RE:outlook Actually it doesn't matter how much oil West Hazel is producing since the lease lender has exercised their right to sieze production and redirecedt revenue to paydown this obligation. This also means that revenue is now essentially ZERO to the company and the holder of the term Loan has not recieved required payments. Forberance was issued to May 31 then extended to August 31. However since no cash production will be recieved by the company prior to the discharge of the lease obligation. One of three things must happen
1) They recieve a new financing and consolidate all obligations under that or
2) They recieve and addition forbearance to extend at the end of August
3) They declare bankruptcy
Iten 3 is the MOST LIKELY SCENARIO at this point.
In February 2014, the Company entered in to a finance lease whereby the Company would lease a production facility over a period of eleven months. Under the terms of the lease, the Company is required to make fixed monthly payments of $184,450 for nine months. Prior to the payout, the Company has an ownership interest of 1% in the facility. After these nine payments are made, the Company will have an ownership interest of 95% in the facility. If the Company fails to make the required payments, the lessors may in their sole discretion immediately take and sell oil produced by the Company with such oil to be valued equal to outstanding amounts. Once the total payout costs have been satisfied, the Company is to pay to the minority owner an amount of $6,250 each month for 12 months, at which time the payments then cease. The interest rate implicit in this lease is 16% per annum. The Company was unable to make loan payments during the third quarter and is in default of the terms of the finance lease. The Company has executed a forbearance agreement which extends the loan until May 31, 2015 at which time the loan becomes due immediately and the loan becomes subject to demand for repayment. The lender has provided a notice to pay to the marketer so that revenue proceeds are re-directed for lease repayment. The loan has been extended a further 90 days until August 29, 2015. As at March 31, 2015, the obligation outstanding under this lease was $566,956 (June 30, 2014 - $1,224,954). The leased asset is being depleted using the unit of production method.
In April 2014, a term loan in the amount of $1,600,000 was advanced with a stated interest rate of 16% per annum and maturity of April 30, 2015. The Company was unable to make loan payments during the third quarter ended March 31, 2015 and is in default of the terms of the loan agreement. The Company has executed a forbearance agreement which extends the loan until May 31, 2015 at which time the loan becomes due immediately and the loan becomes subject to demand for repayment. The loan has been extended a further 90 days until August 29, 2015. This loan is repayable with principal payments of approximately $135,000 plus interest on a monthly basis. As at March 31, 2015, the obligation outstanding under this loan was $505,401 (June 30, 2014 - $1,141,028). Deferred financing fees of $1,175 related to the loan (June 30, 2014 - $58,973) are recorded on the statement of financial position.