Call Us Sign-Up/Sign-In
Spain Brazil Russia France Germany China Korea Japan

Artificial Intelligence driven Marketing Communications

iCrowdNewswire Dec 19, 2020 2:26 PM ET

Prairie Provident Announces Renewal of its Credit Facilities, Additional Liquidity and Warrant Arrangements


Prairie Provident Announces Renewal of its Credit Facilities, Additional Liquidity and Warrant Arrangements

iCrowd Newswire - Dec 19, 2020

Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) announces that the Company has reached agreements with its lenders providing for the renewal of its current credit facilities, an issue of US$11.4 million principal amount of 6-year senior subordinated notes with proceeds applied against its revolving facility, amendments to its existing credit agreements to, among other things, reduce cash interest costs and reset financial covenants, and an issue of warrants to purchase up to 34,292,360 common shares (representing 19.9% of the total number of shares outstanding) at a price of $0.0192 per share.

The transactions and amendments provided for in the agreements are anticipated to be completed and become effective on Monday, December 21, 2020.

Overall, the agreements will extend the term of the Company’s debt instruments, provide additional liquidity, and reduce annual cash interest expenses.

Revolving Facility

The agreements will renew PPR’s senior secured revolving note facility (the “Revolving Facility”) and extend the revolving period and maturity date from April 30, 2021 to December 31, 2022, with a borrowing base of US$57.7 million. The borrowing base is subject to reduction to US$53.8 million on December 31, 2021 and to semi-annual redeterminations thereafter, but without limiting the lenders’ right to require a redetermination at any time. The next scheduled borrowing base redetermination is in Spring 2022 based on a year-end 2021 reserves evaluation.

Borrowings under the Revolving Facility are repayable at the Company’s election. Repayments generally will not affect the aggregate commitment or borrowing base under the Revolving Facility, except in certain limited circumstances where a repayment will reduce the borrowing base.

The margin on amounts borrowed under the Senior Facility will be 650 bps per annum above benchmark prime, Libor or CDOR rates, as applicable.   Financial covenant ratios will be relaxed and reset to thresholds that reflect current circumstances and provide Prairie Provident with comfort on its compliance expectations over future periods. Covenants under the Revolving Facility are otherwise substantially unchanged, except that capital expenditures and acquisitions will generally be limited to consistency with PPR’s annual capital development plan, as created and updated by the Company from time to time and approved by the lenders.

Net proceeds from the issue and sale of the New Notes described below will be applied on closing against borrowings under the Revolving Facility. Thereafter, the undrawn capacity under the Revolving Facility is expected to be available to finance PPR’s ongoing capital expenditures and for general corporate purposes. Upon closing, the Revolving Facility will be approximately Cdn$62 million or US$47 million drawn against the US$57.7 million borrowing base.

Senior Subordinated Notes

The agreed amendments will extend the maturity date and reduce the interest rate on Prairie Provident’s outstanding US$28.5 million original principal amount of senior subordinated notes due October 2021 (the “Original Notes”), including with respect to past interest amounts thereon paid in kind. The renewal will extend the maturity date to June 30, 2023.   The annual interest rate on the Original Notes is also being reduced from 15% to nil until June 30, 2021, and will thereafter rise to 4% at the earlier of 15 months after closing (March 2022) and the last day of the fiscal quarter for which the Company’s trailing 12-month senior leverage ratio is 2.5 or less, and to 8% at the earlier of 20 months after closing (August 2022) and the last day of the fiscal quarter for which the Company’s trailing 12-month senior leverage ratio is 2.0 or less.

Additionally, the holders of the Original Notes will purchase an additional US$11.4 million principal amount of 12% senior subordinated notes due December 2026 (the “New Notes”), the net proceeds of which will be applied against borrowings under the Revolving Facility. Upon closing, an aggregate of approximately Cdn$60 million or US$47 million will be outstanding under the Original Notes and the New Notes (collectively, the “Notes”).

The agreements will further provide that, until certain financial criteria are met, PPR may elect to pay in kind all interest due on the Notes. The terms of the Revolving Facility require that the Company make this election and not pay cash interest on the Notes until these criteria are satisfied. Prairie Provident will thereafter be permitted to elect to pay in kind up to 4.00% per annum of interest on the Notes.

As with the Revolving Facility, financial covenants under the Notes will be relaxed and reset to thresholds that reflect current circumstances and provide the Company with comfort on its compliance expectations over future periods, with a 15% cushion relative to covenant ratios under the Revolving Facility. Covenants under the Notes are otherwise substantially unchanged, except that capital expenditures and acquisitions will generally be limited to consistency with the Company’s annual development plan, as created and updated by the Company from time to time and approved by the lenders.

Warrants

Contemporaneously with closing, the Company will issue warrants to purchase up to 34,292,360 common shares (representing 19.9% of the total number of shares outstanding) at a price of Cdn$0.0192 per share (subject to adjustment in certain circumstances) for an 8-year term expiring in December 2028. The exercise price is based on the volume-weighted average trading price of the common shares on the Toronto Stock Exchange over the past five trading days. Outstanding warrants to purchase up to an aggregate of 8,318,000 common shares, which were previously issued in conjunction with the closings of the Original Note transactions in 2017 and 2018, will be cancelled in full.

Outlook

During 2020, the downturn in commodity prices necessitated suspension of the Company’s capital program. Also, during the year approximately 200 boe/d of marginal production was permanently shut in. In spite of those challenges, current production of approximately 4,400 boe/d is only down by 20% from year ago levels. The Company’s low decline rate can be credited to initiatives to waterflood core properties over the last number of years. The priority in 2020 has been cost containment. PPR conducted a bottom-up review of all of our expenses and moved forward with immediate reduction opportunities through rate negotiations, workforce optimizations, and deferral of workover activities. Compared to 2019, operating costs for the first nine months of 2020 reduced by over $7 million and gross G&A expenses reduced by over $2.5 million. Additional costs savings are expected in 2021 as the Company realizes the full-year benefits from our cost reduction initiatives. Prior to 2020, Prairie Provident had excellent results from its drilling program at Princess Alberta. The Company has an inventory of additional Princess drills that have highly attractive economics based on current commodity prices. The renewal of our credit facilities and additional financing position the Company to proceed with those developments. The Company will release a detailed capital budget in the new year and expects to commence drilling its first well early in the first quarter of 2021.

ABOUT PRAIRIE PROVIDENT:

Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to grow organically in combination with accretive acquisitions of conventional oil prospects, which can be efficiently developed. Prairie Provident’s operations are primarily focused at the Princess and Michichi areas in Southern Alberta targeting the Ellerslie, the Lithic Glauconite and the Banff formations, along with an established and proven waterflood project at our Evi area in the Peace River Arch.

For further information, please contact:

Prairie Provident Resources Inc.
Tony van Winkoop
President and Chief Executive Officer
Tel: (403) 292-8071
Email: tvanwinkoop@ppr.ca

Contact Information:

Prairie Provident Resources Inc.
Tony van Winkoop
President and Chief Executive Officer
Tel: (403) 292-8071
Email: tvanwinkoop@ppr.ca








Tags:    Wire, Disclosure Newswire, United States, English