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OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION
DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO
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CALGARY, AB, April 8, 2021 /CNW/ - PetroShale Inc.
("PetroShale" or the "Company") (TSXV: PSH) (OTCQB:
PSHIF) is pleased to announce the closing of its previously
announced recapitalization transaction (the "Transaction"),
which included a private placement of additional equity (the
"Private Placement"), a rights offering (the "Rights
Offering") and the exchange of all outstanding Preferred Shares
(which had been issued by the Company's wholly owned subsidiary)
for common shares (the "Preferred Share Exchange").
The Rights Offering, combined with the concurrent Private
Placement to the Company's two largest shareholders as described
more fully below, raised total aggregate gross proceeds of
$30 million.
On March 4, 2021, the Company
announced the Transaction which was designed to significantly
improve the Company's financial flexibility and
sustainability. The Company anticipates the Transaction will
provide the following benefits to the Company:
- A comprehensive recapitalization of the Company that will
improve and simplify the Company's balance sheet and enhance our
business prospects going forward, for the benefit of all
stakeholders. Total proceeds of $30
million raised through the Rights Offering and Private
Placement will be used to reduce outstanding borrowings under the
Company's senior secured credit facility (the "Credit
Facility"). The current indebtedness under the Credit Facility
will be reduced to approximately US$151.0
million and the current liquidation preference of the
Preferred Shares will be eliminated with the Preferred Share
Exchange, for a 42% aggregate reduction in financial
obligations.
- A commitment from the Company's senior lenders to extend the
maturity of the Credit Facility from June
2022 to June 2023 and, subject
to ongoing semi-annual reviews, maintain the current borrowing base
at US$177.5 million, providing the
Company with financial flexibility and sufficient liquidity as it
resumes drilling and completion operations in 2021.
- Annual cash savings of approximately US$7.8 million of Preferred Share dividend
payments (assuming such dividends would be paid in cash at a rate
of 9.0% per annum on the stated value of US$86.9 million). When combined with the
anticipated interest expense savings of approximately US$1.1 million per annum following application of
the common share equity proceeds from the Rights Offering and
Private Placement against the Credit Facility, this will result in
aggregate cash savings of approximately US$8.9 million per annum.
- Reinforcement of the long-term commitment to the Company from
all significant stakeholders, including Mr. M. Bruce Chernoff (the Company's Executive Chairman
and a director), First Reserve (the former holder of the Preferred
Shares, as further described below) and the Company's senior
lenders.
- Upon closing of the Transaction, all Preferred Shares were
exchanged for 182,275,798 common shares at an exchange price of
$0.60 per share and all special
voting shares held by First Reserve were cancelled. With the
exchange of all Preferred Shares, the priority to the Company's
assets that the Preferred Shares had over the common shares has
been eliminated.
The Rights Offering expired on April 7,
2021, with the rights trading on the TSXV under the symbol
"PSH.RT" being de-listed at 12:00
p.m. (Toronto time) on that
date. Through the Rights Offering, the Company issued
28,115,285 common shares pursuant to the basic subscription
privilege, and 1,137,680 common shares pursuant to the additional
subscription privilege. Upon closing of the Rights Offering,
PetroShale issued a total of 29,252,965 common shares at a price of
$0.20 per share, raising proceeds
from the Rights Offering of approximately $5.9 million.
Upon closing of the Company's Private Placement with FR XIII
PetroShale Holdings L.P. ("First Reserve", a U.S. based
private equity investor) and a company of which Mr. M Bruce Chernoff is a significant shareholder
("Chernoffco"), First Reserve has acquired 50,000,000 common
shares for aggregate subscription proceeds of $10.0 million and Chernoffco has acquired
70,747,035 common shares for aggregate subscription proceeds of
$14.1 million. The common
shares issued pursuant to the Private Placement will be subject to
a hold period of four month plus one day. Following the
Rights Offering, the Private Placement and the exchange of the
Preferred Shares pursuant to the Preferred Share Exchange,
PetroShale has 520,804,251 million common shares outstanding.
