RE:Dividends
As of June 30, 2021, BTE had long term senior notes of US$46.3.
They all matures on Nov 30 2022.
This long term notes contain various caveats, one of which will be no dividends.
So that long term debt will have to be bought back, or redemed on maturity, before a dividend can be paid. I'm assuming it can be bought back. In Q1 2021 BTE repaid US$1.1 million of this senior debt, which is why I'm assuming they can do the same to the rest prior to Nov 30/22.
In addition, BTE has its credit facility (basically a bank loan) - determined by the value of their assets (ie oil/gas in the ground). This gets reviewed reviewed bianually. Presently the limit is $440 million, with $215 million being a term loan, and the remaining $225 million basically being a line of credit. As of June 30/21 $370 million was borrowed. That would be $155 borrowed on the line of credit giving $70 million undraw on the credit line. There is a change at Dec 31/21 limiting this undrawn amout to $35 million (unclear what this means - but it seems to suggest the credit line limit is reduced to an amount $35 million above the amount drawn on Dec 31/21.)
Total long term debt was about $424 million at that time. There was also a working capital defict of $38.5 million.
The Nov 30 2022 date was finalized in Q1 2021, back when WTI was in the low US$50's (those negotiations probably started much earlier in late 2020 when WTI was in the US$30's or low $40's.). The terms are probably unfavorable - ie higher rates and limits on spending.
Back then, the strategy would have been to buy time, and prevent lenders from calling their loans and triggering a forced sale/liquidation.
That strategy worked. BTE bought the time they needed. There is no chance of a debt default, and now they are receiving large amounts of extra cash.
It turns out, they bought more time than they needed - about a year more.
What does that mean?
From a cash flow point of view, almost nothing (they are paying a higher interest rate than they would otherwise - probaby 1-3% - maybe $10 million ish). Its not nothing - its 10-20c/share, but not significantly material to the share price. ie cash flow would be about that much higher over the next year if not for the above agreement.
From a dividend perspective it means everything. I suspect the US debt can be repurchased and cancelled with the extra cash flow. Maybe even by the end of this year - if not, then in Q1/22.
That will leave the bank loan. That bank loan is probably what Loukas is trying to renegotiate right now. Its a balancing act for the banks. On the one hand they want to loan as much as possible, and on the other, they want their money as safe as possible (ie maximum asset value and cash flow ratios). ie, the banks don't want their loan paid off, but they don't want money leaving the company either. If the banks refuse to renegotate the terms of their loan piror to Nov 30/22 then come Dec 1/22, BTE may not need to borrow anything from them. it would dely the dividend, but it would make it larger.
There are lots of behind the scenes logistics before a dividend is declared. Each one of which is a step closer, and will likely appear in the share price.
It also exposes BTE to a take over between now and when the dividend is declared.. A buyer would not be limited by loan covenant - they could pay off all the debt at the time of the transaction, then reissue with different terms
It all starts with free cash flow - that being the cash flow over and above what is needed to operate the company. The company is doing very well presently, and likely will continue to do so. Oil looks like its on an unstoppable road to US$100, and who know where after that.
The world oil price has been priced for years on the assumption that whatever is happenning to US oil storage, is also happenning elsewhere. That may not be the case any more. Its starting to look like the US is relatively insulated to what is happening elsewhere.
Resources have been misallocated to green energy infrastructure, instead of oil/gas. Thats an energy deficit in the making. Its been going on for several years, but its just starting to show in the market. Demand for energy continues to grow, while supply growth is restricted through asset misallocation.
As a further bonus for Canadian producers, you may have noticed Line 3 came on a few days ago. Transmountain expansion should be producing by the end of next year, with all their production leaving North America - all of which means reduced differential between Canadain and US prices.