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Perpetual Eliminates Minimum Acceptance Condition and Extends Note Exchange Proposal for its 8.75% Senior Notes and Provides Hedging Update

Donnerstag, 12.01.2017 14:06 von PR Newswire

PR Newswire

CALGARY, Jan. 12, 2017 /PRNewswire/ - (TSX: PMT) – Perpetual Energy Inc. ("Perpetual" or the "Company") announces that it has further extended the acceptance date for its previously announced proposal to exchange all of its 8.75% senior notes due March 15, 2018 (the "2018 Senior Notes") and its 8.75% senior notes due July 23, 2019 (the "2019 Senior Notes" and together with the 2018 Senior Notes, the "Existing Senior Notes") for new 8.75% senior notes (the "Exchange Senior Notes") having an extended maturity date (the "Note Exchange Proposal").  The Note Exchange Proposal is now open for acceptance by holders of Existing Senior Notes until 5:00 p.m. (Toronto time) (the "Expiry Time") on January 23, 2017, or such later time and date on which the Note Exchange Proposal may be extended by Perpetual (the "Expiry Date"). It has been extended to provide additional time for holders of Existing Senior Notes who have not already tendered their Existing Senior Notes to participate in the Note Exchange Proposal.

The completion of the Note Exchange Proposal is no longer conditional upon Noteholders holding in the aggregate at least $20 million aggregate principal amount of the issued and outstanding Existing Senior Notes accepting the Note Exchange Proposal and tendering their Existing Senior Notes prior to the Expiry Time on the Expiry Date. As of the date hereof, an aggregate of $17.4 million principal amount of Existing Senior Notes have been irrevocably tendered to the Note Exchange Proposal, consisting of $8.4 million principal amount of 2018 Senior Notes and $9.0 million principal amount of 2019 Senior Notes (collectively, the "Tendered Notes").  On the Expiry Date, Perpetual will exchange the Tendered Notes and any additional Existing Senior Notes that are tendered on or prior to the Expiry Time on the Expiry Date for Exchange Senior Notes. 

Holders of Existing Senior Notes who elect to participate in the Note Exchange Proposal will receive $1,000 principal amount of Exchange Senior Notes for each $1,000 principal amount of Existing Senior Notes properly tendered to the Note Exchange Proposal. The Exchange Senior Notes will contain the same terms as the Existing Senior Notes other than now having: (i) an extended maturity date to January 23, 2022 (being five years from the Expiry Date of the Note Exchange Proposal); (ii) an increased annual interest rate for the first year, and only for the first year, that the Exchange Senior Notes are outstanding of 9.75% instead of 8.75%, which is equal to the equivalent of $10 per $1,000 principal amount of Existing Senior Notes validly tendered under the Note Exchange Proposal; and (iii) consequential changes to the interest payment dates and optional redemption provisions to give effect to the extended maturity date and increased annual interest rate for the first year that the Exchange Senior Notes are outstanding.

Holders of Existing Senior Notes who accept and validly tender their Existing Senior Notes to the Note Exchange Proposal will also receive accrued and unpaid interest outstanding up to, but excluding, the Expiry Date.  In particular, holders of 2018 Senior Notes who tender their 2018 Senior Notes to the Note Exchange Proposal will receive $31.16 per $1,000 principal amount of 2018 Senior Notes in cash. All holders of 2019 Senior Notes will receive their semi-annual interest payment of $43.75 per $1,000 principal amount of 2019 Senior Notes in cash regardless of whether or not they tender their 2019 Senior Notes to the Note Exchange Proposal. In each case the payments represent all accrued and unpaid interest outstanding up to, but excluding, the Expiry Date of January 23, 2017. 

There is currently outstanding $36.0 million aggregate principal amount of 2018 Senior Notes and $24.6 aggregate principal amount of 2019 Senior Notes. Assuming no additional Existing Senior Notes are properly tendered to the Note Exchange Proposal before the Expiry Time on the Expiry Date there will be $27.6 million aggregate principal amount of 2018 Senior Notes and $15.6 million aggregate principal amount of 2019 Senior Notes remaining outstanding and $17.4 million aggregate principal amount of Exchange Senior Notes outstanding upon completion of the Note Exchange Proposal.

