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Perpetual Energy Inc. Provides Credit Facility, First Quarter 2020 Capital Program and Sequoia Litigation Update


CALGARY   Perpetual Energy Inc. (“Perpetual” or the “Company”) announces that its syndicate of lenders have completed their semi-annual borrowing base redetermination. The revolving bank debt borrowing limit (“Borrowing Limit”) will be reduced by the Company’s lenders from $55 million to $45 million on or prior to January 22, 2020, with the next Borrowing Limit redetermination scheduled on or prior to March 31, 2020. The credit facility will continue to revolve until March 31, 2020 and may be extended for a further period of up to 364 days subject to approval by the Company’s lenders. If not extended, the credit facility will cease to revolve, and all outstanding advances will be repayable on November 30, 2020. After giving effect to the Borrowing Limit reduction and considering the current market value of its Tourmaline Oil Corp. (“TOU”) share investment net of the associated margin demand loan, Perpetual has available liquidity sufficient to fund its first quarter drilling program.

First Quarter 2020 Capital Spending Guidance

The Company’s Board of Directors have approved a capital spending program for the first quarter of 2020 to drill, complete and tie-in up to four (4.0 net) development wells offsetting the Company’s recent Clearwater heavy oil formation discovery at Ukalta in Eastern Alberta. The first two exploratory wells were drilled in the third quarter of 2019 and are currently producing oil at a combined rate on clean-up of 160 bbl/d.

Sequoia Litigation Update

On August 15, 2019, the Company received the oral decision related to the Statement of Claim filed on August 3, 2018 with respect to the Company’s disposition of shallow gas assets in Eastern Alberta to an unrelated third party on October 1, 2016 (the “Sequoia Litigation”). The oral decision dismissed and struck all but one of the claims filed by PricewaterhouseCoopers Inc. LIT (“PwC”), in its capacity as trustee in bankruptcy of Sequoia. The Court did not find that the test was met for summary dismissal relating to whether the transaction was an arm’s length transfer for purposes of section 96(1) of the Bankruptcy and Insolvency Act (the “BIA”), on the balance of probabilities. Accordingly, the BIA claim was not dismissed or struck and only that part of the claim can continue against Perpetual. On August 23, 2019, PwC filed a notice of appeal with the Court of Appeal of Alberta, contesting the entire August 15, 2019 oral decision, and on August 26, 2019, Perpetual filed a similar notice of appeal contesting the BIA claim portion of the decision. The appeal proceedings are expected to be scheduled during the first half of 2020, following receipt of the written decision, now anticipated to be prior to January 6, 2020. On November 18, 2019, Perpetual’s application for security for costs of the appeal was heard and a decision from the Court of Appeal is expected prior to the end of January 2020.

ADDITIONAL INFORMATIONAbout Perpetual

Perpetual is an oil and natural gas exploration, production and marketing company headquartered in Calgary, Alberta. Perpetual operates a diversified asset portfolio, including liquids-rich natural gas assets in the deep basin of west central Alberta, heavy oil and shallow natural gas in eastern Alberta, with longer term opportunities through undeveloped oil sands leases in northern Alberta. Additional information on Perpetual can be accessed at www.sedar.com or from the Corporation’s website at www.perpetualenergyinc.com.

Forward-Looking Information

Certain information regarding Perpetual in this news release including management’s assessment of future plans, operations, capital spending guidance, credit facility and Sequoia litigation update may constitute forward-looking information or statements under applicable securities laws. The forward looking information includes, without limitation, anticipated amounts and allocation of capital spending; statements pertaining to adjusted funds flow levels, statements regarding estimated production and timing thereof; statements pertaining to type curves being exceeded, forecast average production; completions and development activities; infrastructure expansion and construction; estimated FDC required to convert proved plus probable non-producing and undeveloped reserves to proved producing reserves; prospective oil and natural gas liquids production capability; projected realized natural gas prices and adjusted funds flow; estimated decommissioning obligations; commodity prices and foreign exchange rates; and commodity price management. Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in this news release, which assumptions are based on management’s analysis of historical trends, experience, current conditions and expected future developments pertaining to Perpetual and the industry in which it operates as well as certain assumptions regarding the matters outlined above. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Perpetual and described in the forward-looking information contained in this news release. Undue reliance should not be placed on forward-looking information, which is not a guarantee of performance and is subject to a number of risks or uncertainties, including without limitation those described under “Risk Factors” in Perpetual’s Annual Information Form and MD&A for the year ended December 31, 2018 and those included in other reports on file with Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and at Perpetual’s website (www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not exhaustive. Forward-looking information is based on the estimates and opinions of Perpetual’s management at the time the information is released, and Perpetual disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or otherwise, other than as expressly required by applicable securities law.

Non-GAAP Measures

This news release contains the term “available liquidity” which does not have a standardized meaning prescribed by GAAP. Available liquidity is defined as Perpetual’s reserve-based credit facility Borrowing Limit, plus the fair value of the TOU share investment, less borrowings and letters of credit issued under the reserve-based credit facility (the “Credit Facility”) and the TOU share margin demand loan. Management believes that in addition to net cash flows from operating activities as defined by GAAP, available liquidity is a useful supplemental measure to assess the ability of the Company to finance capital expenditures and expenditures on decommissioning obligations, and to meet its financial obligations.  Available liquidity may not be comparable with the calculation of similar measurements used by other entities.

For additional reader advisories in regards to non-GAAP financial measures, including Perpetual’s method of calculation and reconciliation of these terms to their corresponding GAAP measures, see the section entitled “Non-GAAP Measures” within the Company’s MD&A filed on SEDAR.

BOE Equivalents

Perpetual’s aggregate proved and probable reserves are reported in barrels of oil equivalent (boe). Boe may be misleading, particularly if used in isolation. In accordance with NI 51-101, a boe conversion ratio for natural gas of 6 Mcf: 1 boe has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

The following abbreviations used in this news release have the meanings set forth below:

bbls

barrels

boe

barrels of oil equivalent

Mcf

thousand cubic feet

MMcf

million cubic feet

MMBtu 

million British Thermal Units

GJ 

gigajoules



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