via Geoffrey Laxton 2014-12-30 Oil patch companies flirting with default theglobeandmail/…/%3bjsessionid=JkSHJk3Dgp…/… SUBSCRIBERS ONLY CALGARY — The Globe and Mail Published Tuesday, Dec. 30 2014, 3:43 PM EST Last updated Tuesday, Dec. 30 2014, 3:43 PM EST One of the country’s most troubled oil sands companies is holding off on payments to bondholders and nearing default. Southern Pacific Resource Corp., a small and long-suffering outfit out of Calgary, on Tuesday said in a statement that it has “elected not to make the cash interest payment” of about $5.175-million due Dec. 31 related to its outstanding six per cent convertible unsecured subordinated debentures. The company has a so-called 30 day cure period from the payment date to cough up the cash “before an event of default will occur,” according to Southern Pacific’s press release. The firm said it “intends to continue to work with its stakeholders and advisors to consider the next steps for the company in its strategic review and capital restructuring process” as the clock ticks down on its default deadline. Southern Pacific earlier this month hired bankers at the Royal Bank of Canada to help it address its liquidity and capital structure. Companies going down this route often end up selling themselves or their assets. Southern Pacific admits that in December, “continued production improvements have not yet materialized” at one of its projects. This, coupled with low oil prices, will further hurt the company’s prospects. Southern Pacific is not alone. Connacher Oil and Gas Ltd., another small and troubled energy firm trying to extract bitumen near Fort McMurray, earlier this month hired Bank of Montreal to “devise and implement a strategy to address” its capital structure. Laricina Energy Corp. in November picked BMO, Peters & Co. Ltd., and Morgan Stanley to help it find strategic options,which may end in an auction. Laricina is a privately-held oil sands company. Shoreline Energy Corp., a penny stock, will also miss its interest payment to debt holders this month, according to a statement it released Tuesday. The Calgary-based exploration and production company said it plans to “make a proposal to the debenture holders in the first quarter of 2015 for the purpose of facilitating the corporation’s restructuring and strategic corporate transaction opportunities.” The missed payment is tied to the company’s convertible debt. RBC is working with Shoreline to untangle its numerous financial woes. Shoreline last month received conditional approval to reprice warrants. It has been negotiating with lenders for months, and has been selling assets. A proposed merger with Lilis Energy Inc. fell apart in March. Shoreline settled a land title dispute in February and hoped that would help it reduce debt and restructure. Its strategic review continues. Companies across the energy patch have revised their 2015 budgets, cut dividend payments, and put assets on the auction block, in light of falling oil prices. Southern Pacific needs to both relieve its financial burden and current debt structure and secure additional financing to fund further drilling. The company issued a frank warning to investors: “Trading in securities of the company should be considered highly speculative,” Southern Pacific said in a paragraph preceding the boilerplate section which usually contain cautionary statements.
Posted on: Thu, 01 Jan 2015 19:52:04 +0000
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