PARAMOUNT RESOURCES LTD (TSX:POU) company history: the story so far

History

Paramount Resources, a Calgary oil and gas explorer, borrowed and bought assets to grow, then in 2007 agreed to sell its Surmont oil sands holdings to MEG Energy.

2003-2004: Debt and a major purchase

Paramount Resources is a Western Canada oil and gas explorer and producer based in Calgary. In October 2003 it agreed to sell US$175 million of 7 7/8% senior notes due 2010 to U.S. investors. The filing does not say how the money was to be used.

In July 2004 Paramount closed the purchase of oil and gas assets in the Kaybob area of Alberta and the Fort Liard area (Northwest Territories and northeast British Columbia) from Enerplus Commercial Trust for $189 million, subject to adjustments. The assets produced about 10,000 barrels of oil equivalent a day. Paramount forecast 2004 production of 37,500 barrels a day and year-end net debt of about $430 million after the deal. Some of the assets remained subject to rights of first refusal, which let other parties match a sale.

The record is then quiet until 2006.

2006-2007: Refinancing, new shares and the Surmont sale

In August 2006 Paramount arranged and closed a US$150 million Term Loan B through UBS Securities. It ran six years with no scheduled repayments and was secured by Paramount's shares in North American Oil Sands Corporation. Those shares must be used to prepay the loan if they are sold, and repaying early carried a 2% premium in year one and 1% in year two. Paramount drew the loan in full and used it to repay all of its revolving credit facility debt.

In November 2006 it planned to issue 2,000,000 flow-through shares at $33.75. Flow-through shares pass certain tax deductions to buyers. One million went to underwriters and one million to companies controlled by Chairman and CEO Clayton Riddell. The money was to fund the rest of the 2006 and part of the 2007 exploration and development programs. The Riddell family held about 50% of the shares.

On 1 June 2007 Paramount agreed to sell its 100%-owned Surmont oil sands leases and gas rights to MEG Energy Corp. for $301.7 million: $150 million in cash, half at closing and the rest with interest by June 30, 2008, plus MEG shares deemed worth $151.7 million. It also had five agreements to sell about 860 barrels a day for $30.5 million. Year-to-date potential sale proceeds stood at about $1.015 billion. At that date the sale had not yet closed, and 70,937,175 shares were outstanding at April 30, 2007.

Written from the 6 story beats below (2003 to 1 June 2007), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2007

1 June
Paramount agreed to sell its Surmont-area oil sands leases and natural gas rights to MEG Energy Corp. for $301.7 million: $150 million in cash (half at closing, $75 million with interest by June 30, 2008) and MEG shares deemed worth $151.7 million. It also has five agreements to sell about 860 Boe/d for $30.5 million, bringing year-to-date potential disposition proceeds to about $1.015 billion. This sells the 100% Surmont interest it held and leaves it with an equity stake in MEG.
asset acquisition disposition

2006

16 Nov
Paramount plans to issue 1,000,000 flow-through common shares at $33.75 ($33,750,000) through underwriters, plus another 1,000,000 at the same price to companies controlled by Chairman and CEO Clayton Riddell. Proceeds are to fund the rest of the 2006 and part of the 2007 exploration and development programs. This would add shares for existing holders, and the Riddell family holds about 50% of the shares.
capital raising announcement
29 Aug
Paramount closed the US$150 million Term Loan B facility announced earlier in August 2006, drawing it in full and using the proceeds to repay all of its revolving credit facility debt. It runs six years with no scheduled repayments, is secured by its North American Oil Sands shares, and must be prepaid from any sale of those shares; early repayment carries a 2% premium in year one and 1% in year two.
debt financing
8 Aug
Paramount engaged UBS Securities to arrange, on an uncommitted basis, a Term Loan B facility of up to US$150 million, with a six-year term, to be secured by its shares of North American Oil Sands Corporation. It intends to use the money to reduce its existing revolving credit facility and for general corporate purposes, and expects it around August 25, 2006.
debt financing

2004

2 July
Paramount closed its previously announced purchase of oil and gas assets in the Kaybob area of Alberta and the Fort Liard area (Northwest Territories and northeast British Columbia) for $189 million, subject to adjustments, from Enerplus Commercial Trust. The assets produce about 10,000 BOE/d, and Paramount forecasts 2004 production of 37,500 BOE/d and year-end net debt of about $430 million after the deal. Certain of the assets remain subject to rights of first refusal.
business combination

2003

24 Oct
Paramount agreed to sell US$175 million of 7 7/8% senior notes due 2010 to U.S. investors, under an indenture dated October 27, 2003 with The Bank of Nova Scotia Trust Company of New York as trustee. The filing shown is mainly the indenture and underwriting exhibits; it adds new debt for the company, and the use of proceeds is not stated in the text provided.
debt financing