal claims such as the Sequoia litigation can be
substantial, even with respect to claims that have no merit and due
to the inherent uncertainty of the litigation process, the
resolution of the Sequoia litigation to which the Company has
become subject could have a material effect on the Company's
financial position and results of operations.
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.