As part of closing the Transaction, the Company, First Reserve and
Chernoffco also entered into a new investor rights agreement.
PetroShale intends to release its 2021 first quarter operating
and financial results after markets close on Wednesday May 19, 2021. Consolidated Financial
Statements and Management's Discussion and Analysis will be posted
to the Company's website and SEDAR shortly after the press release
is disseminated.
In addition, the Company intends to hold its annual shareholder
meeting on June 16, 2021. In light of
the impacts associated with the COVID-19 pandemic, the Company
plans to conduct its meeting through remote communication using a
live webcast audio feed. As such, shareholders will have the option
to vote by proxy in advance of the Meeting. At this time, the
Company is intending to restrict physical attendance at the Meeting
to essential personnel and registered shareholders and proxyholders
entitled to attend and vote at the Meeting. Further information
about the Meeting, including its location, options and instructions
for voting, and details on accessing the webcast, will be outlined
within the management information circular and proxy materials,
which the Company intends to mail to shareholders and file on SEDAR
no later than May 25, 2021.
Early Warning Disclosures
Pursuant to the Private Placement, Chernoffco acquired
70,747,035 common shares at $0.20 per share. After giving effect to the
common shares acquired by Chernoffco pursuant to the Private
Placement Mr. M. Bruce Chernoff
(directly or indirectly including through Chernoffco) currently
beneficially owns, or exercises control or direction over,
135,202,821 common shares or approximately 26.0% of the issued and
outstanding common shares (on a non-diluted basis) after giving
effect to the issuance of the common shares pursuant to the
Preferred Share Exchange, the Rights Offering and the Private
Placement. Mr. Chernoff (through Chernoffco) acquired the
70,747,035 common shares described herein for investment purposes.
Mr. Chernoff may, depending on market and other conditions,
increase or decrease his ownership of common shares or other
securities of the Company, whether in the open market, by privately
negotiated agreement or otherwise. Mr. Chernoff will file an early
warning report, pursuant to National Instrument 62-103, in respect
of his acquisition of common shares, and this report will be
available on the Company's SEDAR profile at www.sedar.com or by
contacting Mr. Chernoff at Suite 3230, 421 – 7th Avenue
SW Calgary, Alberta T2P 4K9 Phone:
(403) 266-1717.
Pursuant to the Private Placement, First Reserve acquired
50,000,000 common shares at $0.20 per
share. First Reserve also exchanged all Preferred Shares for an
aggregate of 182,275,798 common shares at an exchange price of
$0.60 per share pursuant to the
Preferred Shares Exchange. Additionally, as part of the Preferred
Share Exchange, all 45,568,949 special voting shares of the Company
held by First Reserve were redeemed and cancelled by the Company
for nominal consideration in accordance with the terms thereof (the
"SVS Redemption"). After giving effect to the Private
Placement, the Preferred Share Exchange and the SVS Redemption,
First Reserve currently beneficially owns, or exercises control or
direction over, 234,978,500 common shares, representing 45.1% of
the issued and outstanding common shares (on a non-diluted basis)
after giving effect to the issuance of the common shares pursuant
to the Preferred Share Exchange, the Rights Offering and the
Private Placement. First Reserve acquired the 232,275,798 common
shares described herein for investment purposes. First Reserve may,
depending on market and other conditions, increase or decrease its
ownership of common shares or other securities of the Company,
whether in the open market, by privately negotiated agreement or
otherwise. First Reserve will file an early warning report,
pursuant to National Instrument 62-103, in respect of its
acquisition of common shares, and this report will be available on
the Company's SEDAR profile at www.sedar.com or by contacting First
Reserve's media representatives at (212) 355-4449.
