Laricina Energy Ltd has completed an issue of $150 million in senior secured notes to CPPIB Credit Investments, the debt financing arm of Canada Pension Plan Investment Board (CPPIB). The funding has a four-year term. The Calgary-based energy company, which has been backed with private equity by CPPIB and U.S.-based Lime Rock Partners since 2010, said it intends to pursue additional funding alternatives to advance its Germain and Saleski oil sands projects in Alberta, increase liquidity, and improve financial flexibility. Founded in 2005, Laricina is based in Calgary.
Laricina Energy Ltd. issues $150 million Senior Secured Notes to CPPIB Credit Investments Inc., and provides Operational Update
March 20, 2014
Laricina Energy Ltd. (“Laricina”) advises shareholders that it has completed the issuance to CPPIB Credit Investments Inc. (“CII”), a wholly-owned subsidiary of CPP Investment Board (“CPPIB”), of $150 million in 11.5% senior secured notes with a four year term (the “Notes”) pursuant to a trust indenture.
“CPPIB has been a strategic financial investor in Laricina since its initial equity investment in 2010,” said Glen Schmidt, President and Chief Executive Officer of Laricina. “They are our largest shareholder and this debt investment shows continued support of our business. The Notes will provide Laricina with flexibility while we continue to seek financing solutions to advance Saleski Phase 1, allowing us to prudently manage operations at the Saleski Pilot and the Germain Commercial Demonstration Project as we expand activities and ramp-up production.”
Prior to this debt issuance, Laricina has been funded entirely through private equity. Laricina intends to pursue additional funding alternatives in order to further advance at Saleski, increase liquidity and improve financial flexibility.
The proceeds from these Notes will be used to advance the Saleski Pilot, Germain Commercial Demonstration Project, and for general corporate purposes. In connection with this note issuance Laricina also issued to CII warrants to purchase common shares of Laricina as follows: 1.00 million warrants at an exercise price of $15.00; 1.00 million warrants at an exercise price of $17.50; and 1.75 million warrants at an exercise price of $20.00 which warrants expire March 20, 2019.
BMO Capital Markets and Peters & Co. Limited acted as financial advisors to the Company. TD Securities Inc. acted as exclusive financial advisor to CII.
The Saleski Pilot continues to enhance Laricina’s understanding of the Grosmont carbonate reservoir and provide an operational roadmap for Saleski Phase 1, the Company’s next commercial-scale project in the Grosmont. Most recent advancements at the Pilot include drilling a 700 metre sidetrack well in the Grosmont C zone which is currently in its first production cycle. Additionally, this is the first simultaneous steam injection and production cycle in the two Grosmont C zone wells testing block steaming and production where the wells will be operated as a unit. In the Grosmont D zone, an application with the Alberta Energy Regulator was approved to drill a new well approximately 100 metres from the existing pilot wells into undisturbed reservoir. This new well is intended to progress the recovery process and optimize production from the Grosmont D zone utilizing current generation drilling techniques and capitalizing on Laricina’s experience drilling wells in the Grosmont.
We continue start-up operations at the Germain Commercial Demonstration Project as select wells are converted from steam to production. Operations and facilities have normalized after a pipeline break last fall (on a third-party line that supplies natural gas to the Germain facility) resulted in a stoppage in steaming and start-up. Steaming resumed at limited capacity using compressed natural gas trucked to site until the pipeline was repaired. However, subsequent to the pipeline break the plant suffered an upset that required a shut-down to perform maintenance work on certain vessels before re-starting the facilities and steam injection in December 2013. As a result of the interruptions, the benefit of the steam previously injected to heat the reservoir was mostly lost delaying ramp-up. The reservoir is once again responding as expected and bitumen production is starting to ramp-up from the initial wells.
Further detail on both Saleski and Germain will be provided in Laricina’s 2013 Annual Report, expected to be made available in April 2014.
About CPPIB Credit Investment Inc.
CPPIB Credit Investments Inc. is a multi-faceted global credit investment program wholly-owned by Canada Pension Plan Investment Board. Since its inception, the group has invested $13 billion of capital and currently holds approximately $5 billion of credit investments. With investments in the Americas, Europe and Asia, the team is focused on providing debt financing across the entire capital structure including term loans, high-yield bonds, mezzanine lending and other solutions for corporations.
Canada Pension Plan Investment Board (“CPPIB”) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (“CPP”) to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London, Hong Kong, New York and São Paulo, CPPIB is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2013, the CPP Fund totalled C$201.5 billion. For more information about CPPIB, please visit www.cppib.com.
About Laricina Energy Ltd.
Laricina is a non-public, Calgary based, responsible energy company that will contribute supply to the growing demand for crude oil through in situ oil sands development.
Laricina’s goal is to create value by developing Canada’s oil sands using innovative in situ technologies. The Company has a diverse portfolio of oil sands assets at varied stages of development, and experienced people with the requisite technical expertise. Laricina has identified five core areas with commercial production potential in excess of 600,000 gross barrels of bitumen per day from a large concentrated resource base with 387 million barrels of probable reserves and 4.6 billion barrels of contingent plus prospective resources (best estimate) as determined by Laricina’s independent reservoir engineers. These assets include oil sands resources in the familiar McMurray Formation, and the developing Grand Rapids, and Grosmont and Winterburn carbonate plays, all of which offer significant production potential.
This information release contains certain “forward-looking statements” within the meaning of such statements under applicable securities law including but not limited to final regulatory approval from the Energy Resources Conservation Board and Alberta Environment. Forwardlooking statements are frequently characterized by words such as “plan”, “expect”, “estimate”, “intend”, “believe”, “anticipate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on Laricina’s experience and current beliefs as well as assumptions made by, and information currently available to, Laricina, and are subject to a variety of risks and uncertainties including, but not limited to, those associated with resource definition, unanticipated costs and expenses, regulatory approvals, fluctuating oil and gas prices, and the ability to access sufficient capital to finance future acquisitions and development. Although the Company believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this information release are not exhaustive and readers are not to place undue reliance on forward-looking statements. Laricina disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this message, except as 2 required under applicable securities legislation. The forward-looking statements are expressly qualified by these cautionary statements.
For further information please contact:
Heidi Christensen Brown
Senior Analyst, Investor Relations
Laricina Energy Ltd.
East Tower, 5th Ave Place
800, 425 1st Street SW
Calgary, AB. T2P 3L8
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