Cequence Energy Announces Proposed Plan of Compromise and Arrangement and Meeting of Creditors

Cequence Energy Ltd. (“Cequence” or “the Company“) announces a recapitalization transaction (the “Restructuring Transaction”), to be implemented as a plan of compromise and arrangement (the “Plan”) under the Companies’ Creditors Arrangement Act (“CCAA”) that will allow Cequence to reduce its debt and interest costs and improve liquidity to fund future operations.

In connection with the Plan, Cequence has entered into a restructuring support agreement (the “Support Agreement”) with certain lenders under the Company’s second lien senior secured $50.0 million term loan facility due October 3, 2023 (the “Term Loan“), as plan sponsors (collectively, the “Plan Sponsors”). Pursuant to the Support Agreement, the Plan Sponsors have, among other things, agreed to convert $17.9 million and the unpaid interest on the Term Loan into unsecured debt, accept shares of Cequence as payment for satisfaction of a certain portion of the principal amount of the Term Loan, modify the interest rate on the remaining outstanding principal amount of the Term Loan and to take other actions to support the Plan.

The implementation of the Plan is conditional upon, among other things, the approval by the required majorities of Secured and Unsecured Creditors (as such terms are defined in the Plan) of Cequence voting at the meeting of those creditors to be called for such purpose. The meeting will be held on September 15, 2020, pursuant to an order of the Court of Queen’s Bench of Alberta, as further described below. If the Plan is approved by the Secured and Unsecured Creditors, the Company will seek an order of the Court sanctioning the Plan under the CCAA following the meeting.

Cequence also announces that it has obtained today an order from the Court of Queen’s Bench of Alberta (the “Court”) that approves the calling and holding of a virtual-only meeting of Secured and Unsecured Creditors (the “Meeting”), which will be held on September 15, 2020 at 9:00 a.m. (Calgary time).  The record date for creditors entitled to vote at the Meeting has been set at 5:00 p.m. (Calgary time) on September 14, 2020.  Cequence also obtained an order from the Court today extending the stay period under the CCAA up to and including September 30, 2020, and a confidentiality order in respect of a limited number of commercially sensitive terms in the Support Agreement.  Copies of these orders are available on the website of Ernst & Young Inc., the court-appointed monitor (the “Monitor” of Cequence), at www.ey.com/ca/cequence.

Additional information with respect to the Plan and the Meeting, including instructions on how to vote at the Meeting, will also be posted on the Monitor’s website.

RESTRUCTURING TRANSACTION

The Plan and the Restructuring Transaction include the following key elements:

• the operations of the Company will continue as normal and without disruption following the implementation of the Plan;
• the lenders under the Term Loan have agreed to disclaim, as a deficiency claim, $17.9 million and the unpaid interest on the Term Loan, and amend the Term Loan agreement by, among other things, modifying the interest rate payable;
• amendment or disclaimer of certain key long term agreements to improve the future financial viability of the organization;
• articles of amendment will be filed to create a new class of common shares, which the lenders under the Term Loan will accept as satisfaction of a portion of their debt;
• the lender of the Company’s debtor-in-possession facility that was made available in connection with the CCAA proceedings under a commitment letter (as amended, the “DIP Facility Commitment Letter”) will enter into an agreement to amend and restate the DIP Facility Commitment Letter to provide Cequence with an operating credit facility following the Plan implementation and the completion of the CCAA proceedings;
• Unsecured Creditors with accepted claims less than or equal to $1,500 (“Convenience Class Creditors”), will be paid in full up to $1,500; and
• all other Unsecured Creditors will receive the first $1,500 of their accepted claims, plus their pro rata share of an Unsecured Creditor fund of $500,000, less amounts paid to Convenience Class Creditors.

All existing common shares, stock options and restricted share units of Cequence (collectively, the “Equity Claims”) will be cancelled and extinguished for no consideration and without any return of capital. Holders of Equity Claims will not be entitled to attend or vote at the Meeting.

After implementation of the Plan is complete, the Plan Sponsors will control all of the issued and outstanding common shares in Cequence.

The above description is a summary only and subject to the terms of the Plan and orders of the Court.

OVERVIEW OF CEQUENCE

Cequence is engaged in the exploration for and the development of oil and natural gas reserves.  The Company’s primary focus is the development of its Simonette asset in the Alberta Deep Basin with other non-core assets in Northeast British Columbia and the Peace River Arch of Alberta.  Further information can be found at www.cequence-energy.com.

The TSX has neither approved nor disapproved the contents of this news release.

For further information, please contact:

Todd Brown                   
Chief Executive Officer 
Phone: (403) 806-4049
tbrown@cequence-energy.com

Allan Mowbray
Vice President, Finance and Chief Financial Officer
Phone: (403) 806-4041
amowbray@cequence-energy.com