Peyto Announces Closing of Repsol Acquisition, Exchange of Subscription Receipts Into Common Shares, an Issuance of Senior Secured Notes and Appointment of New Director

Source Company Press Release
Company Peyto Exploration & Development Corp., Repsol
Tags Country: Canada, Financing Activities: Debt Financing, Equity Financing, Financing News, M&A: Asset Deal, Deals, Sustainability: People, Upstream: Upstream News
Date October 17, 2023

Peyto Exploration & Development Corp. (""Peyto or the ""Company) (TSX: PEY) is pleased to announce that it has completed its previously announced acquisition of  Repsol Canada Energy Partnership, which holds the Canadian upstream oil and gas business of  Repsol Exploración, S.A.U. (""Repsol), including all related midstream facilities and infrastructure located predominantly in the Deep Basin area of Alberta, for cash consideration of US$468 million (CDN$636 million) (the "Acquisition") prior to closing adjustments. The Acquisition increases Peyto’s current production to 123,000 boe/d (86% natural gas, 14% NGLs), adds over 800 high-impact gross drilling locations1 and includes extensive gas processing and pipeline infrastructure that complement Peyto’s legacy assets in the Edson area. Peyto has plans to begin drilling operations on the  Repsol lands, immediately.

Acquisition Financing

The Acquisition was partially funded by a previously closed bought deal financing whereby Peyto issued 16,916,500 subscription receipts (the "Subscription Receipts") at a price of $11.90 per Subscription Receipt for gross proceeds of approximately $201 million, which included the full exercise of the over-allotment option granted to the underwriters.

On closing of the Acquisition, the net proceeds from the sale of the Subscription Receipts were released from escrow to Peyto to partially fund the purchase price of the Acquisition with the remainder of the purchase price funded by drawing on Peyto's credit facilities, as described below. In addition, on closing of the Acquisition, in accordance with the terms of the Subscription Receipts, each Subscription Receipt was exchanged for one common share of Peyto. Trading in the Subscription Receipts on the Toronto Stock Exchange is expected to be halted and the Subscription Receipts delisted before trading commences on October 18, 2023.

Following the exchange of Subscription Receipts for common shares of Peyto, former holders of Subscription Receipts will be entitled to receive the dividend to be paid to holders of record of common shares on October 31, 2023 (provided they have not transferred the Common Shares prior to such date) with payment occurring on November 15, 2023.

Peyto is pleased to announce that in conjunction with the closing of the Acquisition, the Company amended and restated its credit facilities with a syndicate of banks increasing the committed revolving facility from $800 million to $1 billion and adding a new $174 million two-year amortizing term loan.

Issuance of Private Placement of Senior Secured Notes

The Company is also pleased to announce that it has priced an issuance of $160 million of senior secured notes. The notes will have a coupon rate of 6.46% and mature in October 2030. The notes will be issued by way of a private placement pursuant to a note purchase agreement and rank equally with Peyto's obligations under its credit facility and existing note purchase and private shelf agreement. Interest will be paid semi-annually in arrears. Proceeds from the notes will be used to repay the $100 million, 3.70% notes due October 24, 2023 and to decrease Peyto’s borrowings under its amended credit facility. Closing of the private placement is expected to occur on October 24, 2023. The senior notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Hedging Update

The Company has been active in hedging future production with financial and physical fixed price contracts to protect a portion of its future revenue from commodity price and foreign exchange volatility. Currently, Peyto has approximately 422,000 mcf/d of natural gas locked in at $3.91/mcf for 2024 and approximately 373,000 mcf/d locked in at $4.07/mcf for 2025. The Company's fixed price contracts combined with its diversification to the Cascade power plant and other premium market hubs in North America allow for revenue security and support continued shareholder returns through dividends and debt reduction.

Appointment of New Director

Peyto is also pleased to announce the appointment of Ms. Nicki Stevens to its Board of Directors. Ms. Stevens is the Senior Vice President of Production, Marketing and ESG for Hammerhead Energy Inc. Ms. Stevens has over 30 years of industry experience with a strong technical background in a variety of development and operational functions. Ms. Stevens holds a Bachelor of Science in Mechanical Engineering from the University of Alberta and serves on the Board of Governors for the Explorers and Producers Association of Canada.

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