CALGARY, Alberta – Cequence Energy Ltd. (“Cequence” or the “Company”) (TSX: CQE) announces that it has commenced a strategic process to identify and pursue potential strategic options and alternatives to maximize the value for its stakeholders, which will be carried out under the Companies’ Creditors Arrangement Act (“CCAA”).
The strategic process will explore a broad range of options and alternatives that may be available to the Company to address its liquidity challenges brought on by the significant deterioration in commodity prices, driven largely by the economic impact of the COVID-19 pandemic. These options may include the sale of all or a portion of the business and assets or shares of the Company, renegotiation of certain onerous contracts, refinancing, recapitalization or other restructuring alternatives. Cequence has determined that in the current circumstances it is in the best interests of the Company and its stakeholders to implement such strategic process through a court-supervised restructuring proceeding, and has obtained today an initial order (the “Initial Order”) from the Court of Queen’s Bench of Alberta (the “Court”) commencing proceedings under the CCAA. Pursuant to the Initial Order, among other things, a 10-day stay of proceedings has been granted in respect of the Company to allow the business to continue to operate without disruption while Cequence pursues potential strategic and restructuring alternatives under Court supervision for the benefit of its stakeholders. The Company anticipates seeking one or more further orders from the Court extending the initial stay of proceedings.
The decision to commence CCAA proceedings was made following careful consideration by Cequence’s Board of Directors and management. The Company’s senior secured credit facility is up for renewal on June 16, 2020 and the Company has been advised that, under the current suppressed commodity prices and with the onerous third party processing and transportation arrangements, the credit facility would not be renewed by the lender, nor could the Company qualify for the previously announced Canadian Federal Government Oil & Gas Sector Support Program. The CCAA process will provide an opportunity to prepare and file a plan of arrangement or compromise for consideration by its creditors and other stakeholders, while preserving the Company’s existing operations and value under the protection of the stay of proceedings. Under the Initial Order, Cequence will continue carrying on business in a manner consistent with the commercially reasonable preservation of their businesses and assets.
In connection with the CCAA proceedings, Cequence has obtained an interim financing facility (the “Interim Financing”) subject to certain terms contained in a Debtor In Possession financing term sheet (the “DIP Term Sheet”) between the Company and the lenders of the Interim Financing, which was approved by the Court pursuant to the Initial Order. The Interim Financing, which will be advanced to the Company in multiple tranches to an aggregate maximum amount of $7.0 million, provides the Company with additional funding to support its ongoing operations without disruption while pursuing its strategic process. The Interim Financing was conditional upon the granting of the Initial Order and is being provided on the basis that the Court grant a super-priority charge in favour of the lenders of the Interim Financing over all of the Company’s current and future assets, property and undertakings.
Cequence will continue to pay its employees for services rendered during the CCAA proceedings and pay essential suppliers for goods and services provided to the Company following the commencement of the CCAA proceedings. Ernst & Young Inc. has been appointed as monitor (the “Monitor”) in the CCAA proceedings. Materials publicly filed in the CCAA proceedings, including copies of the Initial Order, will be made available on the Monitor’s website at http://www.ey.com/ca/cequence. During the CCAA proceedings, management of the Company will remain responsible for managing day-to-day operations under the general oversight of the Monitor.
In light of industry challenges facing the Western Canadian oil and natural gas sector, Cequence believes that the commencement of the CCAA proceedings at this time will provide the Company with the time and stability required to continue operating its business while it works to implement the strategic process alternatives and achieve an outcome that is in the best interests of its stakeholders. However, there can be no assurance that the strategic process will result in a successful outcome, and given the level of secured debt obligations of the Company, there can be no assurance with respect to quantum of recovery that may be available to satisfy claims made by the Company’s secured or unsecured creditors. Additional information will be made available by the Company in due course as determined to be necessary or appropriate by the Company, the Monitor, and the Court.
Prior to Cequence obtaining the Initial Order, Dan O’Neil tendered his resignation as director of Cequence. Cequence wishes to thank Mr. O’Neil for his commitment and service to the Company.
In accordance with the policies of the Toronto Stock Exchange (the “TSX”), in connection with the CCAA proceedings, the TSX will be reviewing the continued listing of the common shares of the Company. The common shares of the Company have been suspended from trading at this time.
Norton Rose Fulbright Canada LLP is acting as legal counsel to Cequence in connection with the CCAA proceedings.
OVERVIEW OF CEQUENCE
Cequence is engaged in the exploration for and the development of oil and natural gas reserves. The Company’s primary focus is the development of its Simonette asset in the Alberta Deep Basin with other non-core assets in Northeast British Columbia and the Peace River Arch of Alberta. Further information can be found at www.cequence-energy.com.