- Combination Creates a Stronger Company with a Far Superior
Future
- Markets are rewarding Consolidation with Share Price
Appreciation
CALGARY, AB, Jan. 14, 2021 /PRNewswire/ - OBSIDIAN ENERGY
LTD. (TSX: OBE) (OTCQX: OBELF) ("Obsidian Energy" or
the "Company") today provided Bonterra Energy Corp.
("Bonterra") shareholders with compelling reasons why
combining Bonterra and Obsidian Energy is in their best interests
through increased shareholder value.
"Our in-depth financial and operational analysis clearly shows
that the value as a combined entity results in far greater share
price appreciation and upside than either company could achieve on
a stand-alone basis under a variety of commodity price scenarios,"
said Stephen Loukas, Obsidian
Energy's Interim President and CEO. "The pace of consolidation in
the industry has increased substantially with recent deal
announcements in both the mid and large cap space, which the market
has rewarded with significant share price appreciation. It is
becoming clear that companies who do not act may be left behind to
the detriment of their shareholders. Notwithstanding these obvious
market trends, Bonterra's management team and board has refused to
engage. As a result, if Bonterra shareholders truly want to protect
and grow the value of their investment, they need to take matters
into their own hands."
Obsidian Energy urges Bonterra shareholders to be part of a
stronger company with a far superior future by accepting the
Company's offer (the "Offer") to purchase all of the
outstanding Bonterra common shares ("Bonterra Shares") in
consideration for two Obsidian Energy common shares for each
Bonterra Share tendered to the Offer. The transaction is compelling
and in the best interests of Bonterra shareholders for the
following reasons:
Industry consolidation has gained momentum and is being
rewarded in the public markets. Industry consolidation has
accelerated over the past few months as certain boards have seized
opportunities to build increased scale, efficiency and resilience
consistent with the feedback from capital markets:
- In Canada, recent
consolidation announcements have spanned companies of all sizes,
with companies such as Cenovus Energy Inc., Whitecap Resources Inc.
and Tamarack Valley Energy Ltd., among others, rewarded for
consolidation with share price appreciation.
- Larger and more efficient companies, like a combined Obsidian
Energy and Bonterra, can generate increased free cash flow,
allowing for debt reduction and value creation for shareholders
while also reducing reliance on semi-annual credit facility
redeterminations by diversifying debt funding sources.
The combination creates the 'Cardium
Champion' – a larger, more efficient and
focused company with the financial and operational strength to act
on future growth and value enhancing opportunities. Some of the
benefits of the combining Obsidian Energy and Bonterra include:
- Meaningful Scale: Positions the combined company
as the largest Cardium producer and a top 20 Western Canadian oil
producer, focused on light oil development with low decline
rates.
- Solid Position for Growth: Strong operating
platform with a lower cost structure, improved capital efficiencies
and the ability to generate substantially more free cash flow,
allowing for reduced debt levels, an improved financial position,
greater funds flow from operations per share and a clear path to
significant share price appreciation.
- Well Positioned for Further Consolidation: The
combined entity would be over twice the size of any other
Cardium-focused company, placing it in a position of strength for
future Cardium consolidation.
Management has a solid strategy and plan to improve
shareholder value, which is expected to result in share
appreciation as a combined entity. The strategy includes:
- Spending within cash flow while growing production and reducing
debt levels.
- Driving further cost efficiencies to free up additional cash
flow for reinvestment into the highest return drilling
opportunities in the Cardium, which are largely located on Obsidian
Energy's lands.
- Actively and prudently manage decommissioning liabilities,
utilizing provincial grants and reutilizing wells where possible to
reduce the overall future impact.
- Continuing to execute additional consolidation opportunities to
create shareholder value.
- Returning capital to shareholders by ultimately restoring a
dividend.
Obsidian Energy's current management team has built a
track record as one of the most efficient companies among its
industry peers. We have:
- Considerable experience and expertise drilling and developing
assets in the Cardium and Western Canadian Sedimentary Basin.
