CALGARY – (PIPE – TSX-V) Pipestone Energy Corp. (“Pipestone Energy” or the “Company”) is pleased to announce that it has successfully re-financed its existing credit facilities with a $225 million Reserve Based Loan (“RBL”), which provides meaningful financial flexibility going forward. Additionally, the Company achieved its previously announced 2019 exit production guidance in November 2019, with average estimated sales production of ~15,700 boe/d (~44% liquids).
Credit Facility Refinancing
The RBL consists of a $195 million syndicated revolving facility (“Syndicated Facility”) and a $30 million bi-lateral operating facility (“Operating Line”). The Syndicated Facility includes an accordion feature, which provides for a $25 million increase to the borrowing capacity, subject to the mutual consent of its lenders. The revolving period of the RBL currently ends on November 30, 2020 with an additional one-year term out period thereafter if the revolving period is not extended. The borrowing base on the facility will be redetermined bi-annually in the spring and fall each year. The syndicate consists of four banks, including National Bank Financial Inc. and Bank of Montreal as Co-Lead Arrangers and National Bank Financial Inc. as the Sole Bookrunner with Alberta Treasury Branch, and Canadian Western Bank rounding out the syndicate.
The RBL fully replaces the $198.5 million two-year first lien credit facility (the “Credit Facility”), which consisted of a $168.5 million term loan, a $10 million revolving credit facility, and a $20 million letter of credit facility. At closing, the Company has a total draw of approximately $164 million on its Syndicated Facility, cash and cash equivalents of approximately $28 million and an estimated working capital deficit (excluding cash) of $26 million. As a result, at closing Pipestone’s net debt position is approximately $162 million. In addition, the Company has outstanding letters of credit totaling $14 million allocated towards its Operating Line availability.
Despite continuing third-party midstream start-up challenges, the Company has achieved its 2019 exit production guidance one-month ahead of the original schedule. In November 2019, based on field estimates, total Company sales volumes averaged approximately 15,700 boe/d (comprised of 36% condensate and 44% total liquids), near the top end of its 2019 exit guidance of 14,000 to 16,000 boe/d.
The Company successfully finished drilling six (6) wells with an average lateral length of 2,600 metres on its 6-24 pad in late November for an estimated average cost of $2.2 million per well. These wells are currently being completed using Pipestone’s limited entry or “XLE” design, and are expected to be on-stream by the end of Q1 2020.
After drilling operations on the 6-24 pad ended, the rig was moved to the 6-30 pad to drill six (6) wells with an average lateral length of 2,650 metres. The rig is slated to batch drill all six surface holes prior to year end with main hole drilling to follow until late Q1 2020. Completion operations will commence thereafter.
In recent weeks, the price of Edmonton Condensate (“EdCon”) moved from a discount to a premium to West Texas Intermediate (“WTI”). The Company has taken advantage of this rally by physically selling 2,000 bbl/d of its January condensate production at a weighted average premium of US$2.90/bbl to WTI.
Pipestone Energy Corp.
Pipestone Energy Corp. is an oil and gas exploration and production company with its head office located in Calgary, Alberta. The company is focused on developing its pure-play condensate-rich Montney asset in the Pipestone area near Grande Prairie, Alberta. Pipestone Energy is committed to building long term value for our shareholders and values the partnerships that it is developing within its operating community. Pipestone Energy shares trade under the symbol PIPE on the TSX Venture Exchange. For more information, visit www.pipestonecorp.com.