REG - Canadian O'Seas Petr - $3.5m Equity Financing & Board Changes

Canadian Overseas PetroleumAnnouncement

06/09/2023 07:30

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RNS Number : 5442L  Canadian Overseas Petroleum Ltd  06 September 2023

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, THE REPUBLIC OF
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RELEASE, PUBLICATION OR DISTRIBUTION WOULD BREACH ANY APPLICABLE LAW OR
REGULATION.

 

 COPL Announces $3.5m Equity Financing, WTI Swap Unwind and Certain
Management/Board Changes

London, United Kingdom; Calgary, Canada: September 6, 2023 - Canadian Overseas
Petroleum Limited ("COPL" or the "Company") (XOP: CSE) & (COPL: LSE), an
international oil and gas exploration, production and development company with
production and development operations focused in Converse and Natrona
Counties, Wyoming, USA, is pleased to announce (the "Announcement") $3.5
million of committed common share financing and certain amendments to the
outstanding Bonds (as defined below) of the Company, as described herein
(collectively, the "Financing").

 

Highlights

·    c. $8.5 million of liquidity ensures the Company is fully financed in
to the first quarter of 2024 with the intention of reaching possible third
party strategic Joint Venture (as defined below) agreement

o $3.5 million equity injection at 4p per share from Anavio

o c. US$5.0 million liquidity released from hedge restructuring

o $0.5 million cash saving from Directors agreeing to waive all cash
compensation for 2023

o $2.0 million of G&A reductions achieved to date in 2023 and a further
$1.0 million identified to be reduced prior to year-end 2023

·    John Cowan appointed as new CEO

·    Tom Richardson appointed as Chairman

·    Important waivers and amendments agreed to both Senior Credit
Facility and Bonds from an aligned and supportive pair of stakeholders and key
capital providers to the Company

·    Company to appoint one additional non-executive director

·    Barron Flats Unit gas gathering infrastructure improvement completed
ahead of schedule and under budget

 

Senior Lender Support and amendment of financing terms

 

In concert with the Financing, COPL has the full support of its existing
Senior Credit Facility Lender who has agreed to: (i) continue to waive the
application of financial ratios, (ii) restructure 100% of the WTI hedges from
Sep23 to Jan24, freeing up c. $5.0 million of near-term cash flow, and (iii)
allow the reallocation of significant COPL expenses to the COPL America Inc.
operating entity.

 

Other terms connected with the Financing include:

 

·    Completion of the Financing is expected prior to the end of September
2023 and is intended to sufficiently fund COPL in to the first quarter of 2024
for production growth and to conclude the previously announced joint venture
(the "Joint Venture") negotiations.

·    The Common Shares are being purchased at a price of 4p per share by
Anavio Capital Partners LLP or an entity or entities associated by it (the
"Purchaser").

·    The Company will grant the Purchaser 69,721,116 warrants to purchase
Common Shares at a price of 4p per share, expiring August 26, 2027.

·    The conversion price of the Bonds (as defined below) will be amended
to a price of 4p ($0.0502) per conversion share.

·    The exercise price of the existing warrants expiring on August 26,
2027 will be amended to a price of 4p.

·    Anavio and the Company have agreed to discuss a possible reduction of
the quantum of payment of any "Make Whole Amount" under the terms and
conditions of each of its 2027 Bonds and 2028 Bonds (each as defined below),
provided a satisfactory Joint Venture is entered into by the Company, hence
reducing potential dilution.

·    The Company will appoint one additional independent non-executive
director to be nominated by the Purchaser by no later than November 1, 2023.

·    The Directors have agreed to waive all cash payments for services
during 2023 (expected to total approximately $0.5 million) in order to assist
with the liquidity management and cost cutting at the Company. The existing
Directors will instead each receive one 2028 Bond to be issued by COPL. These
bonds will be issued on or around December 31, 2023. In connection with such
bonds, the Directors will not have: (i) voting rights; (ii) the ability in the
first year to convert such bonds into shares in the Company; (iii) the ability
in the first year to receive shares in the Company in lieu of cash payments of
principal or interest under the bonds; and (iv) the ability in the first two
years to receive shares in the Company in lieu of make whole payments in the
event of a bond redemption.

