Canadian Overseas Petroleum Ltd (LON:COPL) said a US$65mln senior credit facility has been approved by the lender, described as ‘US based global investment firm’.
The company, in a statement, highlighted that it is “significant positive step” towards closing the company’s transformative acquisition of Atomic Oil and Gas, an onshore US producer.
The approval secures a four-year facility with an initial borrowing base of US$45mln, plus an additional US$20mln to provide funds for future developments.
COPL describes the financing terms as “market competitive” and said that the facility is now subject to the execution of final definitive loan documentation.
In January, COPL announced the signing of a term sheet for the facility and, as noted at that time, that the company has been working with the lender to complete due diligence, including a review of the development and capital investment plans for 2021 and 2022.
Draw down of the facility will allow COPL to complete its US$54mln acquisition of Atomic, which comprises a US$41mln cash component.
"Approval of the credit facility by the lender's investment committee is a key milestone to completing the Atomic acquisition,” said Ryan Gaffney, COPL's chief financial officer.
“The quality of the assets we are acquiring has allowed the company to attract the debt necessary to complete and we are working with the lender to complete loan documentation in the coming week."
Arthur Millholland, COPL chief executive, meanwhile, added: “This loan will facilitate the completion of the Atomic acquisition which will be materially value enhancing to COPL, providing an immediate and growing revenue stream from day one.
“Crude oil prices have increased by 50% since we entered into the transaction thus enhancing the overall value of the proposition.
“Working with our new colleagues we plan to accelerate the production profile from the Atomic assets. This represents a step change in the strategic growth opportunities open to COPL and we look to the future with renewed confidence."
The Atomic acquisition brings producing assets in the US state of Wyoming, the Barron Flats Shannon Unit (57.7% owned by Atomic) and Cole Creek Unit (66.7% owned by Atomic).
Barron Flats produces around 1,400 barrels per day (bpd), up from 200 bpd in 2017, and is forecast to reach a plateau rate of 5,000 bpd gross by 2022.
The Cole Creek asset, meanwhile, is forecast to have a 3,500 bpd plateau by 2026.
Significantly, the fields are at the front end of what’s expected to be a 40+ year operating life.