Delphi Energy Corp. (“
Delphi” or
the “
Company”) announces that it has obtained an
order from the Court of Queen’s Bench of Alberta (the
“
Court”) granted in Delphi’s proceedings under the
Companies’ Creditors Arrangement Act (the “
CCAA”)
extending the stay period provided by the amended and restated
initial order to May 22, 2020.
Delphi reports that Luminus Energy IE Designated
Activity Company, an affiliate of a pooled investment vehicle of
Luminus Management, LLC (“Luminus”), has purchased
and taken an assignment of all of the rights of Delphi’s first lien
senior secured lenders, ATB Financial (as administrative agent),
Bank of Montreal and The Bank of Nova Scotia (together the
“Senior Lenders”), under Delphi’s credit
facilities. Luminus is a related party of Delphi which, through one
or more of its pooled investment vehicles or affiliates thereof,
holds 14,065,138 common shares, representing approximately 57% of
Delphi’s outstanding common shares, and approximately $58.7 million
principal amount of Delphi’s second lien senior secured notes,
representing approximately 49% of the outstanding second lien
senior secured notes.
On April 24, 2020, Delphi received notice of the
Senior Lenders’ intent to exercise their right to terminate the
commodity swap contracts held by the Company, in aggregate totaling
$17.19 million. The proceeds were used to reduce the $31.8 million
owed to the Senior Lenders.
“We view this as a very positive step forward in
pursuit of an acceptable and timely solution for the remaining
stakeholders, given the stated objective of certain members of the
Senior Lending Syndicate to terminate the relationship with the
Company”, said David Reid, President and Chief Executive Officer of
the Company. “We now look forward to accelerating the process”.
The extension of the stay period to May 22, 2020
is expected to allow for interim financing for the Company to be
negotiated and finalized, for a claims process to be prepared, and
for the Company, in consultation with Luminus and the monitor in
the CCAA proceedings, to continue its restructuring efforts. As
part of this process, the Company plans to pursue programs recently
announced by the Federal and Provincial Governments in conjunction
with the Business Development Canada and Export Development Canada
to expand credit support for at-risk small and medium-sized energy
companies.
The Company also intends to pursue well
abandonment funding from the Federal and Provincial Government
programs, to continue to reduce its well abandonment obligations.
Delphi has actively managed its abandonment obligations with an ARO
of approximately $23.55 million as at March 31, 2020 and continues
to have one of the strongest LLR ratings in industry at 9.91.
Operations Update
Delphi continues to be impressed with the
results of the three new wells drilled and completed in the first
quarter of 2020. The 03-30-59-23 W5M (“03-30”) has achieved a first
30 day production rate (“IP30”) of 1.9 million
cubic feet per day (“mmcf/d”) of sales gas, and
1,010 barrels per day (“bbl/d”) of field
condensate, for a total production rate of approximately 1,410
barrels of oil equivalent per day (“boe/d”)
including natural gas liquids (“NGL”). The second
well has produced intermittently to restrict corporate production
during this period of low oil prices. Over 18 days, the 13-12-60-24
W5M (“13-12”) well has averaged 2.9 mmcf/d of
sales gas and 1,400 bbl/d of field condensate for a total
production rate of approximately 2,000 boe/d, including NGLs. The
third well at 14-12-60-24 W5M (“14-12”) remains
shut-in. Given the current low oil prices and the termination of
the hedging contracts by the Senior Lenders, the Company will
continue to restrict production to fulfill only short term
contractual delivery obligations. During the month of April,
corporate production averaged approximately 7,100 boe/d (49 percent
field condensate and NGLs).
Update on Continuous Disclosure
Filings
Further to Delphi’s previously announced
decision to postpone its annual general meeting of shareholders to
a later date in 2020, Delphi intends to rely on the temporary
blanket relief provided by the Canadian Securities Administrators
(including the exemptive relief contained in Alberta Securities
Commission Blanket Order 51-518 – Temporary Exemptions from Certain
Requirements to File or Send Securityholder Materials) to postpone
the filing of its executive compensation disclosure required under
applicable securities laws until such time as it is filed and
delivered to shareholders as part of Delphi’s information circular
relating to its 2020 annual general meeting of shareholders.
