Hi Bruce,This is all about disclosure and if this were a US...

Hi Bruce,

This is all about disclosure and if this were a US listed company there would be no issue ... the credit facility is filed with the SEC and is available to anyone to view ... and figure out if you want to invest in the equity.

Here (Australia) is like a freakin' root canal to get the information ... and damn sure we aint getting it from the company unless its a last second disclosure to explain why the need to raise equity for example.

But the "structure" of credit agreements are fairly standard in the language they use .... but not necessarily the bars they set. the MLA has become more common in E&P (especially after oil price decline) but I still wouldn't say its the majority. The credit agreement would set it out clearly. If its there I've seen it as
(a) Flat amount ... e.g. $10M ... meaning $10M in Cash or Cash Equivalents available at all times for the Term of Facility
(b) % of Debt Facility ... e.g. 20% of Total Facility (not amount drawn) ... so if $55M was the Debt Facility $11M is MLA for the duration of the term of the facility
(c) Variable based on the Leverage Ratio (likely Debt/EBITDAX). So if leverage ratio was say <2 MLA might be $0. Greater than 4 it might be 30% of Debt and so on.

Is is just co-incidence that $17.5 is 50% of the Total Trance A debt (A1 $25 + A2 $10)

It is OEL itself that is reporting to the bank, that as of its Quarterly filing it either is or is not in compliance with the financial covenants of the loan. They don't have a review of the covenants ... those conditions were set when the loan was taken. They might ask for variations to terms (sometimes that comes with fees/price). The review dates are different as these tend to be done (again this is a US based view) along with 6 monthly Borrowing Base Reviews (but we don't have a BB we a have senior secured non-revolving facility that likely includes a covenant that is PDP based - hence the multiple tranches .. but we don't know).

What we have is a failure to keep the market fully informed in a timely fashion - meaning those covenants that caused this equity raising didn't just happen last week. They were there from Nov 4 2019 (when debt facility was announced) ... its just that now because without this equity raising they would have been breached they are been disclosed ... much to the surprise of the shareholder base who were under the impression that the balance sheet was strong.

Full disclosure of all of the covenants needs to be mandatory ... otherwise you have some market participants at a disadvantage. I will say it again. If that MLA covenant was disclosed in the HY accounts released on Mar 12 2020 and I'm looking at their Balance Sheet with CC&E = $25.7M and the shareholder letter of Feb 17 that shows Capex = $13M then basic math will tell you that FCF of $5M at least is necessary to remain about $17.5 as MLA. That SCREAMS COVENANT BREACH COMING UNLESS EQUITY CAPITAL IS RAISED ... something that an institutional investor worth their salt should know IMO.

Anyway, I've said more than enough on the subject.