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Rubellite Energy Inc. and Perpetual Energy Inc. Jointly Announce A Strategic Recombination to Unlock Shareholder Value Through Increased Scale, Improved Access to Capital, Enhanced Optionality and Material Synergies

Press Release

Calgary, Alberta – September 17, 2024 – Rubellite Energy Inc. (TSX:RBY) (“Rubellite”) and Perpetual Energy Inc. (TSX:PMT) (“Perpetual”) are pleased to jointly announce that they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) whereby Rubellite and Perpetual will recombine in an all-share transaction (the “Transaction”) to create a stronger company that will be managed by the existing executive team and will operate as Rubellite Energy Corp. The Transaction, which will be completed by way of a plan of arrangement, will have significant benefits for both Rubellite and Perpetual shareholders and all other stakeholders.

“The Transaction will provide shareholders of both Rubellite and Perpetual with valuable synergies, both quantitative and qualitative” said Sue Riddell Rose, President and CEO of both Rubellite and Perpetual. “Shareholders will benefit from owning a larger, financially stronger company with increased free funds flow, enhanced liquidity and a well-defined organic growth profile. The recombined company will continue to execute on the business plan focused on exploration, development and consolidation in the Clearwater and Mannville Stack heavy oil plays where multi-lateral horizontal drilling technology is being applied to unlock significant resource while generating attractive returns for shareholders while the non-operated natural gas asset in the Deep Basin at Edson provides diversification of funds flow and optionality to enhance the execution of the business plan.”

Pursuant to the Transaction, holders of Rubellite common shares (“Rubellite Shares”) will receive one (1) common share of the recombined company (“New Shares”) for each Rubellite Share held, holders of Perpetual common shares (“Perpetual Shares”) will receive one (1) New Share for every five (5) Perpetual Shares held, and Perpetual’s outstanding senior notes ($26.2 million in face value) will be converted into 11.6 million New Shares based on the five-day volume weighted average price (“VWAP”) for the Rubellite Shares prior to the announcement of $2.25 per share. Upon completion of the Transaction, the recombined company will have an estimated 93.0 million shares outstanding and holders of Rubellite Shares will own 72.7%, holders of Perpetual Shares will own 14.8%, and holders of Perpetual senior notes will own 12.5% of the recombined company.

Rubellite’s syndicate of four banks have confirmed that the credit facility for the recombined company will have a borrowing limit of $140 million which, in combination with Rubellite’s outstanding $20 million five year term loan (the “Rubellite Term Loan”), will provide enhanced liquidity.

HIGHLIGHTS OF THE RECOMBINED COMPANY

The recombined company is forecast to realize material administrative, operating and financial synergies in the order of $40 to $50 million over the next four years. With increased size and scale, greater financial liquidity, and enhanced flexibility to the recombined enterprise with operations carried on by its subsidiaries, the recombined company will be well positioned to execute on the development of its high quality drilling inventory with significant optionality to efficiently realize the value of the combined assets through its growth-focused business plan.

Highlights of the recombined company (estimated at closing) include:

  • Large scale exposure to operated heavy oil assets in the Clearwater and Mannville Stack plays
    • Over 7,000 boe/d (100% oil) of conventional heavy oil production
    • Access to over 580 net sections of prospective lands
    • Multiple exploration prospects captured with material upside location inventory potential if successful
    • Significant heavy oil resource captured beyond primary recovery in core development assets representing future enhanced recovery potential
  • Strategic exposure to high quality natural gas assets in the Deep Basin
    • Approximately 4,000 boe/d (~90% natural gas) of conventional natural gas and liquids production
    • Predictable base production profile, attractive half cycle economics, operated by JV partner Tourmaline Oil Corp.

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