Shares of Cerus Energy Corp. (TSXV: CEA) surged on the announcement as the deal is considered a significant milestone for the Company
SmallCapPower | August 8, 2017: Cerus Energy Corp. (TSXV: CEA) announced recently that it has inked an agreement with Vital Energy Inc. for providing syndicated financing for Vital’s Pennant project. Cerus’ wholly-owned subsidiary, Lomac Canada Ltd will provide the syndicated financing for the Phase I developments of the Pennant, Saskatchewan Development Finance Platform (DFP) and will be funded through a combination of secure debt, credit and cash from arm’s length and non-arm’s length funders. The deal is a significant milestone for Cerus Energy as the Vital Pennant is the inaugural project of the DFP platform and will be the standard by which the effectiveness and success of the platform’s performance will be gauged. Post the news, shares of Cerus Energy surged 38% to close at $0.26 on August 2, 2017.
As per the terms, the Lomac Canada Syndicate will be awarded 160% of the 180% penalty as well as the retention of collected revenue until penalty payout while Cerus Energy retains a 20% margin on the project and the 5% GORR (Gross Overriding Royalty) for its transaction facilitation and oversight. Based on the booked locations, the Vital Pennant project has $112 million committed to development, excluding pipelines or centralized processing facilities. The total penalty amount will exceed $201.6 million, which translates into a retained margin of $40.32 million for Cerus Energy at 20%.
Mackenzie Loree, President and CEO Cerus Energy Corporation, said “We are very close to achieving the goals that have been set out for Cerus Energy and the initiation of our DFP. The creation of a platform that can fund development operations on an ongoing basis, without requiring dilution or issuance of debt in Cerus Energy, is key to our continued success.”
Unlike traditional oil & gas exploration companies, Cerus Energy Group employs a hybrid investment model that is used in conjunction with its operating subsidiaries for the rapid engagement and development of strategic capital projects and operations. Cerus Energy is yet to generate revenues and holds total assets of $85.3 million as of March 31, 2017.
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