Paramount Resources Ltd. Announces Closing of Asset Sale, Declaration of Special Distribution, Amended $500 Million Credit Facility and Operational and Development Update
Canada NewsWire
CALGARY, AB, Jan. 31, 2025
CALGARY, AB, Jan. 31, 2025 /CNW/ - Paramount Resources Ltd. ("Paramount" or the "Company") (TSX: POU) is pleased to announce:
-- the closing of its previously announced asset disposition to Ovintiv Inc. (the "Transaction"); -- the declaration of a special cash distribution of $15.00 per class A common share ("Common Share"); -- the entering into of an amended $500 million four-year financial covenant-based revolving bank credit facility; -- estimated fourth quarter sales volumes and annual 2024 capital expenditures; -- additional details concerning its 2025 development plans; -- recent liquids hedging activity; and -- a revised monthly dividend of $0.05 per Common Share beginning in February.
CLOSING OF TRANSACTION
Paramount has closed the previously announced disposition of its Karr, Wapiti and Zama properties to a wholly-owned subsidiary of Ovintiv Inc. ("Ovintiv"). The Company received cash proceeds of approximately $3.3 billion after adjustments. In addition, the Company received Ovintiv's 50% operated interest at the Two Island Lake field and a 50% operated interest at the Kiwigana field, each in the Horn River Basin.
DECLARATION OF SPECIAL DISTRIBUTION
Paramount's Board of Directors has declared a special cash distribution of $15.00 per Common Share (the "Special Distribution") out of the proceeds of the Transaction. The Special Distribution will be comprised of a return of capital to shareholders in the amount of $12.00 per Common Share and a special dividend in the amount of $3.00 per Common Share that will be designated as an "eligible dividend" for Canadian income tax purposes. The Special Distribution will be payable on February 14, 2025 to shareholders of record on February 10, 2025.
The Toronto Stock Exchange has advised Paramount that it will implement "due bill" trading with respect to the Special Distribution. Due bills notionally represent an entitlement that will be due to a shareholder from an issuer in connection with the completion of a material corporate event. In the case of the Special Distribution, each due bill will represent the right to receive the $15.00 per Common Share cash payment comprising the Special Distribution.
A due bill will be deemed to attach to each Common Share traded in the time period between the opening of trading on the record date for the Special Distribution and the end of trading on the payment date for the Special Distribution (the "Due Bill Trading Period"). During the Due Bill Trading Period, any seller of Common Shares will also be deemed to sell and assign the right to the Special Distribution to the purchaser of the Common Shares. As a result, the Common Shares will maintain their full value through to the end of trading on the payment date of the Special Distribution. The Common Shares will not commence trading on an ex-distribution basis (i.e., without the entitlement to receive the Special Distribution) until the first trading day following the payment date of the Special Distribution. The due bills will be redeemed on the ex-distribution date and payment will be made to the holders of the due bills thereafter.
CREDIT FACILITY AND CAPITAL RESOURCES
In conjunction with the closing of the Transaction, Paramount has amended its financial covenant-based senior secured revolving bank credit facility (the "Credit Facility") with the unanimous support of its bank syndicate. The capacity of the Credit Facility has been adjusted to $500 million from $1.0 billion and the maturity date has been extended to January 31, 2029. In addition, Export Development Canada has extended its guarantee of the Company's separate $90 million unsecured demand revolving letter of credit facility to June 30, 2026.
Following closing of the Transaction and pro forma the payment of the Special Distribution, Paramount will have over $800 million in cash, investments in securities valued at approximately $550 million (approximately 80% of which is attributable to publicly traded securities) and no drawings under the Credit Facility. This provides the Company with ample liquidity to advance the development of its deep inventory of opportunities.
OPERATIONAL UPDATE
Based on preliminary field estimates, Paramount's fourth quarter 2024 sales volumes averaged approximately 102,500 Boe/d (48% liquids), in line with prior guidance. Grande Prairie Region sales volumes associated with the Transaction accounted for approximately 71,000 Boe/d (50% liquids) of this total. The Company estimates annual capital expenditures for 2024 to be between $840 million and $850 million, also in line with prior guidance.(1)
2025 DEVELOPMENT PLANS
As previously announced, the Company is budgeting capital expenditures in 2025 of between $760 million and $790 million.
