Source Energy Services Ltd. (together with its affiliates, “Source” or the “Company”) is pleased to announce the completion of its recapitalization transaction (the “Recapitalization Transaction”) pursuant to a plan of arrangement dated November 25, 2020 (the “Plan of Arrangement”) under the Canada Business Corporations Act. The Plan of Arrangement was approved by the Court of Queen’s Bench of Alberta on November 27, 2020.

“We are very pleased to have successfully completed the Recapitalization Transaction with strong support from our key stakeholders,” said Brad Thomson, Chief Executive Officer of Source. “We have significantly improved our capital structure and addressed our liquidity challenges arising from the historic downturn in the Western Canadian oil and gas industry. Completion of the Recapitalization Transaction will provide enhanced financial strength and flexibility and better position Source to pursue our business and strategic objectives. We thank all of our customers, suppliers, employees, shareholders and other stakeholders for their continued commitment to Source.”

As a result of the completion of the Recapitalization Transaction, the Company has extended the maturity under its senior secured credit agreement to 2023 and issued new senior secured first lien notes (the “New Secured Notes”) that mature in 2025. The Recapitalization Transaction achieves a $32.7 million reduction of principal obligations and reduces Source’s near term cash interest expense. Under the Plan of Arrangement, the Company’s 10.5% senior secured first lien notes due 2021 were exchanged for New Secured Notes in the aggregate principal amount of $142,238,201 and new common shares of Source constituting 62.5% of the common shares outstanding on a fully diluted basis immediately following completion of the Recapitalization Transaction. The Company has the option, for all quarterly interest payments on the New Secured Notes due on or before February 15, 2022, to pay interest in kind through the issuance of additional New Secured Notes rather than in cash.

Concurrently with the completion of the Recapitalization Transaction, Source and its lending syndicate have amended and restated the Company’s senior secured credit agreement to enable Source to access incremental liquidity under an additional revolving facility in an initial principal amount of up to $20 million.

Under the Recapitalization Transaction, the common shares of Source outstanding immediately prior to the completion of the Recapitalization Transaction were consolidated on a twelve for one basis and represent 37.5% of the common shares outstanding on a fully diluted basis immediately following completion of the Recapitalization Transaction.