Ann: Trading Halt, page-86

I think this is one thing I would like management to comm to market. Shoring up confidence always helps.

Gdn/Cmon, I posted this in the weekend as I was curious about the covenant situation. CTP have a loan with MQ too and state their covenants:

I would like to understand how the half year report got signed off by BDO on the 12 March given we were more or less where we are now (except F5 dud).

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Otto are lucky to have a relatively small debt facility...but the debt facility still has certain covenants in place. Unfortunately, we don't know what these covenants are...per the half year report:

"The facility agreement has certain financial covenants that the Company has to comply with. All such financial covenants have been complied with in accordance with the facility agreement."

Of course, the half year report was issued on the 12 March 2020 and the latest covenant period was 31 December 2019....however, covenants are usually forward looking too. You would therefore expect that BDO were happy to sign off that the forward looking covenants, at date of signing (i.e. 12 March 2020 when oil price was c$30 bbl).

Central Petroleum, also listed on the ASX, has a debt facility with MacQ and provide a little more insight into the covenants:

"(e) Financing Facilities (continued)Under the terms of the Facility, the Group is required to comply with the following two key financial covenants:

1. The Group Current Ratio is at least 1:1, excluding amounts payable under the Macquarie debt facility
2. The Net Present Value with a 10% discount rate (“NPV10”) of forecasted net cash flow from the Palm Valley, Dingo and Mereenie gas fields limited by the sales of only Proved Developed Producing reserves, divided by the outstanding loan amount must be greater than 1.3:1.

The Group remains compliant with these and all other financial covenants under the Facility."


If we assume that we have similar debt covenants to CTP, then we should fine:
1. At Dec-19, OEL have $29m in current assets and $10m of current liabilities (excl. MQ payments due). 2.9x. Forward looking becomes a little more difficult, but using numbers from the quarterly:
Mar-20 : $29m less $15m (lets assume capex spend in next quarter is the liability) + $7m (revenue as production costs in the $15m) = $21m + hedging current assets of... 170k @ $25 bbl = $4m = $25m CA. Current liabilities at Mar-20 will be c$7m capex + other of c$3m = 2.5 times coverage
Jun-20.... should be fine. So should Sep-20. By Dec-20, do we really see $25 oil?!
2. NPV10 of assets must be 1.3 x the outstanding loan amount. MA will tell you we have AUD $300m in NPV but let's be realistic, it's probably more like $50m USD on current pricing. Therefore, should be fine on that front too.