I have spent quite a bit of time trying to do my own rudimentary "models" to understand the impact of falling oil prices on OSH's ability to maintain adequate cash reserves and comply with debt covenants.
i have calculated that even if oil averages under US$25 from now until the end of June, and US$30 from July to December, OSH may not breach their covenants (3x EBITDAX interest cover ratio) and would (just) have enough cash. This however assumes they can draw down their corporate facilities to meet the required PNG LNG repayments.
Does anyone disagree with this? My main concern is what happens in the event that they are unable to draw down the corporate facilities to repay PNG LNG. I'm not sure what typical business practice would be, and if anything would prevent them from doing so, given the unfavourable economic outlook.
My opinion based on the above is that this should make the stock a buy, but please all DYOR. Keen to hear the views of anyone who disagrees with me.
OSH Price at posting:
$2.34 Sentiment: Buy Disclosure: Held
