A couple of thoughts re small parts of cmon's post/s as I have very little time to post in right now.
5. The decline treadmill will take over and production will decrease - but you're still in the game if oil recovers quickly.
The company announced that there will no further drilling at NSY until further notice, however Rainbow is being assessed, there is a deal for a reliable vertical play about to be announced, Bluff assessment is coming along nicely, Roosevelt has vertical potential (hmm, cheap to drill low cost verticals again, must be a coincidence). There is more production in yet to be fracked wells than the company has averaged over many years. I could not be less concerned by decline curves.
2. Covenants - noted earlier the concern on Debt/EBITDAX ratio - For the full calculation being used refer to Exhibit C - Schedule 2.
The covenants are in place to provide an avenue for the bank to recover their funds if they are concerned about the companies ability to meet its obligations. The oil price was well into its decline last meeting and Omaha reduced the interest rate, increased the borrowing base and the available funds. Not a sign that they have any immediate concerns. I am sure they are not shrinking violets when it comes to moving in when required, however I cannot see that this would be in their best interests at any point soon, whether an option or not.....of course meeting the covenants would be best.
SSN Price at posting:
1.1¢ Sentiment: Buy Disclosure: Held