Delphi announces that it also intends to rely on
exemptive relief granted by Canadian securities regulatory
authorities that allows it to delay the filing of its interim
financial report for the interim period ended March 31, 2020 as
required by section 4.4 of National Instrument 51-102 and related
management's discussion & analysis as required by subsection
5.1(2) of National Instrument 51-102 (collectively, the “Q1
Filings”) and estimates that the Q1 Filings will be available for
filing on or before June 29, 2020. Until such time as these filings
are made, Delphi’s management and other insiders are subject to a
trading blackout that reflects the principles contained in section
9 of National Policy 11-207 – Failure-to-File Cease Trade Orders
and Revocations in Multiple Jurisdictions. Except as previously
announced by Delphi in connection with the CCAA proceedings, there
have been no material business developments since the date of
Delphi’s audited consolidated financial statements for the years
ended December 31, 2019 and 2018 that were filed on March 12, 2020,
a copy of which is available on SEDAR at www.sedar.com.
Additional Information
Delphi and certain of its subsidiaries were
granted an initial order and protection under the CCAA on April 14,
2020. PricewaterhouseCoopers Inc. has been appointed by the Court
as monitor in the CCAA proceedings. Materials publicly filed in the
CCAA proceedings, including copies of the initial order of the
Court, are available on the monitor’s website at
http://www.pwc.com/ca/delphi. Delphi will continue to provide
updates regarding its restructuring as developments warrant.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading
producer of liquids-rich natural gas. The Company has achieved top
decile results through the development of our high quality Montney
property, uniquely positioned in the Deep Basin of Bigstone, in
northwest Alberta. Delphi continues to outperform key industry
players by improving operational efficiencies and growing our
dominant Bigstone land position in this world-class play. Delphi is
headquartered in Calgary, Alberta.
FOR FURTHER INFORMATION PLEASE
CONTACT:
DELPHI ENERGY CORP.2300 - 333 –
7th Avenue S.W.Calgary, AlbertaT2P 2Z1Telephone: (403) 265-6171
Facsimile: (403) 265-6207Email: info@delphienergy.ca Website:
www.delphienergy.ca
DAVID J. REIDPresident &
CEO
Forward-Looking Statements.
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
Canadian securities laws. These statements relate to future events
or the Company’s future performance and are based upon the
Company’s internal assumptions and expectations. All statements
other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of any of the words “expect”,
“anticipate”, “continue”, “estimate”, “may”, “will”, “should”,
“believe”, "intends”, “forecast”, “plans”, “guidance”, “budget” and
similar expressions.
