COPL Files For Creditor Protection: “Little Prospect For A Return To Shareholders”

Canadian Overseas Petroleum Limited (CSE: XOP) has initiated a significant restructuring process, announcing the issuance of an initial order by the Alberta Court of King’s Bench under the Companies’ Creditors Arrangement Act (CCAA).

In connection with the CCAA proceedings, COPL and its subsidiaries have executed a restructuring support agreement with senior lenders to COPL’s subsidiary, COPL America, Inc. These lenders have agreed to support a sale and investment solicitation process (SISP), with plans to serve as a stalking horse bidder to acquire a substantial portion of the COPL Group’s business through a credit bid. The firm intends to seek court approval to launch the SISP on or around March 18, 2024.

Additionally, the company intends to seek recognition of the CCAA proceedings in the United States Bankruptcy Court for the district of Delaware.

As a result of these developments, trading of COPL’s common shares has been suspended on the London Stock Exchange, although a determination from the Canadian Securities Exchange is pending. COPL’s common shares are listed under the symbols “XOP” on the CSE and “COPL” on the London Stock Exchange.

This restructuring effort follows extensive consideration and review of COPL’s financial situation. The company and its subsidiaries have applied for the initial order to facilitate a stay of proceedings, approval of debtor-in-possession financing, and the appointment of KSV Restructuring Inc. as the monitor.

Anavio

Back in January, COPL responded to inquiries from shareholders regarding recent financing activities, particularly those involving Anavio.

The company clarified that the recent financings from Anavio were deemed necessary due to its financial situation and were structured under arm’s length negotiations reflecting the company’s circumstances and market realities. COPL aimed to address liquidity challenges and maintain operational viability through these financial transactions.

The first financing with Anavio, announced on July 22, 2022, involved convertible bonds raising $19.7 million to finance the acquisition of additional interests in Wyoming assets from Cuda Energy LLC. Subsequent issuances of convertible bonds on January 3 and March 27, 2023, raised nearly $15 million.

The firm said these financings were vital for COPL to meet its working capital requirements and secure limited waivers from senior lenders for financial covenants until September 2023.

On September 6, COPL announced a fourth financing with Anavio of $3.5 million, with pricing terms subject to negotiations reflecting the company’s circumstances and market conditions. Following subsequent market fluctuations, COPL successfully renegotiated the financing terms, upsizing it to $4 million and repricing the shares at 2.6p per COPL common share, representing a +30% premium to the closing share price.

Regarding a fifth Anavio financing, announced on December 29, 2023, COPL entered into an equity financing agreement of $2.5 million with Anavio. This funding was said to be crucial for working capital purposes and operational improvements.

The company then emphasized that all financing decisions were made after thorough consideration of alternatives and with the guidance of legal advice. COPL explained that its board explored various options, including winding down operations, but concluded that maintaining operations was essential for maximizing potential value for shareholders.

COPL dismissed claims of preferential treatment towards Anavio, asserting that negotiations were conducted in the best interests of all stakeholders. The board reiterated its commitment to shareholder interests, noting the absence of personal benefits for board members from the financing activities.

During the CCAA proceedings, COPL Group will maintain its day-to-day operations, intending to continue payments to critical suppliers in the ordinary course. The forbearance agreement with the company’s senior lenders has now expired, affecting future value for shareholders.

“The company believes there is little prospect for a return to shareholders or bond holders,” the firm said.

The basis for this application stems from COPL’s financial struggles, including the failure to generate free cash flow, operational challenges, and market conditions affecting its Wyoming oil assets. Despite cost reduction efforts and last-minute forbearance from lenders, COPL’s liquidity remains strained, necessitating urgent measures to address impending insolvency.

“The Applicants are companies to which the CCAA applies. The Applicants have claims against them in excess of $5,000,000 and are insolvent,” the firm said in its filing.

COPL emphasizes the need for CCAA protection to continue as a going concern, maintain employment, and preserve enterprise value while pursuing restructuring efforts. The company aims to secure necessary funding, restructure its operations, and pursue avenues for sale and investment solicitation to mitigate its financial challenges.


Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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