7. DEBT

Asset Backed Securitization Facility

In 2022, the Company entered into an asset backed securitization of certain producing oil and gas wells (the "ABS Facility"). The ABS Facility is led by an insurance company, and all borrowings under the ABS Facility are secured by working interests in a subset of the Company's producing assets, which are held by a subsidiary of its operating subsidiary, Origination.

The ABS Facility consists of the following tranches:

• On April 27, 2022 the ABS Facility had an initial size of $80,000,000 ("Tranche 1") with additional capacity to expand up to $150,000,000 in total based on the underlying collateral. Tranche 1 of the ABS Facility carries an interest rate of LIBOR+6% (with a 1% LIBOR floor) for the initial year, LIBOR +12% (with a 1% LIBOR floor) for the second year. Tranche 1 has an initial maturity date of one year, with the Company having the option to extend an additional year to an ultimate maturity date of April 2024. Interest payments are required monthly.

• On September 12, 2022 the ABS Facility was increased by $55,000,000 ("Tranche 2"), to a total size of $135,000,000. Tranche 2 of the ABS Facility carries an interest rate of LIBOR+8% (with a 1% LIBOR floor) for the initial year, LIBOR +14% (with a 1% LIBOR floor) for the second year. Tranche 2 has an initial maturity date of one year, with the Company having the option to extend an additional year to an ultimate maturity date of September 2024. Interest payments are required monthly.

The Company's subsidiaries have certain financial covenants under the ABS Facility, including maintaining a debt service coverage ratio of no less that 1.1 to 1.0.

Under the terms of the ABS Facility, the Company is also required to:

(i) As of the initial borrowing date, enter into certain forward commodity swap contracts included in Note 18 which it has done.

(ii) Maintain an interest reserve account that will hold a cash balance sufficient to cover three months of scheduled interest payments (Note 2 - restricted cash).

Repayments of the undiscounted principal required under the ABS Facility for each year noted are as follows:

2023	$	61,630,567
2024		48,352,110
2025 and thereafter		-
Total	$	109,982,677

In addition to the required principal repayments outlined above, the Company's subsidiaries could also be required to make additional payments:

(i) if the debt service coverage ratio is less than 1.20 to 1.00, the Company must make an additional principal prepayment equal to net income/(loss) adjusted for all non-cash charges, plus/(minus) working capital not including the current portion of debt under this facility and other adjustments required under the terms of the agreement.

(ii) if the production tracking ratio is less than 80%, the Company must make an additional principal prepayment equal to net income/(loss) adjusted for all non-cash charges, plus/(minus) working capital not including the current portion of debt under this facility and other adjustments required under the terms of the agreement.

(iii) if the loan to value is above 85%, the Company must make an additional principal prepayment equal to net income/(loss) adjusted for all non-cash charges, plus/(minus) working capital not including the current portion of debt under this facility and other adjustments required under the terms of the agreement.

At December 31, 2022, the Company was not subject to any other additional principal prepayments.

The carrying value of the outstanding loan balances is composed of:

December 31, 2022		Current			Long-term			Total (net)
Principal drawn	$	61,630,567		$	48,352,110		$	109,982,677
Unamortized discount and interest at the imputed rate		680,615			842,926			1,523,541
Unamortized debt issuance costs		(2,084,263	)		(516,328	)		(2,600,591	)
Total (net)	$	60,226,919		$	48,678,708		$	108,905,627

As the ABS Facility is an increasing rate debt, finance expense is recognized based on the imputed effective interest rate of 12.2% and 13.6% for Tranche 1 and 2 over the expected two-year term of each tranche, respectively, plus the LIBOR interest rate component. As a result, interest expense recognized in the first year of each tranche will exceed interest paid, and effectively result in an interest accrual, shown as unamortized discount and interest at the imputed rate above. For the year ended December 31, 2022, the Company incurred $8,968,929 of finance expense (December 31, 2021 - $nil), and interest paid on the ABS Facility was $5,808,996.

Goldman Facility

On December 22, 2020, the Company entered into a credit facility with Goldman Sachs (the "Goldman Facility"). All borrowings under the Goldman Facility were secured by the Company's oil and gas producing wells and the assets of three of the Company's subsidiaries. The Goldman Facility carried an interest rate of LIBOR+6% (with a 1% LIBOR floor) and had a maturity date of December 2031. Interest payments were required quarterly.

In April 2022, in connection with the ABS Facility, the Company repaid the Goldman Facility in full and amortized the remaining unamortized borrowing costs.

The outstanding balances under this facility were as follows:

December 31, 2022		Current			Long-term			Total (net)
Principal drawn		-			-			-
Unamortized discount and debt issuance costs		-			-			-
Total (net)		-			-			-
December 31, 2021		Current			Long-term			Total (net)
Principal drawn	$	7,722,206		$	17,515,203		$	25,237,409
Unamortized discount and debt issuance costs		(662,372	)		(1,375,896	)		(2,038,268	)
Total (net)	$	7,059,834		$	16,139,307		$	23,199,141

For the year ended December 31, 2022, the Company incurred $2,420,486 of finance expense related to the facility (December 31, 2021 - $3,612,927).

Corporate Credit Facility

In October 2021, the Company's operating subsidiary Origination closed on a corporate credit facility (the "Corporate Credit Facility"). The Corporate Credit Facility had a maximum borrowing capacity of $12,500,000, subject to quarterly borrowing base determinations by the lender. The loan charged interest at prime +2.25% and had a one-year maturity. A subset of certain Company working interests in producing assets were secured in connection with the Corporate Credit Facility.

During the first quarter of 2022, Origination closed a new Corporate Credit Facility to replace the previous facility. The new Corporate Credit Facility had a maximum borrowing capacity of $30,000,000, which was subsequently increased in October 2022 to $65,000,000, subject to quarterly borrowing base determinations by the lender. The Corporate Credit Facility is secured by working interests in a subset of the Company's producing assets and charges interest at the greater of 5.00% and prime +1.75% and has a one-year maturity.

As of December 31, 2022, the Company had drawn $41,500,000 under the Corporate Credit Facility (December 31, 2021 - $2,200,000), and for the year ended December 31, 2022, incurred $1,736,868 of interest expense related to the facility (December 31, 2021 - $nil). The borrowing base as of December 31, 2022 was $64,435,764 (December 31, 2021- $6,579,750).