CALGARY – Perpetual Energy Inc. (“Perpetual” or the “Company”) announces that its syndicate of lenders have completed their semi-annual borrowing base redetermination. The revolving bank debt borrowing limit (“Borrowing Limit”) will be reduced by the Company’s lenders from $55 million to $45 million on or prior to January 22, 2020, with the next Borrowing Limit redetermination scheduled on or prior to March 31, 2020. The credit facility will continue to revolve until March 31, 2020 and may be extended for a further period of up to 364 days subject to approval by the Company’s lenders. If not extended, the credit facility will cease to revolve, and all outstanding advances will be repayable on November 30, 2020. After giving effect to the Borrowing Limit reduction and considering the current market value of its Tourmaline Oil Corp. (“TOU”) share investment net of the associated margin demand loan, Perpetual has available liquidity sufficient to fund its first quarter drilling program.
First Quarter 2020 Capital Spending Guidance
The Company’s Board of Directors have approved a capital spending program for the first quarter of 2020 to drill, complete and tie-in up to four (4.0 net) development wells offsetting the Company’s recent Clearwater heavy oil formation discovery at Ukalta in Eastern Alberta. The first two exploratory wells were drilled in the third quarter of 2019 and are currently producing oil at a combined rate on clean-up of 160 bbl/d.
Sequoia Litigation Update
On August 15, 2019, the Company received the oral decision related to the Statement of Claim filed on August 3, 2018 with respect to the Company’s disposition of shallow gas assets in Eastern Alberta to an unrelated third party on October 1, 2016 (the “Sequoia Litigation”). The oral decision dismissed and struck all but one of the claims filed by PricewaterhouseCoopers Inc. LIT (“PwC”), in its capacity as trustee in bankruptcy of Sequoia. The Court did not find that the test was met for summary dismissal relating to whether the transaction was an arm’s length transfer for purposes of section 96(1) of the Bankruptcy and Insolvency Act (the “BIA”), on the balance of probabilities. Accordingly, the BIA claim was not dismissed or struck and only that part of the claim can continue against Perpetual. On August 23, 2019, PwC filed a notice of appeal with the Court of Appeal of Alberta, contesting the entire August 15, 2019 oral decision, and on August 26, 2019, Perpetual filed a similar notice of appeal contesting the BIA claim portion of the decision. The appeal proceedings are expected to be scheduled during the first half of 2020, following receipt of the written decision, now anticipated to be prior to January 6, 2020. On November 18, 2019, Perpetual’s application for security for costs of the appeal was heard and a decision from the Court of Appeal is expected prior to the end of January 2020.