Canadian Overseas Petroleum Limited (LSE:COPL, CSE:XOP) (COPL) said it has signed a 'Tap' Purchase Agreement for the issue of further 2025 convertible bonds with an aggregate principal amount of US$4mln which is fully anchored by the lead investor for its July 2022 convertible offering.
Following its hedge restructuring, the company said the offering proceeds will be used for recompletions at Cole Creek Frontier Sands, capex and miscible injections at the Barron Flats Shannon flood and for upfront deposits and fees for debt refinancing term sheets for COPL America.
The 'Tap' feature to increase the convertible allows COPL to draw further development funds, should it require, with the aim of increasing production or for future drilling plans, subject to mutual agreement with the lead investor.
In a statement, Arthur Millholland, COPL president and chief executive officer, commented: "The Tap provided by our lead institutional investor today illustrates the confidence they have in our business plan going forward. Long-term investors in the company are key to our future, as they provide balance and confidence to our current shareholders, and other stakeholders, by allowing the company to grow through the execution of its business plan. One only needs to look at Occidental Petroleum who have performed brilliantly with the support of a single long-term lead institutional investor."
The company anticipates signing a debt refinancing term sheet in January 2023 and closing the debt refinancing in the first quarter of 2023.
COPL said it has the support of its existing lender and has a structured amendment to its senior credit facility as it continues its debt refinancing and joint venture discussions for the development of its Wyoming assets.
To facilitate the convertible Tap and COPL's first-quarter objectives including debt refinancing, COPL noted that it has agreed to amendments of certain terms of its senior credit facility. The liquidity covenant has been amended to a 30-day average of US$2mln and requisite permissions for the funding of COPL America's first quarter of 2023 work programme and use of the convertible Tap proceeds have been received.
Alongside the convertible Tap, COPL said it has received written consent from a majority of 2025 bondholders to avoid adjustments to the 2025 bond instrument conversion price minimizing shareholder dilution. The conversion price remains at $0.1583 per share for each $200,000 of 2025 principal outstanding.
The main bond terms are identical to the existing 2025 convertible bonds. Pricing terms have improved versus July 2022 issue (higher issue price: 80% vs 78% on July convertibles), higher strike on new warrants of 18p versus 16.75p on July warrants.
There are no changes to the 2024 bond instrument or warrants issued in July 2022 as a result of this convertible Tap Financing.
COPL is an international oil and gas exploration, development and production company actively pursuing opportunities in the United States with operations in Converse County Wyoming, and in sub-Saharan Africa through its ShoreCan joint venture company in Nigeria, and independently in other countries.