Lightstream Resources Ltd is the latest oil and gas producer to seek creditor protection by Geoffrey Morgan, Financial Post, September 20, 2016, Calgary Herald
CALGARY – Lightstream Resources Ltd. is seeking protection from its creditors after the oil and gas producer failed to reach a deal to restructure close to $1.2-billion worth of debt.
Lightstream shares, which fell from a high of $9.03 each before oil prices started their slide to 10 cents a piece, were halted Tuesday ahead of a de-listing review after the company announced late Monday it would seek Companies’ Creditors Arrangement Act (CCAA) protection.
Lightstream needed to settle litigation with a group of its unsecured creditors by last Friday in order to facilitate a debt restructuring deal with the company’s secured creditors. The deal, announced in July, would have reduced Lightstream’s overall debt by about $1.2 billion and cut the company’s cash interest payments by $112 million per year.
However, the company is now headed for a sale under the CCAA process. It’s the latest in a series of heavily indebted Calgary-based oil and gas company to discontinue and seek protection since oil prices began their long slide more than two years ago.
The West Texas Intermediate benchmark oil price rose slightly Tuesday to US$43.68 per barrel, which is less than what higher-cost oil and gas producers need to be profitable.
Lightstream boosted bonuses as share price plummeted to pennies
by Rebecca Penty, Bloomberg News, September 13, 2016, Calgary Herald
Lightstream Resources Ltd. increased 2015 cash bonuses for three executives months before the Calgary-based oil producer proposed a debt-for-equity swap to stay afloat as its stock was down to pennies.
Chief financial officer Peter Scott and chief operating officer Rene LaPrade saw their non-equity compensation for last year, paid in December, increase about 11 per cent from 2014 to $200,000 each, according to a filing from the company.
The bonus for Peter Hawkes, vice-president for geosciences, surged 32 per cent to $119,763. Share-based awards and total compensation fell for each of the executives as the stock plunged almost 80 per cent to end the year at 26 cents.
The disclosure was part of a report in advance of a Sept. 30 annual meeting, at which shareholders and bondholders will vote on a restructuring proposed by Lightstream that would cut debt by $904 million. Unsecured bondholders including Mudrick Capital Management LP have said they’re opposed to the terms of the deal, which would hand control of the company to top-ranked bondholders.
The plan is the latest attempt by Lightstream to stay in business as it struggles to make debt payments with a crude market rout exceeding two years.
The producer entered the downturn highly leveraged and has avoided parting with its prized Bakken assets in Saskatchewan, even after starting a sales process in December 2014. If the restructuring doesn’t proceed, Lightstream plans to secure a buyer for all or part of the company under the court-supervised Companies’ Creditors Arrangement Act process, a way to reorganize rather than liquidate through bankruptcy.
Craig Lothian, a former director of Lightstream who was on the compensation committee in 2015, said he resigned from the board on Dec. 21 during a meeting to approve the bonuses because he was opposed to them and voted against them.
Lothian, in an email, said he stepped down verbally from the board during the meeting and followed up with an email immediately after. Lightstream, in a news release that day, indicated Lothian had resigned but didn’t give a reason.
“I opposed granting any bonuses given that the Lightstream share price had dropped over 80 per cent, year over year,” Lothian said.
Chief executive John Wright, 56, saw his cash award fall 6.9 per cent to $186,200. The CEO’s total compensation fell 24 per cent to about $1.6 million. The bonus for Mary Bulmer, vice-president of corporate services, fell 11 per cent to $133,867.
In 2015, the bonuses were paid in cash, while prior to that, bonuses were typically paid in cash as well as deferred common shares, according to the filing. Under the restructuring plan, all outstanding deferred common shares will be adjusted in value and be immediately and fully vested and exercisable.
Bonuses for 2015 reflect the executives’ achievement of some, but not all, corporate performance measures, the filing said. The figures reflect a decision by the board’s compensation committee to “substantially reduce the available bonus pool,” recognizing poor share price performance, the erosion of investment value for shareholders and the low oil price operating environment, according to the document.
Lightstream’s executive compensation levels were determined in relation to 12 Canadian domestic producers in its peer group, according to the company’s management information circular. Among those peers, all lowered bonuses for each executive in 2015 except in two cases. Crew Energy Inc. didn’t award cash bonuses at all for last year, while Torc Oil & Gas Ltd. lowered bonuses and paid out most in shares, rather than cash.
In opposing the restructuring, Mudrick has argued Lightstream is favouring Apollo Global Management LLC and Blackstone Group LP’s GSO Capital, which became the highest-ranked bondholders in a previous debt swap last year.
Lightstream’s leverage continued to weigh on the company even after last year’s exchange, which pushed unsecured note-holders down the capital structure for claims in the event of a restructuring. Those investors and shareholders are now being asked to take a haircut under a recapitalization the company proposed in July, which would give the highest-ranked bondholders the majority of the shares in a new Lightstream in exchange for their second-lien notes.
If the plan proceeds, unsecured note-holders would together be left with a 2.75 per cent stake and warrants equal to five per cent of the shares of Lightstream. Existing shareholders would get 2.25 per cent plus warrants equal to a 7.75 per cent stake. Secured note-holders would get a 95 per cent equity stake.
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