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Canadian Overseas Petroleum in new convertible bond financing deal

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North American oil and gas explorer Canadian Overseas Petroleum [LON:COPL] has announced a USD 13.6m commitment in convertible bond financing. It has inked purchase agreements with its current institutional stakeholders plus a new institutional investor for an increase in quantum of its 2024 bonds and 2025 bonds. The company said yesterday this would involve an aggregate principle amount of USD 13.6m committed.

The convertible financing has been led by COPL’s main bondholder. The plan is to use the new financing to fund production growth while also allowing the management team to conclude its RBL and JV talks. The main bondholder now gets the right to appoint a non-exec director to the board of COPL if it so wishes.

A further undrawn option has also been made available should it become necessary, which ensures that COPL can remain well funded into 2024. There is a further USD 7m in principal which is available to be tapped if required under current terms.

Oil and gas explorer with Wyoming operations

COPL is an international oil and gas exploration, development and production company which is 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. Its Wyoming operations are considered one of the most environmentally responsible with minimal gas flaring and methane emissions combined with electricity sourced from a neighbouring wind farm to power production facilities.

The proceeds of the convertible financing will be used to improve facilities which in turn can feed into increased production, to pay off outstanding payables and for operating capital. It should also be noted that COPL’s senior credit facility  lender has provided a waiver on its 2 March 2023 liquidity covenant and a six month asset and leverage ratio covenant waiver on the back of the current convertible financing.

Further debt financing

COPL is currently engaged in further debt refinancing and JV discussions, but the news does considerably enhance the security of its financial position. Its senior lender has said it is also going to support the convertible financing via an option to roll future interest and/or fees into bonds, which could provide COPL America with cash flow impact of approximately USD 500,000 per month.

COPL also said that on the back of the convertible financing, the management team will use “all commercially reasonable efforts” to achieve annualised G&A reductions of approx USD 2.5m per month, with savings of at least USD 1m achieved by the end of June. These reductions should user in a more efficient cost base for the company, without it having to sacrifice its strategic and operational aspirations.

“After some bumpy months operationally, and in our refinancing negotiations, this raise supports the company to an intended RBL and for the capital investment required to achieve a material production uplift,” said CEO Arthur Milholland. “We appreciate the support of our leading investors and are excited about the deployment of this capital.”

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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