Criterium Energy Ltd (TSX-V: CEQ): Transactions repriced on more attractive terms
• Criterium has renegotiated the terms of the Mont d’Or (MOPL) acquisition.• Criterium will now assume only ~US$25.5 mm of debt rather than ~US$37 mm previously. A US$4.8 mm payment to the lenders and the conversion of US$4.9 mm of debt into equity (US$2.5 mm on completion of the acquisition plus US$2.4 mm in 2025) reduce further the existing debt to ~US$15.8 mm at closing. This is materially lower than the US$19.7 mm of debt under the previous terms.
• Tourmalet (a subsidiary of Provident Capital Partners, the seller of MOPL) will, as before, be issued US$1 mm in Criterium shares at closing.
• Criterium is raising new capital of C$15.3 mm, comprising C$10 mm of convertible debt plus C$5.3 mm of new equity. The C$10 mm convertible plus C$2.5 mm of the new equity is being issued to a strategic investor.
• The C$10 mm convertible carries an interest rate of 14.75% per annum and has a duration of 5 years. Criterium can buy back the convertible after two years and holds a right of first refusal on any conversion. The convertible holder will also be issued 62.5 mm warrants at an exercise price C$0.14/sh. The convertible debt can be converted into equity at C$0.16/sh.
• The new equity is being issued at a price of C$0.11/sh including one warrant with an exercise price of C$0.14/sh for every new share.
• As we incorporate the new terms of the transactions and assume the worst case of a full conversion of the convertible debt into equity, we have changed our target price to C$0.45/sh near our new ReNAV.
Net debt
The net debt on closing is ~US$16 mm. On our base case of 1.8 mboe/d production in 2024 and 2.6 mboe/d production in 2025, excluding any step out drilling success or contribution from gas monetization and assuming US$94/bbl for Brent flat (=current Brent price), we forecast the company would to have net cash greater than its market cap on closing by early 2026. The monetization of the 2C gas resources and some step-out drilling success could take production to 6.5 mboe/d in 2025.
Valuation build-up
We estimate the value of the company based on its development programme at ~C$0.25/sh. Drilling the 2C contingent oil resources would add ~C$0.10/sh unrisked while the sanction of the gas aggregation project would add a further ~C$0.04/sh to ~C$0.39/sh. Drilling success at the Cerah prospect would add a further C$0.10 per share. The unrisked value of Bulu stands at C$0.11 to C$0.13/sh.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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