Canadian Overseas Petroleum Limited (LSE:COPL, CSE:XOP, OTC:VELXF) has raised $4 million of new equity funding and has refinanced other existing facilities, to free up some $13.5 million of its expected cash flow in America through 2024.
In a statement, the company said it raised $4 million in an ‘upsized’ placing priced at a 30% premium to Thursday’s closing share price – new shares are being sold at 2.6p each, compared to a close of 1.95p.
It highlighted that the net impact of the financing is to “fully fund the business through Q1-2024 and reduce 2023 and 2024 liabilities in excess of $13.5 million”.
The new arrangements give the company “more than $17 million in investment support from its largest financial stakeholders”, it said.
COPL added that it is on-track to cut another $1 million of costs in the fourth quarter.
Moreover, it intends to appoint a new director "shortly" with the incoming person expected to focus on increasing production and controlling operating costs.
Chief executive John Cowan, in the statement, described himself as delighted and said he can now focus on delivering increased production.
“If we can bring production back above 2,000 barrels per day on average for 2024 it will allow us to fully fund COPLA for the entire year,” Cowan said.
“We remain focused on progressing our discussions relating to the JV and look forward to being able to focus on delivering operationally."
Meanwhile, chair Tom Richardson added: "I am delighted with the support from all our major stakeholders through this challenging period.
“They are all world class institutions with their own reputations for excellence.
“Their belief in this team and our strategy to deliver returns for all investors is both welcome and reassuring."
Presently, COPL’s US operation comprises six ‘tied-in’ wells supported infrastructure (including five high-pressure separators to the gas gathering system) and it said it plans to spend $1 million over the next two months on NGL injectant with the aim of increasing the density of NGL's in the gas injection.
The initial results of this work is anticipated before the end of November, it added.
The raise and finance deals
In the equity raise, COPL is selling 126.18 million new shares to Anavio, which will also receive share warrants that are exercisable also at 2.6p per share, and expire in August 2027.
Additionally, COPL noted changes to existing warrants and convertible bond terms, with existing bondholder warrants (some 137.8 million of them) now becoming exercisable at 2.6p, with expiry also set in August 2027.
Outstanding convertible bonds - $12.4 million maturing in 2027 and $13 million maturing in 2028 – will now be convertible at 3.17 cents per share.
The new financing arrangements additionally give COPL the ability to pay certain creditors with new shares, up to a total of $500,000.
Alongside the arrangements agreed with Anavio, COPL said it has agreed to crystallise all hedge losses from October 2023 to December 2024, which total $10.96 million, and enter into new swap arrangements to crystallise the hedge on 4 October 2023.
It also agreed to pay a revised interest rate on the same terms as the Senior Credit Facility on the outstanding liability to the provider of the swap arrangement – on the same terms as the company’s senior credit facility, after a $500,000 upfront payment as "part crystallisation" of the hedge.
The swap provider, meanwhile, agreed to waive any further amortisation of the amount until maturity and has elected to payment-in-kind (PIK) interest from October 2023 to 31 January 2024.
The impact, COPL said, is the freeing up of over $13.5 million of cash to the end of 2024 for COPL America.
At the same time, the lender providing COPL’s senior credit facility agreed to accumulate all interest arising between October 2023 and 31 January 2024 on a PIK basis, waived quarterly covenant tests and reduced a minimum liquidity covenant from $2.5 million to $1.5 million from October to December 2023.
"The restructuring with our senior creditors and the Anavio financing provides COPL America with improved operating cash flow from today, and the company intends to direct that to increased NGL injectant and field capex to increase production and demonstrate the potential of the Wyoming assets," COPL chief financing officer Ryan Gaffney said.
In London, COPL shares traded 4% higher in Friday’s early deals to trade at 2.03p each.