Banks slash credit facility of Athabasca Oil

CALGARY

Athabasca Oil Corp.’s bankers have cut the oilsands producer’s credit by more than half, forcing the company to seek federal aid to survive the coronavirus-pandemic induced oil price crash.

After a review, Athabasca’s banking syndicate reduced its credit facility to $42 million, a 65-per-cent cut from $120 million previously, the company said.

“The company continues to pursue opportunities to access credit support offered by the Government of Canada during this uncertain economic environment created by the COVID-19 pandemic,” the company said in a release.

Athabasca is the first company in Alberta’s heavy oil industry to announce its intention to use the funding available by the federal government. Without assistance, analysts say the company faces a challenge to repay the US$450 million in debt due February 2022, given the current outlook for oil prices.

“If current commodity price weakness lingers into 2021, we believe refinancing of the US$450 million senior secured notes due February 2022 will be a challenge,” Raymond James analyst Chris Cox said in a May research note.

In the company’s release, Athabasca said it still has $330 million cash or “near cash” on its balance sheet, but financial analysts have flagged that the company is burning cash following the collapse in oil prices. To date, the federal government has announced a series of liquidity programs for embattled oil sector companies. On May 11, the federal government announced the Large Employer Emergency Financing Facility (LEEFF) for companies seeking $60 million or more in bridge loans.