Obsidian Energy Announces TSX Approval for Renewal of Normal Course Issuer Bid

Rhea-AI Summary

Obsidian Energy LTD. announces the renewal of its normal course issuer bid (NCIB) to repurchase up to 7,564,767 common shares, representing 10% of the public float, over 12 months starting February 29, 2024. The NCIB aims to enhance shareholder value by buying back shares at market price or through other permitted means on the TSX and NYSE American stock exchanges. The company believes that repurchasing shares can improve per share metrics and increase the underlying value of the company's common shares.

Insights

Financial Analyst

When evaluating the share repurchase program initiated by Obsidian Energy, it is crucial to consider the signal it sends to the market. A normal course issuer bid (NCIB) is often interpreted as a company's management believing that its stock is undervalued. By repurchasing shares, Obsidian Energy is essentially investing in itself, which could be an indicator of strong future prospects or a strategic move to improve financial ratios such as earnings per share (EPS) by reducing the number of shares outstanding.

However, it's important to scrutinize the financial health of the company before concluding that the NCIB will be beneficial. The fact that Obsidian Energy has not reached its current NCIB limit suggests either a strategic decision to repurchase a specific number of shares or a potential lack of sufficient capital to support a more aggressive buyback. Furthermore, the impact on liquidity should be assessed, as the repurchase of shares could potentially reduce the cash reserves of the company, impacting its ability to invest in growth opportunities or weather downturns.

Market Research Analyst

From a market perspective, the announcement of an NCIB can have both immediate and long-term effects on a company's stock price. In the short term, such announcements can lead to a positive reaction in the stock market as investors may perceive the buyback as a sign of confidence from management. Additionally, the reduction in the number of shares available in the market can lead to an increase in the stock's demand, potentially driving up the price.

Over the long term, the success of such a program is contingent upon the overall market conditions and the company's performance. If the underlying reasons for the stock's undervaluation are not addressed, the positive effects of the NCIB may be short-lived. It is also worth considering the opportunity cost of the capital used for the NCIB, as these funds could have been allocated to other initiatives with potentially higher returns.

Legal Expert

The regulatory framework surrounding NCIBs is designed to prevent market manipulation. Obsidian Energy's compliance with the TSX NCIB rules and Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, indicates adherence to strict guidelines regarding the volume and timing of share repurchases. This compliance is essential to maintain investor confidence and ensure a level playing field in the market.

The establishment of an automatic securities purchase plan is a notable strategy, as it allows for the repurchase of shares during periods when company insiders are typically prohibited from trading due to possession of material non-public information. This plan must be carefully structured to avoid any potential regulatory scrutiny or the perception of impropriety, ensuring that all transactions are conducted fairly and transparently.

Calgary, Alberta--(Newsfile Corp. - February 27, 2024) - OBSIDIAN ENERGY LTD. (TSX: OBE) (NYSE American: OBE) ("Obsidian Energy", the "Company", "we", "us" or "our") is pleased to announce that the Toronto Stock Exchange (the "TSX") has accepted Obsidian Energy's notice of intention to renew our normal course issuer bid (the "NCIB"). The NCIB allows Obsidian Energy to purchase up to 7,564,767 common shares (representing 10 percent of the Company's public float, as defined by the TSX, as of February 15, 2024) over a period of 12 months commencing on February 29, 2024. On February 15, 2024, Obsidian Energy had 77,405,038 common shares outstanding and 75,647,677 common shares in our public float. The NCIB will expire no later than February 28, 2025.

Under the NCIB, common shares may be repurchased through the facilities of the TSX, the NYSE American stock exchange and/or alternative trading systems in Canada and the United States, or as otherwise permitted under applicable securities laws. Purchases under the NCIB will be made through open market purchases at market price, as well as by other means as may be permitted under applicable securities laws. The NCIB will be effected in accordance with the TSX NCIB rules and/or Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, which contain restrictions on the number of common shares that may be purchased on a single day, subject to certain exceptions for block purchases, based on the average daily trading volumes of Obsidian Energy's common shares on the applicable exchange.

The total number of common shares Obsidian Energy is permitted to purchase on the TSX is subject to a daily purchase limit of 45,793 common shares, representing 25 percent of the average daily trading volume of 183,175 common shares on the TSX calculated for the six-month period ended January 31, 2024. However, the Company may make one block purchase per calendar week on the TSX which exceeds such daily repurchase restrictions. Any common shares that are purchased under the NCIB will be cancelled upon their purchase by Obsidian Energy.

The actual number of common shares that may be purchased under the NCIB and the timing of any such purchases will be determined by Obsidian Energy. The Company believes that, at times, the prevailing share price does not reflect the underlying value of our common shares and the repurchase of our common shares for cancellation represents an attractive opportunity to enhance Obsidian Energy's per share metrics, and thereby increase the underlying value of the Company's common shares for our shareholders.

