Southern Pacific Resource Corp STPJF

STP Borrowing and Break Even

[mjh9413]

This has been touched on many times on this BB and I look at it this way. First, the borrowing.
The Conv Debs ($172.5MM) are redeeemable as shares, so no direct dollar commitment, but qtly interest costs are  about $3.5MM.
The $260MM Second Lien is truly not repayable as long as covenants are met until 2017 but its qtly interest cost is about $7.6MM.
The $100MM Bank Revolver still had a balance left unused at Mar 31 but let's assume it is all drawn (which may present a serious ongoing problem but let us do this for just carrying costs). The latter would be about $2MM per qtr.
So, apart from worrying about breaches of covenant on latter (which I believe also have a major out in terms of allowing for increase in prodn to 8000 or so bbls by sometime in 2014), they have no repayment calls of any amount and, if nothing else changed the total carrying cost per qtr would be about $$13.1MM. On a $40/bbl free cf that is 3600bbls/day.
Now my hoped for $40 net cf includes G&A expenses per barrel but if we add  $2.7MM to the qtly carrying costs for a total of $15.8MM cash needs and use the $40/bbl we get 4,300bbls/day.
Formidable but not impossible and remember the carrying costs assume 100% use of the bank revolver and the inclusion of G&A with a $40 free cf number is in my mind double counting.
3600 to 4300 bbls/day is just about where we were last qtr (incl the capitalised prodn from McKay) and the call upon the company for repayment dollars is at least 2 years away...just covenants to worry about. Oh, and increasing prodn numbers from both Senlac and McKay. Let me know if I am off base. (By the way, the debs traded at $80 in 2011).