SHLE:CC - Source Energy Services Update on Refinancing Process and Receipt of Waiver of Cross Default from Lenders under its Credit Agreement
(TheNewswire)
Calgary, Alberta – TheNewswire - September 15,2022 – ( TSX:SHLE ) (OTC:SCEYF) – Source Energy Services Ltd. (together with its affiliates,“Source” or the “Company”) announces that it is in theadvanced stages of closing a new USD $60 million senior creditfacility. As noted in our news release of August 15, 2022, the Companydid not make the August 15, 2022, interest payment (the “AugustInterest Payment”) due on the senior secured first lien notes (the“Senior Notes”). Source has still not made the August InterestPayment as the Company continues to be prohibited under the terms ofthe Company’s existing credit facility from doing so. Theprohibition relates specifically to the Company not meeting a trailingfinancial test as a result of the Company’s financial results in thefourth quarter of 2021.
Source has now exceeded the cure period for the non-payment of theAugust Interest Payment and is currently in default on the SeniorNotes. The Company is in discussions with noteholders representing asignificant portion of the outstanding principal of the Senior Notes,who have expressed to Source that they are supportive of theCompany’s efforts to complete a refinancing of its credit facility.Based on such discussions, the Company does not expect the noteholdersto take any immediate steps to accelerate repayment of the SeniorNotes under the indenture that governs the Senior Notes. Upon closingof the new senior credit facility, the Company intends to pay theAugust Interest Payment. Further, the lenders under the Company’scurrent credit facility have provided a conditional waiver on thecross default (the “Waiver”) arising from the default of theSenior Notes.
The Waiver is effective until the earlier to occur of: (i) September21, 2022, and (ii) the date that the trustee appointed under theindenture governing the Senior Notes, or holders of not less than 25%of the aggregate principal amount of Senior Notes then outstanding,declares an acceleration of the outstanding Senior Notes such that thenotes become immediately due and payable (such earlier date to occuris referred to as the “Extension Period”).
The Company is current with all its suppliers, industry partners andcontractors and intends to remain so. The utilization of the ExtensionPeriod will not affect any of the Company’s operations or commercialobligations, as the Company currently has more than $20 million ofavailable liquidity.
Source is a company that focuses on the integrated production anddistribution of high quality frac sand, as well as the distribution ofother bulk completion materials not produced by Source. Sourceprovides its customers with an end-to-end solution for frac sandsupported by its Wisconsin and Peace River mines and processingfacilities, its Western Canadian terminal network, its “last mile”logistics capabilities and Sahara, a proprietary wellsite mobile sandstorage and handling system.
Source’s full-service approach allows customers to rely on itslogistics platform to increase reliability of supply and to ensure thetimely delivery of frac sand and other bulk completion materials atthe wellsite.
Certain statements contained in this press release constituteforward-looking statements relating to, without limitation,expectations, intentions, plans and beliefs, including information asto the future events, results of operations and Source’s futureperformance (both operational and financial) and business prospects.In certain cases, forward- looking statements can be identified by theuse of words such as “expects”, “estimates”,“anticipates”, “believes”, “continues”, “focus” orvariations of such words and phrases, or state that certain actions,events or results “may” or “will” be taken, occur or beachieved. Such forward-looking statements reflect Source’s beliefs,estimates and opinions regarding its future growth, results ofoperations, future performance (both operational and financial), andbusiness prospects and opportunities at the time such statements aremade, and Source undertakes no obligation to update forward-lookingstatements if these beliefs, estimates and opinions or circumstancesshould change unless required by applicable law. Forward-looking statements are necessarily based upon a numberof estimates and assumptions made by Source that are inherentlysubject to significant business, economic, competitive, political andsocial uncertainties and contingencies. Forward-looking statements arenot guarantees of future performance. In particular, this pressrelease contains forward-looking statements pertaining, but notlimited, to: Source’s discussions with its debtholders and lenders,and the noteholders’ intentions to not accelerate repayment of theSenior Notes; Source’s expectations of its ability to complete arefinancing of its credit facility; Source’s expectation that itwill remain current with all its suppliers, industrypartners and contractors; and that the Company’s operationsand commercial obligations will not be affected by the mattersdisclosed herein .
By their nature, forward-looking statements involve numerous currentassumptions, known and unknown risks, uncertainties and other factorswhich may cause the actual results, performance or achievements ofSource to differ materially from those anticipated by Source anddescribed in the forward-looking statements.