- Increased the quality and quantity of inventory of our Cardium
assets, which have shallow declines and high netbacks.
- Improved cost efficiencies in G&A, capital spending,
operating costs and decommissioning expenditures.
- Increased free cash flow, providing additional funds for
reinvestment. Contrary to Bonterra's unfounded claims, Obsidian
Energy generated $92 million in funds
flow from operations in the first three quarters of 2020, over
three times more than Bonterra, resulting in over $37 million of free cash flow after capital and
decommissioning expenditures.
- Significantly reduced debt levels and improved metrics. The
Company lowered debt levels by $25
million since March 31, 2020
through the COVID-19 pandemic, while Bonterra increased its debt
level.
Bonterra's board of directors is ignoring the benefits of
industry consolidation and has not offered any realistic
plan as to how it will create share price
appreciation. Bonterra's current plan is based on
continued oil price recovery and increasing debt to maintain or
grow production. This is not a sustainable strategy and raises
significant concerns:
- Bonterra's plan neglects the growing trend and reward of
consolidation, risking being left behind as companies combine to
access greater efficiencies, improved financial positions and
higher share prices.
- Bonterra's plan assumes capital efficiencies and improved
operating results that the company has not been able to achieve
historically.
- Bonterra's debt leverage multiples are the highest in the peer
group, and management plans to outspend 2021 cash flow to grow 2021
production. Should commodity prices decrease or Bonterra fail to
meet its execution targets, Bonterra may be in a critical position
considering the bank redetermination of the borrowing base in
June 2021 with lenders who may demand
repayment.
Stephen Loukas continued, "While
we have provided a compelling strategy to create the 'Cardium
Champion' and benefit shareholders of both companies through the
upside of consolidation, Bonterra's board of directors has ignored
the market's expectations and the opportunity to create significant
value for their shareholders. We urge Bonterra shareholders to
review the Offer documents, accept the Offer to tender your shares
and be part of a stronger company with better upside and a far
superior future."
Additional detail about these and other compelling reasons to
tender Bonterra Shares to the offer including analysis, graphs,
charts and supporting information can be found in the original take
over bid circular dated September 21,
2020, as varied by a Notice of Extension, Variation and
Change filed with Canadian securities regulators on December 22, 2020 (collectively, the "Offer
Documents"), information and presentations on Obsidian
Energy's website. Bonterra shareholders are encouraged to review
this information in their decision to tender their Bonterra
Shares.
OFFER INFORMATION AND HOW TO TENDER SHARES
The Offer is open for acceptance until 5:00 p.m. (Mountain Standard Time) on Monday,
January 25, 2021, unless extended, accelerated or withdrawn.
As set out in further detail in the Offer Documents, the Offer
is subject to certain conditions, including: that the Bonterra
Shares validly deposited to the Offer, and not withdrawn, represent
more than 50% of the then outstanding Bonterra Shares (on a
fully-diluted basis) and certain regulatory and third party
approvals (as outlined in the Offer Documents) have been obtained,
and other customary conditions. Subject to applicable law, Obsidian
Energy reserves the right to withdraw, accelerate or extend the
Offer and to not take up and pay for any Bonterra Shares deposited
under the Offer unless each of the conditions of the Offer is
satisfied or, if applicable, waived by Obsidian Energy at or prior
to the expiry of the Offer. Bonterra shareholders are strongly
encouraged to read the Offer Documents carefully and in their
entirety, since they contain additional important information
regarding Obsidian Energy and the terms and conditions of the Offer
as well as detailed instructions on how Bonterra shareholders can
tender their Bonterra Shares to the Offer. Bonterra shareholders
can also view the Offer specific webpage on Obsidian Energy's
website, where they can review the Offer presentation, letter
to Bonterra shareholders and other key information related to the
Offer.
If you have questions or to tender your Bonterra Shares, you can
contact Kingsdale Advisors, our information agent and depositary
for the Offer, at 1-888-564-7333 (North American Toll-Free Number)
or +1-416-867-2272 (Outside North America) or via email
at contactus@kingsdaleadvisors.com.
