RE:Butall is full of itThe Sales and Investment Solicitation Process (SISP) the Nuttal referred to is in regards to the ARO reporting Surge is required to under take as part of their Credit Agreement. The full list of requirements can be found on pages 88 and 89 of the Credit Agreement posted on Sedar (date 12 Aug). ARO Reporting is
Asset retirement obligation
An Asset Retirement Obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset in which the timing or method of settlement may be conditional on a future event, the occurrence of which may not be within the control of the entity burdened by the obligation. In the United States, ARO accounting is specified by Statement of Financial Accounting Standards (SFAS, or FAS) 143,[1] which is Topic 410-20 in the Accounting Standards Codification published by the Financial Accounting Standards Board. Entities covered by International Financial Reporting Standards (IFRS) apply a standard called IAS 37 to AROs, where the AROs are called "provisions". ARO accounting is particularly significant for remediation work needed to restore a property, such as decontaminating a nuclear power plant site, removing underground fuel storage tanks, cleanup around an oil well, or removal of improvements to a site. It does not apply to unplanned cleanup costs, such as costs incurred as a result of an accident.
Firms must recognize the ARO liability in the period in which it was incurred, such as at the time of acquisition or construction. The liability equals the present value of the expected cost of retirement/remediation. An asset equal to the initial liability is added to the balance sheet, and depreciated over the life of the asset. The result is an increase in both assets and liabilities, while the total expected cost is recognized over time, with the accrual steadily increasing on a compounded basis.[2]
Nutall would know all this but IMO he's trying to stir up controversy for reasons only known to him. The actual repoting requirements by Surge are as follows from page 89
(mm) Sales and Investment Solicitation Process.
The Borrower shall pursue a formal sales and investment solicitation process (“SISP”) that includes the steps and milestones set forth in Schedule L hereto with the objective of, among other things, soliciting, exploring, assessing and negotiating possible Corporate Transactions.
(nn) SISP Reporting.
The Borrower shall deliver to the Agent detailed updates on the status and progress of the SISP, on a bi-weekly basis for the period beginning on the Closing Date and ending on and on a weekly basis thereafter, and, in any case, promptly upon the request of the Agent.
The Agent referred to is detailed on page 77
12.5 Lender Financial Advisor
The Loan Parties acknowledge and consent to the engagement by the Agent (at its own discretion or upon the request of any one Lender) of a financial advisor (the “Lender Financial Advisor”) to assist the Lenders in the evaluation of the Borrower’s financial information, asset or business valuations, forecasts and reporting as well as evaluating the SISP, potential financings (including DIP financings), equity infusions, take-overs, or other restructuring proposals or proposed Corporate Transactions. The Borrower shall give full access to the Lenders and/or the Lender Financial Advisor to its management, properties, projects, systems and books and records and will pay for the reasonable fees and disbursements of the Lender Financial Advisor
I really hate lawyers.
They also detail other requirements, such as the size of any acquisitions Surge is allowed to under take. The conclusion I come to is this is part of the new normal reporting requirements for Canadian Oil Companies under their credit agreements. I am interested to see if this requirement shows up in other companies amendments. Very Burdensome.