Going-Concern ClauseI can't decide whether to buy more shares or give up and sell everything.
So I pulled out the 2Q-2020 financial statements to calculate the WTI price they needed to break-even on a cash basis without the assistance of hedging gains. (It seems to work out to about C$24/boe. Anything above that is available for drilling or paying down the debt. WTI Sep-30 contract is quoted on Reuters at US$40.98, which is C$54.12 translated at 0.7572 C$/U$. This is promising.)
But I was surprised to discover a Going Concern Clause at the bottom of the Balance Sheet. It says see Note 2 to the Financial Statements. It says they are required to repay the C$167.5m non-revolving term loan on March 31, 2021. And of course, they can't.
I got lazy at the end of 2Q and only read their earnings press release, which does not mention a going concern clause. After that, I read their Aug-2020 Corporate Presentation. It also does not contain a Going Concern warning. In my experience with Going Concern disclosures, they normally are mentioned in the Press Release. So now I'm nervous about trusting what I read.
I also found in the Aug 2020 Corporate Presentation a graph on page 4 of their hedging program. It looked great! Hedged WTI at $55 in 4Q-2020. With WTI at US$41 that would be a nice hedging profit in 4Q. Except the graph is in Cdn$. Which means they are actually hedged at US$41 in 4Q ... which means no hedging gains. Who expresses WTI in Cdn$? Even WCS is expressed in US$.
Poof. There goes my trust in management. So should I stay or should I go?