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Laricina Energy Ltd. (“Laricina” or the “Company”), announced today that it has entered into a term sheet (the “Term Sheet”) in respect of a settlement transaction (the “Settlement Transaction”) with CPPIB Credit Investments Inc. (“CPP Credit”) the sole holder of the Company’s 11.5% senior secured notes and payment-in-kind notes (collectively the “Notes”) issued pursuant to the trust indenture dated March 20, 2014 (the “Indenture”).
The Company also announced it was granted a further order (the “Order”) by the Court of Queen’s Bench of Alberta, Judicial Centre of Calgary (the “Court”) to extend creditor protection under the previously announced Companies’ Creditors Arrangement Act (Canada) (“CCAA”) until and including August 7, 2015.
The Settlement Transaction contemplates that the Company will make an initial payment and two subsequent scheduled payments, the latter subject to adjustment, and certain anticipated receivables will also be used to repay the Notes when received. The principal amount owing under the Notes as at July 6, 2015 is $142.4 million.
Under the terms of the Settlement Transaction, and when approved by the Court, Laricina shall pay immediately to CPP Credit $31.4 million from its cash on hand on account of firstly, accrued and unpaid interest, secondly, reasonable costs reimbursable pursuant to the Indenture and, thirdly with the remainder applied as a partial repayment of principal outstanding under the Notes. Following this payment the outstanding principal amount of the Notes is forecasted to be $113.7 million subject to adjustment for interest which may be paid in cash or added to the principal amount of the Notes.
Thereafter the Settlement Transaction contemplates that such remaining outstanding principal amount of the Notes owing to CPP Credit will be dealt with by:
CPP Credit may terminate the Settlement Transaction if the Effective Date has not occurred by November 30, 2015.
The Settlement Transaction specifically provides that Laricina may undertake a capital repayment process (“Capital Repayment Process”) and seek transactions which may include selling assets or the entire company (the “Alternative Transactions”), in order to raise sufficient funds to repay CPP Credit. The Company intends to conduct the Capital Repayment Process to solicit transactions for that purpose. In the event Laricina is successful in identifying one or a number of Alternative Transactions that are sufficient to repay CPP Credit, it may terminate the Settlement Transaction at any time on or before November 30, 2015 in order to complete those Alternative Transactions. CPP Credit has also agreed to cooperate to implement certain potential transactions that could result in a partial repayment of the Notes in conjunction with the Settlement Transaction.
As previously communicated to shareholders, BMO Capital Markets, Morgan Stanley Canada Limited and Peters & Co. Limited have been engaged as financial advisors to assist the Company in the Capital Repayment Process and with seeking Alternative Transactions. Laricina and its advisors have prepared an asset and corporate sale process information memorandum and a fully-updated virtual data room for access to due diligence materials concerning the Company and its assets and will canvas interested parties to sign non-disclosure agreements and receive access to the data.
The Company remains committed to continuing to work hard to achieve the best outcome for all stakeholders.
Pursuant to the Order, on July 22, 2015 the Company will present its application for approval by the Court in Laricina’s ongoing proceedings under the CCAA of i) a claims process, ii) payment to CPP Credit of $31.4 million as described above, and iii) Laricina’s proposed Capital Repayment Process. A definitive agreement (the “Settlement Agreement”) in respect of the Settlement Transaction is to be completed before the end of July 2015 and together with the Term Sheet will be presented for approval by the Court on August 5, 2015. In the interim, Laricina will finalize its claims process, Capital Repayment Process and work with CPP Credit to prepare the Settlement Agreement, and related definitive documentation required to implement the Settlement Transaction, work with the Monitor regarding its intended restructuring process and matters related thereto and continue to update shareholders accordingly.
With the continued stay of proceedings pursuant to the Order, the Company has sufficient liquidity, with estimated cash and cash equivalents as of June 30, 2015 of approximately $104.6 million, for the extended stay period which expires on August 7, 2015 and, which may be extended thereafter as the Court deems appropriate.
