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Laricina Energy Ltd. Update on Debt Covenants and Strategic Alternatives Process
Calgary, Alberta
January 2, 2015
Laricina Energy Ltd. (“Laricina” or the “Company”) announces that it has missed its bitumen
production covenant for the fiscal quarter ending December 31, 2014 under the terms of the trust
indenture (the “Indenture”) relating to the $150 million in 11.5% senior secured notes (the
“Notes”) issued in the first quarter of 2014. Missing this production covenant is an event of default
for which there is no cure period under the Indenture. As a result, the Notes are required to be
reclassified as a current liability at December 31, 2014 which causes the Company to be in
default of a related working capital covenant under the Indenture.
The Notes were issued to CPPIB Credit Investments Inc., a wholly-owned subsidiary of CPP
Investment Board (collectively “CPPIB”) pursuant to the Indenture dated March 20, 2014, due
March 20, 2018. The Notes are fully secured against the assets of the Company.
Laricina reported on November 18, 2014 an updated reserves and resource assessment and
economic evaluation of its assets at Saleski (Grosmont Formation) and at Germain (Grand
Rapids Formation) as of September 30, 2014 by independent qualified reserves evaluator CU
Petroleum Consultants Ltd. (“GLJ”), prepared using GLJ’s October 1, 2014 price forecast.
Laricina’s working interest proved plus probable reserves assigned to these assets was 0.5 billion
barrels of bitumen and the before tax 10% present value of these reserves was $0.2 billion.
Laricina’s working interest contingent resources (best estimate) assigned to these assets was 2.4
billion barrels of bitumen and the before tax 10% present value of these resources was $6.2
billion. The updated economic evaluation did not include Laricina’s working interest contingent
resources (best estimate) assigned to its non-core assets estimated at 1.5 billion barrels of
bitumen by GLJ at December 31, 2013. An updated reserves and resource assessment and
economic evaluation of all the Company’s properties for year end 2014 is currently underway.
Laricina’s Germain and Saleski assets have a resource life of more than 25 years (at estimated
future production levels) and generate value based on long-term crude oil prices which may be
materially higher than near-term crude oil prices, based on the current crude oil futures curves
and industry/analyst forecasts.
The Company estimates it had cash and cash equivalents of approximately $178 million as at
December 31, 2014.
Under the terms of the Indenture, Laricina covenanted to achieve average daily bitumen
production from the Saleski pilot (the “Saleski Pilot”) and the Germain commercial demonstration
project (the “Germain CDP”) for the fourth quarter of 2014 of 1,255 barrels per day. Preliminary
average daily production for the fourth quarter of 2014 is estimated to be approximately 18
percent below this target. The nature of the production shortfall is a result of the character of both
the Germain CDP and Saleski Pilot being at a demonstration or pilot phase for the Grand Rapids
and Grosmont formations, respectively, with high production variability as a result.
Today steady operations continue at the Germain CDP with increasing production and declining
steam to oil ratios (“SOR”), with an average instantaneous SOR for the four producing well-pairs
of approximately 3.2. At the Saleski Pilot the 3D well is in its fourth production cycle and the C
zone wells are in a steam injection phase.
Under International Financial Reporting Standards the amount outstanding under the Notes and
the related payment-in-kind interest notes, both of which were previously treated as non-current
liabilities, now must be reclassified to current liabilities as at December 31, 2014 as a result of the
production covenant breach.
Laricina is in discussions with CPPIB on a potential remedy to the defaults under the Indenture.
The Company cautions that there are no assurances that an agreement with CPPIB will be
achieved and the failure to reach an agreement may result in the inability for the Company to
operate as a going concern.
As announced in Laricina’s third quarter report on October 31, 2014, financial advisors have been
engaged to assist the Company in examining and pursuing a full range of financial and strategic
alternatives. The strategic alternatives process continues; however there is no assurance that this
ongoing process will result in a successful transaction. The Company continues to implement
cost controls at its operations in this challenging external environment.
About Laricina Energy Ltd.
Laricina is a non-public, Calgary based, responsible energy company that will contribute supply to
the growing demand for crude oil through in situ oil sands development.
Laricina’s goal is to create value by developing Canada’s oil sands using innovative in situ
technologies. The Company has a diverse portfolio of oil sands assets at varied stages of
development, and experienced people with the requisite technical expertise. Our current focus is
on the Company’s two core producing projects Saleski and Germain. Lañcina’s asset base,
holds 0.5 billion barrels of probable reserves, 3.9 billion barrels of contingent resources (best
estimate) and 0.3 billion barrels of prospective resources (best estimate) as determined by
Laricina’s independent reservoir engineers as at September 30, 2014 for Germain Grand Rapids
and Saleski Grosmont, and as at December 31, 2013 for all other properties. These assets
include oil sands resources in the familiar McMurray Formation, and the developing Grand
Rapids, and Grosmont and Winterburn carbonate plays, all of which offer significant production
potential.
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This information release contains certain “foiward-Iooking statements” within the meaning of such
statements under applicable securities law including but not limited to final regulatory approval
from the Alberta Energy Regulator and Alberta Environment. Forward-looking statements are
frequently characterized by words such as “plan”, “expect”, “estimate”, “intend”, “believe”,
“anticipate” and other similar words, or statements that certain events or conditions “may” or “will”
occur. Forward-looking statements are based on Laricina’s experience and current beliefs as well
as assumptions made by, and information currently available to, Laricina, and are subject to a
variety of risks and uncertainties including, but not limited to, those associated with resource
definition, unanticipated costs and expenses, regulatory approvals, fluctuating oil and gas prices,
and the ability to access sufficient capital to finance future acquisitions and development
Laricina’s resources at Saleski and Burnt Lakes are contained in the Gresmont Formation, and a
portion of Germain’s resources are contained in the Winterbum Formation, each a carbonate
reservoir. Some of the Company’s contingent resources in the carbonates that are analogous to
the Saleski pilot are based on established technologies that have been demonstrated to be
commercially viable specifically for the subject reservoirs, and some are based on technology
under development that require further development and piloting to confirm the commercial
viability of applying these technologies to carbonate reservoirs. Resource volumes based on
technology under development have a higher risk than volumes based on established technology.
Although the Company believes that the expectations represented by such forward-looking
statements are reasonable, there can be no assurance that such expectations will prove to be
correct Readers are cautioned that the assumptions and factors discussed in this information
release are not exhaustive and readers are not to place undue reliance on forward-looking
statements. Laricina disclaims any intention or obligation to update or revise any forward-looking
statements as a result of new information, future events or otherwise, subsequent to the date of
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this message, except as required under applicable securities legislation. The forward-looking
statements are expressly qualified by these cautionaiy statements.
For further information please visit www.laricinaenerQy.com or contact:
Glen Schmidt
President and Chief Executive Officer
403.718.8800
or
Maria Van Gelder
Vice President Corporate Development
403.718.8806
Laricina Energy Ltd.
East Tower, 5th Ave Place
800, 425 lstStreetSW
Calgary, AB. T2P 3L8
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