Announces Filing of Information Circular CALGARY, AB, Aug. 5, 2021 /CNW/ - (TSX: PMT) – Perpetual Energy Inc. ("Perpetual" or the "Company") is pleased to announce the management information circular (the "Information Circular") with respect to the previously announced Plan of Arrangement involving Rubellite Energy Inc. ("Rubellite") has been filed on SEDAR at www.sedar.com. On July 16, 2021, Perpetual announced the creation of Rubellite, approximately $73 million in equity financings, the settlement of the majority of its second lien term loan (the "Second Lien Loan Settlement") and new credit facilities (the "Rubellite Transactions"). The Special Meeting of Shareholders to consider the Plan of Arrangement and other related matters is scheduled to be held on August 31, 2021. Perpetual shareholders are encouraged to carefully review the Information Circular as it contains important deadlines and information with respect to the exercise of warrants to be received by Perpetual shareholders in connection with the Plan of Arrangement and for Perpetual shareholders to participate in the equity financings.
The Rubellite Transactions offer a "full capital solution" for Perpetual by reducing Perpetual's net debt, normalizing the balance sheet leverage ratios and surfacing incremental value from the development of its assets. Perpetual believes that the Rubellite Transactions will materially improve its liquidity and significantly improve both its ability to operate as a going concern and meet its obligations as they become due, including the flexibility to make cash payments of second lien and third lien interest which has recently been paid in-kind. At the same time, completion of the Rubellite Transactions will enhance Perpetual's ability to capture the inherent value in its asset base by funding investment opportunities to grow and sustain production and adjusted funds flow.
Perpetual will realize net cash proceeds from the Rubellite Transactions of approximately $53.2 million which it will use to reduce net debt. The maturity of the Company's new $17 million Credit Facility has been extended to May 31, 2023 subject to the completion of the Rubellite Transactions at which time Perpetual expects to be less than 25% drawn. As part of the Second Lien Loan Settlement, the maturity of a new second lien term loan of approximately $2.7 million has been extended to December 31, 2024. Total net debt is forecast to decline by 45% from $107.4 million at March 31, 2021 to approximately $59 million at closing of the Rubellite Transactions, inclusive of estimated capital spending at East Edson and other forecast corporate revenues and expenses during the third quarter of 2021. Interest cost savings alone will improve Perpetual's liquidity by approximately $4 million annually. The general and administrative cost recoveries under the management services agreement with Rubellite will further enhance Perpetual's liquidity by approximately $2 to $3 million annually.
Following completion of the Rubellite Transactions, Perpetual is expected to have sufficient liquidity to invest capital in its assets to grow production and adjusted funds flow and convert proved and probable undeveloped reserves to proved developed producing reserves which serves to support the Company's borrowing capacity, increases the fair market value of Perpetual's assets, and generally enhances the Company's ability to meet its obligations as they become due. In addition, with the committed extension to the first lien credit facility, Perpetual anticipates it will be better positioned to enter into risk management contracts to mitigate commodity price risk.
Rubellite will initially be exclusively focused on Clearwater oil exploration and development utilizing multi-lateral horizontal drilling technology. The Clearwater is a high rate of return play with compelling economics at current forward market prices for Western Canadian Select crude oil. Rubellite is expected to begin operations with zero debt and positive working capital of approximately $13 million. In the context of current strip pricing, Rubellite's organic growth business plan is expected to be fully funded, drive material adjusted funds flow growth over the next two years and has the potential to generate significant free funds flow by 2022.
CFO SUCCESSION
Ryan Shay was appointed Vice President Finance and Chief Financial Officer ("CFO") of the Company on May 4, 2021, succeeding Mark Schweitzer. Mr. Schweitzer remained an employee of Perpetual and extended his planned retirement to the end of July to assist Perpetual through the announcement of the Rubellite Transactions.
"We thank Mark for his exceptional leadership and strategic insights that have positioned Perpetual for future success, especially over the past six months during our balance sheet refinancing process through to the creation of Rubellite and wish him well in his retirement." said President and CEO Sue Riddell Rose.