UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
40-F
(Check One)
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Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
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or
☒
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Annual report pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended December 31, 2017
Commission file number
1-32895
OBSIDIAN ENERGY LTD.
(Exact name of registrant as specified in its charter)
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Alberta, Canada
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1311
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Not applicable
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(Province or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number (if applicable))
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(I.R.S. Employer
Identification Number (if Applicable))
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Suite 200, 207 9
th
Avenue SW, Calgary, Alberta,
Canada T2P 1K3
(403)
777-2500
(Address and Telephone Number of Registrants 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.
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Title of each
class
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Name of each exchange on
which registered
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Common Shares
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New York Stock Exchange
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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:
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☒
Annual Information Form
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☒
Audited Annual Financial Statements
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Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period
covered by the annual report:
504,340,988
Indicate by check mark whether the Registrant by filing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant to Rule
12g3-2(b)
under the Securities Exchange Act of 1934 (the Exchange Act). If Yes is marked,
indicate the file number assigned to the Registrant in connection with such Rule.
Yes ☐ 82-
No ☒
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 is an emerging growth company as
defined in Rule
12b-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. ☐
FORM
40-F
Principal Documents
The following documents, filed as
Exhibits 99.1, 99.2, 99.3 and 99.4 to this Annual Report on Form
40-F,
are hereby incorporated by reference into this Annual Report on Form
40-F:
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(a)
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Annual Information Form for the fiscal year ended December 31, 2017;
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(b)
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Managements Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2017;
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(c)
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Audited Consolidated Financial Statements for the fiscal year ended December 31, 2017, prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board; and
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(d)
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Supplemental Oil and Gas information.
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ADDITIONAL DISCLOSURE
Certifications and Disclosure Regarding Controls and Procedures.
(a)
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Certifications
. See Exhibits 99.5, 99.6, 99.7 and 99.8 to this Annual Report on Form
40-F.
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(b)
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Disclosure Controls and Procedures
. As of the end of Obsidian Energy Ltd.s (Obsidian Energy) fiscal year ended December 31, 2017, an evaluation of the effectiveness of Obsidian
Energys disclosure controls and procedures (as such term is defined in Rules
13a-15(e)
and
15d-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 Energys 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.
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It should be noted that while
the CEO and CFO believe that Obsidian Energys disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that Obsidian Energys 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)
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Managements Annual Report on Internal Control Over Financial Reporting
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Management is responsible for establishing and maintaining adequate internal control over Obsidian Energys financial reporting. Obsidian
Energys 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 Energys assets are safeguarded.
Management has assessed the effectiveness of
Obsidian Energys internal control over financial reporting as at December 31, 2017. 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 Energys internal control over financial reporting. Based on this assessment, management has concluded that Obsidian Energys internal control
over financial reporting was effective as of December 31, 2017.
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The effectiveness of Obsidian Energys internal control over financial reporting as at
December 31, 2017 has been audited by Ernst & Young LLP, as stated in their Report of Independent Registered Public Accounting Firm on Obsidian Energys internal control over financial reporting that accompanies Obsidian
Energys Audited Consolidated Financial Statements for the fiscal year ended December 31, 2017, filed as Exhibit 99.3 to this Annual Report on Form
40-F.
(d)
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Attestation Report of the Registered Public Accounting Firm
. The required disclosure is included in the Report of Independent Registered Public Accounting Firm on Obsidian Energys internal control over
financial reporting that accompanies Obsidian Energys Audited Consolidated Financial Statements for the fiscal year ended December 31, 2017, filed as Exhibit 99.3 to this Annual Report on Form
40-F.
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(e)
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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
Companys Managements Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2017, filed as Exhibit 99.2 to this Annual Report on Form
40-F.
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Notices Pursuant to Regulation BTR.
None.
Audit Committee Financial Expert.
Obsidian Energys board of directors has determined that Raymond Crossley, a member of Obsidian Energys audit committee, qualifies as an audit
committee financial expert (as such term is defined in Form
40-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 Form
40-F
and is referred to in
this Annual Report on Form
40-F
as the Code of Ethics.
The Code of Ethics is available for viewing on
Obsidian Energys website at www.obsidianenergy.com, is available in print to any shareholder who requests a copy, and was previously filed as an exhibit to Obsidian Energys Annual Report on Form
40-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
by
e-mail
to investor_relations@obsidianenergy.com.
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During the year ended December 31, 2017, 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 Form
40-F
to be disclosed, by posting such disclosure on Obsidian Energys website, which may
be accessed at www.obsidianenergy.com.
Principal Accountant Fees and Services.
The required disclosure is included under the heading External Auditor Service Fees in Obsidian Energys Annual Information Form for the
fiscal year ended December 31, 2017, filed as Exhibit 99.1 hereto.
Pre-Approval
Policies and Procedures.
(a)
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The terms of the engagement of Obsidian Energys external auditors to provide audit services, including the budgeted fees for such audit services and the representations and disclaimers relating thereto, must be
pre-approved
by the entire audit committee.
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With respect to any engagements of Obsidian
Energys external auditors for
non-audit
services, Obsidian Energy must obtain the approval of the audit committee or the Chairman of the audit committee prior to retaining the external auditors to
complete such engagement. If such
pre-approval
is provided by the Chairman of the audit committee, the Chairman shall report to the audit committee on any
non-audit
service engagement
pre-approved
by him at the audit committees first scheduled meeting following such
pre-approval.
