Bonavista Energy Corp BNPUF

Deep Dive on Going-Concern Disclaimer

[RetailRube]

For the last 6 weeks, I have been trying to verify the company's claim that "for the remainder of 2019 and 2020 based on current strip pricing, which is in significant backwardation, indicates a potential breach of its total debt to EBITDA within the next 12 months.  Management forecasts may change materially based on actual prices received."

I wanted to construct a set of numbers from www.cmegroup.com futures prices that proved the company's statement.  In particular, I wanted to show why there was no going-concern disclaimer in their annual report which the BOD approved and released on 2019-Feb-14 and KPMG auditors approved on 2019-Feb-14.  But by 2019-May-02 when the company issued their 2019-1Q earnings report, the futures prices had rapidly collapsed, forcing the company to issue a going-concern disclaimer. I am suspicious at the sudden change, particularly since the company had written UP the value of their reserves in 2018-4Q.  I hope the auditors are asking these same questions.

So far, I have failed to find the math that can prove the collapse happened in March/April.  Moreover, the company did not provide any calculations or further comment.  I read the entire 2019-1Q report and its notes, the entire 2018 annual report, notes and MD&A, the entire 2018 AIF, the entire 2019-May Corporate Presentation and the entire 2019-July Corporate Presentation.  Nothing.  Remarkably, the 2019-July Corporate Presentation contains zero mention of the existence of a Going-Concern disclaimer, not even in the disclaimer footnotes.

But I did find some cool stuff during my research that I will share that with you in my next couple of posts.  I hope that you will see something that you can take to the next level of understanding.

I am still a shareholder.  I am hoping that suspending the dividend ($2.6m/qtr) will be followed soon by announcements of cuts to the capital budget ($170m for 2019) and possible asset disposals.  The chairman has seen his 10m share holding decline since 2011 from $300m to only $4m.  TIME TO ACT!