CALGARY, Alberta- Delphi Energy Corp. (“Delphi” or the “Company”) announces that it has obtained an order from the Court of Queen’s Bench of Alberta (the “Court”) granted in Delphi’s proceedings under the Companies’ Creditors Arrangement Act (the “CCAA”) extending the stay period provided by the amended and restated initial order to May 22, 2020.
Delphi reports that Luminus Energy IE Designated Activity Company, an affiliate of a pooled investment vehicle of Luminus Management, LLC (“Luminus”), has purchased and taken an assignment of all of the rights of Delphi’s first lien senior secured lenders, ATB Financial (as administrative agent), Bank of Montreal and The Bank of Nova Scotia (together the “Senior Lenders”), under Delphi’s credit facilities. Luminus is a related party of Delphi which, through one or more of its pooled investment vehicles or affiliates thereof, holds 14,065,138 common shares, representing approximately 57% of Delphi’s outstanding common shares, and approximately $58.7 million principal amount of Delphi’s second lien senior secured notes, representing approximately 49% of the outstanding second lien senior secured notes.
On April 24, 2020, Delphi received notice of the Senior Lenders’ intent to exercise their right to terminate the commodity swap contracts held by the Company, in aggregate totaling $17.19 million. The proceeds were used to reduce the $31.8 million owed to the Senior Lenders.
“We view this as a very positive step forward in pursuit of an acceptable and timely solution for the remaining stakeholders, given the stated objective of certain members of the Senior Lending Syndicate to terminate the relationship with the Company”, said David Reid, President and Chief Executive Officer of the Company. “We now look forward to accelerating the process”.
The extension of the stay period to May 22, 2020 is expected to allow for interim financing for the Company to be negotiated and finalized, for a claims process to be prepared, and for the Company, in consultation with Luminus and the monitor in the CCAA proceedings, to continue its restructuring efforts. As part of this process, the Company plans to pursue programs recently announced by the Federal and Provincial Governments in conjunction with the Business Development Canada and Export Development Canada to expand credit support for at-risk small and medium-sized energy companies.
The Company also intends to pursue well abandonment funding from the Federal and Provincial Government programs, to continue to reduce its well abandonment obligations. Delphi has actively managed its abandonment obligations with an ARO of approximately $23.55 million as at March 31, 2020 and continues to have one of the strongest LLR ratings in industry at 9.91.
Delphi continues to be impressed with the results of the three new wells drilled and completed in the first quarter of 2020. The 03-30-59-23 W5M (“03-30”) has achieved a first 30 day production rate (“IP30”) of 1.9 million cubic feet per day (“mmcf/d”) of sales gas, and 1,010 barrels per day (“bbl/d”) of field condensate, for a total production rate of approximately 1,410 barrels of oil equivalent per day (“boe/d”) including natural gas liquids (“NGL”). The second well has produced intermittently to restrict corporate production during this period of low oil prices. Over 18 days, the 13-12-60-24 W5M (“13-12”) well has averaged 2.9 mmcf/d of sales gas and 1,400 bbl/d of field condensate for a total production rate of approximately 2,000 boe/d, including NGLs. The third well at 14-12-60-24 W5M (“14-12”) remains shut-in. Given the current low oil prices and the termination of the hedging contracts by the Senior Lenders, the Company will continue to restrict production to fulfill only short term contractual delivery obligations. During the month of April, corporate production averaged approximately 7,100 boe/d (49 percent field condensate and NGLs).
Update on Continuous Disclosure Filings
Further to Delphi’s previously announced decision to postpone its annual general meeting of shareholders to a later date in 2020, Delphi intends to rely on the temporary blanket relief provided by the Canadian Securities Administrators (including the exemptive relief contained in Alberta Securities Commission Blanket Order 51-518 – Temporary Exemptions from Certain Requirements to File or Send Securityholder Materials) to postpone the filing of its executive compensation disclosure required under applicable securities laws until such time as it is filed and delivered to shareholders as part of Delphi’s information circular relating to its 2020 annual general meeting of shareholders.
Delphi announces that it also intends to rely on exemptive relief granted by Canadian securities regulatory authorities that allows it to delay the filing of its interim financial report for the interim period ended March 31, 2020 as required by section 4.4 of National Instrument 51-102 and related management’s discussion & analysis as required by subsection 5.1(2) of National Instrument 51-102 (collectively, the “Q1 Filings”) and estimates that the Q1 Filings will be available for filing on or before June 29, 2020. Until such time as these filings are made, Delphi’s management and other insiders are subject to a trading blackout that reflects the principles contained in section 9 of National Policy 11-207 – Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions. Except as previously announced by Delphi in connection with the CCAA proceedings, there have been no material business developments since the date of Delphi’s audited consolidated financial statements for the years ended December 31, 2019 and 2018 that were filed on March 12, 2020, a copy of which is available on SEDAR at www.sedar.com.
Delphi and certain of its subsidiaries were granted an initial order and protection under the CCAA on April 14, 2020. PricewaterhouseCoopers Inc. has been appointed by the Court as monitor in the CCAA proceedings. Materials publicly filed in the CCAA proceedings, including copies of the initial order of the Court, are available on the monitor’s website at http://www.pwc.com/ca/delphi. Delphi will continue to provide updates regarding its restructuring as developments warrant.
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.