DBRS Comments on Athabasca Oil’s New Term Loan Financing

DBRS notes that Athabasca Oil Corporation (Athabasca or the Company; rated B with a Stable trend) has announced the issuance of a USD 225 million senior secured term loan, an additional USD 50 million senior secured term loan, which Athabasca may draw at its option any time up to May 7, 2016, and a new $125 million revolving credit facility to replace its existing $350 million credit facility. DBRS views this action as modestly credit negative, particularly at a time when cash flow generation remains constrained because of limited production. Any additional significant increase in leverage going forward and/or material delays relating to the completion of Hangingstone Project 1 could result in a negative rating action. However, DBRS recognizes that the additional debt secured by Athabasca improves the Company’s liquidity profile.

Athabasca’s liquidity profile is also expected to strengthen significantly once proceeds from the Dover Put/Call option (the Dover Option; estimated net proceeds of $1.23 billion) are received. Athabasca exercised the Dover Option on April 17, 2014, and is expected to receive the proceeds by the end of Q2 2014. The current B rating, first assigned in November 2012, assumes the successful completion of the Dover Option.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Oil and Gas Industry (July 2013), which can be found on our website under Methodologies.