Clearview Resources Ltd. reports third quarter 2020 results

HIGHLIGHTS

Over the past several months, the Company has been focused on the completion of three financing initiatives to improve the Company’s financial position during these unprecedented times and for the future.  These strategic initiatives include:

• Securing a workable credit agreement with its lender that provides the credit capacity and flexibility required for the current economic environment;
• Securing long-term funding through the Federal Government sponsored Export Development Canada (“EDC”) Guarantee program; and
• Raising $1.25 million in convertible debentures from the Company’s very supportive shareholders to reduce the Company’s outstanding bank debt.

Now, the Company has a reserve-based credit facility agreement of $15.0 million with the next annual review date set for October 31, 2021, a second credit facility of $6.25 million, 80% guaranteed by the EDC and has raised $1.25 million though a convertible debenture offering.

Production has averaged 2,050 barrels of oil equivalent per day (“boe/d”) over the nine months ended September 30, 2020, despite minimal capital expenditures and the shut-in of production in the second quarter.

Financial and Operating Highlights

FINANCIAL and OPERATIONAL RESULTS

During the third quarter of 2020, Clearview’s realized price for oil improved from the second quarter but was still lower by 31% than the comparative period of 2019, due to a significant drop in benchmark oil pricing as a result of the COVID-19 pandemic which continued to affect selling prices in the third quarter.  Natural gas liquids prices improved by 10% due to a stronger market for propane and butane.  Natural gas prices were higher by 107% as a result of the low storage levels in Alberta and the continued build out of the Nova system.  The Company’s realized sales price per barrel of oil equivalent (“boe”) was 9% lower in the third quarter of 2020 than the comparative period in 2019.

Production for the three months ended September 30, 2020 was down 11% to 2,132 boe/d versus the comparative period of 2019.  The decrease in production was primarily due to lower oil production of 17% as not all oil production was brought back on-stream by the beginning of the third quarter.  Natural gas liquids, generally associated with natural gas production, decreased 18% for the quarter ended September 30, 2020 versus the comparative period of 2019.  Natural gas production decreased by 5% in the three months ended September 30, 2020 versus the comparative period of 2019.

Revenue, net of royalties, decreased by $0.6 million in the third quarter, an 18% decrease from the comparative period.  This decrease was largely due to lower realized prices and lower production volumes.  The Company’s cost structure was reduced in the three months ended September 30, 2020 with total costs for transportation, operating costs and general and administrative expenses down $0.8 million versus the comparative period of 2019.   Offsetting the decrease in costs was a $0.2 million reduction in realized gains on commodity contracts versus the comparative period.  As a result of a reduced cost structure, adjusted funds flow was the same as the comparative quarter of 2019 at $0.9 million.  The Company’s corporate netback increased by 18% to $4.75 per boe for the current quarter versus $4.01 per boe in the comparative period of 2019.

Adjusted funds flow for the current quarter ended September 30, 2020 was $0.9 million.  Capital expenditures were $0.1 million which enabled the Company to reduce its net debt by $0.8 million during the quarter.  As of September 30, 2020, the Company had net debt of $14.2 million.

OPERATIONS UPDATE

Clearview has maintained production at a reasonable level while incurring minimal operational and capital spending. Quarterly operating expenses decreased by 22% to $2.5 million from $3.2 million in the comparative third quarter of 2019. Third quarter capital spending was constrained to facility turnarounds mandated by the Alberta Boiler Safety Association (ABSA) and regulatory-related surface reclamation efforts. The office and field staff rapidly adapted to the low commodity pricing environment with cost-cutting initiatives, all while maintaining a strong production profile with a top priority of safety and regulatory compliance.

FEDERAL AND PROVINCIAL PROGRAMS

The Company continues to assess the impact of the current market dynamics and investigate any programs initiated by the federal and provincial government to assist companies affected by the pandemic.  The Company meets the requirements of the Canada Emergency Wage Subsidy program and has been receiving its eligible subsidy under this program.  Clearview has also filed numerous applications for wellsite rehabilitation under the Government of Alberta’s Site Rehabilitation Program (“SRP”).  The Company has received approval on $150 thousand through the SRP program.

Clearview has commenced a six well abandonment program with its oilfield service company partners utilizing funding from Phase 1 of the Government of Alberta’s Site Rehabilitation Program (SRP). Upon completion of this program, the Company plans to pursue additional abandonment and reclamation opportunities with funds provided under Phases 3 and 4 of the SRP. Candidate sites are currently being screened and reviewed. Clearview has also submitted applications for grants focused on reducing methane emissions under the Province of Alberta’s Industrial Energy Efficiency and Carbon Capture, Utilization and Storage program, and is exploring additional programs to reduce its environmental impact in its day-to-day operations.

