This is just some of the more information I was hinting at .... I'll cut and paste most of the filing in discussion paragraphs .... most important first. Anything in italics is quoted from SEC filing. The bolding is me
(A) Changes to Credit Facility
"Also on March 31, 2016, Samson USA entered into a Third Amendment (the “Third Amendment”) to its Credit Agreement (the “Credit Agreement”) with its primary lender, Mutual of Omaha Bank, as Administrative Agent (the “Agent”), and the other lenders party thereto. The Third Amendment increased Samson USA’s borrowing base to $30.5 million upon the closing of the Acquisition. Samson USA used $11.5 million of this expanded borrowing base to finance the Acquisition. The Third Amendment also made the following changes to the Credit Agreement: (1) the addition of more restrictive financial covenants (including the debt-to-EBITDA ratio and the minimum liquidity requirement); (2) increases in the interest rate and unused facility fees; (3) the addition of a minimum hedging requirement of 75% of forecasted production; (4) a requirement to reduce Samson USA’s general and administrative expenses from $6 million to $3 million per year; (5) a requirement to raise an additional $5 million in equity on or before September 30, 2016; (6) a requirement to pay down at least $10 million of the loan by June 30, 2016; and (7) the addition of a monthly cash flow sweep whereby 50% of cash operating income will be used to repay outstanding borrowings under the Credit Agreement."
(1) .... don't understand that. More restrictive Debt/EBITDAX. Guessing here that maybe because (DA) has been reduced due to impairments
(2) was disclosed
(3) wasn't disclosed but addressed but my question then remains the amount hedged at 75% appears to me to be lower than expected production ... need the fricken proforma to put that to bed
(4) reduced G&A by 50% to $3M ... well that's a surprise but must mean that no extra G&A required for the acquisition to be successful .... makes you wonder why G&A was so high to begin with (subtle sarcasm)
(5) THE OTHER SHOE DROPS - Can I say I told you so because I did. Expected something like this (and entered a long position before knowing the details and not particularly liking the timetable at all. Might be a real short term trade). Raise $5M in equity before Sep 30, 2016. That has to be a placement surely.
(6) I hate this part. Absolutely hate it and borderline questionable disclosure. Pay down $10M of loan facility by June 30, 2016. That's a challenge. Further debt like 3rd lien might be possible but that will likely trigger revised Interest coverage ratio from (1).
(7) 50% of cash operating income going to pay down credit facility each month. Good banking to recovery the facility. Will definitely strain SSN working capital
NOW DO Y'ALL BELIEVE ME about how these BB's and bank relationships work. MOB is working to reduce its exposure to SSN and get as much money back as soon as possible.
Continuing on with SEC disclosure....
(B) OAS 2L note
"Also pursuant to the PSA Amendment, the Seller agreed to finance $4 million of the purchase price for the Assets pursuant to a secured promissory note (the “Note”) issued by Samson USA to the Seller. The Note has a 12-month term and bears interest at 10%. The Note is secured by a second-lien mortgage and security interest in substantially all of the Assets. The Note is subject to a subordination and intercreditor agreement with the Company’s primary lender, and is subject to customary events of default. Upon an event of default, the outstanding balance of the Note becomes immediately due and payable, subject to the terms of the subordination and intercreditor agreement, and accrues interest at a default rate of 15%"
Nothing special really other than appears tie to same defaults as Credit Facility
(C) P&SA.
"... on March 31, 2016, Samson USA completed the Acquisition pursuant to the Purchase Agreement and PSA Amendment. The acquired Assets include oil and gas leases subject to specified depth limitations; oil, gas and disposal wells; contracts and equipment related to the acquired leases, wells and lands; and producible hydrocarbons thereunder. Samson USA purchased the Assets from the Seller named above for a total purchase price of $16.16 million, after adjustment pursuant to the Purchase Agreement and the PSA Amendment. There is no current relationship, other than in respect of the Acquisition (including a Transition Services Agreement for operation of certain Assets that is expected to terminate no later than April 30, 2016), between the Company or Samson USA and the Seller."
Either I read the agreement incorrectly or their is a surprise in there. Interpretation is that "only" $340K of produceable hydrocarbons were lifted during the effective date of agreement to closing date. That is much less than my estimate and Rob79's estimate. What did we get wrong or what changed?
Fools rush in and I am beginning to feel foolish already for not waiting for information I knew deep down had to be forthcoming (eventually).
You're right Alacrity... and it took less than 24 hours!!
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