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Press release from CNW Group

Connacher Oil and Gas Limited Launches Second Lien Secured Note Offering

Tuesday, May 17, 2011

Connacher Oil and Gas Limited Launches Second Lien Secured Note Offering13:12 EDT Tuesday, May 17, 2011/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/CALGARY, May 17 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX ("Connacher")) announced today an offering (the "Offering"), by way of private placement, of approximately US$900 million principal amount of Second Lien Senior Secured Notes ("New Notes").  It is anticipated that the New Notes will be issued in a combination of Canadian dollar notes due in 2018 and US dollar notes due in 2019.  Completion of the Offering remains subject to market and other conditions and will follow a limited marketing process and a determination of the pricing of the New Notes.The net proceeds of the Offering, after deduction of the expenses related thereto, are expected to be used to purchase the company's presently outstanding First Lien and Second Lien Senior Secured Notes ("Old Notes") tendered pursuant to cash tender offers ("Tenders") initiated on May 10, 2011.  It is currently anticipated that completion of the initial settlement of the Tenders would take place concurrently with the proposed settlement date of the Offering which is May 31, 2011.In conjunction with these transactions, Connacher also announced that it intends to amend its existing revolving credit facility, increasing its size to $100 million and extending its maturity to three years.  The amended facility is anticipated to be syndicated to a number of financial institutions and completed concurrently with the closing of the Offering.These transactions are intended to strengthen Connacher's balance sheet, improve its overall financial strength and further enhance the company's liquidity.Connacher Oil and Gas Limited is a Calgary-based company whose primary assets are two steam assisted gravity drainage ("SAGD") bitumen production projects, Pod One and Algar, which are part of the company's  Great Divide project in Alberta's oil sands area.  Recent bitumen production has been approximately 14,000 bbl/d from these projects. Further expansion of Connacher's bitumen production is contemplated from continued ramp up at Algar, as well as optimization programs and innovative recovery methods at both projects.  Connacher also holds extensive undeveloped bitumen reserves and resources and owns conventional crude oil and natural gas production, reserves and undeveloped acreage in Alberta.  A wholly-owned subsidiary operates a 9,500 bbl/d heavy crude oil refinery in Great Falls, Montana, U. S. A.This press release is not an offer of the New Notes in the United States.  The New Notes have not and will not be registered under the U. S. Securities Act of 1933, as amended (the "US Securities Act").  The New Notes may not be offered or sold, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the US Securities Act, or to persons outside the United States in compliance with Regulation S and applicable Canadian exemptions.  Any public offering of securities made in the United States would be made by means of a prospectus that would be obtainable from Connacher and that would contain detailed information about Connacher, its management and financial statements.This press release contains certain "forward-looking information" within the meaning of applicable securities law including statements regarding the proposed terms of the Offering and the amendment of Connacher's revolving credit facility (the "Amendment"), the use of proceeds of the Offering, the proposed closing date of the Offering and the Amendment, the proposed initial settlement date of Connacher's tender offers and the anticipated impact of Connacher's refinancing activities on its financial position and liquidity.  Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the information is provided, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. These factors include the inherent risks involved in the exploration and development of oil sands properties, the possibility that Connacher may not be able to obtain the necessary approvals to proceed with the Offering, the Amendment or the tender offers for the Old Notes, difficulties or delays in start-up operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors including unforeseen delays. For a description of the risks and uncertainties facing Connacher and its business and affairs, readers should refer to Connacher's Annual Information Form for the year ended December 31, 2010. Connacher undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward looking statements.For further information: Richard A. Gusella Chairman and Chief Executive Officer OR Peter D. Sametz President and Chief Operating Officer OR Grant D. Ukrainetz Vice President, Corporate Development Phone:  (403) 538-6201         Fax:  (403) 538-6225 inquiries@connacheroil.com        Website:  connacheroil.com