Chinook Energy Inc. (fka CNKEF)

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https://chinookenergyinc.com/wp-content/uploads/2019/08/CKE-Aug-8-19-Presentation-Final.pdf



Value here at $0.034





PRESIDENTS MESSAGE



Since being repaired following a pipeline rupture near Prince George, BC, Enbridge has operated its Westcoast pipeline at reduced pressures which has negatively impacted the natural gas price at Station 2. This reduced service is likely to have a continued negative impact on Station 2 gas prices for the duration of the restriction, understood to be until this October. Although we responded by acquiring additional egress allowing us to realize a premium over Station 2 spot pricing, most transport services are currently fully contracted or are not economically favourable. We will continue to focus on capital preservation and optionality until we observe more constructive BC Station 2 benchmark pricing or are otherwise able to secure more favorable natural gas pricing which would serve to strengthen our balance sheet and facilitate future drilling activity.

We are not in compliance with one of our lender’s financial covenants: net debt to cash flow that allows a maximum ratio of three times due to a cash flow deficit over the previous 12 months for the reasons set forth below. Cash flows, as defined by our lender, approximate adjusted funds flow less provision expenditures and lease payments. Third party outages and our reaction to depressed BC Station 2 pricing through voluntary restricting our production combined to reduce our adjusted funds flow over this previous period. Because this financial covenant is calculated on a trailing 12 months basis, the effect of these previous production restrictions are punitive in its calculation over the next forecasted nine months and outweigh the effect from expected higher pricing. Our forecast may materially change if the BC Station 2 benchmark exceeds current strip pricing during the upcoming winter season resulting from the expected increase in BC take away capacity anticipated from the expansion of TCPL’s North Montney Pipeline combined with Westcoast’s pipeline returning to normal operating pressures.

Although our debt is drawn under a demand agreement resulting in all such draws always being classified as a current liability, the noncompliant net debt to cash flow financial covenant and recent decreases in forward BC natural gas strip pricing creates uncertainty as to the likelihood that our lender will provide us a waiver for the noncompliance with this financial covenant. We expect our lender to reduce the $10 million availability of our credit facility given recent decreases in forward natural gas benchmark pricing. While we continue discussions with our lender, the borrowing base redetermination and resolution of the financial covenant breach remain outstanding. These discussions include requesting that our lender provide us a waiver for the financial covenant breach and/or remove (modify) it from (within) the terms of our demand credit facility agreement. While these discussions are ongoing, we are evaluating other financing options that may inject additional liquidity including the disposition of natural gas assets, the sale/leaseback of midstream assets and other alternative sources of debt.




https://chinookenergyinc.com/chinook-energy-inc-announces-second-quarter-of-2019-operating-and-financial-results/




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