Obsidian Energy Completes Offer to Purchase $2.0 Million of our Outstanding Senior Unsecured Notes

Rhea-AI Summary

Obsidian Energy completes the offer to purchase $2.0 million of Senior Unsecured Notes due July 27, 2027, resulting in an oversubscription of approximately $49.2 million. The Company paid $2.0 million for the Notes, leading to a proration for the tendered Notes. Settlement was completed, leaving $114.2 million of Notes outstanding.

Insights

Financial Analyst

The completion of Obsidian Energy's offer to purchase a portion of its outstanding Senior Unsecured Notes is a strategic financial maneuver. The transaction's oversubscription indicates a robust demand for the company's debt instruments, which could be interpreted as a positive signal regarding investor confidence in Obsidian Energy's creditworthiness. The proration of the tendered notes, due to the oversubscription, means that investors who offered their notes for sale had only a fraction of them accepted, which is a common outcome in oversubscribed debt repurchase scenarios.

From a financial perspective, the repurchase of debt can lead to an improvement in the company's debt-to-equity ratio, assuming the equity value remains constant or increases. This could potentially enhance the company's financial health and appeal to both debt and equity investors. However, the $2.0 million repurchase is relatively small compared to the remaining $114.2 million of notes outstanding, which suggests that the impact on the company's leverage may be minimal.

Debt Market Analyst

Obsidian Energy's recent repurchase offer is a noteworthy event in the debt market, particularly for those holding the company's 11.95 percent Senior Unsecured Notes. The high interest rate on these notes reflects a premium for the risk associated with unsecured debt, which is not backed by collateral. The tender offer's oversubscription suggests that the yield offered by these notes is attractive compared to current market rates, or that note holders are seeking to liquidate their positions for liquidity or strategic reasons.

For the remaining note holders, the reduced outstanding principal could imply a slight increase in the notes' scarcity, potentially affecting their market value. The buyback also demonstrates Obsidian Energy's proactive approach to liability management, which could influence the market's perception of the company's financial strategy and future debt issuances.

Corporate Strategy Analyst

Obsidian Energy's decision to repurchase a portion of its high-interest debt before maturity is a strategic move that reflects the company's broader financial strategy. By reducing high-cost debt, the company could be aiming to lower its interest expenses, which can free up cash flow for other operational or strategic initiatives. This move also signals to the market that the company is actively managing its capital structure and is willing to use available cash to address debt obligations, which can be seen as a sign of financial prudence.

It is important to monitor how these actions fit into Obsidian Energy's long-term strategy, particularly in the context of the energy sector's volatility. The company's ability to manage its debt profile effectively will be important in maintaining financial flexibility and pursuing growth opportunities or weathering downturns in the energy market.

Calgary, Alberta--(Newsfile Corp. - March 14, 2024) - OBSIDIAN ENERGY LTD. (TSX: OBE) (NYSE American: OBE) ("Obsidian Energy", the "Company", "we", "us" or "our") today announced completion of our previously announced offer (the "Offer") to purchase for cash, up to an aggregate amount of $2.0 million of our outstanding 11.95 percent Senior Unsecured Notes due July 27, 2027 (the "Notes"). The Offer expired on March 11, 2024, and was made on the terms and subject to the conditions set forth in the Offer to Purchase dated February 26, 2024 (the "Statement").

The Offer was oversubscribed, with approximately $49.2 million aggregate principal amount of Notes validly tendered prior to 5:00 p.m., EDT, on March 11, 2024. The aggregate purchase consideration paid by the Company pursuant to the Offer was $2.0 million (approximately, due to rounding), resulting in a proration of the Notes validly tendered. Notes were accepted for purchase and cancellation only in principal amounts equal to minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. Notes that were accepted and prorated pursuant to the Offer were rounded up or down to the nearest $1,000. Holders who tendered less than all of their Notes must not hold Notes in less than the minimum authorized denomination of $2,000 principal amount as a result of the Offer.

Settlement of the Offer was completed by the Company today. Holders will receive payment for the accepted Notes as soon as practicable, in accordance with the terms of the Statement. Upon completion of the Offer, the Company has $114.2 million of Notes outstanding.

Computershare Investor Services Inc. served as the tender agent for the Offer.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.

All figures are in Canadian dollars unless otherwise stated.

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.

The forward-looking statements and information are based on certain key expectations and assumptions made by Obsidian Energy. 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: the risk of a downgrade in the Company's credit ratings and the potential impact on the Company's access to capital markets and other sources of liquidity; fluctuations in currency and interest rates; and changes in or interpretation of laws or regulations. 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

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/201578

FAQ

What was the purpose of Obsidian Energy 's offer?

The purpose of the offer was to purchase $2.0 million of the Company's outstanding 11.95 percent Senior Unsecured Notes due July 27, 2027.

How much was oversubscribed in Obsidian Energy 's offer?

Approximately $49.2 million aggregate principal amount of Notes were oversubscribed.

What was the aggregate purchase consideration paid by Obsidian Energy ?

The Company paid $2.0 million (approximately) as the aggregate purchase consideration for the Notes.

How much are the Notes outstanding after the completion of the offer?

After the offer completion, Obsidian Energy has $114.2 million of Notes outstanding.

Who served as the tender agent for the offer?

Computershare Investor Services Inc. served as the tender agent for the Offer.