ADDITIONAL READER ADVISORIES
NO OFFER OR SOLICITATION
This news release does not constitute an offer to buy or sell,
or a solicitation of an offer to sell or buy, any securities of
Obsidian Energy or Bonterra. The Offer is subject to a registration
statement (the "Registration Statement") filed with the United
States Securities and Exchange Commission (the "SEC") under the
U.S. Securities Act of 1933, as amended. The Registration Statement
includes various documents related to such offer and sale. OBSIDIAN
ENERGY URGES INVESTORS AND SHAREHOLDERS OF BONTERRA TO READ THE
REGISTRATION STATEMENT AND ANY AND ALL OTHER RELEVANT DOCUMENTS
FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE OFFER AS
THOSE DOCUMENTS BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of such
registration statement, as well as other relevant filings regarding
Obsidian Energy or the Offer, at the SEC's website (www.sec.gov)
under the issuer profile for Obsidian Energy, or on request without
charge from the Corporate Secretary of Obsidian Energy at Suite
200, 207 – 9th Avenue, SW, Calgary,
Alberta T2P 1K3.
NON-GAAP MEASURES
This news release contains references to certain financial
measures including funds flow from operations ("FFO"), cash flow,
free cash flow, netback and debt which do not have a standardized
meaning prescribed by International Financial Reporting Standards
and therefore are considered non-GAAP measures; accordingly, they
may not be comparable to similar measures provided by other
issuers. FFO is cash flow from operating activities before changes
in non-cash working capital, decommissioning expenditures, office
lease settlements, the effects of financing related transactions
from foreign exchange contracts and debt repayments and certain
other expenses and is representative of cash related to continuing
operations. FFO is used to assess the Company's ability to fund its
planned capital programs. Cash flow is funds flow from operations
before changes in any non-cash working capital changes and
decommissioning expenditures. Free cash flow is funds flow from
operations less capital and decommissioning expenditures. Netback
is the per unit of production amount of revenue less royalties,
operating expenses, transportation expenses and realized risk
management gains and losses, and is used in capital allocation
decisions and to economically rank projects. Debt is bank debt,
notes and, solely in respect of Bonterra, subordinated debt
(including the subordinated note(s) issued by Bonterra to private
related party investors).
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute
forward-looking statements or information (collectively
"forward-looking statements") within the meaning of the "safe
harbour" provisions of applicable securities legislation.
Forward-looking statements are typically identified by words such
as "anticipate", "continue", "estimate", "expect", "forecast",
"budget", "may", "will", "project", "could", "plan", "intend",
"should", "believe", "outlook", "objective", "aim", "potential",
"target" and similar words suggesting future events or future
performance. In particular, this document contains forward-looking
statements pertaining to, without limitation, the f anticipated
strategic, operational and financial benefits and synergies that
may result from the proposed combination between Obsidian Energy
and Bonterra including: that the combined entity would result in
far greater share price appreciation and upside than either company
could achieve on a stand-alone basis; that the combination between
Obsidian Energy and Bonterra would create a stronger company with a
far superior future, lower cost structure and improved capital
efficiencies, generate increased free cash flow, and reduce
reliance on semi-annual credit facility redeterminations; the
ability of the combined company to undertake future Cardium
consolidation; and expectations relating to growing production and
reducing debt levels and returning capital to shareholders by
restoring a dividend.
