SSN 0.00% 1.5¢ samson oil & gas limited

In the NFL, the game is stopped when there is 2 minutes left to...

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    In the NFL, the game is stopped when there is 2 minutes left to play in each half.

    IMO, SSN is at the 2MW for the 1st half of its new existence (i.e. post FB acquisition & NS disposition). First question is do they have the ball and are playing offense OR are they playing defense trying to prevent a score being made against them?

    If its defense they are playing then these are the plays they have to stop. Items in italics are references to terms in the MOB Credit Agreement, Amendment #3, Mar 2016.

    1. Maintain a Leverage Ratio of less than 5.75 : 1 for this past Qtr. With Total Funded Debt at $24.5M this means that EBITDAX must be ~> $4.26M

    2. Maintain a Senior Leverage Ratio of less than 4.25 : for this past Qtr. With Senior Funded Debt at $19.5M this means that EBITDAX must be ~> $4.59M

    OK - so EBITDAX will need to be at $4.6M p.a. for the Qtr to pass both of the above. MOB has cut SSN a break on the EBITDAX calculation allowing it to annualize the Qtrly amount (otherwise the negative amount in Q1 would have not doubt tripped them).

    3. Maintain an Interest Coverage Ratio of ~> 2.5 :1. This one is a little unclear but I'm calculating it as 9% of $19.5M which is $1.755M which requires $3.51M of EBITDAX. In that case if you pass (2) then you pass (3). It could also be $2.255M (adding in now the OAS interest of 10% on $5M paid on maturity) which raises EBITDAX to $5.6375M which raises the bar further.

    4. Maintain Minimum Liquidity of not less than $1.5M at the end of each month through Dec 2016. Given a fully drawn BB (??) then this means unrestricted cash on hand.

    5. Maintain Swap Contracts for not less than 75% of projected production. Be interesting to see how active SSN has been in this regard when oil was at $50/Bbl.

    6. "On or before September 30, 2016, Borrower shall have received aggregate net cash proceeds of not less than $5,000,000 from an Equity Transaction". Thus far SSN has received ~ $1,294,754 (net) from the equity offering in Apr'16. So ~ $3.7M of net equity left to raise with a true and correct prospectus due Aug 31, 2016.


    IMO, a sign that SSN has the ball and is gaining yards playing offense is

    (a) Excess Cash Flow which is clearly defined in the MOB Credit Facility as

    on a consolidated basis in accordance with GAAP, as of any applicable date of determination thereof for the calendar
    month then ended, an amount equal to

    (a) cash receipts for such calendar month, minus
    (b) lease operating expenses paid during such calendar month, minus
    (c) consolidated cash interest expense paid during such calendar month, minus
    (d) amounts actually paid in cash in respect of production taxes and total federal, state, local and foreign income, and similar taxes for such calendar month, minus
    (e) the aggregate amount of all regularly scheduled principal payments or prepayments of Indebtedness made

    by Borrower and its Subsidiaries during such calendar month, minus
    (f) to the extent permitted under Section 8.07, general and administrative expenses paid during such calendar month.


    There is no ambiguity here. No "B". It's real cash flow according to GAAP.

    Furthermore "On the fifteenth day of each calendar month, Borrower shall prepay the Loans in an amount equal to 50% of Excess Cash Flow for the previous calendar month, as reflected in the Excess Cash Flow Report."

    This would be welcome news and highlighted by SSN as proof of its new strategy working. It would also show up in the BB being lower than the $19.5M as noted at the end of June with the sale of NS asset.


    (b) Completing the Equity sale at whatever share price. Receipt of the cash is more important than the price per share received (from a corporate SSN viewpoint). If the FB recovery is as good as SSN says, the capital efficiency of the project takes care of return on equity.


    GFTA
 
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