CALGARY, Alberta, May 24, 2017 (GLOBE NEWSWIRE) — Delphi Energy Corp. (“Delphi” or the “Company”) is pleased to announce that it has entered into agreements with investors for a $65 million financing transaction (the “Financing Transaction”), comprised of a $35 million equity offering (the “Equity Offering”) and a $30 million principal amount of 10% senior secured Collateralized Exchange ListedTM (“CELTM”) Notes (the “Notes Offering”).
A syndicate of agents, led by Raymond James Ltd. and co-led by AltaCorp Capital Inc., has sold the securities on a private placement basis. The majority of the Financing Transaction was subscribed for by a single US-based institutional investor. Delphi is pleased to have a strategic investor who is constructive to Delphi’s accelerated development plan at its Bigstone Montney assets and is supportive of future consolidation opportunities in the area.
“Given Delphi’s continued strong results on the Bigstone Montney project, we believe continued acceleration of our development plan on our 165.5 sections of Montney land is in the best interest of all our stakeholders,’” said David J. Reid, President and CEO. “Having a large strategic investor who is supportive of this growth and buys into our long-term vision is in itself a strong asset as we move forward with an expanded drilling program.”
The principal use of proceeds will be to expand the Company’s drilling plans for the winter of 2017/2018 and to pursue potential acquisition opportunities. Proceeds from the Financing Transaction will temporarily reduce bank indebtedness and working capital deficits, leaving Delphi’s current $80 million credit facility largely undrawn.
Delphi views this new strategic debt and equity financial partner as aligned with accelerating the capitalization of our large scale development opportunity at Bigstone Montney. The Financing Transaction significantly improves Delphi’s liquidity. Post financing, Delphi’s $80 million credit facility is expected to be undrawn as at June 30, 2017. The enhanced liquidity will support an accelerated capital program and will allow Delphi to continue its Bigstone consolidation efforts, following up on its recently announced acquisition of 22.5 net sections of Montney rights.
Delphi’s latest well results continue to demonstrate strong economics in today’s commodity price environment, and offer high returns on full cycle capital cost and cash netbacks, which supports acceleration of the Company’s development plan. The Company’s ownership in regional infrastructure combined with available third party infrastructure provides a strategic capital cost and spud to on-stream timing advantage. In addition to improving operating margins from increasing condensate yields, an accelerated growth plan is expected to result in lower per barrel operating cost, general and administrative expense and interest expense. As the drilling program moves westward, well economics are expected to be further improved by greater exposure to growing regional condensate yield and decreasing hydrogen sulfide gradients.
The last five wells that Delphi completed in Bigstone had initial average production over the first 30 days (“IP30”) of 1,554 boe/d compared to an average of 1,354 boe/d for the first 28 wells. Virtually all of the difference between the two averages is due to increased field condensate production to 605 barrels per day (“bbls/d”) in the most recent five wells from 406 bbls/d in the first 28 wells. Percentage of condensate to total production on initial production rates increased from 30 percent on the first 28 wells to 39 percent in the most recent five wells.
The Company has been able to drill the first 8 (5.1 net) wells of its 13 (8.4 net) well 2017 program ahead of schedule and upon closing of the Financing Transaction will be in a position to increase its capital program. Delphi intends to add a third rig in the fall and double its planned drilling program for the remainder of 2017 to spring breakup in 2018, increasing the number of wells drilled from 10 to 20 wells. The Company drilled six wells in each of 2015 and 2016. Although the full 2018 capital budget and guidance will not be finalized and approved until the fourth quarter of 2017, Delphi anticipates production in the fourth quarter of 2018 to increase by approximately 40 percent, from its current fourth quarter of 2017 expectation of 11,000 to 11,500 boe/d, with the expanded winter drilling program and continued drilling through 2018. Run-rate cash flow in the fourth quarter of 2018 is anticipated to be in the context of $100 million to $110 million (assuming commodity pricing similar to the Company’s 2017 guidance assumptions).Total debt to cash flow ratio is anticipated to remain at or below the Company’s target of 1.5 times through 2018.
|Drilling Program (# of wells)||2015||2016||2017||2018|
|Historical and current budgets||6||6||13||14|
|Expanded capital program||–||–||3-5||4-8|
The Company has agreed to sell, on a private placement basis, 27,559,055 common shares at an issue price of $1.27 per common share, a discount of 3.8% to the closing price of Delphi common shares on the TSX on May 19, 2017, for aggregate gross proceeds of approximately $35 million (the “Equity Offering”).
Furthermore, the Company has agreed to issue an additional $30 million principal amount of the currently outstanding 10% senior secured Collateralized Exchange ListedTM (“CELTM”) Notes (the “Notes Offering”). The re-opening of the CELTM Notes was priced at 100% of par (plus accrued and unpaid interest) to yield 10% (the “Additional Notes”) and will not be issued with any warrants. The Additional Notes are being offered as further notes to Delphi’s existing $60 million aggregate principal amount of 10% senior secured CELTM Notes due 2021, issued on June 15, 2016 (the “Existing Notes”). The Additional Notes will be issued under the same indenture as the Existing Notes and will be treated as a single class of debt securities with the Existing Notes with identical terms, other than the issue date. The Additional Notes shall be fungible for trading purposes with the Existing Notes. Raymond James is acting as sole placement agent in respect of the Notes Offering.
Both the Equity Offering and the Notes Offering are expected to close on June 13, 2017, subject to necessary regulatory approvals. The common shares and CELTM Notes issued in connection with the Financing Transaction will be subject to a statutory hold period of four months plus one day from the date of closing, in accordance with applicable securities legislation.
CREDIT FACILITY UPDATE
The Company’s credit facility with Alberta Treasury Branches (“ATB”) as syndicate lead and including the Bank of Nova Scotia is in the final stages of its spring review process and is expected to be finalized on or before May 31, 2017.
This news release does not constitute an offer to sell or a solicitation of any offer to buy the securities in the United States. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended and will not be offered or sold in the United States absent an exemption from the registration requirements thereof.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading producer of liquids-rich natural gas. The Company has achieved top decile results through the development of our high quality Montney property, uniquely positioned in the Deep Basin of Bigstone, in northwest Alberta. Delphi continues to outperform key industry players by improving operational efficiencies and growing our dominant Bigstone land position in this world-class play. Delphi is headquartered in Calgary, Alberta and trades on the Toronto Stock Exchange under the symbol DEE.