 

CEO and Chairman appointments

 

In addition, the Company announces that Arthur Millholland has agreed to move
from Chief Executive Officer and a director of the Company with immediate
effect, to President of the Company's affiliate, COPL America Inc. Mr.
Millholland's technical expertise was instrumental in understanding the
long-term value of the Barron Flats Unit miscible flood and acquiring it for
such a relatively low cost. Through further geological study, he and his team
have revealed a vast area of bypassed oil pay in the Cole Creek area, adjacent
to the BFU. The prospective horizons are currently under Joint Venture
negotiation with a respected industry leader. The BFU and the potential joint
venture requires the singular focus of Mr. Millholland and the technical team.
As President of COPLA, he will be well positioned to continue to add value and
success to COPL, where his strengths in upstream hydrocarbon exploration and
development will focus on completing the Joint Venture discussions.

 

Mr. Millholland is replaced as CEO by Mr. Cowan, a COPL director since 2015
with over 40 years of experience as a founder, CEO, and/or director of a
number of private and publicly traded upstream oil and gas corporations. Mr
Cowan will be focused on overseeing the Company's administration and the
development of the Barron Flats Unit Miscible Flood.

 

Thomas Richardson has been appointed as Chairman of the Company.

 

General and Administrative Cost Reduction

 

In Q2 2023, the Company began its initiative to significantly reduce G&A
expenses. To date, $2.0 million of annualised G&A has been reduced, mostly
through termination of a number of contracts.  The Company has identified a
further $1.0 million to be reduced prior to year-end 2023. An employee
voluntary salary reduction initiative is in discussion with senior employees,
where reductions will be "made whole with bonus" when certain milestones have
been reached as determined by the COPL Board of Directors. As stated above,
the current Board has agreed to forego cash compensation for all of 2023.

 

Operations Update and Guidance

 

As reported as a subsequent event in the Company's Q2 2023 press release, the
Barron Flats Unit gas gathering infrastructure improvement was completed ahead
of schedule and under budget. Currently, the Company is determining the best
level of efficiency and is restarting NGL gas injection in September. The
Company is focused on delivering production results in Q4 2023 and, further
guidance will be provided as appropriate, and as approved by the Board of
Directors.

 

MI 61-101

 

The Company has also determined that the Financing is a "related party
transaction" pursuant to Multilateral Instrument 61-101 - Protection of
Minority Security Holders in Special Transactions ("MI 61-101") and is exempt
from the formal valuation and minority approval requirements applicable to
related party transactions defined under MI 61-101 pursuant to the financial
hardship exemption under sections 5.5(g) and 5.7(1)(e) of MI 61-101.

 

The Company relies on the above exemptions on the basis that: (i) as described
in the Company's announcement of February 1, 2023, the Company is in serious
financial difficulty because, without the Financing, it does not have
sufficient working capital for its present requirements, (ii) the Financing is
designed to improve the financial position of the Company, (iii) the
transaction is not subject to court approval or court order, (iv) the Board of
Directors of the Company and all independent directors, each of the foregoing
acting in good faith, have determined that (i) and (ii) above apply and that
the terms of the Financing are reasonable in the circumstances to the Company,
and (v) as at the date hereof, there is no other requirement to hold a meeting
to obtain the approval of the shareholders of the Company for the Financing.

 

Definitions

 

Reference is made to the Bond Instrument dated July 26, 2022 as amended on
March 24, 2023 in respect of the issue of $20,000,000 Senior Convertible Bonds
due 2027 (the "2027 Bonds") (of which $12.4 million principal amount remains
outstanding), the Bond Instrument dated 26 July 2022 as amended on December
30, 2022 and March 24, 2023 in respect of the issue of $24,000,000 Senior
Convertible Bonds due 2028 (the "2028 Bonds") (of which $13.0 million
principal amount remains outstanding) (together with the 2027 Bonds
collectively, the "Bonds").

 

Tom Richardson, Chairman commented: "COPL is entering an important new phase
of extremely tight financial discipline.  The Company now has a focussed
executive team and Board aligned in their focus on delivering value for all
stakeholders. We are delighted with the belief and wholly aligned support of
our two most significant capital providers in the changes we are effecting."

 

John Cowan, CEO commented: "Following a challenging period for the company
both financially and operationally I am committed to delivering on the
potential of our increasingly well invested assets.  It is my simple aim to
drive maximum value from them, whilst also ensuring that if the interest being
shown by certain third parties in joint venturing with us matches our own
views on value, we will seek to further scale through partnership."

 

 

About the Company:

 

COPL is an international oil and gas exploration, development and production
company actively pursuing opportunities in the United States with operations
in Wyoming.

 

The Company operates the Cole Creek Unit 100% WI, Barron Flats Shannon
(Miscible) Unit 85% WI and holds Barron Flats Federal (Deep) 85% WI in
addition to non-unitized lands 100% WI.

