Cathedral Energy Services Announces Closing of Flowback and Production Testing Division Sale and Amendments to Credit Facility

/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/

CALGARY, Jan. 17, 2017 /CNW/ - Cathedral Energy Services Ltd. (TSX: CET) ("Cathedral" or the "Company") is pleased to announce that the previously announced sale of its flowback and production testing assets to Ideal Completions Group LLC ("Ideal") was completed on January 16, 2017. 

The net proceeds of the sale, estimated to be $17.2 million, will initially be used to reduce the amount owing under the Company's credit facility along with supplementing working capital and capital investment required to support Cathedral's growing directional drilling business.  Post-closing, Cathedral's bank debt is estimated to be approximately $11.3 million.

Cathedral also announces it has negotiated certain amendments to its credit facility ("Amended Facility") with The Bank of Nova Scotia ("BNS") and Export Development Canada ("EDC").   Under the Amended Facility, Cathedral's total credit facility availability is $23 million. The lenders have also agreed to extend the maturity date of Cathedral's credit facility to December 2018. 

The financial covenants associated with the Amended Facility are as follows:

Quarter ending:

Maximum Funded Debt to Bank
EBITDA Ratio (Note 1)

Minimum Debt Service Ratio (Note 1)

 

December 31, 2016 (Note 2)

Waived

Waived

March 31, 2017 (Note 3)

3.50

2.00

June 30, 2017

3.50

2.50

September 30, 2017

3.50

1.75

December 31, 2017

3.25

3.00

March 31, 2018 to December 31, 2018

3.00

3.00

Notes:

1.

Funded Debt to Bank EBITDA Ratio and Debt Service Ratio are defined in accordance with the Amended Facility agreement. 

2.

Requirement for minimum Bank EBITDA for the quarter ended December 31, 2016 of $2.5 million.

3.

Minimum liquidity availability requirement of $2 million for the period ending June 30, 2017.

4.

Minimum Working Capital Ratio not less than 1.25 to 1.00.

 

Over the past 2 years, Cathedral has taken action to aggressively reduce expenses while preserving the key employee base required to ramp up our business as activity levels improve.  During that same time period, Cathedral has worked proactively with its lending partners to accommodate their requirements and preserve upside value in our business.   Since the end of 2014, Cathedral has reduced bank debt by approximately $44.8 million (80%) and has remained cash flow positive except for the traditional slow activity level second quarter.  To assist with securing additional liquidity, in August 2016, the Company arranged for EDC to join its lending syndicate and EDC continues to be supportive of Cathedral's strategy.  The Company entered into a strategic alternatives process in September 2016 with a view to improving its balance sheet and provide funds to support growth opportunities in its directional drilling business. This has been accomplished through the sale of Cathedral's production testing division to Ideal.  

Cathedral management is very pleased with both our financial and operational accomplishments since the beginning of the industry downturn and believe we are now well positioned to secure the growth opportunities available to the Company with industry activity levels improving.

Further details on Cathedral's credit facility are outlined in the Company's financial disclosure located on SEDAR under Cathedral's profile at www.sedar.com.

FORWARD-LOOKING INFORMATION
This press release contains certain statements or disclosures relating to Cathedral that are based on the expectations of Cathedral as well as assumptions made by and information currently available to Cathedral which may constitute forward-looking information under applicable securities laws. In particular, statements related to net proceeds of the sale, estimated to be $17.2 million and funds will initially be used to reduce the amount owing under the Company's credit facility along with supplementing working capital and capital investment may contain forward-looking information. Many factors could cause the performance or achievement by Cathedral to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking information, including without limitation, the risk that the Disposition is delayed or is not completed for any reason, and the risk that the net proceeds of the Disposition are less than anticipated. Cathedral's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website (www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. Cathedral disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Cathedral Energy Services Ltd. (the "Company" or "Cathedral"), based in Calgary, Alberta is incorporated under the Business Corporations Act (Alberta) and operates in the U.S. under Cathedral Energy Services Inc.  The Company is publicly traded on the Toronto Stock Exchange under the symbol "CET".  Cathedral, is a trusted partner to North American energy companies requiring high performance directional drilling services. We work in partnership with our customers to tailor our equipment and expertise to meet their specific geographical and technical needs.  Our experience, technologies and responsive personnel enable our customers to achieve higher efficiencies and lower project costs.  For more information, visit www.cathedralenergyservices.com.

SOURCE Cathedral Energy Services Ltd.

For further information: Requests for further information should be directed to: P. Scott MacFarlane, President and Chief Executive Officer or Michael F. Hill, Chief Financial Officer: Cathedral Energy Services Ltd., 6030 3 Street S.E., Calgary, Alberta T2H 1K2, Telephone: 403.265.2560, Fax: 403.262.4682 www.cathedralenergyservices.com

RELATED LINKS
http://www.cathedralenergyservices.com

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