Cequence Energy Initiates Court-Supervised Restructuring
TSX-listed junior oil & gas company Cequence Energy Ltd. has initiated a court-supervised restructuring process to address liquidity challenges brought on by the steep drop in oil prices since the start of the year.
The court-supervised process under the Companies’ Creditors Arrangement Act (CCAA) provides an opportunity for the debt-ridden company to prepare a plan or arrangement to reduce debts, which will be presented to creditors and other stakeholders. The process also ensures that existing operations of the company remain afloat during the process.
Cequence is currently engaged in oil and natural gas exploration, development and production operations in Western Canada, with a primary focus on its Simonette property in the Alberta Deep Basin. The company also holds interests in other non-core assets in Northeast British Columbia and the Peace River Arch of Alberta.
“The strategic process will explore a broad range of options and alternatives that may be available to the Company to address its liquidity challenges brought on by the significant deterioration in commodity prices, driven largely by the economic impact of the COVID-19 pandemic,” the company said in a statement. These options may include a sale of all or a portion of the business and assets or shares of the company, and may also include renegotiating certain onerous contracts, refinancing, recapitalization, or other restructuring alternatives.
Cequence stated that it has also obtained an initial order from the Court of Queen’s Bench of Alberta, granting it a 10-day stay on other proceedings, which allows the company to operate without disruptions to pursue potential strategic and restructuring alternatives.
“The Company anticipates seeking one or more further orders from the Court extending the initial stay of proceedings,” the company said, while adding that under the provisions of the CCAA proceedings, it also obtained an interim financing facility of up to C$7 million in multiple tranches.
The interim financing was conditional upon the granting of the initial order and has been provided on the basis that the Court grants a super-priority charge in favor of the lenders over all of Cequence’s current and future assets, properties, and undertakings.
The TSX will also be looking at the continued listing of common shares of the company, which are currently suspended from trading.
Norton Rose Fulbright Canada LLP is acting as legal counsel to Cequence in connection with the CCAA proceedings.