Approximately $560 million of planned 2025 capital expenditures at the midpoint are allocated to the Willesden Green Duvernay development, where Paramount plans to:
-- complete the first phase of the Company's new Alhambra natural gas
processing plant (the "Alhambra Plant"), with start-up expected in the
fourth quarter of 2025;
(_________________________________________) (1) See
the "Product Type Information" in the Advisories section
for a breakdown of sales volumes in this press release
by the specific product types of shale gas, conventional
natural gas, NGLs, light and medium crude oil, tight
oil and heavy crude oil. See also "Oil and Gas Measures
and Definitions" in the Advisories section.
-- drill 22 (22.0 net) Duvernay wells;
-- bring onstream 23 (23.0 net) Duvernay wells, with seven wells feeding the
existing Leafland facility and 16 wells to be brought onstream through
the Alhambra Plant; and
-- accelerate the second phase of the Alhambra Plant, with start-up expected
to occur in the fourth quarter of 2026.
In the Kaybob Region, expenditures will be predominantly focused on development activity at Kaybob North Duvernay, where the Company plans to drill eight (8.0 net) Duvernay wells and bring onstream nine (9.0 net) Duvernay wells. Duvernay production growth is expected to offset declines from legacy conventional production in the region.
Capital has also been allocated to ongoing appraisal activities at Paramount's early-stage assets, including Sinclair.
The breakdown of planned 2025 capital expenditures by category at the midpoint is as follows:
-- Drilling, completion, equipping and tie-ins -- $525 million; -- Facilities and gathering -- $235 million; and -- Corporate and other -- $15 million.
As previously announced, 2025 average sales volumes are expected to be between 37,500 Boe/d and 42,500 Boe/d (48% liquids), with a 2025 year-end exit rate in excess of 45,000 Boe/d. Based on preliminary field estimates, January sales volumes averaged approximately 103,500 Boe/d (48% liquids). Sales volumes are anticipated to average between 28,000 Boe/d and 32,000 Boe/d in February to September, with new well activity essentially offsetting declines. With the start-up of the Alhambra Plant, fourth quarter sales volumes are anticipated to average between 40,000 Boe/d and 45,000 Boe/d.
RECENT HEDGING ACTIVITY
In January 2025, Paramount hedged an additional 5,000 Bbl/d of liquids for calendar 2025 at a WTI price of C$105.00/Bbl. The Company now has a total of 10,000 Bbl/d of liquids hedged for the remainder of 2025 at an average WTI price of C$105.00/Bbl.
With Paramount's natural gas market diversification contracts currently in place, over 70% of the Company's post-Transaction 2025 natural gas sales volumes will benefit from exposure to markets outside of AECO.
REVISED MONTHLY DIVIDEND
Consistent with its previously announced intention to revise its monthly dividend following closing of the Transaction, Paramount's Board of Directors has declared a cash dividend of $0.05 per Common Share payable on February 28, 2025 to shareholders of record on February 20, 2025. The dividend will be designated as an "eligible dividend" for Canadian income tax purposes.
ABOUT PARAMOUNT
Paramount is an independent, publicly traded, liquids-rich natural gas focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas, including longer-term strategic exploration and pre-development plays, and holds a portfolio of investments in other entities. The Company's principal properties are located in Alberta and British Columbia. Paramount's class A common shares are listed on the Toronto Stock Exchange under the symbol "POU".
ADVISORIES
Forward-looking Information
Certain statements in this press release constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "will", "expect", "plan", "schedule", "intend", "propose", or similar words suggesting future outcomes or an outlook. Forward-looking information in this press release includes, but is not limited to:
-- estimated fourth quarter 2024 average sales volumes and 2024 annual
capital expenditures;
-- planned capital expenditures in 2025 and the allocation thereof;
-- planned and potential exploration, development and production activities,
including the expected timing of completion of phase one and phase two of
the Alhambra Plant;
-- the expectation that Duvernay production growth will offset declines from
legacy conventional production in the Kaybob Region;
-- estimated January 2025 average sales volumes;
-- expected average sales volumes for 2025 and certain periods therein; and
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