Bonterra Energy Announces Private Offering of $135 Million Senior Secured Second Lien Notes

Bonterra Energy Corp. (TSX: BNE), a leading Canadian oil and gas company, has announced a private offering of $135 million senior secured second lien notes. The offering is part of the company's ongoing efforts to strengthen its balance sheet and improve its financial flexibility.

The notes, which will mature on December 31, 2025, will bear an interest rate of 8.00% per annum, payable semi-annually on June 30 and December 30 of each year. The principal amount of the notes will be repaid in full on the maturity date. The notes are subject to certain covenants, including financial covenants and affirmative covenants, which are typical for such debt instruments. The notes are secured by a second lien on the assets of the company and its subsidiaries.



The offering is rated BB+ by S&P Global Ratings and Ba1 by Moody's Investors Service. The proceeds from the offering will be used primarily to repay debt, aligning with Bonterra's goal of reducing its net debt and improving its debt-to-equity ratio. The company has been focusing on debt repayment and capital efficiency, and this offering is a strategic move to further strengthen its financial position.

Bonterra Energy's debt-to-equity ratio has been decreasing over time, indicating improved financial health. As of June 30, 2024, the company's debt-to-equity ratio was 29.0%, lower than its historical average. The company's focus on debt repayment and capital efficiency has contributed to this improvement.



The company's production performance has also been strong, with average production in 2023 of 14,204 BOE per day, a 6% increase from 2022. In the fourth quarter of 2023, production averaged 15,128 BOE per day, a 16% increase from the same period in 2022. This improvement reflects the company's efficient capital deployment, high-quality asset base, and the outperformance of new wells brought onstream in 2023.

Bonterra Energy's dividend policy aims to return up to 25% of free funds flow to shareholders. The triggers for implementing a return of capital model include a target net debt of $135 to $145 million, a debt/EBITDA ratio of less than 1.0x, and prioritizing balance sheet management if low commodity prices persist. The combination of base and special dividends will be used to distribute capital to shareholders.



In conclusion, Bonterra Energy's private offering of $135 million senior secured second lien notes is a strategic move that supports the company's long-term financial strategy and debt management objectives. By raising capital through this offering, the company can further strengthen its balance sheet, improve its capital efficiency, and maintain its financial flexibility, all while pursuing sustainable growth and value creation for shareholders.