LONDON (Alliance News) - Nighthawk Energy PLC Monday said it will use two-thirds of its cash balance to repay some of its outstanding debt, but believes it will have adequate liquidity to fund its existing operations throughout 2016.
Following weeks of negotiations with its lender, the Commonwealth Bank of Australia, Nighthawk has struck a deal with the bank that has led to a series of amendments to its reserve-based loan covenants, including to the leverage ratio and elimination of the minimum liquidity requirements.
The negotiations began in early December after Nighthawk breached covenants under its reserve-based loan, principally the total debt to earnings before interest, tax, depreciation, amortisation and exploration expenses covenant. Fortunately for Nighthawk, the bank granted a waiver as the pair entered talks about adjusting the covenant.
On Monday, Nighthawk said the agreed amendments will mean the company expects to be within covenant parameters for the reporting period that ended December 31, 2015.
The amendments include the redetermination of Nighthawk's borrowing base to USD23.0 million. Currently, Nighthawk has outstanding debt totalling USD27.0 million, meaning the company will have to repay USD4.0 million.
Nighthawk said it will pay the USD4.0 million from its USD6.0 million cash balance, but tried to alleviate any concerns about its cash moving forward by stating it will have "adequate liquidity" to continue its existing operations throughout 2016.
In addition, Nighthawk said it is confident of gaining approval for its water flood project in the US. A formal hearing with the Colorado Oil and Gas Conservation Commission is scheduled for January 27 and 28, and the company said it was common for applications to be contested.
A water flood programme is the use of water injection to increase the production from oil reservoirs. Use of water to increase oil production is usually implemented as a secondary measure after the use of the reservoir's natural energy to flow oil begins to lag.
"As is common in these hearings, the application is being contested. However the company and its lawyers are confident that it has a strong case and expect that the project will be approved," said Nighthawk.
Nighthawk shares were trading down 5.8% to 0.965 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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