Laricina Energy Ltd. and its wholly owned subsidiaries: Laricina GP Holding Ltd. and 1276158 Alberta Inc. (collectively “Laricina” or the “Company”), announced today that they have been granted creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”).
“Requesting this creditor protection was a difficult, but necessary step,” said Glen Schmidt, President and CEO. “This was done after careful consideration of all available alternatives and the Laricina Board of Directors believes that this is in the best interests of all its stakeholders. We will continue to work hard with our advisors to pursue strategic alternatives as we seek to restructure and further reduce costs.”
Protection has been obtained pursuant to an order dated March 30, 2015 with effect as of March 26, 2015 (the “Order”) by the Court of Queen’s Bench of Alberta, Judicial Centre of Calgary (the “Court”). CCAA protection stays creditors and others from enforcing rights against Laricina and affords the Company the opportunity to restructure its financial affairs.
Seeking protection under the CCAA followed receipt of a Demand for Payment in full by March 26, 2015 from the sole noteholder (the “Lender”) of all amounts due under the terms of the trust indenture (the “Indenture”) relating to $150 million of 11.5% senior secured notes issued in March of 2014. The Lender issued a Notice of Intention to Enforce Security against the assets of the Company with its demand for payment. At the time of Laricina’s application for the Order under the CCAA, the Lender made a cross application for a receivership order which was adjourned indefinitely by the Court.
With the stay of proceedings pursuant to the Order, the Company has sufficient liquidity for the initial stay period which expires on April 24, 2015 and, which may be extended thereafter as the Court deems appropriate, during which time Laricina will formulate a restructuring plan (the “Plan”) pursuant to the CCAA.
While under CCAA protection, Laricina’s Board of Directors continues in its usual role and its management remains responsible for the day-to-day operations of the Company under the oversight of PricewaterhouseCoopers Inc., which is the Court-appointed monitor (the “Monitor”), and which will be responsible for reviewing Laricina’s ongoing operations, assisting the Company with the development and filing of the Plan, liaising with creditors and other stakeholders and reporting to the Court.
It is expected that the Company’s operations will continue uninterrupted in the ordinary course of business and obligations to employees and suppliers of goods and services, after March 25, 2015, will continue to be met on an ongoing basis subject to the oversight of the Monitor.
Background Information
Laricina’s most significant assets are its oil sands reserves and resources. The Company’s core Germain and Saleski assets have a resource life of more than 25 years (at estimated future production levels) and generate value based on long-term crude oil prices, which may be materially higher than near-term crude oil prices, based on the current crude oil futures curves and industry/analyst forecasts.
Laricina believes the CCAA process gives it the best chance of preserving the long-term value of its assets and managing its financial position. An updated reserves and resource assessment and economic evaluation on 70% of Laricina’s net land base prepared by GLJ Petroleum Consultants Ltd. (“GLJ”) as of December 31, 2014 using GLJ’s January 1, 2015 price forecast, determined Laricina’s probable undeveloped reserves were 0.5 billion barrels and contingent resources (best estimate) were 3.7 billion barrels of bitumen. The pre-tax 10% present value of these resources was $0.3 billion and $6.7 billion, respectively.
In November 2014 the Company announced a strategic alternatives process. While under CCAA protection, this process is expected to become part of the Plan and the engagement of Peters & Co. Limited, BMO Capital Markets and Morgan Stanley Canada Limited will continue as the financial advisors in that regard. In addition BMO Capital Markets has been engaged to assist the Company in negotiating and restructuring its existing debt obligations and supporting development of the Plan.
The Company announced in early 2015 it was in default of certain production covenants and, as a consequence of the production default a related working capital covenant, all as set out in the Indenture. Since then Laricina had been engaged in dialogue with the Lender on potential solutions to addressing its note indebtedness and current financial situation, however the parties have not arrived at a mutually satisfactory solution. The estimated amount of indebtedness to the Lender is $164.2 million in principal and interest as at March 30, 2015.
In addition the Lender claims an acceleration payment amount of approximately $9.7 million is owing to it which claim is being examined by the Company and its advisors. Current estimated cash and cash equivalents on hand are approximately $140.0 million as at March 30, 2015.
Enquiries for the Monitor may be directed to:
PricewaterhouseCoopers Inc.
Calgary, Alberta
Dawn Walby
Office: +1 403 509 6669
www.pwc.com/car-laricina