The Board of Directors and management of Perpetual believe the Note Exchange Proposal will enhance the Company's strategy of long term value creation for securityholders as well as its assets and operations. The Note Exchange Proposal will improve the Company's liquidity beyond the current maturity dates of the Existing Senior Notes, enabling Perpetual to pursue strategic growth and value-enhancing opportunities important to its corporate strategy. Directing capital to further develop the Company's asset base and augment the profitability of its operations is expected to generate greater short and long term value for securityholders than would the retirement of its Existing Senior Notes. The directors and officers of Perpetual have tendered their Existing Senior Notes to the Note Exchange Proposal.

Upon the successful completion of the Note Exchange Proposal, Noteholders who participate in the Note Exchange Proposal will continue to own a security on substantially the same terms (including the 8.75% coupon rate) as the Existing Senior Notes with the additional benefit of having a longer maturity date of five years from the Expiry Date and an increased annual interest rate for the first year the Exchange Senior Notes are outstanding without incurring any additional transaction costs. In addition, in the event that a significant amount of the outstanding aggregate principal amount of the Existing Senior Notes are properly tendered to the Note Exchange Proposal, holders of the Exchange Senior Notes are anticipated to benefit from improved liquidity in the market for Exchange Senior Notes, which is typically associated with a larger overall issued and outstanding principal amount.

Perpetual currently intends to repay any 2018 Senior Notes and 2019 Senior Notes not tendered to the Note Exchange Proposal on or prior to their respective maturity dates of March 15, 2018 and July 23, 2019 through proceeds from excess funds flow, asset sales, refinancing or a combination thereof.

Scotia Capital Inc. has been engaged to act as sole dealer manager and solicitation agent, Kingsdale Shareholder Services has been appointed the information agent and Computershare Investor Services Inc. has been appointed as depositary for the Note Exchange Proposal.

The Note Exchange Proposal and the initial notice of extension and variation was sent to holders of Existing Senior Notes on or about December 12, 2016 and December 28, 2016 respectively, and a notice of extension and variation in respect of the extended Expiry Date and related amendments to the Note Exchange Proposal is anticipated to be sent to holders of Existing Senior Notes on or about January 13, 2017. Holders of Existing Senior Notes are urged to evaluate carefully all information regarding the Existing Senior Notes and the Exchange Senior Notes and to consult their own investment, legal, tax and other professional advisors and to make their own decision whether to accept the Note Exchange Proposal.

Noteholders who have any questions or require further information are encouraged to contact Scotia Capital Inc., the sole dealer manager and solicitation manager, at 1-888-776-3666 or email michael.lay@scotiabank.com, Kingsdale Shareholder Services, the information agent, at 1-855-682-2031 or email contactus@kingsdaleshareholder.com, or Computershare Investor Services Inc., the depositary, at 1-800-564-6253 or email corporateactions@computershare.com.

Notice to United States Noteholders

The solicitation described herein is made for the securities of a Canadian entity and is subject to Canadian disclosure requirements that are different from those of the United States.  Financial statements included or incorporated by reference in the Note Exchange Proposal related to the solicitation have been prepared in accordance with Canadian generally accepted accounting principles and are subject to Canadian auditing and auditor independence standards, which differ from United States generally accepted accounting principles and United States auditing and auditor independence standards.  As a result, such financial statements may not be comparable to the financial statements of United States companies.

Perpetual Energy Inc. exists under the laws of the Province of Alberta, Canada.  It may be difficult for U.S. Noteholders to enforce their rights and any claim that they may have arising under United States federal or state securities laws, as Perpetual is incorporated under the laws of Alberta, Canada, all or most of its assets are located in Canada, and all or most of its officers and directors are residents of Canada.  You may not be able to sue a foreign entity or its officers or directors in a foreign court for violations of U.S. federal or state securities laws.  It may be difficult to compel a foreign entity and its affiliates to subject themselves to a U.S. court's judgment.

You should be aware that Perpetual may purchase securities otherwise than under the Note Exchange Proposal, such as in open market or privately negotiated purchases.

HEDGING UPDATE

Perpetual has recently put in place a number of commodity hedges to increase certainty in 2017 funds flow by mitigating the effect of commodity price volatility.

Natural Gas

The following table provides a summary of fixed price natural gas forward sales arrangements (net of related financial natural gas purchase contracts) at the AECO trading hub in place as at January 11, 2017:

Term

Volumes
at AECO

(GJ/d)

Average price
($/GJ)(1)

Market
prices
($/GJ)(2)(3)

Type of contract

January 2017

7,500

3.16

3.33

Financial

January 2017

35,000

3.26

3.33

Physical

February 2017

35,000

3.29

2.67

Physical

March 2017

35,000

3.11

2.65

Physical

April 2017 – December 2017

7,500

3.16

2.74

Financial

April 2017 – December 2017

20,000

3.14

2.74

Physical







(1)

Average price calculated using weighted average price for net open contracts.

