International Petroleum pays down $100 million of acquisition debt

By Devika Patel

Knoxville, Tenn., Aug. 7 – International Petroleum Corp. has repaid $100 million of debt it took on in January for an acquisition using “record-high” cash flow generated in the first half of the year.

“[We’ve had] a record-high cash flow, and that’s allowed us to pay down our debt position,” chief executive officer Mike Nicholson said on the company’s second quarter ended June 30 earnings conference call on Tuesday.

“On the back of that strong cash flow, we’ve been able to significantly reduce the acquisition financing that we took on back on the 5th of January to conclude the Suffield acquisition and we’ve paid down $100 million of that debt so the net debt from the beginning of the year has come down from $355 million and now stands at $255 million.

“[We had] really strong cash flow generation of over $150 million, which has allowed us to pay our debt levels down by $100 million,” Nicholson said.

In January, the company completed a transformational acquisition of the stable, low-decline producing Suffield and Alderson oil and gas assets in Alberta.

The purchase consideration was approximately C$449 million.

International Petroleum paid the costs through an acquisition financing, increasing the company’s existing reserve-based lending facility to $200 million and securing new acquisition credit facilities of C$310 million.

“We closed the Suffield assets acquisition in Canada on the 5th of January this year and we had net debt outstanding on that very day of $355 million,” chief financial officer Christophe Nerguararian said on the call.

“We’ve managed to reduce that net debt by $100 million and bring it down to $255 million.

“You can see the very positive seasonal effect we’re going through now by deleveraging the balance sheet.

“We deleveraged by $100 million in the first half.

“It doesn’t take much effort to be able to project a net debt to EBITDA of below 1x for the company by the end of this year,”

The company repaid the most expensive debt from the acquisition first.

“We obviously started by paying the most expensive layer of capital we took on as part of the acquisition done earlier this year, the second lien in Canada, so we had already repaid C$45 million out of the C$60 million we took on initially,” Nerguararian said.

“After the end of Q2, we repaid the last C$15 million, so the second lien is totally cancelled now,” Nerguararian said.

The oil and gas exploration and production company is based in Vancouver, B.C.

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