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Hi ShouldveSold, The company is operating at breakeven. The net debt is $16.3m. ie $7m cash and $23.3m payables and borrowing. So CEG need $15m in funding to meet it's obligations and be debt free. Of course the may negotiate a settlement with creditors that reduces the amount payable. If the company can become debt free with a finance facility that is provided against reserves and future production, then this would be a huge turn around.

Depends who the debt is with. In the case of PRD it's with FRAM. A lot of companies have subsidiaries that hold debt in order to separate the debt from the asset, hence there would be no way to recover the debt.

Unsecured debt cannot be recovered through forced liquidation or administration. A court would make an order for the debt to be recovered which would then be enforced by a debt collecting agency.

ShouldveSold, For what it's worth, I think a finance facility can clear up the balance sheet with no debt, based on 2P reserves. Cost cutting G&A and working the assets to increase production during 2022 will then be possible to meet repayments on the new facility. That would be a huge turnaround.

The difficulty with unsecured creditors is, if CEG negotiate a facility secured against their assets then the unsecured creditors move to the back of the queue. I guess they will have no choice if they want to get some repayments.

micktrick, Ah ok thanks. I guess with unsecured creditors the debt can't be called in against an asset. This is good for CEG and explains why the creditors are being very supportive.

CEG are producing oil and have plenty of P2 reserves when compared to it's valuation. If oil is in a super cycle, then the price per barrel will increase those reserves. It stands to reason, that this increases available borrowing. Not quite over, I would suggest. Quite the opposite. Although I agree the current sp is valued as being over.

micktrick , Are there any secured creditors? If so, what security against what?

I very much wish my inaugural reports to shareholders would have been in the context of more positive business outcomes, but unfortunately the Company is labouring from the poor technical results and cost overruns of two successive drilling campaigns, as well as the assumption of debts and unpaid liabilities incurred by the previous management of Columbus. Each of these situations in isolation would, in the ordinary course of events, be manageable, but in combination present a significant burden to overcome, further exacerbated by the circumstances and complications prevailing over the last 18 months - including the legal challenge by environmental groups in The Bahamas, and the persistent adverse impacts of Covid-19. The inability thus far to offset these negative outcomes with positive developments elsewhere in the broader business portfolio means that the Company is now in a position where over the near-term it will need to pursue a creditor restructuring and recapitalisation plan.

The Board expects to be able to complete this plan, which, if successful should result in the Company being well positioned for the future, with a largely debt-free balance sheet and a portfolio of assets in active production, and a rising oil price environment. Definitively dealing with matters in the balance of 2021 will mean that Challenger Energy will then have a clear "runway" in 2022 to focus on the core business of any hydrocarbon company: maintaining and enhancing existing production, finding new sources of oil, and then growing portfolio wide production in a way that is both profitable and cashflow generative. As I commented in the 2020 Annual Report, I hope that once we have completed the task of clearing away the legacy of the past 18 months, 2022 can mark the first steps in restoring value in this Company. We will update shareholders as we progress toward that objective.

It has undoubtedly been a difficult year for your Company, and most definitely not what shareholders had hoped for. In this context, on behalf of the Board and staff of Challenger Energy, I would especially like to thank shareholders for their continued support.

As noted above, the Company is presently operating with a balance sheet characterised by an unacceptably high level of historic liabilities and payables. The immediate priority during the remainder of 2021 is for this to be addressed.

However, beyond this immediate hurdle, the Company has a clear opportunity to rebuild value, particularly in the context of continued rising oil prices. The current level of (significantly reduced) corporate overhead means that the Company, if unburdened of its current payables overhang should be able to operate on a self-sustaining basis in 2022, relying on just the existing baseline production,.

Beyond this, the Company has clear work programs defined over the coming years on its core producing assets in Trinidad. Executing those work programs will require capital expenditure, but the timing and quantum of that capital expenditure is discretionary, and that capital expenditure is expected to result in increased production. Execution of these work programs and production results in line with expectations could see the addition of 300 - 500 bopd production over the period 2022-2023 which, assuming $65 per barrel realised oil price, could see the Company's business generating significant operating cash flows for reinvestment into continued production growth.