If, after using its reasonable best efforts, Obsidian Energy is unable to contact the Chairman of the audit committee on a timely basis to
obtain the
pre-approval
contemplated by the preceding paragraph, Obsidian Energy may obtain the required
pre-approval
from any other member of the audit committee,
provided that any such audit committee member shall report to the audit committee on any
non-audit
service engagement
pre-approved
by him at the audit committees
first scheduled meeting following such
pre-approval.
(b)
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Of the fees reported in this Annual Report on Form
40-F
under the heading Principal Accountant Fees and Services, none of the fees billed by Ernst & Young LLP
were approved by Obsidian Energys audit committee pursuant to the
de minimus
exception provided by Section (c)(7)(i)(C) of Rule
2-01
of Regulation
S-X.
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Off-Balance
Sheet Arrangements.
Obsidian Energy has
off-balance-sheet
financing arrangements consisting of operating leases. The operating lease
payments are summarized below in the Tabular Disclosure of Contractual Obligations.
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Tabular Disclosure of Contractual Obligations.
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(CDN$ millions)
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Payment due by period
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Contractual Obligations
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Total
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Less than
1 Year
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1 to 3
Years
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3 to 5
Years
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More than
5 Years
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Transportation
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57
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12
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19
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12
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14
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Power infrastructure
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10
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8
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2
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Office lease
(1)
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243
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34
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68
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68
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73
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Long-term debt
(2)(3)
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359
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31
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303
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22
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3
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Decommissioning liability
(4)
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879
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10
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20
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20
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829
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Total
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1,548
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95
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412
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122
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919
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(1)
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Future office lease commitments will be reduced by sublease recoveries of $101 million.
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(2)
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Obsidian Energys syndicated credit facility with an initial revolving period ending on May 17, 2018, with an additional
one-year
term out period. Obsidian Energy and
its predecessors have successfully extended its credit facility on each renewal date since 1992.
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(3)
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Interest payments have not been included since future debt levels and rates are not known at this time.
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(4)
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These amounts represent the undiscounted future reclamation and abandonment costs that are expected to be incurred over the life of the properties.
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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, Gordon Ritchie and Maureen Cormier Jackson.
Mine Safety Disclosure.
Not applicable.
Disclosure Pursuant to the Requirements of the New York Stock Exchange.
Director Independence
Obsidian Energys
board
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 Energys board of directors also determines whether each member of Obsidian Energys audit committee is independent pursuant to Sections 1.4 and 1.5 of Multilateral Instrument
52-110
Audit Committees and Rule
10A-3
under the Exchange Act.
Obsidian
Energys board of directors has determined that George H. Brookman, John Brydson, Raymond Crossley, William A. Friley, Maureen Cormier Jackson, Edward H. Kernaghan, Gordon Ritchie and Jay W. Thornton
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
US-5
of an organization that has a relationship with the company). In reaching this determination in respect of George H. Brookman, the board of directors considered that although West Canadian
Digital Imaging Inc., of which Mr. Brookman is a shareholder and the Chief Executive Officer, provides printing and related services to Obsidian Energy, Mr. Brookman is not involved with the services provided by West Canadian to Obsidian
Energy and the amounts paid by Obsidian Energy to West Canadian 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 certain
non-audit
accounting advisory services to Obsidian Energy during 2014 2017 and took on the role of internal
auditor position in 2017, Mr. Crossleys 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 some
sub-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. Ritchies appointment to the board of directors was after his retirement from RBC.
Presiding Director at Meetings of
Non-Management
Directors
Obsidian Energy schedules regular executive sessions in which Obsidian Energys
non-management
directors (as that term is defined in the rules of the New York Stock Exchange) meet without management participation. Jay Thornton, the Chairman of the board of directors, serves as the presiding director (the Presiding Director)
at such sessions.
Communication with
Non-Management
Directors
Shareholders may send communications to Obsidian Energys
non-management
directors by writing to George H.
Brookman, Chairman of the governance committee of the board of directors, care of Investor Relations, Obsidian Energy Ltd., 200, 207 9
th
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.
US-6
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 Energys website at www.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 by
e-mail
to investor_relations@obsidianenergy.com.
Board Committee Mandates
The Mandates of Obsidian
Energys audit committee, human resources and compensation committee, governance committee, operations and reserves committee are each available for viewing on Obsidian Energys website at www.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 by
e-mail
to
investor_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 NYSEs corporate governance standards. Obsidian Energy has included a description of such significant differences in corporate governance practices on its website which may be accessed at www.obsidianenergy.com.
US-7
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 Form
40-F;
the securities in relation to which the obligation to file an annual report on Form
40-F
arises; or transactions in said securities.
B. Consent to Service of Process.
Obsidian Energy has previously filed a Form
F-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 Form
F-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 Form
40-F
and has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 7, 2018.
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Obsidian Energy Ltd.
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By:
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/s/ David L. French
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Name:
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David L. French
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Title:
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President and Chief Executive Officer
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EXHIBIT INDEX
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Exhibit
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Description
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99.1
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Annual Information Form for the fiscal year ended December 31, 2017
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99.2
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Managements Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2017
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99.3
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Consolidated Financial Statements for the fiscal year ended December 31, 2017
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99.4
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Supplemental Oil and Gas information
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99.5
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Certification of President & Chief Executive Officer pursuant to Rule
13a-14(a)
or
15d-14
of the Securities Exchange Act of 1934
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99.6
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Certification of Chief Financial Officer pursuant to Rule
13a-14(a)
or
15d-14
of the Securities Exchange Act of 1934
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99.7
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
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99.8
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
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99.9
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Consent of Ernst & Young LLP
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99.10
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Consent of Sproule Associates Limited
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