Athabasca Oil Corporation Announces Market Egress Transactions that Increase Corporate Liquidity by ~$100 Million
August 17 2021 - 7:49PM
Athabasca Oil Corporation (TSX: ATH) (“Athabasca” or the “Company”)
has executed two strategic market egress transactions that increase
corporate liquidity by approximately $100 million through cash
consideration and the release of restricted cash that was securing
letters of credit. These transactions further bolster the Company’s
strong liquidity position with a 60% increase in pro forma
unrestricted cash balances to approximately $265 million.
Athabasca believes the market for Canadian heavy
crude is improving in a lasting way. Expanded basin egress capacity
(including Enbridge Line 3 Replacement, the TransMountain Expansion
Project “TMX” and DRU implemented crude-by-rail) should provide
Canadian producers improved access to the global heavy oil market
in the future. At the same time, modest growth forecasts for
Canadian oil production are expected to drive excess egress
capacity. As a result, Athabasca believes conditions will emerge
for lower volatility compared to what has been experienced in
recent years and Western Canadian Select (“WCS”) heavy oil in
Edmonton may be among the most valuable global crude
benchmarks. By undertaking a monetization of its TMX and
Keystone capacity, the Company will increase its current
unrestricted cash balances, reduce future financial commitments and
still benefit from an improved outlook for WCS differentials.
Commercial Transactions
Overview
Athabasca has assigned its Keystone Base service
of approximately 7,200 bbl/d of blended bitumen capacity and the
Development Cost Agreement (“DCA”) in relation to the Keystone XL
pipeline to an industry player. The Company has also entered into a
seven-year marketing agreement with the counterparty for 15,000
bbl/d of heavy oil that will diversify the Company’s sales to the
US Gulf Coast once the incremental Keystone Base service becomes
available to industry. The marketing agreement has customary and
additional fees including a flow through pipeline tariff when the
Gulf Coast service becomes available. This transaction increases
corporate liquidity by approximately $80 million through the
recovery of a deposit and the release of restricted cash that was
securing existing letters of credit.
Additionally, the Company has executed a sale
and assignment agreement of its 20,000 bbl/d TMX pipeline service
to a downstream player for $20 million cash consideration.
Athabasca believes that the timing for monetizing the service is
optimal as the Company receives cash consideration today while
still being able to participate in the benefits of the construction
of the pipeline through an improved local basin differential
outlook. The transaction reduces $1.1 billion of transportation
commitments over the 20-year term and removes a $50 million future
financial assurance requirement once the pipeline is
operational.
About Athabasca Oil
Corporation
Athabasca Oil Corporation is a Canadian energy
company with a focused strategy on the development of thermal and
light oil assets. Situated in Alberta’s Western Canadian
Sedimentary Basin, the Company has amassed a significant land base
of extensive, high quality resources. Athabasca’s common shares
trade on the TSX under the symbol “ATH”. For more information,
visit www.atha.com.
For more information, please contact:
Matthew Taylor
Chief
Financial
Officer 1-403-817-9104 mtaylor@atha.com
Reader Advisory:
This News Release contains forward-looking
information that involves various risks, uncertainties and other
factors. All information other than statements of historical fact
is forward-looking information. The use of any of the words
“anticipate”, “plan”, “forecast”, “continue”, “estimate”, “expect”,
“may”, “will”, “project”, “target”, “should”, “believe”, “predict”,
“pursue”, “potential”, “view” and “contemplate” and similar
expressions are intended to identify forward-looking information.
The forward-looking information is not historical fact, but rather
is based on the Company’s current plans, objectives, goals,
strategies, estimates, assumptions and projections about the
Company’s industry, business and future operating and financial
results. This information involves 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. No assurance can be given that these
expectations will prove to be correct and such forward-looking
information included in this News Release should not be unduly
relied upon. This information speaks only as of the date of this
News Release and, except as required by applicable securities laws,
the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of
unanticipated events. In particular, this News Release contains
forward-looking information pertaining to, but not limited to, the
following: expected in-service dates for Enbridge Line 3
replacement and the TransMountain Expansion project; expectations
for WCS heavy oil to be amongst the most valuable global crude
benchmarks; and other matters.
With respect to forward-looking information
contained in this News Release, assumptions have been made
regarding, among other things: commodity prices; the regulatory
framework governing royalties, taxes and environmental matters in
the jurisdictions in which the Company conducts and will conduct
business and the effects that such regulatory framework will have
on the Company, including on the Company’s financial condition and
results of operations; the Company’s financial and operational
flexibility; the Company’s financial sustainability; the Company’s
future debt levels; the Company’s ability to obtain financing on
acceptable terms; impact of increasing competition globally.
Unrestricted cash balances are as of July 30,
2021 pro forma the two commercial transactions referenced in this
New Release. Actual results could differ materially from those
anticipated in this forward-looking information as a result of the
risk factors set forth in the Company’s Annual Information Form
(“AIF”) dated March 3, 2021 and Management’s Discussion and
Analysis dated July 28, 2021, available on SEDAR at www.sedar.com,
including, but not limited to: weakness in the oil and gas
industry; exploration, development and production risks; prices,
markets and marketing; market conditions; continued impact of the
COVID-19 pandemic; climate change and carbon pricing risk;
regulatory environment and changes in applicable law; gathering and
processing facilities, pipeline systems and rail; statutes and
regulations regarding the environment; political uncertainty; state
of capital markets; changing demand for oil and natural gas
products; royalty regimes; foreign exchange rates and interest
rates; hedging; operational dependence; operating costs; project
risks; financial assurances; diluent supply; third party credit
risk; indigenous claims; reliance on key personnel and operators;
income tax; cybersecurity; hydraulic fracturing; liability
management; seasonality and weather conditions; unexpected events;
internal controls; insurance; litigation; competition; chain of
title and expiration of licenses and leases; breaches of
confidentiality; new industry related activities or new
geographical areas; and risks related to our debt and
securities.
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