Boosting Liquidity with $140M Notes to Advance Energy Expansion Plans

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Tenaz Energy Corp. (TNZ:TSX) has successfully closed its US$140 million private placement offering of senior unsecured notes due in 2029. The notes, which carry an annual interest rate of 12% and are non-callable for 2.5 years, were priced at par and placed with institutional investors. This offering replaces the previously announced US$90 million delayed-draw term loan facilitated by the National Bank of Canada for the acquisition of NAM Offshore BV (NOBV). The additional liquidity generated by this offering enables Tenaz Energy to continue its merger-and-acquisition strategy and fund the completion of the NOBV acquisition, which is expected to close in mid-2025.

The offering was executed with National Bank Financial Inc. as the sole book-runner and placement agent, acting as a financial adviser to Tenaz for the NOBV acquisition. Tenaz Energy's leadership highlighted the strategic significance of this funding in furthering its international M&A ambitions. It also solidified its foothold in the Dutch North Sea gas market. The transaction underscores Tenaz Energy's commitment to the long-term strategy of acquiring under-optimized international assets to drive free cash flow and shareholder returns.

Oil and Gas Regulatory Shifts and Market Focus

According to Politico, on November 7, the oil and gas industry anticipated increased production support from the incoming administration. The incoming administration has promised to streamline approvals for liquefied natural gas (LNG) export permits and reduce regulatory constraints. However, experts expressed concerns about global oil demand peaking and the risks associated with tariffs on imports and exports. Ryan Bernstein, a consultant for McGuireWoods, noted that efforts would focus on a "drill, baby, drill" approach while cutting support for renewable energy funding. Despite these promises, ExxonMobil CEO Darren Woods stated, "I don't think the level of production in the U.S. is being constrained by external restrictions," suggesting that policy changes might not significantly impact output.

The Hill, on November 12, reported that the oil and gas sector remained optimistic about regulatory rollbacks and expanded drilling opportunities under the new administration. Amanda Eversole of the American Petroleum Institute emphasized the industry's interest in lifting "flawed" tailpipe mandates and environmental restrictions, stating, "We want to make sure that we stop this flawed approach." The report also highlighted expectations for increased LNG exports, with Citizens for Responsible Energy Solutions predicting that such measures would remove barriers to production and exports.

Finally, Reuters, on November 12, highlighted that the American Petroleum Institute had called for broad policy changes. These included the repeal of methane fees and support for increased LNG exports. API CEO Mike Sommers stated, "Voters across the country. . .  sent a clear message to policymakers that they want an all-of-the-above approach to energy." The group also advocated for the rescission of policies limiting oil and gas development on federal lands and for lifting restrictions that impact drilling permits under existing environmental laws.

Catalysts Driving Tenaz

According to Tenaz Energy's November 2024 corporate presentation, the senior notes offering provides critical financial flexibility to accelerate the company's international expansion. The funds will support the closing of the transformational NOBV acquisition, which will establish Tenaz as a significant operator in the Dutch North Sea. The NOBV assets are expected to contribute 11,000 barrels of oil equivalent per day in 2024, significantly increasing Tenaz Energy's production capacity.

The company also emphasized its plans to optimize acquired assets through operational improvements and development drilling. The integration of NOBV's assets aligns with Tenaz's strategy of targeting high-margin, low-decline production with potential for further growth through exploration and workover projects. Management highlighted that the acquisition will leverage Tenaz's demonstrated expertise in operational improvement and strategic asset consolidation, creating a robust platform for sustainable growth and cash flow generation.

Company Analysis of Tenaz Energy

According to Hydra Capital Partners, on November 11, Tenaz Energy's recent US$140 million senior unsecured notes issuance was seen as a major vote of confidence in the company's management and business strategy. Malcolm Shaw noted that the market reaction, including a 15% rise in share price following the announcement, reflected growing investor recognition of Tenaz's M&A-driven business model.

He highlighted the company's ability to identify and acquire non-core assets from major energy firms. He noted the company's "distinct competitive advantage" in executing its "acquire-optimize-exploit" strategy. Shaw described the tight share structure and management alignment as significant factors contributing to shareholder upside. He pointed to Tenaz's approach, which positions it well to capitalize on future opportunities.

Shaw went on to remark that the debt issuance "virtually guarantees" the potential for future accretive acquisitions, calling it a "massive vote of confidence for longs who believe in the TNZ team and their business plan." He concluded by praising the company's leadership and its vision for creating shareholder value through disciplined growth, likening the investment to a "punch in [his] punchcard," referencing Warren Buffett's analogy of rare and valuable opportunities.

Ownership and Share Structure

According to MarketScreener, management and insiders held approximately 10.57% of Tenaz Energy Corp., with institutional investors owning about 2.93%, and the remaining 86.50% held by other investors.

The company's market capitalization was approximately CA$282.75 million. Over the past 52 weeks, the share price ranged between CA$3.40 and CA$10.52 per share.