I would not assume anything because as the saying goes... Bankers have bank auditors to worry about and auditors don't care about comfort they care whether the loan is good or bad for the bank. If the auditor thinks its bad or impaired the bank has to reserve capital to cover it.
And of course the Bank has the details .... they already know what prices they are going to use in their 1P Reserves NPV calculation - I tried to give some insight into that on the bank lending survey thread.
Surely you have been following the now numerous equity raising and high yield bond sales undertaken by various companies (with stronger balance sheets than SSN) and the common theme is they are all using this capital to pay down bank debt (as they can't meet the restrictive covenants). The Borrowing Base redetermination is due by end Apr. I really and truly hope that the 1P Reserves growth from the additional wells is enough to cover the reduction in value that will get applied by new pricing deck.
On the basis of TB interview the BB is fully drawn at $19M. From that you can calculate the interest bill for Jan-Mar Qtr. SNN have advised of Jan and Feb production. I've posted the oil price averages for Jan and Feb. SSN advised the G&A in prior Qtrly. The relative unknown is the LOE but can be inferred.
I know you like to model just as I do. Put the numbers in. Estimate the Mar Qtr. What do you get?
I've refrained putting up the updated Cash Margin spreadsheet because it just seems to inflame too many posters. The data are the facts however. The covenants are known so the EBITDAX multiples can be easily inferred. They have to produce enough to get over that hump.
What's your estimate for total March production, which then gives total Qtrly production and then estimates for coverage of the covenants.
Monetizing all hedges adds at the $2.2M as noted by SSN as the value of the Hedge Book. Then what - they have to maintain some minimum hedging as req'd by credit agreement.
Definitely will be a Qtrly and 10Q to dig into and see your theory about production. I can understand an E&P that isn't stressed by its debt to "defer" new production (as EOG have explicitly stated) but SSN and a lot of oilers need the price of oil to go up and quickly and produce enough to conform with their covenants.
So far this month WTI is averaging $43.90 and for the QTD I have it at $45.24 (and the differential still between $12-$13).
SSN Price at posting:
1.1¢ Sentiment: None Disclosure: Not Held
