...Charger needs a miracle
I am not an accountant, but I was taking a look at Charger's Q3 unaudited financial statements: it looks like a negative working capital of -$63,888,000 (current assets $7,887,000 minus current liabilities of $71,775,000). If I read note 6 correctly, it would seem that Charger is close to the borrowing limit on its bank line of $65,000,000, with either $58,600,000 or $59,500,000 drawn if the letters of credit are included.
Total liabilities are $95,663,000, although $23,268,000 of this is a decommissioning liability. So what is the debt? Perhaps one could use total liabilities minus current assets minus the decommissioning liability which would have total debt at approximately $64,508,000. Charger's cash flow from operations, by any of the cash flow measures Charger uses, does not look healthy, in my view. Charger's 9 month operating cash flow is (negative) -4,941,000 (annualized (negative) --$6,588,000), and if a person were to use this figure alone, it might seem that Charger could be viewed as being very high risk.
So, to take a more optimistic perspective, and to justify the continued existence of Charger, in my view, one might use the latest 3 month cash flow from operations, before working capital adjustments of +$1,997,000 (annualized +7,988,000). Still, a debt to cash flow ratio of 8.08 which, in my thinking, is very high for a junior Canadian oil and gas company.
I believe that some investors might consider any company approaching its borrowing limit, with an optimistic debt to cash flow ratio of +8 to be at a very increased risk of insolvency.
According to the Q3 2012 unaudited financial statement for Charger, Charger has a demand loan for $65 million and “the next borrowing base review is scheduled to occur on or before March 1, 2013, but may be set at an earlier or later date at the sole discretion of the bank".
It might seem that Charger needs a miracle.