UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM40-F
(Check One)
☐ | Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934 |
or
☒ | Annual report pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2018
Commission file number1-32895
OBSIDIAN ENERGY LTD.
(Exact name of registrant as specified in its charter)
Alberta, Canada | 1311 | Not applicable | ||
(Province or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number (if applicable)) | (I.R.S. Employer Identification Number (if Applicable)) |
Suite 200, 207 – 9th Avenue SW, Calgary, Alberta, Canada T2P 1K3
(403)777-2500
(Address and Telephone Number of Registrant’s Principal Executive Offices)
DL Services Inc., Columbia Center, 701 Fifth Avenue, Suite 6100, Seattle, Washington 98104-7043
(206)903-5448
(Name, Address (Including Zip Code) and Telephone Number
(Including Area Code) of Agent For Service in the United States)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered | |
Common Shares | New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the information filed with this Form:
☒ Annual Information Form | ☒ Audited Annual Financial Statements |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 507,316,031
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule12b-2 of the Exchange Act.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
FORM40-F
Principal Documents
The following documents, filed as Exhibits 99.1, 99.2, 99.3 and 99.4 to this Annual Report on Form40-F, are hereby incorporated by reference into this Annual Report on Form40-F:
(a) | Annual Information Form for the fiscal year ended December 31, 2018; |
(b) | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2018; |
(c) | Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board; and |
(d) | Supplemental Oil and Gas information. |
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ADDITIONAL DISCLOSURE
Certifications and Disclosure Regarding Controls and Procedures.
(a) | Certifications. See Exhibits 99.5, 99.6, 99.7 and 99.8 to this Annual Report on Form40-F. |
(b) | Disclosure Controls and Procedures. As of the end of Obsidian Energy Ltd.’s (“Obsidian Energy”) fiscal year ended December 31, 2018, an evaluation of the effectiveness of Obsidian Energy’s “disclosure controls and procedures” (as such term is defined in Rules13a-15(e) and15d-15(e) under the Exchange Act) was carried out by the management of Obsidian Energy, with the participation of the President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) of Obsidian Energy. Based upon that evaluation, the CEO and CFO have concluded that as of the end of that fiscal year, Obsidian Energy’s disclosure controls and procedures were effective to ensure that information required to be disclosed by Obsidian Energy in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (the “Commission”) rules and forms and (ii) accumulated and communicated to the management of Obsidian Energy, including the CEO and CFO, to allow timely decisions regarding required disclosure. |
It should be noted that while the CEO and CFO believe that Obsidian Energy’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that Obsidian Energy’s disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
(c) | Management’s Annual Report on Internal Control Over Financial Reporting. |
Management is responsible for establishing and maintaining adequate internal control over Obsidian Energy’s financial reporting. Obsidian Energy’s internal control system was designed to provide reasonable assurance that all transactions are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that Obsidian Energy’s assets are safeguarded.
Management has assessed the effectiveness of Obsidian Energy’s internal control over financial reporting as at December 31, 2018. In making its assessment, management used the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework in Internal Control – Integrated Framework (2013) to evaluate the effectiveness of Obsidian Energy’s internal control over financial reporting. Based on this assessment, management has concluded that Obsidian Energy’s internal control over financial reporting was effective as of December 31, 2018.
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The effectiveness of Obsidian Energy’s internal control over financial reporting as at December 31, 2018 has been audited by Ernst & Young LLP, as stated in their Report of Independent Registered Public Accounting Firm on Obsidian Energy’s internal control over financial reporting that accompanies Obsidian Energy’s Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, filed as Exhibit 99.3 to this Annual Report on Form40-F.
(d) | Attestation Report of the Registered Public Accounting Firm. The required disclosure is included in the Report of Independent Registered Public Accounting Firm on Obsidian Energy’s internal control over financial reporting that accompanies Obsidian Energy’s Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, filed as Exhibit 99.3 to this Annual Report on Form40-F. |
(e) | Changes in Internal Control Over Financial Reporting (“ICFR”). The required disclosure is included under the heading “Changes in Internal Control Over Financial Reporting” in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2018, filed as Exhibit 99.2 to this Annual Report on Form40-F. |
Notices Pursuant to Regulation BTR.
None.
Audit Committee Financial Expert.
Obsidian Energy’s board of directors has determined that Raymond Crossley, a member of Obsidian Energy’s audit committee, qualifies as an “audit committee financial expert” (as such term is defined in Form40-F). Mr. Crossley is “independent” as that term is defined in the rules of the New York Stock Exchange.
Code of Business Conduct.
Obsidian Energy has adopted a Code of Business Conduct and Ethics that applies to all employees, officers and directors of Obsidian Energy. This Code constitutes a “code of ethics” as defined in Form40-F and is referred to in this Annual Report on Form40-F as the “Code of Ethics”.
