PETRUS DEBT AND REFI?I picked up this quote as part of a daily O+G report that covers Canadian energy issues.
The first part of the artical was generally laudatory of Petrus and the Gray Brothers handling of management for the firm, but this ending paragraph cast a rather negative light on Petrus:
"Getting back to financings, the Gray family's Petrus Resources Ltd. (PRQ) added 29 cents to $2.39 on 225,600 shares, after closing a $20-million rights offering. President and CEO Ken Gray said the offering received "overwhelming support." Shareholders exercised 97 per cent of the rights available under the basic subscription privilege, with many of them then going on to exercise an additional subscription privilege that was only available to holders who fully exercised their rights.
Not a single share had to be issued to the standby guarantors who had offered to backstop the entire financing. The standby purchasers were Don Gray, Stuart Gray and Glen Gray -- all brothers of Ken Gray -- who collectively own nearly three-quarters of Petrus's shares (and participated in the rights offering, to be clear, just not the standby commitment). Don Gray is the brother who founded Petrus in 2011 and currently serves as chairman. (He is also the chairman of both Gear Energy Ltd. (GXE: $1.56) and Peyto Exploration & Development Corp. (PEY: $13.89).) He turned Petrus into a family affair about a year ago, bringing in his brothers as major shareholders and (in Ken's case) president and CEO.
The brothers have since busied themselves tidying up Petrus's balance sheet and getting back to work in the Alberta Cardium. They have claimed to see signs of progress on both fronts. During 2021, net debt nearly halved to $61-million from $114-million (though this was partially thanks to a sizable shares-for-debt swap with the Grays. Between that and other equity issuances, including the above rights offering, Petrus's share count has risen to 121 million from 49 million in less than a year). As for production, Petrus noted in an update on its website last week that its output in March averaged 7,600 barrels a day, up from an average of 5,900 barrels a day in the first quarter of 2021. It is aiming to exceed 9,000 barrels a day by the end of this year."
Comment, and then the downer:
"Yet the balance sheet still needs plenty of work, and some of it will have to be fast. A credit facility that is currently about $57-million drawn comes due at the end of this month. Petrus is pouring all the money from the above rights offering into this facility, but $20-million will not be enough. It said in the circular for the rights offering that it is "exploring potential refinancing alternatives." If it cannot find an alternative, or persuade the current lenders to renegotiate or extend the facility, it will need to scrape up more financing or face the possibility of default."
What to board members make of this, I was under the impression that the Rights offering would supply funds to reduce debt, but this take seems to indicate risk is present imminently, end of this month, to the extention of facility. Perhaps informed board members can provide some clarity here, I don't know if this is a legit take, the writer of this daily newsletter has a tendency, historically, to be a skeptic and dwell on the negative.
What do y'all think?
Meanwhile is appears price is responding to the relief of pressure seen up until the rights offering was completed, nice rebound, I like it.