(2)

Market prices are based on forward prices as of market close on January 11, 2017.

(3)

January 2017 contracts settled at $3.33/GJ.

 

In addition, as previously disclosed in Perpetual's Management Discussion and Analysis dated November 7, 2016, Perpetual has in place a number of natural gas contracts for the physical sale of natural gas through to August 31, 2018 relating to the marketing arrangements negotiated as part of its disposition of shallow gas assets in eastern Alberta, effective October 1, 2016. Perpetual has closed the following 2017 positions related to the $2.81/GJ call option obtained as a result of the disposition of its shallow gas assets:

Term

Volumes at
AECO
(GJ/d)

Average price

($/GJ)(1)

Profit

($ '000s)

Type of contract

January 2017

33,611

3.24

$448

Financial

February 2017

33,611

3.29

$452

Financial







 

Crude Oil

The following tables provide a summary of crude oil contracts in place as at January 11, 2017.

Costless collar oil sales arrangements in USD$:

Term

Volumes
(bbl/d)

Floor price
(USD$/bbl)

Ceiling
price
(USD$/bbl)

Market prices
(USD$/bbl)

 

Type of contract

January 2017 – December 2017

500

50.00

59.40

55.33

Collar

February 2017 – December 2017

250

50.00

61.50

55.56

Collar

(1)

Market prices are based on forward WTI oil prices as of market close on January 11, 2017.

 

Basis differential contracts between WTI and WCS trading:

Term

Volumes
(bbl/d)

WTI-WCS
differential
(US$/bbl)(1)

Market prices

(US$/bbl)(2)

 

Type of contract

February - December 2017

500

(15.40)

(15.52)

Financial

(1)

WTI-WCS differential price calculated using weighted average price for net open contracts;
contracts settle at WTI index less a fixed basis amount.

(2)

Market prices are based on forward WTI-WCS differential prices as of market close on
January 11, 2017.

 

Foreign Exchange

At January 11, 2017, Perpetual has in place the following U.S. dollar boosted forward sales arrangement:

 

Term

Notional
$USD/month

Boosted notional(1)
$USD/month

Strike rate
($CAD/$USD)

Market prices
($CAD/$USD)(3)

Type of
contract

January 2017 – February 2018(2)

1,000,000

3,000,000

1.25

1.33

Financial

(1)

If the spot rate at expiry of each contract month is below the strike rate, Perpetual pays $USD 3,000,000 multiplied by the difference between the spot rate at expiry and the strike rate.

(2)

If the spot rate at expiry of each contract month is above the strike rate, Perpetual receives $USD 1,000,000 multiplied by the difference between the spot rate at expiry and the strike rate. Cumulative receipts on this contract are limited to a total of $0.8 million, of which $0.6 million has been recognized as of January 11, 2017.

(3)

Market prices are based on forward $CAD/$USD exchange rates as of market close on January 11, 2017.

 

Forward-Looking Information

Certain information regarding Perpetual in this news release including management's assessment of future plans and operations may constitute forward-looking statements under applicable securities laws. The forward-looking information includes, without limitation, statements regarding the Note Exchange Proposal and the timing for its completion and the anticipated benefits to Perpetual and its securityholders. Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in this press release, which assumptions are based on management analysis of historical trends, experience, current conditions, and expected future developments pertaining to Perpetual and the industry in which it operates as well as certain assumptions regarding the matters outlined above. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Perpetual and described in the forward looking information contained in this press release. Undue reliance should not be placed on forward-looking information, which is not a guarantee of performance and is subject to a number of risks or uncertainties, including without limitation those described under "Risk Factors" in Perpetual's Annual Information Form and MD&A for the year ended December 31, 2015 and those included in other reports on file with Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and at Perpetual's website (www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not exhaustive. Forward-looking information is based on the estimates and opinions of Perpetual's management at the time the information is released and Perpetual disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or otherwise, other than as expressly required by applicable securities laws.

About Perpetual

Perpetual Energy Inc. is a Canadian energy company with a spectrum of resource-style opportunities spanning liquids-rich natural gas in the Alberta deep basin, shallow gas, heavy oil and bitumen. Perpetual's shares are listed on the Toronto Stock Exchange under the symbol "PMT". Further information with respect to Perpetual can be found at its website at www.perpetualenergyinc.com.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

SOURCE Perpetual Energy Inc.