03:48:21 EDT Sat 21 Jul 2018
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Pengrowth Energy Corp
Symbol C : PGF
Shares Issued 552,246,104
Close 2017-10-12 C$ 1.31
Recent Sedar Documents

Pengrowth Energy prepays 2018 term notes

2017-10-12 13:10 ET - News Release

Mr. Derek Evans reports


Pengrowth Energy Corp. has prepaid all of its outstanding term notes due in 2018 and has finalized the terms of amending agreements with its lenders under its syndicated bank facility and the holders of its remaining term notes. These agreements amend the existing financial covenants effective for the quarter ended Sept. 30, 2017, through to and including the quarter ending Sept. 30, 2019. The terms of the amending agreements are expected to provide Pengrowth with the financial flexibility and runway to restructure its remaining debt with covenant light debt and to develop a financing strategy for the continuing development of its Lindbergh asset. Success on both fronts should enable Pengrowth to deliver long-term growth in reserves, production and cash flow for the company and its stakeholders.

Debt reductions

The company has been active in the disposition market with significant success thus far in 2017, closing on approximately $825-million of disposition proceeds year to date with another $150-million disposition (Swan Hills) scheduled to close in the fourth quarter. This success has allowed the company to materially reduce its outstanding debt while only reducing its reserve base by approximately 23 per cent based on a proved plus probable Dec. 31, 2016, GLJ reserve evaluation. The company has deployed its existing cash on hand to prepay all the term notes otherwise scheduled to mature on Aug. 28, 2018. The repaid notes are shown in the attached table.

Currency                Amount (millions)   Coupon

Canadian dollar                    $15.0     6.61%
U.S. dollar                       $265.0     6.98%
equivalent  (1)                   $346.2      

(1) Based on a Canadian-dollar/U.S.-dollar 
exchange rate of 0.80.

In addition to the prepayment of the 2018 term notes, the company paid approximately $78-million of principal on its remaining outstanding term notes. With the completion of these payments, the company now has approximately $535-million of term notes outstanding, having repaid approximately $1.1-billion of term notes and convertible debentures since Dec. 31, 2016. The repaid debt carried an annual interest load of approximately $65-million. Pengrowth's next term note maturity is not until Oct. 18, 2019. A table outlining the details of the remaining term notes is provided at the end of this news release.

Amended financial covenants

The company has finalized the amendment agreements with the lenders under its syndicated bank facility and the holders of its term notes. The syndicated bank facility and the term notes were previously bound by financial covenants that included a senior-debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) (12 months trailing) ratio of less than 3.5:1; a senior-debt-to-capitalization ratio of less than 55 per cent; and an EBITDA-to-interest-expense ratio of greater than 4.0 times. The bank lending syndicate and holders of the term notes have agreed, for the waiver period, to:

  • Eliminate the senior-debt-to-EBITDA ratio covenant;
  • Eliminate the debt-to-book-capitalization ratio covenant;
  • Reduce the trailing 12-month adjusted-EBITDA-to-adjusted-interest-expense ratio covenant; the adjusted-EBITDA-to-adjusted-interest ratio will vary from quarter to quarter, and a complete schedule of the quarterly limits is provided at the end of this release.

In exchange for the covenant relaxation, lenders under the syndicated bank facility and the holders of the term notes were granted security over Pengrowth's assets, a 2.0-percentage-point increase in interest rates on remaining outstanding term notes (which increases to 3.0 percentage points on Jan. 1, 2020), as well as a one-time 0.5-percentage-point amendment fee payable on all outstanding term notes maturing after 2018. In addition, the aggregate credit limit under the credit facility has been reduced to $400-million and will be reduced to $330-million following the completion of the previously announced disposition of the company's remaining Swan Hills assets. Currently, approximately $175-million is drawn on the facility.

