Some light in tunnel....No not the train!!!!!, page-13

Hi Rob,

Good to see your data is nearly the same as mine - as it should be because most of it has been published - and it thus shows a similar result. Where we differ the most is in the index pricing averages and differential - I using PAALP price bulletin for what the pipeline is paying to operators (WTI and WBS) not what the traders are using on NYMEX. I'm also always trying to represent the data as $/Boe to be able to see the impact of production growth.

I put in 40,000 BOE as estimate as that gets to breakeven in my calcs for FFO (your surplus/deficit line)

Your Qtrly estimate is EBIT loss of $87K (or in other words not enough cash generated to pay interest). That's the interest coverage covenant gone right there.

EBITDAX a little harder to estimate since SSN do not provide a pro-forma reconciliation but adding back the DD&A expense and Capex (what little there was) for the Qtr would likely trigger that covenant too as it wont be enough to get to $1.36M for the Qtr IMO.

On that basis you're showing SSN to be in default too then - correct?

That would be 2 times is a row. Again the Bank has (in the US anyway) regulators that review them. This loan would now be classed as non-performing IMO. To make it performing that would need to renegotiate the terms and certainly change the EBITDAX and interest coverage ratio. That will cost in terms of waiver fees and a higher interest rate (already see this on a couple of stocks I hold). The redetermination of Reserves value IMO is critical - they will get credit for additional Reserves from new wells but the overall value has to come down. Question is by how much (and while I can't believe it could go to $0 like it did for AMZG (Divide County), it would be a big surprise if $19M held up). While the Debt/Equity ratio doesn't say over-levered, the operating metrics do and the only real thing that can that materially change that is rapid recovery in price of oil which is out of SSN's control.

I do think though that TB has options to remedy current problems.

Like Rob said warnings apply - do your own research for your decision making.