CALGARY, AB – Highwood Oil Company Ltd., (“HOCL“, “Highwood” or the “Company“) (TSXV: HOCL) is pleased to announce that, as a result of its strategic alternatives review process, it has today entered into a definitive agreement with an arm’s length purchaser, Tamarack Valley Energy Ltd. (“Tamarack“) to divest of the Company’s Clearwater assets for cash consideration of $40.8 million (the “Divestiture“). The effective date of the Divestiture is November 1, 2020.
The Divesture is expected to close on December 21, 2020 and remains subject to customary closing conditions.
GO FORWARD POSITIONING
The Company’s Board of Directors has approved the Divestiture given the tremendous accretion in value of the Clearwater assets since the Company began amassing a land position in 2017. The Divestiture is transformative to the Company’s balance sheet and removes lender pressure while positioning Highwood to seek out new growth opportunities.
Together with the Red Earth disposition, previously announced on November 13, 2020, the Divestiture will leave Highwood with a cleaner balance sheet. The Company’s lender has granted a further extension of the maturity of Term Facility A to December 31, 2020 to allow for closing of the Divestiture. Proceeds from the divestiture will satisfy the expiring tranches of the Company’s existing credit facility. Upon closing of the transaction, the Company is expecting an $8-10 million pro forma operating facility and will seek to evaluate acquisition opportunities.
Following the conclusion of the Company’s strategic alternatives review process, Highwood emerges with corporate production of 100 bbl/d from producing properties in Western Canada, along with a 100% working, operated interest in the Wabasca River Pipeline System.
The Wabasca River Pipeline is an open-access system located 450 km of Edmonton and delivers crude oil onto the Plains Rainbow System. After seeing reduced activity during the first half of the year attributed to the commodity price shock experienced in Q1/20, Highwood remains encouraged by the pace of returning volumes through the pipeline. Based on current throughput, and historical operating expenses the asset is expected to generate $4 million of base free cash flow in 2021.
ADVISOR
National Bank Financial Inc. acted as financial advisor to Highwood with respect to the Divestiture.