CALGARY, AB, Dec. 31, 2020 /CNW/ - Western Energy
Services Corp. ("Western" or the "Company") (TSX:
WRG) is pleased to announce amendments to its senior syndicated
credit facilities and a new credit facility with HSBC Bank Canada
("HSBC") offered with the participation of the Business
Development Bank of Canada
("BDC"), as well as its capital expenditure budget for
2021.
Extension and Amendments to Senior Credit
Facilities
Western's senior lenders have approved an
extension of the maturity of Western's syndicated revolving first
lien credit facility (the "Revolving Facility") and its
committed operating facility (the "Operating Facility" and
together the "Credit Facilities") from December 17, 2021 to July
1, 2022. The total commitments under the Revolving and
Operating Facilities are unchanged totalling $50 million and $10
million, respectively.
Western and its lenders have agreed to make some other changes
to the Credit Facilities, including the following adjustments to
its financial covenants:
- The Company has obtained covenant relief for the third and
fourth quarters of 2021 whereby:
-
- the consolidated senior debt to consolidated EBITDA covenant is
waived;
- a minimum liquidity of $5 million
is required;
- the maximum consolidated debt to consolidated capitalization
covenant has been increased to 0.65x from 0.60x; and
- a maximum consolidated senior debt to consolidated
capitalization ratio of 0.10x has been added.
- Annual capital expenditures for 2021 cannot exceed $10 million.
Western was in compliance with all of its covenants under the
Credit Facilities prior to these amendments and is in compliance
with all covenants under the Credit Facilities as
amended.
6 Year HSBC Committed Term Non-Revolving Facility
In
conjunction with the amended Credit Facility, Western has entered
into an agreement with HSBC for a $12.5
million six-year committed term non-revolving facility with
the participation of BDC (the "HSBC Facility") under BDC's
Business Credit Availability Program ("BCAP"). The
BCAP program was implemented to help small and medium sized
companies, directly impacted by the COVID-19 pandemic with
additional liquidity to cover operating costs. The HSBC
Facility bears interest at a floating rate and matures on
December 31, 2026. The HSBC
Facility was fully funded on December 31,
2020. Western plans to use the proceeds to fund its
January 2021 interest and principal
payments under its second lien secured term loan with Alberta
Investment Management Corporation ("AIMCo") and the
remaining funds will be used for future interest and principal
payments to AIMCo.
Western expects that the amendments to the Credit Facilities,
combined with the new HSBC Facility and prudent cost management
throughout 2020 and into 2021, will allow the Company to increase
its liquidity through the current challenging environment arising
from the COVID-19 pandemic, and position the Company to capitalize
on improved industry conditions as they
arise.
2021 Capital Budget
Western also announces its
preliminary 2021 capital expenditure budget of approximately
$6 million, which is expected to be
comprised of maintenance capital, of which $4 million is budgeted for the contract drilling
segment and $2 million is budgeted
for the production services segment.
Western's capital expenditure budget is underpinned by an
expectation of a similar level of activity in 2021 as compared to
2020. Given a number of challenging macro factors impacting
the oil and gas industry in Western
Canada, including the ongoing reduction in global oil demand
arising from the COVID-19 pandemic and restrictions on access to
international oil markets arising from delays to pipeline
expansions for Canadian oil production, the outlook for 2021
remains uncertain. Western will continuously monitor the
utilization of its fleet and will adjust the 2021 capital
expenditures accordingly.
About Western
Western is an oilfield service company
which provides contract drilling services in Canada through its Horizon Drilling division
and in the United States through
its wholly-owned subsidiary Stoneham Drilling Corporation. In
Canada, Western also provides well
servicing through its Eagle Well Servicing division, and in
the United States through Western
Oilfield Services, a division of Stoneham Drilling
Corporation. Additionally, Western provides oilfield rental
services through its Aero Rental Services division.
Forward-Looking Statements and Information
This press
release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws.
The use of any of the words "expect", "anticipate", "will",
"outlook" and similar expressions is intended to identify
forward-looking statements or information. More particularly
and without limitation, this press release contains forward-looking
statements and information relating to the Western's expectations
regarding the impact of amendments to its Credit Facilities and the
HSBC Facility on its financial flexibility and ability to fund and
grow its business; the ability of Western to meet its debt
covenants; Western's planned capital expenditures for 2021,
including expected composition thereof; Western's capital
allocation and budget strategy; anticipated activity levels in
2021; and information regarding the anticipated economic conditions
in the Western Canadian oil and gas industry. These
forward-looking statements and information are based on certain key
expectations and assumptions made by Western, including that
Western's level of activity in 2021 will be similar to
2020.
Although Western believes that the expectations and assumptions
on which such forward-looking statements and information are based
are reasonable, undue reliance should not be placed on the
forward-looking statements and information as Western cannot give
any assurance that they will prove to be correct. Since
forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks
and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors and
risks. These include, but are not limited to, the impact of
challenging economic conditions, including those arising from the
reduction in oil demand from the effects of the COVID-19 pandemic
and ongoing restrictions on access to oil markets outside western
Canada, risks associated with
general economic conditions, the demand for Western's services,
volatility in market prices for oil and natural gas and the effect
of this volatility on the demand for oilfield services generally,
currency exchange rate risk, potential changes in cost structures
in Western's industry, compliance with covenants (both new and
existing) and/or repayment obligations under Western's Credit
Facilities and the HSBC Facility, changes in legislation,
dependence on, and concentration of, major customers, the
creditworthiness of and performance by Western's counterparties and
customers.
Readers are cautioned that the foregoing list of risks and
uncertainties is not exhaustive. Additional information on
these and other risk factors that could affect Western's operations
or financial results are included under the heading "Business
Risks" in the Company's management's discussion and analysis for
the period ended September 30, 2020
and under the heading "Risk Factors" in Western's annual
information form for the year ended December
31, 2019, both of which may be accessed through the SEDAR
website at www.sedar.com. The forward-looking statements and
information contained in this press release are made as of the date
hereof and Western does not undertake any 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.
SOURCE Western Energy Services Corp.