REG - Canadian O'Seas Petr - COPL Signs Financing to Close Cuda Acquisition

Canadian Overseas PetroleumAnnouncement

22/07/2022 12:30

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220722:nRSV4792Ta&default-theme=true

RNS Number : 4792T  Canadian Overseas Petroleum Ltd  22 July 2022

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
SOUTH AFRICA, NEW ZEALAND OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH
RELEASE, PUBLICATION OR DISTRIBUTION WOULD BREACH ANY APPLICABLE LAW OR
REGULATION.

 

COPL Signs Financing to Close the Cuda Acquisition ahead of procuring a
Reserve Based Loan Facility

London, United Kingdom; Calgary, Canada: July 22, 2022 - 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"):

 

·    The Company has signed Purchase Agreements for the issue of two
series of convertible bonds with an aggregate principal amount of US$25.2
million (the "Principal Amount"): $12.6 million maturing in 2024 and $12.6
million maturing in 2025 (collectively, the "Convertible").

·    The Convertible is anchored by a long term, UK based institutional
shareholder (the "Lead Investor") and other institutional investors (all
investors collectively, "Bondholders").

·    This instrument replaces the previous bridge loan, announced on 19
April 2022 and is structured to accommodate the implementation of a planned
Reserve Based Loan ("RBL") facility.  The Convertible is initially unsecured
and permits the Company to structure new senior debt.

·    A 'tap feature' to increase the Convertible allows COPL to draw
further development funds, should it require, with the aim of increasing
production or for future drilling plans, subject to mutual agreement with the
Lead Investor.

·    Subscription Proceeds of $19.7 million from the Convertible will be
used to finance the cash component of the acquisition of the Cuda Energy LLC
("Cuda") assets (the "Cuda Acquisition") which will lead from Q3-2022 to an
increase in the Company's share of oil production from certain of its Wyoming
assets.

·    With a bankrupt partner removed from the Wyoming Assets and, those
working interests owned by COPL America, the Company believes, it is now
optimally positioned for management to achieve its near-term objective of
finalising a RBL agreement to refinance its debt structure during 2022.

 

COPL believes this instrument offers superior terms for the Company to pursue
its corporate objectives for 2022, by providing:

 

·    A longer average maturity of 30 months, with options for COPL to
repay in cash or in COPL common shares.

·    Flexibility through optional redemption by the Company to call the
instrument if certain conditions are met.

·    A structure deliberately designed to support COPL and senior lenders
with the implementation of an RBL agreement.

·    The Lead Investor and COPL have agreed to a 'tap feature' whereby
they can mutually agree funding for development and drilling at COPL's Wyoming
Assets, in a structure that fits with a RBL or senior debt.

·    The Company has also agreed to a moratorium on equity issuances for
90 days from the Issue Date, whilst the Company works to conclude its
objective of senior debt refinancing and, not to issue further convertible
securities whilst the Bonds are outstanding.

·    The Conversion Price was set at 5% premium to the 5-day volume
weighted average price prior to signing a binding term sheet agreeing terms in
principle with the Investor on 6 July 2022.

 

Cuda Acquisition

 

COPL's affiliate, COPL America Inc., intends to close the Cuda Acquisition
simultaneously with the closing of the Convertible on 25 July 2022.   On
closing the Cuda Acquisition:

 

·    COPL America will become the majority owner of its Wyoming Assets
with operated interests of 85 - 100% across three oil producing Units in
Wyoming, USA.

·    COPL will, from Q3-2022, report increased share of oil production
reflecting majority interest in its Wyoming Assets, which will benefit COPL
America from exposure to 'unhedged' oil production.

·    Closing the Cuda Acquisition will remove a bankrupt working interest
partner that has constrained COPL America's financial resources and limited
the pace of development since COPL America acquired its Wyoming Assets in
March 2021.  As at 31 May 2022, the Cuda Receivable owed to COPL America had
decreased to $1.95 million.

 

Convertible Terms

 

Terms not defined in this Announcement have the meaning given to them in the
Convertible. The key terms of the Convertible are as follows:

 

·    US$25.2 million aggregate Principal Amount between two series of
bonds of $12.6 million Principal Amount each, denominated at US$200,000 per
bond (one "Bond").

·    24 months maturity for one series and 36 months maturity for the
other series (each, a "Maturity Date"), expected to be issued on 25 July 2022
("Issue Date").

