OTCPK:ARNBF - Post by User
Comment by
nlr2on Jun 20, 2014 5:33pm
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Post# 22681430
RE:potential investor; insight requested
RE:potential investor; insight requestedIf the debt load wasn't so horrific it wouldn't be 50 cents. Haha. The three ways out that I can see are,
1) Sell Deer Mountian. If they got around 120 million they could reduce the credit line to 35 million which the two debentures outstanding for about 180 million. Production would decline by 1100 BOE/D and the line of credit would be cut. The positives are that they would have a bit more wiggle room to accelerate the drilling plans to get production up. Plus it would not reduce the land posistion by that much.
2) Sell the whole company. If Lightstream wants this to be their third core area then they can use equity and proceeds from disposistions to buy us.
3) If the well results in the winter program can be duplicated then maybe they can grow their way out. This is the least likely scenario, but by far the best. Since they have no activity scheduled for Q2 and I think Q3 they could get the debt down to around 140 million. If production declines more at a more shallow pace then come winter they could ramp production up from the high 3000's into the high 4000's. This would boost cashflow and allow for more debt repayment and better metrics. If the share price responds then they can convert the convertible debentures into equity when they come due and consolidate the shares. So existing shareholders would be diulted but the debt situation would be much improved as would production.
The biggest variables are,
1) Can they duplicate the success of winter drilling?
2) can they expand the Ethel waterflood and see a strong response quickly enough?
3) can they keep driving costs down, both for DCT and for operating?
If the answer to all three of these is yes then something positive will happen going forward and the share price will increase dramatically. If not we are screwed.
The wildcard in my eyes is if they can sell some of the infrastructure to midstream companies. If they could do this then the debt could come down without hurting production.