Derek Evans, president and chief executive officer of Pengrowth, commented: "We have been committed to reducing our debt and strengthening our financial position in order to build a stronger foundation for growing the company going forward. The agreements with our lenders and noteholders mark a key milestone in our plan and provide us with additional financial runway. We remain focused on restructuring and strengthening the company's financial position, including finding new sources of capital to replace our existing term notes with less covenant restrictive debt. With success, this financial plan is expected to allow us to execute on our development strategy, including the development of our Lindbergh phase 2, which remains on hold awaiting stronger commodity prices. While we are happy to see the recent strengthening in crude oil prices, a decision to proceed with phase 2 is dependent on a higher long-term crude oil price environment for diluted bitumen sales. Once complete, Lindbergh is expected to ultimately deliver long-term growth in production and cash flow."

              SCHEDULE OF REMAINING TERM NOTES OUTSTANDING                           
Currency                             Amount     New coupon     Maturity date
                                  (millions)       rate (%)

U.S. dollar                           $30.3           5.49     Oct. 18, 2019
British pound                          13.0           5.45     Oct. 18, 2019
U.S. dollar                          $100.9           7.98      May 11, 2020
U.S. dollar                           $91.5           6.07     Oct. 18, 2022
Canadian dollar                       $21.9           6.74     Oct. 18, 2022
U.S. dollar                          $170.3           6.17     Oct. 18, 2024
Canadian-dollar equivalent (1)       $534.5                                     

(1) Based on a Canadian-dollar/U.S.-dollar exchange rate of 0.80 and 
a Canadian-dollar/British-pound exchange rate of 0.61.

                              TOTAL DEBT CONTINUITY

                                     Sept. 30, 2017               Oct. 12, 2017

Series                       Currency        Amount         Amount        Amount 
                                        outstanding     paid/drawn   outstanding 
                                          (millions)     (millions)    (millions)

2018                  Canadian dollar         $15.0         ($15.0)           $0
                          U.S. dollar        $265.0        ($265.0)           $0
2019                      U.S. dollar         $35.0          ($4.7)        $30.3
                        British pound          15.0           (2.0)         13.0
2020                      U.S. dollar        $115.5         ($14.6)       $100.9
2022                      U.S. dollar        $105.0         ($13.5)        $91.5
                      Canadian dollar         $25.0          ($3.1)        $21.9
2024                      U.S. dollar        $195.0         ($24.7)       $170.3
Bank facility         Canadian dollar          $0.0         $175.0)       $175.0
equivalent (1)                              $959.10                      $709.60

(1) Based on a Canadian-dollar/U.S.-dollar exchange rate of 0.80 and 
a Canadian-dollar/British-pound exchange rate of 0.61.

                               Before Swan Hills closing          After Swan Hills closing 
Q3 2017                                     4.00 to 1.00                      4.00 to 1.00           
Q4 2017                                     1.21 to 1.00                      0.77 to 1.00           
Q1 2018                                     1.00 to 1.00                      0.75 to 1.00           
Q2 2018                                     0.87 to 1.00                      0.68 to 1.00           
Q3 2018                                     1.12 to 1.00                      1.03 to 1.00           
Q4 2018                                     1.08 to 1.00                      1.01 to 1.00           
Q1 2019                                     1.17 to 1.00                      1.13 to 1.00           
Q2 2019                                     1.21 to 1.00                      1.19 to 1.00           
Q3 2019                                     1.23 to 1.00                      1.23 to 1.00           
Q4 2019 and thereafter                      4.00 to 1.00                      4.00 to 1.00           

The full details of the amending agreements, including terms, will be filed in the coming days and made available on SEDAR.


BMO Capital Markets Inc. acted as financial advisers to Pengrowth.

About Pengrowth Energy Corp.

Pengrowth Energy is a Canadian intermediate energy company focused on the sustainable development and production of oil and natural gas in Western Canada from its Lindbergh thermal oil property and its Groundbirch Montney gas property. The company is headquartered in Calgary, Alta., and has been operating in the Western basin for over 28 years.

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