FIRST LIEN CREDIT FACILITY
On November 25, 2022, the Company closed on its new First Lien Facility, totaling $110 million. The new First Lien Facility has been syndicated among three supportive banks and is restructured as a normal course, reserve-based credit facility available on a revolving basis through October 31, 2023, with bi-annual borrowing base redeterminations and a term maturity of October 31, 2024.
FOUR-YEAR TERM DEBT FACILITY
Also, on November 25, 2022 the Company closed on an amortizing four-year, non-revolving, $95 million Term Debt Facility. Fixed interest of 11.70 percent will be applied to a portion of the Term Debt Facility and floating interest of Canadian Prime Rate plus 6.25 percent on the remaining amount.
The Term Debt Facility has been utilized to facilitate the formation of the new First Lien Facility through the repayment of the existing First Lien Facility bank debt, which was set to mature on November 30, 2022, and the full repayment of the existing BDC Term facility.
The Term Debt Facility was arranged through a private institutional lender and provides the Company with a defined term and stable capital to facilitate the continued development of Bonterra’s high-quality, conventional, light oil asset base. Furthermore, the Term Debt Facility also represents a significant step forward toward the Company’s goal of implementing a shareholder returns-based business model focused on a combination of debt repayment, sustainable dividends and modest production growth.
REPAYMENT OF BDC TERM FACILITY
Closing of the New Credit Facilities has enabled Bonterra to fully repay the Company’s non-revolving, $47 million BDC Term Facility. The repayment of the BDC Term Facility allows the Company to exit the Business Credit Availability Program (“BCA”) that governed the BDC Term Facility. Participation in the BCA Program placed certain restrictions on Bonterra’s capital allocation options, including the payment of dividends.
REVISED DEBT CAPITAL STRUCTURE AND LIQUIDITY
Bonterra’s debt capital structure has been significantly improved and the Company expects to benefit from enhanced stability. Bonterra forecasts that bank debt will be substantially repaid by the second quarter of 2023, subject to market conditions and commodity pricing, providing significant available liquidity and flexibility to the Company moving forward.
STRATEGIC REPOSITIONING AND OUTLOOK
Bonterra has now successfully undertaken and completed the strategic steps below over the last 24 months to reposition the Company’s balance sheet.
- In October 2020, Bonterra announced that it had been approved by BDC for a second lien, non-revolving four-year term facility for up to $45 million to allow the Company to withstand the financial and operational impacts of COVID-19 and to continue pursuing development of its high-quality, Cardium light oil assets to generate long-term, sustainable net asset value per share growth as the economy recovered;
- In October 2020, the Company announced it had been approved for up to $38.4 million in a reserve-based lending commitment from Export Development Canada (“EDC”) to provide additional liquidity. With the new First Lien Facility in place, the Company no longer required the EDC lending commitment. Bonterra would like to thank EDC for their support and the capital provided during a period of unprecedented commodity price volatility;
- In October 2021, Bonterra successfully closed an unsecured debt placement, comprised of senior unsecured debentures and common share purchase warrants for a total of $59 million, which facilitated the restructuring of its existing First Lien Facility bank debt to a fully conforming basis; and
- Today’s announcement of the closing of the Company’s New Credit Facilities, consisting of (i) a new $110 million First Lien Facility, (ii) and a new $95 million second lien secured Term Debt Facility along with the repayment of its existing $47 million BDC Term Facility completes the restructuring of the Company’s debt capital structure and allows the Company to continue in normal course with its long term business objectives.
Bonterra’s goal is to be a well-capitalized entity generating significant free cash flow to support future shareholder returns through debt repayment, sustainable dividends and modest production growth. In the near term, the Company plans to continue building on the significant bank debt reduction of approximately $150 million that it achieved between Q2 2021 and Q3 2022, to further strengthen its balance sheet.
For the 2022 fiscal year, the Company anticipates funds flow1 of approximately $190 million (2021 – $105 million) with funds flow1 in excess of capital expenditures (“free funds flow”1) of approximately $110 million (2021 – $33 million), resulting in a net debt to EBITDA ratio of less than 1.0 times. Bonterra plans to share its Board approved 2023 operational guidance in December 2022.
Peters & Co. Limited acted as exclusive financial advisor to Bonterra in connection with the forgoing series of transactions, including most recently the Term Debt Facility. CIBC Capital Markets Inc. and ATB Capital Markets Inc. were appointed strategic advisors to Bonterra on the Term Debt Facility.
Bonterra Energy Corp. is a conventional oil and gas corporation with operations in Alberta, Saskatchewan and British Columbia, focused on its strategy of long-term, sustainable growth and value creation for shareholders. The Company’s shares are listed on The Toronto Stock Exchange under the symbol “BNE”.
Non-IFRS and Other Financial Measures
Throughout this release the Company uses the terms “funds flow”, “free funds flow”, “net debt” and “EBITDA” to analyze operating performance, which are not standardized measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative by management, shareholders and analysts. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies.
The Company defines funds flow as funds provided by operations including proceeds from sale of investments and investment income received excluding effects of changes in non-cash working capital items and decommissioning expenditures settled. Free funds flow is defined as funds flow less dividends paid to shareholders, capital and decommissioning expenditures settled plus option proceeds. Net debt is defined as long-term subordinated debt and subordinated debentures plus working capital deficiency (current liabilities less current assets). EBITDA is defined as net income for the period excluding finance costs, provision for current and deferred taxes, depletion and depreciation, share-option compensation, gain or loss on sale of assets and impairment of assets. Net debt to EBITDA ratio is defined as net debt at the end of the period divided by EBITDA for the period.