Connacher first-quarter EBITDA deficit grows; CCAA filing possible

By Caroline Salls

Pittsburgh, May 11 – Connacher Oil and Gas Ltd.’s adjusted EBITDA deficit increased to C$26.7 million in the quarter ended March 31 from a deficit of C$18.8 million for the same period of 2015, according to a news release.

Connacher said the increased deficit is mostly a result of lower revenue, net of royalties, partially offset by lower blending and transportation and handling costs.

The company said first-quarter revenue, net of royalties, decreased 78% to C$11.8 million from C$53.8 million for the quarter ended March 31, 2015 as a result of the decline in crude oil prices and lower sales volumes associated with the curtailment of production.

The net loss for the first quarter of this year was C$43 million, narrowing from a C$139.9 million first-quarter 2015 net loss. Connacher said this change resulted primarily from lower finance charges and lower foreign exchange losses, partially offset by a decrease in adjusted EBITDA.

Connacher closed the first quarter with a cash balance of C$30.5 million, down from C$47.2 million at Dec. 31.

As previously reported, the company’s board of directors initiated a process to investigate, evaluate and consider possible financing and restructuring alternatives available to Connacher and formed a special committee to assist the board in this process.

Lender forbearance

On March 31, the company entered into a forbearance agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent, and some lenders under $153.8 million of loans.

Under the terms of the forbearance agreement, the lenders agreed not to enforcement rights and remedies arising from Connacher’s failure to pay the cash interest and principal payments due on March 31 until the earlier of April 30, the occurrence of an event of default unrelated to the payment failure or the occurrence of a default or breach of representation by the company under the forbearance agreement.

On April 30, the company entered into a second forbearance agreement, which extended the forbearance period until May 16.

Convertibles default

According to the release, the failure to make the March 31 loan payments within the applicable grace period constitutes an event of default under the indenture governing the company’s 12% convertible second-lien notes due Aug. 31, 2018.

Connacher said it is working with an informal committee of the holders of the convertible notes during the forbearance period.

Cash flow issues

The company said the deterioration of crude oil pricing has constrained its ability to generate positive cash flow from operations. Coupled with the low-price commodity environment, Connacher said the restrictive provisions of its long-term debt arrangements have severely constrained its access to additional financing.

Without the injection of new sources of financing and positive cash flow from operations, the company said it will be challenged to deploy the capital required to maintain existing reserve and production bases, fund maintenance capital, fund working capital requirements, and will be unable to discharge future obligations as they come due.

Connacher said the special committee will continue to investigate restructuring and refinancing alternatives, which include filing for creditor protection under the Companies’ Creditors Arrangement Act.

Connacher is a Calgary, Alta.-based developer, producer and marketer of bitumen from oil sands.

© 2015 Prospect News.
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