SSN 0.00% 1.5¢ samson oil & gas limited

Bolding is mine "As oil companies embark on their semi-annual...

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    Bolding is mine

    "As oil companies embark on their semi-annual discussions with bank lenders -- a process known as the “redetermination of the borrowing base” -- they are faced with a major difficulty coinciding with the slumping price of crude.

    “The problem they’re going to face is that their availability of capital from the banks is limited by the collateral value attributed to their assets,” says Buddy Clark, who heads the energy practice at Dallas-based law firm Haynes and Boone.

    He says that during last October’s redeterminations banks were using an oil price of $80 a barrel. Based on a recent informal survey of bank lenders by his firm, prices are coming down significantly, with at least one lender now pricing at $50 a barrel for 2015."
    That is pretty hard price and only one lender but it is a signal to be watchful of.
    http://www.bloombergview.com/articles/2015-01-20/levine-on-wall-street-francs-fraud-and-oil


    Now none of this is new - happened in the last big downturn with the GFC (the whole BB redeterminations possibly resulting in deficiencies). Below is a link to a really good article to understand what happens. And it discusses what actions happen at what points in time. I think you can see some of those things. There is no suggestion that SSN is going to be deficient - no one will know beforehand.

    http://www.google.com.au/url?sa=t&r...4oJlGBzF4skt6MRNw&sig2=e5MrIcRb2LHG4sB_3Bg-Zg


    SSN is "lucky" as it has a sole Banker/Administrative Agent and not a syndicate. Also a "local bank". Clearly they still have confidence by the issuance of the waiver. IMO another thing is that the drawn BB is not large and SSN has not problem making the interest payment. Banks have Bank Examiners though and they can assess loans to be high risk - meaning the lending Bank has to reserve more capital because of it. That could of course lead to a Bank selling the loan to a 3rd party.

    SSN doing the right things now by deferring Capex, cutting costs, converting PUD/PDNPs to PDP, negotiating covenants and they have the other options available as noted in 10Q should it be necessary.

    To me addressing the Debt is more important than any headline boepd number but for sure additional production and incrementally higher prices will help with Debt/EBITDAX
 
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Currently unlisted public company.

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