Obsidian Energy has established an automatic securities purchase plan with a designated broker whereby common shares may be repurchased at times when such purchases would otherwise be prohibited pursuant to regulatory restrictions or self-imposed blackout periods. Under the automatic securities purchase plan and before entering into a self-imposed blackout period, the Company may, but is not required to, request that the designated broker make purchases under the NCIB. Such purchases will be made at the discretion of the designated broker, within parameters established by Obsidian Energy prior to the blackout periods. Outside of the blackout periods, purchases are made at the discretion of the Company's management. The automatic securities purchase plan constitutes an "automatic plan" for purposes of applicable Canadian securities legislation and has been pre-cleared by the TSX.

The Company was permitted to repurchase up to 8,073,847 common shares under its current NCIB that ran from February 27, 2023 to February 26, 2024. As at February 15, 2024, Obsidian Energy had repurchased an aggregate of 5,353,635 common shares under our expiring NCIB on the open market at a volume weighted average price per common share of approximately $9.30 per share.

ADDITIONAL READER ADVISORIES

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable Canadian and U.S. securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this news release contains forward-looking statements and information concerning: the timing, methods and quantity of any purchases by Obsidian Energy of its common shares under the NCIB; and the Company's belief that the repurchase of common shares under the NCIB will increase the underlying value of common shares held by shareholders.

The forward-looking statements and information are based on certain key expectations and assumptions made by Obsidian Energy, including expectations and assumptions concerning: Obsidian Energy's views with respect to its financial condition and prospects, the stability of general economic and market conditions, currency exchange rates and interest rates, the availability of cash or other financing sources to fund repurchases of common shares under the NCIB and our ability to comply with applicable terms and conditions under the Company's debt agreements, the existence of alternative uses for Obsidian Energy's cash and other financial resources and our ability to comply with applicable laws and regulations (including Canadian and U.S. securities laws, and Canadian corporate law) pertaining to the NCIB. Although Obsidian Energy believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Obsidian Energy can give no assurance that they will prove to be correct. By its nature, such forward-looking statements and information are subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to: our inability to repurchase common shares under the NCIB in the amounts permitted or at all due to a lack of financial resources, the inability to comply with our debt agreements, legal restrictions on share repurchases, competing demands for our financial resources, or other factors; the anticipated benefits of repurchasing our shares under the NCIB do not materialize; Obsidian Energy's future capital requirements; general economic and market conditions; demand for Obsidian Energy's products; and unforeseen legal or regulatory developments and other risk factors detailed from time to time in Obsidian Energy reports filed with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are cautioned that the assumptions used in the preparation of such forward-looking statements and information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on such forward-looking statements and information. Obsidian Energy gives no assurance that any of the events anticipated will transpire or occur, or, if any of them do, what benefits Obsidian Energy will derive from them. The forward-looking statements and information contained in this news release are expressly qualified by this cautionary statement. Except as required by law, the Company does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein. Readers should also carefully consider the matters discussed that could affect Obsidian Energy, or its operations or financial results in Obsidian Energy's Annual Information Form (see "Risk Factors" and "Forward-Looking Statements" therein) for the year ended December 31, 2023, which is available on the SEDAR+ website (www.sedarplus.ca), EDGAR website (www.sec.gov) or Obsidian Energy's website.

Obsidian Energy shares are listed on both the Toronto Stock Exchange in Canada and the NYSE American exchange in the United States under the symbol "OBE".

CONTACT

TENDER AGENT
     Computershare Investor Services Inc.
     Toll-Free: 1-800-564-6253
     Email: corporateactions@computershare.com

OBSIDIAN ENERGY
     Suite 200, 207 - 9th Avenue SW, Calgary, Alberta T2P 1K3
     Phone: 403-777-2500
     Toll Free: 1-866-693-2707
     Website: www.obsidianenergy.com

     Investor Relations:
     Toll Free: 1-888-770-2633
     Email: investor.relations@obsidianenergy.com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/199423

FAQ

What is Obsidian Energy's normal course issuer bid (NCIB) renewal about?

Obsidian Energy LTD. has announced the renewal of its NCIB to repurchase up to 7,564,767 common shares, representing 10% of the public float, over a 12-month period starting February 29, 2024.

How many common shares can Obsidian Energy repurchase under the NCIB?

Obsidian Energy can repurchase up to 7,564,767 common shares under the NCIB.

What is the purpose of Obsidian Energy's NCIB renewal?

The purpose of the NCIB renewal is to enhance shareholder value by repurchasing shares at market price or through other permitted means on the TSX and NYSE American stock exchanges.

How does Obsidian Energy plan to repurchase common shares under the NCIB?

Obsidian Energy plans to repurchase common shares through open market purchases at market price and other permitted means under applicable securities laws on the TSX and NYSE American stock exchanges.

What was the volume weighted average price per common share under the expiring NCIB?

As of February 15, 2024, Obsidian Energy had repurchased 5,353,635 common shares under the expiring NCIB at a volume weighted average price of approximately $9.30 per share.