SYNDICATED CREDIT FACILITY UPDATE
The Company has entered into an agreement with our lenders to extend the revolving period and borrowing base redetermination date under our syndicated credit facility to July 15, 2022, from May 31, 2022, to accommodate timing associated with the Company’s refinancing. The maturity date of both the syndicated credit facility and non-revolving term loan remain unchanged at November 30, 2022.
As part of the extension, Obsidian Energy has agreed to an $8.7 million reduction of the syndicated credit facility with the aggregate amount available now set at $358.1 million, consisting of a $260.0 million revolving syndicated credit facility and a $98.1 million non-revolving term loan.
Obsidian Energy also made a US$1.0 million repayment on our senior secured notes, which reduced the Company’s outstanding balance of these notes to US$36.7 million (maturity date of November 30, 2022). Upon completion of the refinancing, our debt structure is expected to provide the Company with a stable capital source that provides appropriate operational liquidity and a longer-term maturity profile.
VIKING AREA UPDATE
In May, we returned to the Viking for the first time since 2017, licensing eight 100 percent working interest wells and spudding the first well mid-month as part of a development program to revitalize this asset. Capital expenditures for the project are approximately $12.5 million with first production expected early in the third quarter. The Viking asset stands out as a light oil focused play with a material degree of associated natural gas. As a result, this asset offers highly economic returns with current commodity prices while providing the Company with the opportunity to continue drilling through the typical spring break-up period due to favourable ground conditions in the area.
As commodity prices remain strong, we have ample capacity for further Viking development with our strong inventory of locations and 100 percent ownership of oil and gas infrastructure in the region. Overall, the eight wells are expected to add approximately 1,000 boe/d on a 30-day, initial production basis (67 percent light oil).
HEDGING UPDATE
The Company continues to have an active hedge program. We are primarily focused on near term WTI positions to protect cashflow given our first half capital program. In addition, we have built a solid foundation on summer AECO natural gas pricing, which is also highly constructive to the business. As at May 31, 2022, the following financial oil and gas contracts are in place on a weighted average basis:
In addition, PROP Energy 45 Limited Partnership, our wholly owned limited recourse subsidiary that purchased 45 percent of the Peace River Oil Partnerships units from a third party on November 24, 2021, entered into the following financial hedges in conjunction with the acquisition financing:
ANNUAL AND SPECIAL MEETING
The Annual and Special Meeting (the “Meeting“) is scheduled for Thursday, June 16, 2022, at 9:00 am (Mountain Daylight Time) at the offices of Obsidian Energy. In association with the Meeting, our Interim President and CEO, Mr. Stephen Loukas and other members of management will host a webcast presentation after the formal portion of the meeting at 10:30 am (Mountain Daylight Time) (the “Presentation“). Additional information about the Meeting and Presentation including links to the webcast and phone numbers to listen in can be found on our website.
ADDITIONAL READER ADVISORIES
OIL AND GAS INFORMATION ADVISORY
Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value. Boe/d means barrels of oil equivalent per day.