With respect to the forward-looking statements contained in this pressrelease assumptions have been made regarding, among other things:proppant market prices; future oil, natural gas and liquefied naturalgas prices; future global economic and financial conditions; futurecommodity prices, demand for oil and gas and the product mix of suchdemand; levels of activity in the oil and gas industry in the areas inwhich Source operates; the continued availability of timely and safetransportation for Source’s products, including without limitation,Source’s rail car fleet and the accessibility of additionaltransportation by rail and truck; the maintenance of Source’s keycustomers and the financial strength of its key customers; themaintenance of Source’s significant contracts or their replacementwith new contracts on substantially similar terms and that contractualcounterparties will comply with current contractual terms; operatingcosts; that the regulatory environment in which Source operates willbe maintained in the manner currently anticipated by Source; futureexchange and interest rates; geological and engineering estimates inrespect of Source’s resources; the recoverability of Source’sresources; the accuracy and veracity of information and projectionssourced from third parties respecting, among other things, futureindustry conditions and product demand; demand for horizontal drillingand hydraulic fracturing and the maintenance of current techniques andprocedures, particularly with respect to the use of proppants;Source’s ability to obtain qualified staff and equipment in a timelyand cost-efficient manner; the regulatory framework governingroyalties, taxes and environmental matters in the jurisdictions inwhich Source conducts its business and any other jurisdictions inwhich Source may conduct its business in the future; future capitalexpenditures to be made by Source; future sources of funding forSource’s capital program; Source’s future debt levels; the impactof competition on Source; and Source’s ability to obtain financingon acceptable terms.
A number of factors, risks and uncertainties could cause results todiffer materially from those anticipated and described hereinincluding, among others: the effects of competition and pricingpressures; risks inherent in key customer dependence; effects offluctuations in the price of proppants; risks related to indebtednessand liquidity, including Source’s leverage, restrictive covenants inSource’s debt instruments and Source’s capital requirements; risksrelated to interest rate fluctuations and foreign exchange ratefluctuations; changes in general economic, financial, market andbusiness conditions in the markets in which Source operates; changesin the technologies used to drill for and produce oil and natural gas;Source’s ability to obtain, maintain and renew required permits,licenses and approvals from regulatory authorities; the stringentrequirements of and potential changes to applicable legislation,regulations and standards; the ability of Source to comply withunexpected costs of government regulations; liabilities resulting fromSource’s operations; the results of litigation or regulatoryproceedings that may be brought against Source; the ability of Sourceto successfully bid on new contracts and the loss of significantcontracts; uninsured and underinsured losses; risks related to thetransportation of Source’s products, including potential rail lineinterruptions or a reduction in rail car availability; the geographicand customer concentration of Source; the impact of climate changerisk; the ability of Source to retain and attract qualified managementand staff in the markets in which Source operates; labor disputes andwork stoppages and risks related to employee health and safety;general risks associated with the oil and natural gas industry, lossof markets, consumer and business spending and borrowing trends;limited, unfavorable, or a lack of access to capital markets;uncertainties inherent in estimating quantities of mineral resources;sand processing problems; implementation of recently issued accountingstandards; the use and suitability of Source’s accounting estimatesand judgments; the impact of information systems and cyber securitybreaches; and risks and uncertainties related to COVID-19 or itsvariants, including changes in energy demand.
Although Source has attempted to identify important factors that couldcause actual actions, events or results to differ materially fromthose described in the forward-looking statements, there may be otherfactors that cause actions, events or results not to be asanticipated, estimated or intended. There can be no assurance thatforward-looking statements will materialize or prove to be accurate,as actual results and future events could differ materially from thoseanticipated in such statements. The forward-looking statementscontained in this press release are expressly qualified by thiscautionary statement. Readers should not place undue reliance onforward-looking statements. These statements speak only as of the dateof this press release. Except as may be required by law, Source expressly disclaims any intention orobligation to revise or update any forward-looking statements orinformation whether as a result of new information, future events orotherwise.
Any financial outlook and future-oriented financial informationcontained in this press release regarding prospective financialperformance, financial position or cash flows is based on assumptionsabout future events, including economic conditions and proposedcourses of action based on management’s assessment of the relevantinformation that is currently available. Projected operationalinformation contains forward-looking information and is based on anumber of material assumptions and factors, as are set out above.These projections may also be considered to contain future orientedfinancial information or a financial outlook. The actual results ofSource’s operations for any period will likely vary from the amountsset forth in these projections and such variations may be material.Actual results will vary from projected results. Readers are cautionedthat any such financial outlook and future-oriented financialinformation contained herein should not be used for purposes otherthan those for which it is disclosed herein. The forward-lookinginformation and statements contained in this document speak only as ofthe date hereof and have been approved by the Company’s managementas at the date hereof. The Company does not assume any obligation topublicly update or revise them to reflect new events or circumstances,except as may be required pursuant to applicable laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
Scott Melbourn
Chief Executive Officer
(403) 262-1312
investorrelations@sourceenergyservices.com
Derren Newell
Chief Financial Officer
(403) 262-1312
investorrelations@sourceenergyservices.com
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