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Financial Instruments and Fair Value Measurement

3 Months Ended

Mar. 31, 2024

Financial Instruments and Fair Value Measurement

Financial Instruments

Financial instruments are initially recorded at fair value, defined as the price that would be received to sell an asset or paid to market participants to settle liability at the measurement date. For financial instruments carried at fair value, GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels:

•Level 1 - Inputs representing quoted market prices in active markets for identical assets and liabilities

•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly

•Level 3 - Unobservable inputs for assets and liabilities

At March 31, 2024, the Company’s financial instruments recognized on the balance sheet consist of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, current portion of long-term debt, long-term debt and other long-term liabilities. The Company uses appropriate valuation techniques based on the available information to measure the fair values of assets and liabilities.

Fair Value Measurement

The following table presents the Company’s fair value measurements of its financial instruments as of March 31, 2024, and December 31, 2023:


(Thousands of U.S. Dollars)	As at March 31, 2024		As at December 31, 2023
Level 1
Assets
Prepaid equity forward (“PEF”) - current (1)	$	—	$	5,630

Liabilities
6.25% Senior Notes	$	23,242	$	22,994
7.75% Senior Notes	20,692		20,744
9.50% Senior Notes	549,579		429,018
	$	593,513	$	472,756
Level 2
Assets
Restricted cash and cash equivalents - long-term (2)	$	7,778	$	7,750

Liabilities
Credit facility	$	—	$	35,609

(1) The current portion of PEF is included in the other current assets on the Company’s condensed consolidated balance sheet.

(2) The long-term portion of restricted cash is included in the other long-term assets on the Company’s condensed consolidated balance sheet.

The fair values of cash and cash equivalents, current restricted cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying amounts due to the short-term maturity of these instruments.

Restricted Cash - Long-Term

The fair value of long-term restricted cash and cash equivalents approximate its carrying value because interest rates are variable and reflective of market rates.

Prepaid Equity Forward

As at March 31, 2024, the Company had no outstanding PEF asset (As at December 31, 2023 - 1.0 million notional shares with a fair value of $5.6 million). For the three months ended March 31, 2024 and 2023, the Company recorded $0.3 million and $1.7 million loss in general and administrative expenses relating to the PEF, respectively.

During the three months ended March 31, 2024, the Company settled all outstanding notional PEF shares and received net proceeds of $5.1 million resulting in a $0.3 million loss on settlement.

Senior Notes

Financial instruments recorded at amortized cost at March 31, 2024, were the Senior Notes (Note 4).

At March 31, 2024, the carrying amounts of the 6.25% Senior Notes, 7.75% Senior Notes and 9.50% Senior Notes were $24.7 million, $23.8 million, and $532.4 million, respectively, which represented the aggregate principal amount less unamortized debt issuance costs and discounts, and the fair values were $23.2 million, $20.7 million, and $549.6 million, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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