CALGARY, Alberta – Athabasca Oil Corporation (TSX: ATH) (“Athabasca” or the “Company”) is taking further actions in response to the decline in global oil prices to bolster balance sheet strength and corporate resiliency.
Upsized Contingent Bitumen Royalty
Athabasca is pleased to announce an upsizing of the previously completed Contingent Bitumen Royalty with Burgess Energy Holdings L.L.C. (the “Royalty”) for additional cash consideration of $70 million. Athabasca has now raised total cash proceeds of $467 million since 2016 through this unique funding structure at an extremely attractive cost of capital. The transaction closed on April 28, 2020.
The upsized Royalty is limited to Leismer, Hangingstone and Corner. The Royalty follows the same structure as the existing contingent bitumen royalties and ensures the Thermal Oil assets are not encumbered at low commodity prices. The Royalty is based on a scale from 0% – 15% with a Western Canadian Select (“WCS”) heavy benchmark. At prices below US$60 WCS the rate is 0% (US$75 implied WTI assuming a US$15 WCS differential), the minimum 2.5% rate is triggered at US$60 WCS with a sliding scale up to 15% at US$100 WCS (was US$140 WCS). The Royalty is payable after transportation costs and is not expected to materially impact economics of future expansion phases or development projects.
Additional Resiliency Actions
Athabasca is taking further steps to provide additional financial resiliency during these extreme times.
- At Placid, the Company will curtail its base Montney production to ~3,500 boe/d by the end of April. The 10 development wells from the winter program were all placed on-production by early April. Athabasca is pleased with initial production results and will now defer production from the new wells until commodity prices improve. At Kaybob, the partnership is optimizing Duvernay production levels.
- At Leismer, the Company has flexibility to curtail volumes to as low as ~8,000 bbl/d. It intends to take steps over the next month to reduce production to these levels while managing reservoir integrity through optimized steam levels and with non-condensable gas co-injection.
- Athabasca reassigned 15,000 bbl/d of its Keystone XL transportation commitment to a third party, reducing future financial commitments. The Company retains 10,000 bbl/d of Keystone XL capacity.
- The Company has implemented many G&A cost savings initiatives including moving to an 80% work week for corporate staff in the Calgary office.
Athabasca’s 2020 capital program is $85 million ($15 million H2 2020), with $40 million cancelled from the original budget. The Company is suspending its production guidance given the uncertainty associated with duration of the announced curtailments which will be dictated by commodity pricing.
As at March 31, 2020, and pro forma Royalty proceeds, Athabasca had liquidity of ~$355 million ($270 million cash equivalents & $85 million available credit facilities).
Maximizing corporate funds flow and maintaining strong corporate liquidity during the current extreme price volatility remain top priorities for Athabasca.
About Athabasca Oil Corporation
Athabasca Oil Corporation is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. Situated in Alberta’s Western Canadian Sedimentary Basin, the Company has amassed a significant land base of extensive, high quality resources. Athabasca’s common shares trade on the TSX under the symbol “ATH”. For more information, visit www.atha.com.