Connacher Oil and Gas Limited Announces Entering Into of CCAA Acquisition and Plan Sponsorship Agreement and Purchase and Sale Agreement with East River Oil and Gas Ltd.

CALGARY, Aug. 2, 2018 /CNW/ - Connacher Oil and Gas Limited ("Connacher" or the "Company") is pleased to announce that East River Oil and Gas Ltd. (the "Plan Sponsor") has been selected as the "Successful Bidder" pursuant to the sale and investment solicitation process (the "SISP") conducted in Connacher's proceeding under the Companies' Creditors Arrangement Act (the "CCAA").

On May 17, 2016, Connacher previously announced that it had obtained creditor protection under the CCAA pursuant to an initial order granted by the Court of Queen's Bench of Alberta (the "Court"). On March 28, 2018, Connacher obtained a further Court order approving the SISP, which process was conducted within the CCAA proceedings by Houlihan Lokey Capital, Inc., Connacher's financial advisor, under the supervision of Ernst & Young Inc., the Court-appointed CCAA monitor (the "Monitor").

Connacher and the Plan Sponsor have entered into a CCAA Acquisition and Plan Sponsorship Agreement dated August 2, 2018 (the "Plan Sponsorship Agreement") pursuant to which the Plan Sponsor will acquire the Company upon and subject to the terms and conditions set out in the Plan Sponsorship Agreement under a plan of compromise and arrangement (the "CCAA Plan") under the CCAA.  The Plan Sponsorship Agreement also provides that in the event that, among other things, the CCAA Plan is not approved by Connacher's creditors or the Court, or if Connacher and the Plan Sponsor jointly determine that it is no longer viable to implement the transactions contemplated by the CCAA Plan, the Plan Sponsor will acquire substantially all of the assets of Connacher pursuant to a Purchase and Sale Agreement dated August 2, 2018 ("Sale Agreement").

The CCAA Plan provides that, subject to the terms and conditions set out therein, the Plan Sponsor will acquire a 100% equity interest in the Company via a concurrent reorganization pursuant to the Canada Business Corporations Act for cash consideration in excess of the credit bid transaction previously announced by the Company on March 28, 2018.  The CCAA Plan provides for payments and distributions to Connacher's creditors with proven claims from the cash consideration plus Connacher's existing cash as determined and adjusted pursuant to the CCAA Plan. 

As the cash consideration being paid by the Plan Sponsor under the CCAA Plan, along with Connacher's adjusted existing cash, is insufficient to pay all of the claims of creditors of Connacher in full, no value will accrue to Connacher's shareholders as a result of the implementation of the CCAA Plan and the outstanding shares and options of the Company will be cancelled for no consideration and without any vote of the existing shareholders. 

In the event the CCAA Plan does not proceed, subject to the terms and conditions set out in the Sale Agreement, the Plan Sponsor will acquire substantially all of the assets of Connacher for cash consideration that would be less than the cash consideration that is payable under the Plan Sponsorship Agreement.  As the cash consideration being paid by the Plan Sponsor under the Sale Agreement, along with Connacher's adjusted existing cash, is insufficient to fully pay the claims of Connacher's first lien lenders and creditors with claims in priority to the security of the first lien lenders, in the event that the transaction under the Sale Agreement occurs Connacher does not expect any value will accrue to any of Connacher's other creditors and Connacher's business and assets will be transferred to the Plan Sponsor free and clear of all claims.

The completion of the transactions contemplated by the Plan Sponsorship Agreement, the CCAA Plan and the Sale Agreement are subject to a number of conditions, including the receipt of all required regulatory approvals, the approval of the Court and, in the case of the CCAA Plan, receipt of requisite creditor approval.  The Plan Sponsorship Agreement, CCAA Plan and Sale Agreement also contain other terms and conditions customary for transactions of this nature.

The Plan Sponsorship Agreement, the CCAA Plan and the Sale Agreement are supported by a majority of Connacher's first lien lenders who are party to a Support Agreement entered into on March 19, 2018 and which was approved by the Court on March 28, 2018.

On August 22, 2018, Connacher intends to seek orders from the Court (i) approving the Plan Sponsorship Agreement, (ii) approving a supplemental claims process in order to facilitate closing of the transactions described herein; and (iii) accepting the CCAA Plan for filing purposes, authorizing Connacher to call meetings of its creditors to consider and vote on the CCAA Plan, and if approved at the creditors' meetings, scheduling a Court hearing to seek a sanction order in respect of the CCAA Plan; and (iv) approving the Sale Agreement and vesting the purchased assets in the Plan Sponsor free and clear of claims in the event the transaction contemplated by the Sale Agreement occurs.  If such Court approvals are obtained, Connacher will provide further information at that time.

The above description is a summary only and is subject to the terms of the definitive Plan Sponsorship Agreement and CCAA Plan and the Sale Agreement. The material terms of the Plan Sponsorship Agreement and CCAA Plan and the Sale Agreement, including the consideration thereunder, are contained in the Plan Sponsorship Agreement and CCAA Plan and the Sale Agreement, copies of which are available on the Monitor's website at www.ey.com/ca/connacheroilandgas and will be filed under the Company's profile on www.sedar.com.

About Connacher

Connacher is a Calgary-based in situ oil sands developer, producer, and marketer of bitumen. The Company holds a 100 per cent interest in approximately 465 million barrels of proved and probable bitumen reserves and operates two steam-assisted gravity drainage facilities located on the Company's Great Divide oil sands leases near Fort McMurray, Alberta.

Forward Looking Statements

This press release contains forward looking information including, but not limited to, the status of the CCAA proceeding the SISP, the Company's ability to manage its liquidity position and deploy the capital required to maintain existing reserve and production bases, fund maintenance capital, fund working capital requirements and meet contractual and other commitments; expectations regarding future commodity prices, foreign exchange rates, diluent blend ratio, transportation costs, and production and operating costs in future periods; expectations regarding sales and production, bitumen netback, general and administrative expenses, and capital expenditures in future periods; the Company's reserves; and general operational and financial performance in future periods.

Forward looking information is based on management's expectations regarding the Company's future financial position; the Company's future growth, results of operations and production, future commodity prices and foreign exchange rates; future capital and other expenditures (including the amount, nature, and sources of funding thereof), plans for and results of drilling activity; environmental matters; business prospects and opportunities; and future economic conditions. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: that the Company may not obtain required approvals and successfully consummate the CCAA Plan, the Plan Sponsorship Agreement or the Sale Agreement; obtain court orders and approvals with respect to applications filed from time to time, including maintaining the CCAA stay of proceedings past September 30, 2018; that the Company may not prevent third parties from obtaining court orders or approvals that are contrary to the Company's interests, risks relating to the level of indebtedness of the Company, the implementation and impact of any reorganization or restructuring on the assets, business and financial affairs of the Company, future co-operation of the creditors of the Company, the Company's ability to generate sufficient cash flow from operations or to obtain adequate financing to fund capital expenditures and working capital needs and to maintain the Company's ongoing obligations during the CCAA process and thereafter, the ability to maintain relationships with suppliers, customers, employees, shareholders and other third parties in light of the Company's current liquidity situation and the CCAA proceeding, as well as the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to continue operations and increase production to levels previously achieved.

Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. Any forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. Any forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.

SOURCE Connacher Oil and Gas Limited

Merle Johnson, Chief Executive Officer, Jeff Beeston, Chief Financial Officer; Connacher Oil and Gas Limited, Phone: [phone], Fax: [phone], Suite 1040, 640 - 5th Avenue SW, Calgary, Alberta T2P 3G4, [email protected], www.connacheroil.com