6. DEBT

Asset backed securitization facility (the "ABS 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, if certain conditions are met. 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, if certain conditions are met. Interest payments are required monthly.

In March 2023, the ABS Facility was modified to waive certain covenants until July 1, 2023, amend the principal repayment schedules, and extend the Tranche 1 initial maturity date to July 1, 2023. Additionally, part of Tranche 1 was repaid using the proceeds from the early settlement of the commodity derivatives (Note 19).

At the time of entering into Tranche 1 and 2, the Company had anticipated utilizing the term extensions to the ultimate maturity dates. Therefore, as the ABS Facility is an increasing rate debt, interest expense was recognized based on the imputed effective interest rate over the expected two-year term of each tranche, plus the LIBOR interest rate component. As a result, interest expense recognized in the first year of each tranche exceeds interest paid, resulting in an interest accrual. As an accounting policy, the Company does not subsequently revise the amortization schedule for changes to the expected life of the instrument.

Prior to the modification, the imputed effective interest rate of Tranche 1 and Tranche 2 was 12.2% and 13.6%, respectively. After modification, the revised imputed effective interest rate is 9.8% and 14.1% for Tranche 1 and Tranche 2, respectively, which reflects the modified forecasted timing of cash flows in connection with the modification. No gain or loss was recognized on the modified facility.

The Company also incurred third party transaction costs of $598,986 due to the modification, which were recognized as finance expense under other fees (Note 14).

For the three months March 31, 2023, the Company incurred $4,255,259 of finance and interest expense, excluding the third-party transaction costs on the modification noted above (March 31, 2022 - $nil), and the interest paid on the ABS Facility was $3,027,633.

As at March 31, 2023, due to uncertainties on the ability to exercise the extension options on Tranche 1 and 2, the full undiscounted principal of $84,640,028 is forecasted to be payable in 2023, and the full balance has been classified as current. The carrying value of the outstanding loan balances is composed of:

March 31, 2023		Current			Long-term			Total (net)
Principal drawn	$	84,640,028			-		$	84,640,028
Accrued interest		2,156,471			-			2,156,471
Unamortized debt issuance costs		(2,005,895	)		-			(2,005,895	)
Total (net)	$	84,790,604			-		$	84,790,604

December 31, 2022		Current			Long-term			Total (net)
Principal drawn	$	61,630,567		$	48,352,110		$	109,982,677
Accrued interest		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

Under the ABS Facility, the Company was also required to maintain an interest reserve account that will hold a cash balance sufficient to cover three months of scheduled interest payments, which is the restricted cash balance. As at March 31, 2023 the restricted cash balance was $2,719,360 (December 31, 2022 - $3,375,395).

Corporate credit facility

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 had a one-year maturity.

In March 2023, the corporate credit facility was modified, where the drawn principal was converted to a term loan due on July 1, 2023. Under the modified terms, the fees and transaction costs of $78,453 were deferred and are amortized over the term of the loan, and the Company will pay an exit fee of $135,000 at the time the loan is repaid.

The effective interest rate used to amortize the deferred costs and discounts at the time of modification is 10.82%. The interest expense is based on the imputed rate plus the changes to the prime rate component.

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

March 31, 2023		Current		Long-term		Total (net)
Principal drawn	$	54,038,462		-	$	54,038,462
Accrued interest		312,664		-		312,664
Unamortized debt issuance costs		(70,825	)	-		(70,825	)
Total (net)	$	54,280,301		-	$	54,280,301

As of December 31, 2022, the Company had drawn $41,500,000 under the corporate credit facility.