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The Code of Ethics is available for viewing on Obsidian Energy’s website atwww.obsidianenergy.com, is available in print to any shareholder who requests a copy, and was previously filed as an exhibit to Obsidian Energy’s Annual Report on Form40-F for the year ended December 31, 2015. Requests for copies of the Code of Ethics should be made by contacting: investor relations by phone at (888)770-2633 or bye-mail toinvestor_relations@obsidianenergy.com.
During the year ended December 31, 2018, there have not been any amendments to, or waivers, including implicit waivers, from, any provision of the Code of Ethics.
If any amendment to the Code of Ethics is made, or if any waiver from the provisions thereof is granted, Obsidian Energy may elect to disclose the information about such amendment or waiver required by Form40-F to be disclosed, by posting such disclosure on Obsidian Energy’s website, which may be accessed atwww.obsidianenergy.com.
Principal Accountant Fees and Services.
The required disclosure is included under the heading “External Auditor Service Fees” in Obsidian Energy’s Annual Information Form for the fiscal year ended December 31, 2018, filed as Exhibit 99.1 hereto.
Pre-Approval Policies and Procedures.
(a) | The terms of the engagement of Obsidian Energy’s external auditors to provide audit services, including the budgeted fees for such audit services and the representations and disclaimers relating thereto, must bepre-approved by the entire audit committee. |
With respect to any engagements of Obsidian Energy’s external auditors fornon-audit services, Obsidian Energy must obtain the approval of the audit committee prior to retaining the external auditors to complete such engagement. However, the audit committee may delegate to one or more audit committee members (the “Delegate”) authority topre-approvenon-audit services, subject to the fee restriction below. If such delegation occurs, thepre-approval ofnon-audit services by the Delegate, must be presented to the audit committee at its first scheduled meeting following suchpre-approval and the member(s) comply with such other procedures as may be established by the audit committee from time to time. The fees for suchnon-audit services shall not exceed $50,000, either individually or in the aggregate, for a particular financial year without the approval of the audit committee.
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(b) | Of the fees reported in this Annual Report on Form40-F under the heading “Principal Accountant Fees and Services”, none of the fees billed by Ernst & Young LLP were approved by Obsidian Energy’s audit committee pursuant to thede minimus exception provided by Section (c)(7)(i)(C) of Rule2-01 of RegulationS-X. |
Off-Balance Sheet Arrangements.
Obsidian Energy hasoff-balance-sheet financing arrangements consisting of operating leases. The operating lease payments are summarized below in the Tabular Disclosure of Contractual Obligations.
Tabular Disclosure of Contractual Obligations.
(CDN$ millions) | Payment due by period | |||||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | |||||||||||||||
Transportation | 41 | 12 | 13 | 7 | 9 | |||||||||||||||
Power infrastructure | 9 | 7 | 2 | — | — | |||||||||||||||
Office lease(1) | 201 | 33 | 66 | 66 | 36 | |||||||||||||||
Long-term debt(2)(3) | 419 | 17 | 391 | 8 | 3 | |||||||||||||||
Decommissioning liability(4) | 847 | 12 | 24 | 24 | 787 | |||||||||||||||
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Total | 1,517 | 81 | 496 | 105 | 835 | |||||||||||||||
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(1) | Future office lease commitments will be reduced by sublease recoveries of $86 million. |
(2) | Obsidian Energy’s syndicated credit facility with an initial revolving period ending on May 31, 2019, with an additionalone-year term out period. Obsidian Energy and its predecessors have successfully extended its credit facility on each renewal date since 1992. |
(3) | Interest payments have not been included since future debt levels and rates are not known at this time. |
(4) | These amounts represent the undiscounted future reclamation and abandonment costs that are expected to be incurred over the life of the properties. |
Identification of the Audit Committee.
Obsidian Energy has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the audit committee are: Raymond Crossley, John Brydson, Stephen Loukas and Maureen Cormier Jackson.
Mine Safety Disclosure.
Not applicable.
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Disclosure Pursuant to the Requirements of the New York Stock Exchange.
Director Independence
Obsidian Energy’sboard of directors is responsible for determining whether or not each director is independent. In making these determinations, the board of directors considers all relationships of the directors with Obsidian Energy, including business, family and other relationships. Obsidian Energy’s board of directors also determines whether each member of Obsidian Energy’s audit committee is independent pursuant to Sections 1.4 and 1.5 of Multilateral Instrument52-110 Audit Committees and Rule10A-3 under the Exchange Act.