Beyond this, incremental upside value can be achieved through a successful Saffron development in Trinidad, a successful WNZ development in Suriname, expanded in-fill drilling work program in existing fields, and successful farm-out arrangements in each of The Bahamas and Uruguay.

4CER, what you say is in most part true. When you are a cash strapped exploration company, the risks are high in relying on success from the drill to fund the company. If P1 had found oil in commercial quantities, then it would be a different story. As it is, the BoD have some assets to work with and a pathway to turn things around.

micktrick. CEG has agreements in place with it's creditors for the majority $14.5m. Interim partial repayment plans, payment standstills are in place and have been agreed for the purpose of CEG to pursue it's business agenda. That agenda will not be completed overnight, hence the agreements are made with this in mind and unlikely to result in any court action. It shows support for the company. Obviously they want CEG to survive so they can get repayment rather than close out by way of forcing CEG into administration.

This is extremely positive and proves that the business is being giving the breathing room it needs to address the payments. As it's the bulk of the repayments that are due ($14.5m), there is clear support, and this probably stems from the restructuring that is currently being worked on the clear the runway for next year.

The counterparties to the majority of the payables referred to in item (i) and (ii) - mainly various suppliers, contractors and financiers - have worked collaboratively with the Company over the past months to agree various rearrangements, payment stand-stills, and interim partial payment plans so as to afford the Company time to pursue its broader business agenda. This process is continuing, with discussions ongoing in relation to a creditor restructuring coupled with a recapitalisation plan.

(i) approximately $12 million remaining to be paid in respect of the drilling of Perseverance-1,

(ii) approximately $2.5 million due to various suppliers in Trinidad and Tobago in respect of both legacy payables and the Saffron-2 well.

JohnBrigss, I have purchased shares this morning thank you. I have no idea if the recapitalisation will materialise, or if the runway will be cleared for 2022, however based on the assets and the amount of debt that needs restructuring, it's more likely than not that the company will be able to concentrate on it's operations with the debts repaid. I base this on a number of positive factors one being the oil price, and the other being that the current production makes the business cash flow breakeven with ongoing monthly overhead costs of just $200k and no further one off expenses to come now the company has reduced it's costs and become extremely lean.

I would say with some of the non producing assets that have debt cleared by way of forfeiture along with current producing assets demonstrating a production forecast, the actual amount of cash needed circa $10m, can easily be recapitalised through the assets that are producing in a non dilutive way. The mention of preparing the company for a clear runway in 2022 gives hope that this recapitalisation is currently being put into effect. This leads me to believe that a recapitalisation, along with renegotiated payment terms, which may reduce the burden, will allow the company to focus on increasing production and cashflow in 2022, in order to pay back the recapitalisation used to reduce the debt. I would say once this strategy has been announced, a turnaround can be achieved. Interesting that the company has a going concern reported in the interims for the next 12 months, so must be confident of the pathway ahead.

I would say with some of the non producing assets that have debt cleared by way of forfeiture along with current producing assets demonstrating a production forecast, the actual amount of cash needed circa $10m, can easily be recapitalised through the assets that are producing in a non dilutive way. The mention of preparing the company for a clear runway in 2022 gives hope that this recapitalisation is currently being put into effect. This leads me to believe that a recapitalisation, along with renegotiated payment terms, which may reduce the burden, will allow the company to focus on increasing production and cashflow in 2022, in order to pay back the recapitalisation used to reduce the debt. I would say once this strategy has been announced, a turnaround can be achieved. Interesting that the company has a going concern reported in the interims for the next 12 months, so must be confident of the pathway ahead.

CEG have a bigger footprint than PRD. Bahamas, T&T, Suriname, Uruguay. Therefore, COVID affects CEG differently.

They can still report the interims without funding info.

I'm not saying finances are the delay. The interims are backward looking so not reporting on finances as of today. All I would say is that there are some events post the interims that will need addressing, and as such if it relates to any funding, may be the reason we've not heard anything yet. If it's being resolved by way of debt, farmout, or other non dilutive means, they may want to refer to this with up to date info.

Personally, I think they have had loads of time to issue the interims. If it's not today, then there will have to be a good reason why. Possibly Covid related. I doubt there will be much to say as it's all backward looking. The end of June trading update covered the production and revenue. If it is Monday, then possibly to do with associated finance news.