·    13.0% interest per annum in cash. Interest will accrue and increase
by 0.75% each 3-months until COPL gives notice to the Bondholders that it
shall henceforth pay all interest coupons in cash ("Cash Payment Notice").
Interest will decrease by 2.0% per annum, and no further quarterly increases
will apply from such time as the Company provides a notice that it will
henceforth pay interest and make whole payments in cash.

·    Issue Price: 78% of Principal Amount.

·    Maturity Redemption Amount: 119% of the Principal Amount and all
accrued but unpaid interest.

·    Bondholder Early Redemption:  119% of the Principal Amount, all
accrued but unpaid interest and the relevant make whole upon certain events
including fundamental change of control or event of default.

·    Issuer Early Redemption: 114% of the Principal Amount, all accrued
but unpaid interest and the relevant make whole in the period from 6-months
after the Issue Date to and including the first anniversary of the Issue Date
(and thereafter, at 109%), subject to the Parity Value of the Principal Amount
of each bond having exceeded US$260,000.

·    Conversion price of 16.75p, being a 5% premium to the 5-day volume
weighted average price of COPL's common shares on LSE prior to signing binding
terms with the Investor. The Conversion Price is US$0.2001 based on 1.19480
GBP/USD FX rate as of 4pm London, UK on 21 July 2022.  The Conversion Price
will be reset to 13.25p (US$0.1583 based on the aforementioned FX rate) if,
among other things, an RBL is not secured five months from the Issue Date, or
on the twelfth month anniversary of the issue date of the Convertible.

·    Unless previously converted or redeemed, each Bond will be redeemed
in cash by payment of the Maturity Redemption Amount on the Maturity Date.

·    Warrants expiring 30 months from the Issue Date shall be issued to
the Bondholders, providing for the right to acquire an aggregate number of
54,792,590 COPL common shares.  Each Warrant is exercisable at 16.75p.

·    General terms for the Bonds and Warrants include standard features of
EMEA convertible market including anti-dilution, change of control,
short-selling restrictions and customary closing conditions precedent.

 

 

Arthur Millholland, President & CEO, commented:

 

"We are pleased to have the support of our largest shareholder who approached
COPL with an objective of improving COPL's capital structure on closing of the
Cuda Acquisition and, the Convertible provides COPL with the cash required to
close the Cuda Acquisition.

 

"COPL plans an active work program for the remainder of 2022 including
optimization and facility work at the Barron Flats Shannon Unit, recompletions
at the Cole Creek Unit and drilling two horizontal wells at the Barron Flats
Deep Unit to target the significant oil discovery COPL has made in the
Frontier Formation, 1 and 2 sands.   COPL America has well design in hand,
and is procuring long lead items to commence drilling at the Deep Unit in Q4
this year."

 

Ryan Gaffney, CFO, commented further:

"The Cuda Acquisition is a positive step towards COPL America's refinancing
process as it provides majority ownership of our Wyoming Assets and increases
our bankable borrowing base which should make it easier to achieve a larger
refinancing later this year.  We are pleased with our shareholders' support
to provide a longer-term Convertible with well-defined conversion
parameters.  Moreover, this Convertible provides a capital structure that is
flexible and will fit alongside the planned Reserve Based Loan for our Wyoming
Assets.  We are now in prime position to progress term sheet negotiations
with banks and look forward to updating shareholders on bank re-financing
terms as soon as possible this quarter."

 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 Converse County Wyoming, and in sub-Saharan Africa through its ShoreCan
joint venture company in Nigeria, and independently in other countries.

 

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. Arthur Millholland, President & 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

 

Peter Krens

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

 

Andrew Chubb / Neil Passmore

Advisors/Joint Brokers

Hannam & Partners

+44 (0) 20 7907 8500

 

 

 

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

 

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 Placing 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 Placing 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 of estimates and
projections relating to production, cost overruns, health and safety issues,
political and environmental risks, commodity price 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
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 and is acting as
joint broker and sole financial adviser in connection with the Placing.
Tennyson Securities, which is a member of the London Stock Exchange, is
authorised and regulated in the United Kingdom by the FCA and is acting as
joint broker in connection with the Placing. Each of Hannam & Partners 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 by either Hannam & Partners (apart from the responsibilities or
liabilities that may be imposed by the Financial Services and Markets Act
2000, or the regulatory regime established thereunder) or 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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACQBGGDRBUDDGDD