Interesting day. SNDE up over 60%
LONE up over 20%. They put out their 10K with ..... wait for it
Breach of consolidated current ratio and don't expect to be compliant over next 12 months, ergo event of default. Entered into standard waiver and seeking alternative financing etc etc. Problem is the cross default on their 2023 Notes.
Might remember it wasn't all that long ago that their revolver was increased (but of course that was with much higher oil price). And that is the problem (probably)
LONE is well hedged (at a little over 100% of 2019 avg oil produced per day)
As I look at their (not audited) Balance Sheet for the cause of the breach in Current Ratio
CA = 27,741
CL = 330,824 (now includes the 247,000 being the BB which becomes current because of breach)
CL = 83,824
CA/CL = 0.33 .... and that's a really big breach.
Looks like the biggest culprit is rapidly expanding accounts payable and still growing accrued liabilities. Big change in derivatives also contributes ...
So why is it, if effectively 100% hedged on oil, they can't pay their bills when they fall due (supposedly they can "stop" drilling)? Capex plan for 2020 was $80-$85M.
Stop drilling, sell some of the hedges (to match to reduce output) and use that money to pay creditors and get compliant.
There has to be more to it. Obvious problem is April BB redetermination and they are drawn at $247M (on a $290M facility).
Hope there is a call to listen to ...
Interesting to see SNDE.