Under the CCAA proceedings the Company’s operations are continuing uninterrupted and it is expected that obligations to employees and key suppliers of goods and services will continue to be met on an ongoing basis and that the Company’s management will remain responsible for the day-to-day operations of the Company.
At the time of Laricina’s application for the Order under the CCAA, CPP Credit made a cross application which was adjourned indefinitely by the Court.
On April 22, 2015 the Company was granted a second stay of CCAA proceedings until and including July 7, 2015 following the initial order granted effective March 26, 2015 (the “Initial Order”) after seeking protection under the CCAA following receipt of a Demand for Payment in full by March 26, 2015 from CPP Credit of all amounts due under the Indenture.
In conjunction with the Initial Order, PricewaterhouseCoopers Inc. (“PwC”) was appointed by the Court as monitor under the CCAA proceedings (the “Monitor”). All of the materials filed with the Court are available on the Monitor’s website (www.pwc.com/car-laricina).
About Laricina Energy Ltd.
Laricina is a non-public, Calgary based, responsible energy company that will contribute supply to the growing demand for crude oil through in situ oil sands development.
Laricina’s goal is to create value by developing Canada’s oil sands using innovative in situ technologies. The Company has a diverse portfolio of oil sands assets at varied stages of development, and experienced people with the requisite technical expertise. Our current focus is on the Company’s two core producing projects – Saleski and Germain. Laricina’s asset base, holds 0.5 billion barrels of probable reserves, 3.9 billion barrels of contingent resources (best estimate) and 0.2 billion barrels of prospective resources (best estimate) as determined by Laricina’s independent reservoir engineers as at December 31, 2014 for Germain Grand Rapids, Germain Winterburn, Saleski Grosmont, Burnt Lakes, Conn Creek, Poplar Creek and Portage properties, and as at December 31, 2013 for Thornbury, Thornbury West, House River, Germain Wabiskaw and Boiler Rapids properties. These assets include oil sands resources in the familiar McMurray Formation, and the developing Grand Rapids, and Grosmont and Winterburn carbonate plays, all of which offer significant production potential.
This information release contains certain “forward-looking statements” within the meaning of such statements under applicable securities law including but not limited to potential results of a restructuring process and enhancement of shareholder value, disclosure intentions with respect to the strategic alternatives process, capital repayment process or Settlement Transaction, and timing of final regulatory approval from the Alberta Energy Regulator and Alberta Environment. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are frequently characterized by words such as “plan”, “expect”, “estimate”, “intend”, “believe”, “anticipate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on Laricina’s experience and current beliefs as well as assumptions made by, and information currently available to, Laricina, and are subject to a variety of risks and uncertainties including, but not limited to, those associated with resource definition, unanticipated costs and expenses, regulatory approvals, fluctuating oil and gas prices, and the ability to access sufficient capital to finance future acquisitions and development. Laricina’s resources at Saleski and Burnt Lakes are contained in the Grosmont Formation, and a portion of Germain’s resources are contained in the Winterburn Formation, each a carbonate reservoir. Some of the Company’s contingent resources in the carbonates that are analogous to the Saleski pilot are based on established technologies that have been demonstrated to be commercially viable specifically for the subject reservoirs, and some are based on technology under development that require further development and piloting to confirm the commercial viability of applying these technologies to carbonate reservoirs. Resource volumes based on technology under development have a higher risk than volumes based on established technology. Although the Company believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this information release are not exhaustive and readers are not to place undue reliance on forward-looking statements. Laricina disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this message, except as required under applicable securities legislation. The forward-looking statements are expressly qualified by these cautionary statements.
For further information please visit www.laricinaenergy.com or contact:
Marla Van Gelder
Vice President Corporate Development
Laricina Energy Ltd.
East Tower, 5th Ave Place
800, 425 1st Street SW
Calgary, AB. T2P 3L8