CALGARY, Aug. 27, 2018 /CNW/ – (TSX:PMT) – Perpetual Energy Inc. (“Perpetual” or the “Company”) announces that it has filed a Statement of Defence and Application for Summary Dismissal with the Alberta Court of Queen’s Bench (the “Court”) in response to the opportunistic Statement of Claim filed by PricewaterhouseCoopers Inc. LIT (“PwC”), in its capacity as trustee in bankruptcy of Sequoia Resources Corp. (“Sequoia”), as previously announced by Perpetual on August 6, 2018. All allegations made by PwC have been denied and an application to the Court to dismiss all claims has been made on the basis that there is no merit to any of them and that they constitute an abuse of process.
In the Statement of Defence, the Company outlines the details and facts surrounding an arm’s length and fair market value sale transaction that PwC seeks to set aside (the “Transaction”). Perpetual acted in good faith, lawfully and appropriately in all aspects of the Transaction and was fully compliant with the regulatory regime and public policy reflected therein.
The Transaction involved the sale by Perpetual of legacy shallow gas properties (the “Shallow Gas Properties”) almost two years ago to an unrelated third party after an extensive and lengthy marketing, due diligence and negotiation process. The Transaction included terms that were adequate to enable Sequoia to efficiently and profitably operate and manage the Shallow Gas Properties on a go forward basis. The Shallow Gas Properties were producing approximately 35 MMcf/d (5,835 boe/d) of natural gas at that time. A key component of the consideration included a gas marketing contract with a commercial counter-party that guaranteed Sequoia would receive a minimum natural gas price of $2.58/GJ for 23 months on approximately 90% of the base production from the Shallow Gas Properties (the “Gas Marketing Agreement”).
With the benefit of the Gas Marketing Agreement and other valuable consideration provided to Sequoia pursuant to the Transaction, Sequoia had a revenue stream for 23 months and a cost structure that ensured Sequoia’s financial stability to meet its obligations and execute its business plan. Perpetual had no dealings with Sequoia after the completion of the Transaction but understands that Sequoia acquired significant additional assets and related liabilities, including acquisitions from bankrupt entities. Further, the Gas Marketing Agreement was sold for cash by Sequoia more than one year prior to its expiry, thereby exposing Sequoia to the natural gas price collapse that began in the summer of 2017 and has continued into 2018.
The Transaction was not the cause of Sequoia’s bankruptcy. Rather, Sequoia was subsequently rendered insolvent and became bankrupt on March 23, 2018 as a result of its own conduct, including a lack of risk management, and market forces as described in its Letter to Stakeholders dated March 26, 2018. This Letter to Stakeholders is available for review on Sequoia’s website at http://www.sequoiares.ca. This letter describes that Sequoia executed its intended business plan successfully, acquiring significant additional assets, investing in workovers and recompletions and efficiently retiring liabilities with its in-house operations and environmental team. According to this letter, from October 1, 2016 to December 31, 2017, Sequoia abandoned 150 wells and received reclamation certificates for 91 wells, ranking fifth in Alberta in terms of reclamation certificates received.
The full text of the Statement of Defence and Application for Summary Dismissal as well as other related documents filed with the Court have been posted to the Company’s website at http://www.perpetualenergyinc.com. Further information can be obtained by reviewing the public court documents that pertain to the action number 1801-10960, as filed with the Court, Calgary Judicial Centre.
Perpetual is an oil and natural gas exploration, production and marketing company headquartered in Calgary, Alberta. Perpetual operates a diversified asset portfolio, including liquids-rich natural gas assets in the deep basin of west central Alberta, heavy oil and shallow natural gas in eastern Alberta, with longer term opportunities through undeveloped oil sands leases in northern Alberta. Additional information on Perpetual can be accessed at www.sedar.com or from the Corporation’s website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.