Rime is a
Mr.
Provides Cathedral with industry leading proprietary MWD products: Cathedral estimates that approximately 40% of the active drilling rigs in the onshoreU.S. are currently operating with either Rime's complete Slick-HDTM Pulser orAgilis TM Driver on a stand-alone basis.- Strong Adjusted EBITDAS margins and minimal capital requirements: Based on consistent historical results, low requirement for capital investment, and current outlook, Rime is expected to generate strong margins and consistent levels of Adjusted EBITDAS.
- Significant expected synergies through integration with Cathedral's
U.S. operations: Based on Altitude Energy Partner's MWD rental expenses in 2022, Cathedral estimates potential annual synergies of up toCAD$34 million can be realized by reducing Cathedral's reliance on renting third-party MWD products through a potential incremental investment of up toCAD$14 million in Rime MWD equipment. - Attractive transaction structure: To fund the purchase of Rime, Cathedral has obtained a new
USD$21 million term loan from its lending syndicate while maintaining conservative leverage ratios, and has issued the EP Notes with an exchange price of CAD$1.10 per Common Share, representing an approximately 60% premium to the closing price of the Common Shares on the TSX onJuly 10, 2023 . - Accretive transaction metrics: On an annualized basis, including expected synergies and cost of synergies, Cathedral estimates that the total investment in Rime should pay for itself in two years or less.
Pursuant to the terms of the definitive agreements between Cathedral and Rime, the Transaction closed on
- USD
$21,000,000 in cash; and USD$20,000,000 in EP Notes with an exchange price of CAD$1.10 per Common Share.
The EP Notes are subject to the following key terms:
- Cathedral shall pay interest on a quarterly basis to holders of EP Notes at a rate of 5% per annum;
- On
July 11, 2026 (the "Expiry Date"), if not previously exchanged for Common Shares, the EP Notes expire and the holders will be entitled to a cash repayment amount equal to the principal amount outstanding of the EP Notes; - Any time prior to the Expiry Date, if the 20-day volume weighted average trading price of Cathedral shares equals or exceeds CAD
$1.10 per Common Share, Cathedral may cause the exchange of the EP Notes for up to 24,570,000 Common Shares; - Cathedral and the holders of the EP Notes may agree to an earlier exchange of the EP Notes into Common Shares; and
- Holders of the EP Notes and the underlying Common Shares, once exchanged, will be subject to restrictions on resale in the following aggregate amounts and until the following dates: 33.0% on a date that is 12 months following the Closing Date; 33.0% on a date that is 24 months following the Closing Date; and 34.0% on a date that is 36 months following the Closing Date.
Select pro forma financial information is summarized below in Canadian dollar terms:
Pre-acquisition | Post-acquisition | |
Common Shares Outstanding | 243.2 million | 243.2 million |
Market Capitalization(1) | ||
Net Debt(2) | ||
Enterprise Value |
(1) Based on Cathedrals closing share price on
(2) Estimated pre/post-closing - refer to Non-GAAP measures section in this news release.
In concert with the Transaction, Cathedral has signed an amended credit agreement with
This news release does not constitute an offer to sell or a solicitation of an offer to sell any of securities in
Cathedral uses certain performance measures as described below in this news release that are not defined under IFRS or Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures do not have a standardized meaning and may differ from that of other organizations, and accordingly, may not be comparable. Management believes these measures provide supplemental financial information that is useful in the evaluation of Cathedral's operations. They are commonly used by other oilfield service companies. Investors should be cautioned, however, that these measures should not be construed as alternatives to IFRS measures as an indicator of Cathedral's performance.
"Adjusted EBITDAS" is calculated as net income before finance costs, unrealized foreign exchange on intercompany balances, income tax expense, depreciation, amortization, non-recurring costs (including acquisition and restructuring costs), write-down of inventory and share-based compensation; and is considered an indicator of the Company's ability to generate funds flow from operations prior to consideration of how activities are financed, how the results are taxed and non-cash expenses. Further information regarding how Cathedral calculates and uses Adjusted EBITDAS is contained in Cathedral's Q1 2023 Management Discussion & Analysis under the heading "Non-GAAP Measurements" and is available on SEDAR under Cathedral's profile at www.sedar.com.
"Enterprise Value" is calculated as Market Capitalization plus Net Debt. Market Capitalization as shown is based on 243,200,173 Common Shares outstanding as of
""Net debt" is calculated as loan and borrowings plus lease liabilities and EP Notes less cash as of the date of this news release.
This news release contains statements and information that may constitute "forward-looking information" within the meaning of applicable securities legislation, including statements identified by the use of words such as "will", "expects", "positions", "believe", "potential" and similar words, including negatives thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking information in this news release includes, but is not limited to, statements regarding: the expectation that the Rime acquisition will help to further differentiate our product offering in the market; the expectation that Rime becomes stronger with the resources of Cathedral; the expectation that the addition of Rime's proprietary MWD products completes Cathedral's
Such forward-looking information is based on various assumptions that may prove to be incorrect, including, but not limited to, assumptions with respect to: the benefits from the Transaction; the integration of the Rime business into Cathedral's business; assumptions regarding usage of Rime's technologies in North American land drilling markets; conditions in the oil and gas markets and debt and equity markets generally; the ability of the Company to successfully implement its strategic plans and initiatives and whether such strategic plans and initiatives will yield the expected benefits. Although the Company believes that such assumptions are reasonable, the Company can give no assurance that such forward-looking statements will prove to be correct or that any of the events anticipated by such forward-looking statements will occur, or if any of them do so, what benefits the Company will derive therefrom.
Actual results could differ materially due to a number of factors and risks including, but not limited to: the risk that Cathedral will not be able to integrate the Rime business as anticipated or at all; the risk that the Rime business will not yield operational or financial benefits as anticipated or at all; the risk that demand for Cathedral's services will not be as anticipated; conditions in the oil and gas and financial markets in
Additional information regarding risks and uncertainties of the Company's business are contained under the heading "Risk Factors" in the Company's annual information form for the financial year ended
This news release also contains financial outlook information ("FOFI") about prospective results of operations, which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this news release was made as of the date of this news release to provide information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for any other purpose. Cathedral disclaims any intention or obligation to update or revise any FOFI contained in this news release, whether as a result of new information, future events or otherwise, except as required by applicable law.
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