SUBSEQUENT EVENTS

Subsequent to the end of the third quarter, Clearview’s lender completed its annual review of the Company’s revolving, reserve-based credit facility. The credit facility limit was reduced to $15.0 million with the next annual review date being set for October 31, 2021.  The Company had $13.5 million outstanding as of November 26, 2020.  Borrowings under the credit facility continue to be subject to an interest rate of lender prime, currently at 2.45%, plus a credit spread or at the option of Clearview, using the lender’s guaranteed notes, which are subject to the Canadian Dollar Offered Rate (“CDOR”), currently at 0.49% for a 30 day note, plus a stamping fee.  Under this credit agreement, the prime lending credit spread and guaranteed notes stamping fees have increased by 2.75% across the entire pricing grid.

The reserve-based credit agreement continues to require compliance with a working capital covenant  whereby the Company must maintain a minimum working capital ratio of 1 to 1 and a liability management rating (“LMR”) covenant of no less than 2.0.  In addition, the Company will now be required to maintain commodity swap contracts for 50% (approximately 3,400 GJ per day) of its natural gas production volumes and 300 barrels per day of its oil production volumes through to the next annual review date.

Simultaneously, the Company obtained an additional credit facility under its existing credit facility agreement with its lender for $6.25 million under the Business Credit Availability Program (“BCAP”), supported by the Export Development Canada (“EDC”) Guarantee.  The facility has a term of five years with the EDC providing a guarantee to the Company’s lender for 80% of the principal amount outstanding.  Monthly payments required under the facility are for interest costs only, which are subject to an interest rate of lender prime plus a credit spread, similar to the reserve-based credit facility.  The principal amount outstanding must be repaid no later than 50% at the end of the fourth year with the balance of the principal outstanding due for repayment at the end of the fifth year.   The Company will be required to pay an upfront fee of 1.8% annually to the EDC for its guarantee under BCAP.

Additionally, on December 1, 2020, the Company completed a convertible debenture offering to its existing shareholders for $1.25 million.  The debentures are unsecured and subordinate to all senior debt of the Company. The interest payable on the debentures is 10%, payable on a quarterly basis, with a term of five years.  During the term, the debenture is convertible into common shares of the Company at the option of the holder based on a conversion price of $1.50 per common share.  The convertible debentures may be redeemed by the Company, upon consent from its lender, pursuant to the following provisions:

Year 1 – No redemption
Year 2 – 110% of the principal amount
Year 3 – 105% of the principal amount
Years 4 and 5 – 100% of the principal amount

Now, the Company has a reserve-based credit facility agreement of $15.0 million and a second credit facility of $6.25 million, 80% guaranteed by the EDC.  Further improving the Company’s financial position is the five-year term nature of the EDC backed credit facility, having an annual review date on the reserve-based credit facility which is 11 months into the future and the injection of $1.25 million from the convertible debenture offering.  These credit arrangements, the injection of capital by the Company’s shareholders and an overall improving oil and gas environment will allow the Company to reassess the requirement for the going concern disclosure in its December 31, 2020 audited financial statements.

OUTLOOK

In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. In addition, global commodity prices have declined significantly due to a collapse in demand attributed to COVID-19 in combination with an oversupply of oil. Governments worldwide, including those in Canada, have enacted emergency measures to combat the spread of the virus. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

Canadian light oil prices have recovered from their lows of $19.22 per barrel for the month of April to average approximately $50.00 per barrel in November 2020 with the current forward price curve for Canadian oil approximately $50.00 per barrel for 2021.  Canadian natural gas prices were very steady during the third quarter to average $2.24 per million cubic feet.  The current forward price curve for Canadian natural gas is looking even stronger for the rest of the year and into 2021.

In addition to non-core property dispositions, the Company continues to direct efforts toward strategic acquisitions and potential mergers/business combinations to significantly increase the size of the Company for greater efficiencies and cash generating capabilities.

Clearview’s September 30, 2020 unaudited condensed interim financial statements and management’s discussion and analysis are available on the Company’s website at www.clearviewres.com and SEDAR at www.SEDAR.com.

On behalf of the Board of Directors and all the employees of Clearview, we would like to thank our shareholders for their continued support.

FOR FURTHER INFORMATION PLEASE CONTACT:

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