Obsidian Energy’s board of directors has determined that John Brydson, Raymond Crossley, Michael Faust, William A. Friley, Maureen Cormier Jackson, Edward H. Kernaghan, Stephen Loukas, and Gordon Ritchie are each “independent” as that term is defined in the rules of the New York Stock Exchange, in that they have no material relationship with Obsidian Energy (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). In reaching this determination in respect of Maureen Cormier Jackson, the board of directors considered that although Enerflex Ltd. (“Enerflex”), of which Ms. Cormier Jackson is a director, provided equipment and general repair and maintenance to Obsidian Energy, Ms. Cormier Jackson is not involved with the services provided by Enerflex and the amounts paid by Obsidian Energy to Enerflex are immaterial to both parties. In reaching this determination in respect of Raymond Crossley, the board of directors considered that although Mr. Crossley was, until March 6, 2015, a partner with PricewaterhouseCoopers LLP (“PwC”), which provided certainnon-audit accounting advisory services to Obsidian Energy during 2014 – 2018 and took on the role of internal auditor position in 2017, Mr. Crossley’s appointment to the board of directors only became effective upon his retirement from PwC and he did not personally provide any service or advice to Obsidian Energy. In reaching this determination in respect of William A. Friley, the board of directors considered that although Titan Energy Services Ltd. (“Titan”), of which Mr. Friley is a board member, provided some work directly in 2016 and somesub-contracting services for Shark Tank Ltd., which was initially awarded work from Obsidian Energy in 2015, the amount of the work was immaterial in both scenarios and the decision to subcontract the work to Titan by Shark Tank Ltd. was completed independent of Obsidian Energy. In reaching this determination in respect of Gordon Ritchie, the board of directors considered that although RBC Capital Markets LLC (“RBC”), of which Mr. Ritchie was employed at until March 31, 2016, provides some advisory services to Obsidian Energy, Mr. Ritchie’s appointment to the board of directors was after his retirement from RBC.
Presiding Director at Meetings ofNon-Management Directors
Obsidian Energy schedules regular executive sessions in which Obsidian Energy’s“non-management directors” (as that term is defined in the rules of the New York Stock Exchange) meet without management participation. Gordon Ritchie, the Chairman of the board of directors, serves as the presiding director (the “Presiding Director”) at such sessions.
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Communication withNon-Management Directors
Shareholders may send communications to Obsidian Energy’snon-management directors by writing to Maureen Cormier Jackson, Chair of the Human Resources, Governance and Compensation committee of the board of directors, care of Investor Relations, Obsidian Energy Ltd., 200, 207 – 9th Avenue SW, Calgary, Alberta, T2P 1K3 Canada. Communications will be referred to the Presiding Director for appropriate action. The status of all outstanding concerns addressed to the Presiding Director will be reported to the board of directors as appropriate.
Corporate Governance Guidelines
In accordance with the rules of the New York Stock Exchange, Obsidian Energy has adopted corporate governance guidelines, entitled “Governance Guidelines”, which are available for viewing on Obsidian Energy’s website atwww.obsidianenergy.com and are available in print to any shareholder who requests a copy of them. Requests for copies of the Governance Guidelines should be made by contacting: investor relations by phone (888)770-2633 or bye-mail toinvestor_relations@obsidianenergy.com
Board Committee Mandates
The Mandates of Obsidian Energy’s audit committee, human resources, governance and compensation committee, operations and reserves committee and commercial committee are each available for viewing on Obsidian Energy’s website atwww.obsidianenergy.com, and are available in print to any shareholder who requests them. Requests for copies of these documents should be made by contacting: investor relations by phone (888)770-2633 or bye-mail toinvestor_relations@obsidianenergy.com.
NYSE Statement of Governance Differences
As a Canadian corporation listed on the NYSE, Obsidian Energy is not required to comply with most of the NYSE corporate governance standards, so long as it complies with Canadian corporate governance practices. In order to claim such an exemption, however, Obsidian Energy must disclose the significant difference between its corporate governance practices and those required to be followed by U.S. domestic companies under the NYSE’s corporate governance standards. Obsidian Energy has included a description of such significant differences in corporate governance practices on its website which may be accessed atwww.obsidianenergy.com
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UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
A. Undertaking.
Obsidian Energy undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form40-F; the securities in relation to which the obligation to file an annual report on Form40-F arises; or transactions in said securities.
B. Consent to Service of Process.
Obsidian Energy has previously filed a FormF-X in connection with the class of securities in relation to which the obligation to file this report arises.
Any change to the name or address of the agent for service of process of Obsidian Energy shall be communicated promptly to the Commission by an amendment to the FormF-X referencing the file number of Obsidian Energy.
SIGNATURES
Pursuant to the requirements of the Exchange Act, Obsidian Energy Ltd. certifies that it meets all of the requirements for filing on Form40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 7, 2019.
Obsidian Energy Ltd. | ||
By: | /s/ David L. French | |
Name: | David L. French | |
Title: | President and Chief Executive Officer |
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EXHIBIT INDEX
Exhibit | Description | |
99.1 | Annual Information Form for the fiscal year ended December 31, 2018 | |
99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2018 | |
99.3 | Consolidated Financial Statements for the fiscal year ended December 31, 2018 | |
99.4 | Supplemental Oil and Gas information | |
99.5 | Certification of President & Chief Executive Officer pursuant to Rule13a-14(a) or15d-14 of the Securities Exchange Act of 1934 | |
99.6 | Certification of Chief Financial Officer pursuant to Rule13a-14(a) or15d-14 of the Securities Exchange Act of 1934 | |
99.7 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | |
99.8 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
99.9 | Consent of Ernst & Young LLP | |
99.10 | Consent of Sproule Associates Limited |