RE: RE: Take out "All those who understand, you should not run a foul of your loan covenants, are concerned. You kinda pooh-pooh the fact the bank loans ya money and sets out conditions. You follow."
This was a big issue and likely the primary reason for the negative reaction to the NR. Technically speaking the bank had the right to demand payment in full immediately upon breach of the loan covenant. But the company indicated they did not do so, lucky for them. And that probably explained why they had to rush out with some convertible debt financing. But it is scary to think how easily the company could be held financial hostage by the bank and have their entire company shut down due to lack of funds.
This time they avoided striking out. But what if next time timing is bad and they find themselves in a lower oil market of $70-80/bbl in the middle of a stock market panic selloff and unable to raise funds from investors?
The risk is there because management has been unable to grow production to a meaningful level during the past two years and generate some meaningful cash flow in order to get past the junior status hump.