Velvet Energy raises $125 mln in notes, draws on private equity line

Canadian oil and gas company Velvet Energy Ltd has closed a private placement of US$125 million of senior secured second lien notes. Affiliates of FS Investments, GSO Capital Partners and CI Investments were the source of the financing, the proceeds of which will be used by Velvet to pay down debt and expand its Edson Ellerslie development program. The company also plans to draw $30 million on its private equity line to advance exploration initiatives. Last year, Calgary-based Velvet secured an additional $100 million commitment from its backers, Warburg Pincus, Trilantic Capital Partners and ZAM Ventures.


Velvet Energy Ltd. Announces US$125 Million Senior Secured Second Lien Note Financing and an Accelerated 2017 Ellerslie Development Program

CALGARY, AB–(Marketwired – October 05, 2016) –

Velvet Energy Ltd. (the “Company” or “Velvet”), a private oil and liquids-rich natural gas producer in the Deep Basin of Alberta, is pleased to announce that it has completed a private placement (the “Financing”) of US$125 million of Senior Secured Second Lien Notes due 2023 (the “Notes”). The Company is also pleased to provide an update on its core Edson Ellerslie program and plans for advancing key exploration initiatives.

On October 5, 2016, Velvet placed US$125 million of Notes with funds advised by FS Investments and sub-advised by GSO Capital Partners LP, and certain investment funds managed by CI Investments Inc. Proceeds of the Financing will be used to temporarily pay down existing bank indebtedness and to fund an expanded Edson Ellerslie development program. Following with the Financing, the Company plans to draw C$30 million on its equity line led by its private equity investors (the “Private Equity Line”) to continue to advance early stage exploration initiatives. The terms of Velvet’s C$165 million syndicated credit facility remain unchanged after giving effect to this Financing.

Accelerating Activity in Our High Return Base Business

Ken Woolner, President & CEO, stated, “We are very pleased to have partnered with two world-class institutional investors. The Financing, combined with continued access to the Private Equity Line and syndicated bank debt, is a testament to the value of our core Edson Ellerslie assets and provides Velvet with excellent liquidity to advance our business plan in what remains a very challenging capital markets environment. This Financing, along with funds from operations, will allow us to accelerate the pace of our Edson Ellerslie development program in 2017. Thanks in large part to our team’s diligence in reducing both capital and operating expenses in the play, we generate half cycle rates of return in excess of 50 percent at current strip prices.”

Velvet controls over 425 net sections of land in the Edson fairway, and has identified over 600 net drilling locations in the Ellerslie and Deep Basin stack, providing over 10 years of low risk, low cost, high rate of return growth.
RBC Capital Markets acted as an agent in connection with the placement of Senior Secured Second Lien Notes.

Advancing Our Exploration Initiatives

Velvet continues to advance several early stage exploration projects and will allocate proceeds from the Private Equity Line to continue to capture opportunities and derisk play concepts. The Company plans to allocate a portion of the equity proceeds from the drawdown on its Private Equity Line to ongoing exploration activity in the Montney oil window at Gold Creek.

About Velvet Energy Ltd.
Velvet Energy Ltd. is a full cycle, exploration and development company. Since inception, 80% of corporate production has been achieved via the drill bit in the Edson Ellerslie fairway. The company is acutely focused on controlling costs through the entire value chain to achieve top decile rates of return on its capital employed. Velvet is headquartered in Calgary and is backed by three institutional private equity firms in New York, namely Warburg Pincus, Trilantic Capital Partners and 1901 Partners Management LP.

About Warburg Pincus L.L.C.
Warburg Pincus L.L.C. is a leading global private equity firm focused on growth investing. The firm has more than $40 billion in assets under management. The firm’s active portfolio of more than 120 companies is highly diversified by stage, sector and geography. Warburg Pincus is an experienced partner to management teams seeking to build durable companies with sustainable value. Founded in 1966, Warburg Pincus has raised 15 private equity funds, including a $4 billion energy fund that closed in October 2014, which have invested more than $58 billion in over 760 companies in more than 40 countries.

For more than two decades, Warburg Pincus has invested or committed over $9.5 billion across more than 50 energy investments around the world involved in oil and gas exploration and production, midstream, power generation, oilfield technology and related-services, mining and alternative energy development. Notable investments include Antero Resources, Bill Barrett Corporation, Broad Oak Energy, Encore Acquisition Company, Kosmos Energy, Laredo Petroleum, MEG Energy, Newfield Exploration, Spinnaker Exploration and Targa Resources.

The firm is headquartered in New York with offices in Amsterdam, Beijing, Hong Kong, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai and Singapore. For more information please visit

About Trilantic Capital Partners
Trilantic North America is a private equity firm focused on control and significant minority investments in North America. Trilantic North America’s primary investment focus is in the business services, consumer, energy and financial services sectors. To date, Trilantic North America’s energy team has committed approximately $3.2 billion in capital across 24 energy investments. As of June 30, 2016, Trilantic North America currently manages four private equity funds with aggregate capital commitments of $5.9 billion. For more information, visit

About 1901 Partners Management, LP
1901 Partners Management, LP, is a privately held investment adviser formed in 2014 to provide management and advisory services to its clients with respect to oil and gas and other energy-related investments.



Velvet Energy Ltd.
Ken Woolner
President & Chief Executive Officer

Chris Theal
Chief Financial Officer

Peter Henry
Vice President, Finance

Photo courtesy of Reuters/Sergei Karpukhin