 

The Company's Wyoming operations are one of the most environmentally
responsible with minimal gas flaring and methane emissions combined with
electricity sourced from a neighbouring wind farm to power production
facilities.

 

For further information, please contact:

 

Mr. Tom Richardson, Chairman

Mr. John Cowan, CEO

Mr. Ryan Gaffney, CFO

Canadian Overseas Petroleum Limited

Tel: + 1 (403) 262 5441

 

Cathy Hume

CHF Investor Relations

Tel: +1 (416) 868 1079 ext. 251

Email: cathy@chfir.com

 

Charles Goodwin

Yellow Jersey PR Limited

Tel: +44 (0) 77 4778 8221

Email: copl@yellowjerseypr.com

 

Neil Passmore / Andrew Chubb

Adviser/Joint Broker

Hannam & Partners

+44 (0) 20 7907 8500

 

Peter Krens

Joint Broker

Equity Capital Markets, Tennyson Securities

Tel: +44 (0) 20 7186 9033

 

Alex Wood & Keith Dowsing

Joint Broker

Alternative Resource Capital

AW: +44 (0) 7559 910872

KD: +44 (0) 7559 910873

 

 

The Common Shares are listed under the symbol "XOP" on the CSE and under the
symbol "COPL" on the London Stock Exchange.

 

All $ figures are United States Dollars unless otherwise noted.

 

Market Abuse Regulation disclosure

The information contained within this Announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended ("MAR") encompassing information relating to
the Financing described above, and is disclosed in accordance with the
Company's obligations under Article 17 of MAR. In addition, market soundings
(as defined in MAR) were taken in respect of the Financing with the result
that certain persons became aware of inside information (as defined in MAR),
as permitted by MAR. This inside information is set out in this Announcement.
Therefore, upon publication of this Announcement, those persons that received
such inside information in a market sounding are no longer in possession of
such inside information relating to the Company and its securities.

 

Caution regarding forward looking statements

This news release contains forward-looking statements. The use of any of the
words "initial, "scheduled", "can", "will", "prior to", "estimate",
"anticipate", "believe", "should", "forecast", "future", "continue", "may",
"expect", and similar expressions are intended to identify forward-looking
statements. The forward-looking statements contained herein are based on
certain key expectations and assumptions made by the Company, including, but
not limited to, the ability to raise the necessary funding for operations,
delays or changes in plans with respect to exploration or development projects
or capital expenditures. Although the Company believes that the expectations
and assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the forward-looking
statements since the Company can give no assurance that they will prove to be
correct since forward-looking statements address future events and conditions,
by their very nature they involve inherent risks and uncertainties most of
which are beyond the control of Canadian Overseas Petroleum Ltd. For example,
the uncertainty of reserve estimates, the uncertainty that the Financing will
complete the uncertainty of estimates and projections relating to production,
cost overruns, health and safety issues, political and environmental risks,
commodity price, interest rate and exchange rate fluctuations, changes in
legislation affecting the oil and gas industry could cause actual results to
vary materially from those expressed or implied by the forward-looking
information.  Forward-looking statements contained in this news release are
made as of the date hereof and Canadian Overseas Petroleum Ltd. 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.

Hannam & Partners, which is a member of the London Stock Exchange, is
authorised and regulated in the United Kingdom by the FCA is acting as joint
broker in connection with the Financing. Alternative Resource Capital, a
trading name of Shard Capital Partners LLP, and Tennyson Securities, each
authorised and regulated in the United Kingdom by the FCA are acting as joint
broker in connection with the Financing. Each of Hannam & Partners,
Alternative Resource Capital and Tennyson Securities are acting exclusively
for the Company in connection with the matters referred to in this
Announcement and for no-one else and will not be responsible to anyone other
than the Company for providing the protections afforded to their respective
clients, nor for providing any advice in relation to the contents of this
Announcement or any transaction, arrangement or matter referred to herein.

This Announcement has been issued by and is the sole responsibility of the
Company. No representation or warranty, express or implied, is or will be made
as to, or in relation to, and no responsibility or liability is or will be
accepted (apart from the responsibilities or liabilities that may be imposed
by the Financial Services and Markets Act 2000, or the regulatory regime
established thereunder) the Company or by any of their respective affiliates
or agents as to, or in relation to, the accuracy or completeness of this
Announcement or any other written or oral information made available to or
publicly available to any interested party or its advisers, and any liability
therefore is expressly disclaimed.

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