Hi @cmonaussie, I guess my point was $675M is the start PV10 for...

Hi @cmonaussie,

I guess my point was $675M is the start PV10 for $56 oil flat pricing over next 5 years.

We've got roughly $350M debt, with the 1.5 x metric we need PV9 to be > $525M.

So to go from SEC Pv10 to PV9 for covenant what adjustments do we need to account for:

• Discount rate - 9% discount rate will increase $675M
• Term. SEC is 5 years, PV9 is 4 years - this works against us
• Price deck - SEC is flat, Strip is based on futures. Hedging helps us in first 1.5 years, but after that we at mercy of futures vs $56 assumed by SEC in years 1.5- 4
• deferred capex

Without the detailed cash flows and production profile it's impossible to know, but my feel is it would be a stretch to achieve PV9 at 1.5x debt based on current strip.

The questions are

1. Would the bankers call an event of default, or would they give a waiver as they did for LONE
2. What amendment to covenant are they seeking (which are now due in 3 business days) otherwise an event of default occurs.

I can't see the answer to point 2 being an equity raise, market cap is currently US$20M - so even if every shareholder partook in a CR to the value of their holding, it would only raise US$20M, which is just a drop in the ocean compared to the $350M debt, and unlikely everyone would subscribe....

So the only option is a waiver, or a scrip based acquisition of additional PV9 assets to inflate the PV9 value relative to our debt (assuming the target had a lower ratio of PV9 to debt than us)...