Additional Information on the Rights Offering
As set forth above, pursuant to the Rights Offering, PetroShale
issued 29,252,965 common shares at a price of $0.20 per share for gross proceeds of
approximately $5.9 million. A total
of 28,115,285 common shares were issued pursuant to the basic
subscription privilege granted under the Rights Offering, of which,
to the knowledge of the Company (after reasonable inquiry),
2,196,083 common shares were issued to insiders of the Company and
25,919,202 common shares were issued to non-insiders of the
Company. A total of 1,137,680 common shares were issued pursuant to
the additional subscription privilege granted under the Rights
Offering, all of which, to the knowledge of the Company (after
reasonable inquiry), were issued to non-insiders of the Company. To
the knowledge of the Company, no person became an insider as a
result of the Rights Offering (including after giving effect to the
common shares issued under the Private Placement and the Preferred
Share Exchange). There were no selling fees or commissions paid in
connection with the Rights Offering.
About PetroShale
PetroShale is an oil company engaged in the acquisition,
development, and production of high-quality oil-weighted assets in
the North Dakota Bakken / Three Forks.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This press release shall not constitute an offer to sell
or the solicitation of an offer to buy securities of the Company in
the United States nor shall there
be any sale of securities of the Company in any jurisdiction in
which such offer, solicitation or sale would be unlawful. The
securities described herein have not been, and will not be,
registered under the United States Securities Act of 1933, as
amended, or the securities laws of any state of the United States. Accordingly, any of the
securities described herein may not be offered or sold in
the United States or to U.S.
persons unless an exemption from registration is
available.
Note Regarding Forward-Looking Statements and Other
Advisories:
This press release contains forward-looking statements and
forward-looking information (collectively "forward-looking
information") within the meaning of applicable securities laws
relating to, among other things, the anticipated use of the net
proceeds of the financing transactions proposed under the
Transaction, the reduction in the current indebtedness under the
Credit Facility and the expected reduction in the Company's
financial obligations, exceptions with respect to the commitment
from the Company's senior lenders, expected annual cash savings of
Preferred Share dividend payments and interest costs and the
intentions of the investors notes herein with respect to future
acquisitions or dispositions of Company securities.
PetroShale provided such forward-looking statements in reliance
on certain expectations and assumptions that it believes are
reasonable at the time, including expectations and assumptions
concerning the Company's use of proceeds of the Transaction,
capital structure and current and future indebtedness. the
amendments to the Credit Facility will remain in effect, prevailing
commodity prices, weather, regulatory approvals, liquidity, Bakken
oil differentials (including as a result of any interruptions from
the Dakota Access Pipeline ("DAPL") or otherwise), the
ability of the Company to transport its production through DAPL or
other forms of transportation (and the continued availability and
capacity of such transportation means); the Company's lenders
willingness to maintain the Company's borrowing capacity (including
described herein); activities by third party operators; exchange
rates, interest rates, applicable royalty rates and tax laws;
future production rates and estimates of operating costs;
performance of existing and future wells; plant turnaround times
and continued rail service to transport products; reserve volumes;
business prospects and opportunities; the future trading price of
the Company's shares; the availability and cost of financing, labor
and services; the impact of increasing competition; ability to
market oil and natural gas successfully; and the Company's ability
to access capital.
Although the Company believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because the Company can give no
assurance that they will prove to be correct. Forward-looking
information addresses future events and conditions, which by their
very nature involve inherent risks and uncertainties. The Company's
actual results, performance or achievement could differ materially
from those expressed in, or implied by, the forward-looking
information and, accordingly, no assurance can be given that any of
the events anticipated by the forward-looking information will
transpire or occur, or if any of them do so, what benefits the
Company will derive therefrom.
Management has included the above summary of assumptions and
risks related to forward-looking information provided in this press
release in order to provide security holders with a more complete
perspective on the Company's future operations and such information
may not be appropriate for other purposes. Readers are cautioned
that the foregoing lists of factors are not exhaustive. Additional
information on these and other factors that could affect our
operations or financial results are included in reports on file
with applicable securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com). The
forward-looking information is made as of the date of this press
release and the Company disclaims any intent or obligation to
update publicly any forward-looking information, whether as a
result of new information, future events or results or otherwise,
other than as required by applicable securities laws.
All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
SOURCE PetroShale Inc.
