Cequence Energy Announces Confirmation of Its Credit Facility Borrowing Base, the Purchase of Its $60 Million Term Loan and P...
December 17 2018 - 10:39AM
Cequence Energy Ltd. ("Cequence" or the "Company") (TSX: CQE) is
pleased to announce that its senior lender has completed a
redetermination of the borrowing base under the Company’s senior
secured credit facility (the “Credit Facility”), and has confirmed
the borrowing base remains at $7 million. Other than outstanding
letters of credit totalling approximately $1.5 million, the Company
currently has no amounts drawn under the Credit Facility.
Acquisition of the Company’s $60 million
Term Loan
Cequence also wishes to announce that it has
been advised that its $60 million second lien senior secured term
loan facility due October 3, 2022 (the “Term Loan”), as well as the
1,841,459 common share purchase warrants (the “Warrants”) issued in
conjunction with the term loan, have been purchased from CPPIB
Credit Investments Inc. (“CPPIB Credit”), a wholly owned subsidiary
of the Canada Pension Plan Investment Board. The Term Loan and
Warrants were purchased by an individual who, in subsequent
transactions, sold interests in the Term Loan and Warrants to a
small group of persons, including two of the Company’s directors
and officers, Don Archibald (Executive Chairman) and Howard Crone
(Executive Vice-President) (each, together with the aforementioned
original purchasing individual, the “Consortium”). Pursuant to an
agreement among the members of the Consortium, Messrs. Archibald
and Crone each acquired 9.6% of the outstanding Term Loan and 9.6%
of the Warrants. The Warrants have an exercise price of $2.00 per
common share and are exercisable at any time until September 13,
2022. The Term Loan has an outstanding principal balance of
$60 million and a current interest rate of 5% per annum. The terms
and conditions of the Term Loan remain unchanged from the loan
agreement dated July 26, 2018, which has been assigned to the
Consortium. The Term Loan is more fully described in the Company’s
Management’s Discussion and Analysis for the three and nine months
ended September 30, 2018 which is available under the Company’s
profile on SEDAR at www.sedar.com. In connection with the purchase
of the Term Loan by the Consortium, the Company has entered into an
intercreditor and priority agreement among the Company, the
Company’s senior secured lender, and the Consortium.
Cequence thanks CPPIB Credit for its support of
the Company over the past five years and the contributions it has
made to the Company’s growth and development as one its financial
partners.
Operational Update
Cequence has utilized the full $8.6 million
raised through its recently completed rights offering to fund the
successful drilling and completion of 2 gross (2 net) Dunvegan oil
wells as eligible Canadian development expense. The 10-4-62-26W5
and 16-02-62-26W5 Dunvegan oil wells have lateral lengths of 2,100
m and 1,450 m, with 50 and 40 completion stages cemented in place
respectively. Following their completion, the wells were brought
online for clean up during the week of December 3, 2018, and flowed
through temporary test equipment for approximately 5 days each.
During the last 24 hour flow period the 10-4-62-26W5 well produced
approximately 250 bbl/d of oil and 578 bbl/d of water with 11% of
completion water recovered, while the 16-02-62-26W5 well produced
264 bbl/d of oil and 447 bbl/d of water with 7% of completion water
recovered. The wells have been shut in awaiting connection to
permanent production facilities and for pumping equipment to be
installed. The Company is encouraged by the initial flow results
and expects the wells should produce at or above the first month
internal model of 300 bbl/d of oil. These initial well test results
are preliminary only as no pressure transient analysis or well-test
impressions have been carried out, and these test results are not
necessarily indicative of long-term performance or ultimate
recovery.
About Cequence
Cequence is a publicly traded Canadian energy
company involved in the acquisition, exploitation, exploration,
development and production of natural gas and crude oil in western
Canada. Further information about Cequence may be found in its
continuous disclosure documents filed with Canadian securities
regulators at www.sedar.com.
For further information
contact:
Donald Archibald, Executive Chairman, (403)
660-8906, darchibald@cequence-energy.comTodd Brown, Chief Executive
Officer, (403) 806-4049, tbrown@cequence-energy.comKevin Nielsen,
Interim Chief Financial Officer, (403) 806-4041,
knielsen@cequence-energy.com
Advisories
Boe Conversions: Barrel of oil equivalent
("boe") amounts have been calculated by using the conversion ratio
of six thousand cubic feet (6 Mcf) of natural gas to one barrel of
oil (1 bbl). Boe amounts may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf to 1 bbl is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of
oil as compared to natural gas is significantly different from the
energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may
be misleading as an indication of value.
Mcfe Conversions: Thousands of cubic feet of gas
equivalent ("Mcfe") amounts have been calculated by using the
conversion ratio of one barrel of oil (1 bbl) to six thousand cubic
feet (6 Mcf) of natural gas. Mcfe amounts may be misleading,
particularly if used in isolation. A conversion ratio of 1 bbl to 6
Mcf is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of natural gas as compared to oil is
significantly different from the energy equivalent of 1:6,
utilizing a conversion on a 1:6 basis may be misleading as an
indication of value.
Forward-looking Statements or Information
Certain statements included in this press
release constitute forward-looking statements or forward-looking
information under applicable securities legislation. Such
forward-looking statements or information are provided for the
purpose of providing information about management's current
expectations and plans relating to the future. Readers are
cautioned that reliance on such information may not be appropriate
for other purposes, such as making investment decisions.
Forward-looking statements or information typically contain
statements with words such as "anticipate", "believe", “estimate”,
"expect", “forecast”, "plan", "intend", "estimate", “plan”,
"propose", "project", “schedule” or similar words suggesting future
outcomes or statements regarding an outlook. Forward-looking
statements or information in this press release may include, but
are not limited to, statements relating to the drilling results and
future production of the Company’s recently completed Dunvegan
wells and the Company’s production and future performance
expectations of same.
Forward-looking statements or information are
based on a number of factors and assumptions which have been used
to develop such statements and information but which may prove to
be incorrect. Although the Company believes that the expectations
reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking
statements because the Company 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 press release,
assumptions have been made regarding, among other things: the
ability of the Company to obtain qualified staff, equipment and
services in a timely and cost efficient manner; the ability of the
operator of the projects which the Company has an interest in to
operate the field in a safe, efficient and effective manner; field
production rates and decline rates; the ability to replace and
expand oil and natural gas reserves through acquisition,
development of exploration; the timing and costs of pipeline,
storage and facility construction and expansion and the ability of
the Company to secure adequate product transportation; future oil
and natural gas prices; the effectiveness of service rig work on
well clean-up over time; the regulatory framework regarding
royalties, taxes and environmental matters; and the ability of the
Company to successfully market its oil and natural gas products.
Readers are cautioned that the foregoing list is not exhaustive of
all factors and assumptions which have been used.
Forward-looking statements or information are
based on current expectations, estimates and projections that
involve a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated by the
Company and described in the forward-looking statements or
information. These risks and uncertainties may cause actual results
to differ materially from the forward-looking statements or
information. The material risk factors affecting the Company and
its business are contained in the Company's Annual Information Form
for the year ended December 31, 2017 which is available on SEDAR at
www.sedar.com.
The forward-looking statements or information
contained in this press release are made as of the date hereof and
the Company undertakes no obligation to update publicly or revise
any forward-looking statements or information, whether as a result
of new information, future events or otherwise unless required by
applicable securities laws. The forward-looking statements or
information contained in this press release are expressly qualified
by this cautionary statement.
The TSX has neither approved nor disapproved the
contents of this news release.