Connacher Enters Into Support Agreement With Lenders and Obtains Court Authorization to Commence Sale and Investment Solicitation Process

CALGARY, March 28, 2018 /CNW/ - Connacher Oil and Gas Ltd. ("Connacher" or the "Company") is pleased to announce that the Court of Queen's Bench of Alberta (the "Court") in Connacher's Companies' Creditors Arrangement Act ("CCAA") proceeding has approved Connacher's entry into a Support Agreement (the "Support Agreement") with first lien lenders holding in excess of 75% of the principal amount of debt outstanding under the First Lien Credit Agreement dated as of May 23, 2014 (as amended) (the "First Lien Credit Agreement") and the commencement of a new sale and investment solicitation process (the "SISP"). 

The Support Agreement provides the foundation for Connacher's exit from CCAA protection by securing majority first lien lender support for the commencement of a new SISP and the implementation of either a (i) "Superior Transaction" identified during the SISP, or (ii) pre-negotiated credit bid transaction to acquire the assets of Connacher (the "Credit Bid Transaction") in the event that a Superior Transaction is not identified.  The SISP procedures prohibit the first lien lenders from modifying their Credit Bid Transaction to compete with bidders in the SISP.

Connacher has engaged Houlihan Lokey Capital, Inc. ("Houlihan") as financial advisor to conduct the SISP and solicit sale or investment proposals that provide net sale or investment proceeds of at least C$90,000,000, exclusive of Connacher's cash on hand, plus an amount sufficient to pay all claims ranking pari passu or in priority to the obligations under the First Lien Credit Agreement (a "Superior Transaction").

In light of the Company's improved financial performance resulting from cost efficiencies realized during the CCAA process and the improvement in oil prices, Connacher believes that it is appropriate to exit from CCAA in the short term, either through a third party sale or investment transaction or a creditor-driven restructuring. Concurrent with the closing of the sale of the sliding scale royalty to Burgess Energy Holdings, L.L.C. on January 30, 2018, Connacher repaid in full its DIP financing in the amount of US$16,521,164. The Company's cash balances as at March 26, 2018 were C$57,626,382.

The SISP deadline for delivery of initial non-binding letters of intent is 12:00 p.m. (Mountain Time) on May 23, 2018.  The timing and procedures governing the SISP, the terms of participation of prospective purchasers, and the criteria for the submission, evaluation and selection of bids are set out in the Court order approving the SISP dated March 28, 2018.  For the relevant Court filings or for further information on the process please see the Monitor's website at:  www.ey.com/ca/connacheroilandgas.  Parties or persons interested in participating in the SISP are invited to contact Justin Zammit at Houlihan by email at JZammit@HL.com.

The key features of the Credit Bid Transaction include (i) formation of a new entity ("Newco") to acquire all or substantially all of Connacher's assets; (ii) assumption by Newco of Connacher's post-CCAA filing trade payables; (iii) offers of employment being made by Newco to all of Connacher's employees; (iv) entry by Newco into a new senior secured facility (the "Newco Senior Secured Facility"); and (v) distribution of the shares of Newco and the obligations under the Newco Senior Secured Facility to the existing first lien lenders on the terms set out in the Support Agreement and related exhibits.  

The Credit Bid Transaction or any Superior Transaction identified pursuant to the SISP will be subject to approval of the Court. Pursuant to the Support Agreement, Connacher expects to close a transaction by the end of August 2018.

About Connacher

Connacher is a Calgary-based in situ oil sands developer, producer, and marketer of bitumen. The Company holds a 100 per cent interest in approximately 447 million barrels of proved and probable bitumen reserves and operates two steam-assisted gravity drainage facilities located on the Company's Great Divide oil sands leases near Fort McMurray, Alberta.

Forward Looking Statements

This news release contains certain statements that constitute forward looking statements under applicable securities legislation.  All statements other than statements of historical fact are forward looking statements.  In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology.  These statements are only as of the date of this document and Connacher does not undertake to publicly update these forward looking statements except in accordance with applicable securities laws. Forward looking statements, including but without limitation, statements concerning the CCAA process are based on current expectations, estimates, projections and assumptions, which Connacher believes are reasonable but which may prove to be incorrect and therefore such forward looking statements should not be unduly relied upon.  These forward looking statements involve known and unknown risks, uncertainties which may cause actual results or performance to be materially different from any future results or performance expressed or implied herein. These risks, uncertainties and other factors relating to Connacher include, but are not limited to, the level of indebtedness of Connacher, the implementation and impact of the SISP or obtaining any reorganization or restructuring of the assets, business and financial affairs of Connacher, future cooperation of the creditors of Connacher, Connacher's ability to generate sufficient cash flow from operations or to obtain adequate financing to fund capital expenditures and working capital needs and to meet Connacher's ongoing obligations during the CCAA process and thereafter, the ability to maintain relationships with suppliers, customers, employees, shareholders and other third parties in light of Connacher's current liquidity situation and the CCAA proceedings, as well as other general assumptions regarding, among other things: industry activity; the general stability of the economic and political environment; effect of market conditions on demand for Connacher's products; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate its business in a safe, efficient and effective manner; the effect of current plans; the timing and costs of capital expenditures; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding environmental matters in the jurisdictions in which Connacher operates; and the ability of Connacher to successfully market its products.

Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's AIF for the year ended December 31, 2015. Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. Any forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. Any forward looking information included herein is made as of the date of this news release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.

SOURCE Connacher Oil and Gas Ltd.