More particularly and without limitation, this
release contains forward-looking statements and information
relating to the ability of the Company to negotiate and finalize
interim financing, prepare a claims process and continue its
restructuring process, and the timing thereof, the Company’s plans
to pursue programs intended to expand credit support for at-risk
small and medium-sized energy companies and its eligibility to
participate in such programs, the Company’s plans to pursue well
abandonment funding and its ability to continue to reduce its well
abandonment obligations, the Company’s intention to continue to
restrict production to fulfill only short term contractual delivery
obligations, and the expected filing date for Delphi’s executive
compensation disclosure and Q1 Filings. The forward-looking
statements and information contained in this release are based on
certain key expectations and assumptions made by Delphi. The
following are certain material assumptions on which the
forward-looking statements and information contained in this
release are based: the ability of the Company to operate in the
ordinary course during the CCAA proceedings, including with respect
to satisfying obligations to service providers, suppliers,
contractors and employees; the ability of the Company to continue
as a going concern; the Company’s future liquidity position, and
access to capital, to fund ongoing operations and obligations; the
ability of the Company to stabilize its business and financial
condition; the ability of the Company to implement and successfully
achieve its business priorities; the ability of the Company to
comply with its contractual obligations, including, without
limitation, its obligations under debt arrangements; the general
regulatory environment in which the Company operates; the tax
treatment of the Company and the materiality of any legal and
regulatory proceedings; the stability of the global and national
economic environment, the stability of and commercial acceptability
of tax, royalty and regulatory regimes applicable to Delphi,
exploitation and development activities being consistent with
management’s expectations, production levels of Delphi being
consistent with management’s expectations, the absence of
significant project delays, the stability of oil and gas prices,
the absence of significant fluctuations in foreign exchange rates
and interest rates, the stability of costs of oil and gas
development and production in Western Canada, including operating
costs, the timing and size of development plans and capital
expenditures, availability of third party infrastructure for
transportation, processing or marketing of oil and natural gas
volumes, prices and availability of oilfield services and equipment
being consistent with management’s expectations, the availability
of, and competition for, among other things, pipeline capacity,
skilled personnel and drilling and related services and equipment,
results of development and exploitation activities that are
consistent with management’s expectations, weather affecting
Delphi’s ability to develop and produce as expected, contracted
parties providing goods and services on the agreed timeframes,
Delphi’s ability to manage environmental risks and hazards and the
cost of complying with environmental regulations, the accuracy of
operating cost estimates, the accurate estimation of oil and gas
reserves, future exploitation, development and production results
and Delphi’s ability to market oil and natural gas successfully to
current and new customers. Additionally, estimates as to expected
average annual production rates assume that no unexpected outages
occur in the infrastructure that the Company relies on to produce
its wells, that existing wells continue to meet production
expectations and any future wells scheduled to come on in the
coming year meet timing and production expectations.
Although the Company believes that the
expectations reflected in such forward-looking statements and
information are reasonable, it can give no assurance that such
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon. Since forward-looking
statements and information address future events and conditions, by
their very nature they involve inherent known and unknown risks and
uncertainties. Delphi’s actual results, performance or achievements
could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurance can
be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what
benefits Delphi will derive therefrom. Should one or more of these
risks or uncertainties materialize, or should assumptions
underlying forward-looking statements prove incorrect, actual
results may vary materially from those currently anticipated due to
a number of factors and risks. These include, but are not limited
to, the risks associated with the oil and gas industry in general
such as operational risks in development, exploration and
production, delays or changes in plans with respect to exploration
or development projects or capital expenditures, the uncertainty of
estimates and projections relating to production rates, costs and
expenses, commodity price and exchange rate fluctuations, marketing
and transportation, environmental risks, competition from others
for scarce resources, the ability to access sufficient capital from
internal and external sources, changes in governmental regulation
of the oil and gas industry and changes in tax, royalty and
environmental legislation. Additional information on these and
other factors that could affect the Company’s operations or
financial results are included in the Company’s most recent Annual
Information Form and other reports on file with the applicable
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com).
Basis of Presentation. For the
purpose of reporting production information, reserves and
calculating unit prices and costs, natural gas volumes have been
converted to a barrel of oil equivalent (boe) using six thousand
cubic feet equal to one barrel. A boe conversion ratio of 6:1 is
based upon an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. This conversion conforms to the
Canadian Securities Administrators’ National Instrument 51-101 when
boes are disclosed. Boes may be misleading, particularly if used in
isolation. As per CSA Staff Notice 51-327 initial test results and
initial production performance should be considered preliminary
data and such data is not necessarily indicative of long-term
performance or of ultimate recovery.
Readers are cautioned that the foregoing list of
factors is not exhaustive. Furthermore, the forward-looking
statements contained in this release are made as of the date of
this release for the purpose of providing the readers with the
Company’s expectations for the coming year. The forward-looking
statements and information may not be appropriate for other
purposes. Delphi 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 so
required by applicable securities laws. The forward-looking
statements contained in this release are expressly qualified in
their entirety by this cautionary statement.