With respect to forward-looking statements contained in this
document, Obsidian Energy has made assumptions regarding, among
other things: that Obsidian Energy, which is subject to a short
term extension on its senior revolving credit facility and Bonterra
each continue to obtain extensions in respect of their facilities
and otherwise continue to satisfy the applicable covenants under
their respective senior revolving credit facilities, including
following the completion of the Offer and any subsequent second
step transaction, the ability to complete the Offer and the
proposed combination, integrate Obsidian Energy's and Bonterra's
businesses and operations and realize financial, operational and
other synergies from the proposed combination; that each of
Obsidian Energy, Bonterra and, following the completion of the
Offer, the combined entity will have the ability to continue as a
going concern and realize its assets and discharge its liabilities
in the normal course of business; the impact of regional and/or
global health related events, including the ongoing COVID-19
pandemic, on energy demand; that the combined entity's operations
and production will not be disrupted by circumstances attributable
to the COVID-19 pandemic and the responses of governments and the
public to the pandemic; that Bonterra's publicly available
information, including its public reports and securities filings as
of January 13, 2021, are accurate and
complete; global energy policies going forward, including the
continued agreement of members of OPEC, Russia and other nations to adhere to existing
production quotas or further reduce production quotas; Obsidian
Energy's ability to execute on its plans as described herein and in
its other disclosure documents and the impact that the successful
execution of such plans will have on Obsidian Energy and, following
the combination, the combined entity and the combined entities'
respective stakeholders; that the current commodity price and
foreign exchange environment will continue or improve; future
capital expenditure levels; future crude oil, natural gas liquids
and natural gas prices and differentials between light, medium and
heavy oil prices and Canadian, West Texas Intermediate (WTI) and
world oil and natural gas prices; future crude oil, natural gas
liquids and natural gas production levels, including that we will
not be required to shut-in additional production due to the
continuation of low commodity prices or the further deterioration
of commodity prices and our expectations regarding when commodity
prices will improve such that shut-in properties can be returned to
production; future exchange rates and interest rates; future debt
levels; the ability to execute our capital programs as planned
without significant adverse impacts from various factors beyond our
control, including weather, wild fires, infrastructure access and
delays in obtaining regulatory approvals and third party consents;
the combined entity's ability to obtain equipment in a timely
manner to carry out development activities and the costs thereof;
the combined entity's ability to market its oil and natural gas
successfully to current and new customers; the combined entity's
ability to obtain financing on acceptable terms; and the combined
entity's ability to add production and reserves through development
and exploitation activities.
Although Obsidian Energy believes that the expectations
reflected in the forward-looking statements contained in this
document, and the assumptions on which such forward-looking
statements are made, are reasonable, there can be no assurance that
such expectations will prove to be correct. Readers are cautioned
not to place undue reliance on forward-looking statements included
in this document, as there can be no assurance that the plans,
intentions or expectations upon which the forward-looking
statements are based will occur. By their nature, forward-looking
statements involve numerous assumptions, known and unknown risks
and uncertainties that contribute to the possibility that the
forward-looking statements contained herein will not be correct,
which may cause actual performance and financial results to differ
materially from any estimates or projections of future performance
or results expressed or implied by such forward-looking statements.
Such assumptions, risks and uncertainties are described in the
Offer Documents, Obsidian Energy's Annual Information Form for the
year ended December 31, 2019 and
other public filings, available in Canada on SEDAR at www.sedar.com, in
the United States on EDGAR at
www.sec.gov, and on the Company's website at
www.obsidianenergy.com. Readers are cautioned that such
assumptions, risks and uncertainties should not be construed as
exhaustive.
The forward-looking statements contained in this document speak
only as of the date of this document. Except as expressly required
by applicable securities laws, we do not undertake any obligation
to publicly update any forward-looking statements. The
forward-looking statements contained in this document are expressly
qualified by this cautionary statement.
KEY CONTACTS
OFFER INFORMATION AGENT AND DEPOSITARY
Kingsdale
Advisors
North American Toll-Free: 1-888-564-7333
Outside North America:
1-416-867-2272
Email: contactus@kingsdaleadvisors.com
MEDIA
Lisa Ottmann,
Partner
Longview Communications & Public Affairs
Cell: 403-606 0866
Email: lottmann@longviewcomms.ca
OBSIDIAN ENERGY
Suite 200, 207 - 9th Avenue SW,
Calgary, Alberta T2P 1K3
Phone: 403-777-2500
Toll Free: 1-866-693-2707
Website: www.obsidianenergy.com;
Investor Relations:
Toll Free:
1-888-770-2633
E-mail: investor.relations@obsidianenergy.com
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SOURCE Obsidian Energy Ltd.
