RE:RE:VikingAnything is possible.
I suspect they will pay down about $120 million in debt in Q2
Leaving them with about $320 million in debt.
$20 million of which is zero interest held for employees as performance bonus, that can be paid in stock or cash, as the discretion of the company. ie its a liability to itself.
About $47 million is already in a term loan due on Nov 30 (US$36.7 million).
A certain amount of expenditure can be financed as accounts payable.
All of which suggests at the end of Q2 the syndicated loan may have been paid down to about $245 million ish.
The previously published intent is to convert this into long term debintures (ie nothing to do with a bank or syndicate of banks).
Their Prop loan ($10.5 million at the end of Q1) may get paid off as it comes due - it was a 12 month loan if I remember correctly, with timed repayments over that period.
Their US$36.7 million term loan due Nov 30 may just get paid off when it comes due on Nov 30
All of which suggests they may be attempting to refinance about $245 million of bank syndicate loan come July 1
They are probably presently estimating $300-$350 million in cash flow over H2.
$45 million of which is apparently already budgeted for H2 Capex.
It should not be hard for a company that presently generates about $450 million in free cash flow ($600 million in FFO - $150 million in Capex), to place $245 million of long term debt in the market at 6ish percent.
The alternative option would be to extend the syndicate bank loan another year; keep capex where it is, and pay the sydicated loan down to zero by the end of the year.
Both options put OBE in a stronger position by the end of the year.
In my view the former has a larger near term share price impact for the following reasons.
1. Every company has an optimal debt ratio, and its almost never zero (expect in cash flow negative high tech). OBE's optimal debt is probably closer to $300 million with something like 25% getting paid down per year. OBE's optimal debt ratio is not zero.
2. Increasing Capex so that OBE can drill wells that return their cost within a few months is a virtuous circle - ie they invest $100 million, then get that money back within the year, plus another $50 million before the year has ended. Thats a 50% return on capex!
3. Replacing the bank syndicate with open market debintures will lower the interest rate, and allow a return to shareholders in the form of a dividend. A dividend set a 50% of free cash flow (FFO - capex)/2 may be enough to double the share price.
The second option means number 2 and 3 above start 6 months ish later.
It also means someone else may try to buy OBE during those 6 months, while its price remains below what it would be in Option 1.