Good comments from TwistedMachine (London forum)From TwistedMachine:
Ithaca is currently being trounced (as is my investment) due to delay in stella, brush tarring of anyone with high debt levels in the oil sector and low oil prices. There's also seems to be a sustained seller in our midst in canada.
According to Q3 financials the current drawn debt was $830m broken down
- RBL facility $476m at LIBOR plus 2.75-3% interest due to be repaid June 2017.
- Senior notes $300m, paid semi annually at 8.125% due to be repaid June 2019
-Norwegian facility $69m
- Long term bank notes/fees $13m
In those financials the following statement is provided
''The Corporation is in compliance with all its financial and operating covenants''. The brent price of oil then was approx $77 per barrel.
As of 12 January ops update, it is expected $150m will be spent in first half of 2015, 2/3 of which is on stella. Net peak debt drawn is still only expected to be $850m, only $20m more than at the end of Q3. That is because of the following statement relating to 2015:
''The programme is forecast to be fully funded on an annual basis by operating cashflows generated from the Company's currently producing asset portfolio, based on current Brent oil prices and reflecting the benefit of the oil price hedges that have been executed and anticipated operating costs for the year''
The current oil price on 12th Jan was approx $47 (lower than it is now) per barrel for brent.
On the 25th Feb update, the delay in stella advised the additional cost would be $10m only for project management costs. Ithaca state again peak net debt of $850m.
Debt repayments of interest on senior notes and the RBL are being covered. per annum are covered by 12,000 approx boped, 6300 of which hedged at $102. What of the covenants. These are listed in the Q3 reports as follows:
1) $476m on RBL loan
- A corporate cashflow projection showing total sources of funds must exceed total forecast uses of funds for the following 12 months.
- The ratio of the net present value of cashflows secured under the RBL for the economic life of the fields to the amount drawn under the facility must not fall below 1.15:1
- The ratio of the net present value of cashflows secured under the RBL for the life of the debt facility to the amount drawn under the facility must not fall below 1.05:1.
It's impossible to assess the above as we don't have the information although if they were near to being breached an RNS would have been issued.
2) Norwegian facility $69m
The key covenant in the Norwegian Tax Rebate Facility is Norwegian subsidiaries must have available funds to execute planned activities for the year to December in each calendar year.
3) Senior notes $300m fullly drawn down
''There are no financial maintenance covenants tests under the senior notes''
We will know more in the accounts due March 31st. My opinion is that they are still within these covenants for the RBL, although the market doesn't like uncertainty, and is pricing in something worse, particular the canadian mkt. Even the latest news of reducing supplementary tax from 30-20% isn't helping. Although to compare IAE with AFR and GKP is simply because of debt is not a good comparison due to lack of funding covering debt interest payments and licence obligation expenditure and lack of payments (from KRG in GKP case) is off the mark. The mkt isn't agreeing with that prognosis though. Remains to be seen who is bold at this price and makes riches in the next few months or who is plainly wrong and loses wealth. One thing for sure is management are not to blame for the petrofac fiasco but they are responsible for stopping the constant erosion of shareholder value that contains here day after day after that 25 Feb announcement, and they have made no statement to stop it.
Ithaca still have over $1bn in tax allowances on profits to uitilise against current 12,000 bopd.
TM