CALGARY, Aug. 4 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) announced today that it has completed an amendment ("Amendment") to its reserve-backed credit facility, resulting in an extension of its term until June 30, 2012 and a reduction in borrowings under the facility to US$38.25 million, as a result of a one-time payment of US$8 million, made immediately prior to closing and the simultaneous payment of an additional US$3.75 million, representing the second quarter 2010 payment which under normal circumstances would have been paid prior to June 30, 2010 if, as was anticipated, the Amendment had been closed prior thereto.
Petrolifera has agreed to make similar quarterly principal repayments of $US3.75 million, which are anticipated to be financed from its cash balances and cash flow from operations, at the end of each ensuing quarter until June 30, 2012, when the balance of US$12 million (or such lesser amount as may be outstanding) will become due and payable. Pursuant to the Amendment, a portion of any funds received by Petrolifera from the recovery of sunk costs (up to a maximum of US$5 million in the aggregate) pursuant to any farmout agreements which may be consummated with respect to the company's lands in Colombia and Peru will also be used to further reduce indebtedness. Pricing reflects current market conditions based on the London Interbank Rate ("LIBOR"). Pursuant to the Amendment, should alternative sources of funding become available to it, the company retains the right to discharge any balance of indebtedness of this amended reserve-backed credit facility, at any time and without penalty.
The Amendment provides Petrolifera with an immediate improvement in its working capital position, as a significant portion of the company's reserve-backed indebtedness will now be classified as long-term debt. This balance sheet effect will be reflected in the company's financial statements for the six months ended June 30, 2010, which will be released to the public on August 5, 2010. However, cash balances and total debt outstanding at June 30, 2010 will not reflect the payments detailed herein, as they were made after the end of the reporting period and have resulted in the reduction in reserve-backed indebtedness to an aggregate of US$38.25 million, including the current and long-term portion.
Petrolifera retains significant liquidity and anticipates being able to continue meeting its financial obligations pursuant to the terms of this Amendment, but in due course will continue to examine and may pursue alternative funding arrangements to discharge any residual credit facility indebtedness which may remain outstanding, including that which may be due on June 30, 2012.
Petrolifera Petroleum Limited is a Calgary-based crude oil and natural gas exploration and production company with operations in Argentina, Colombia and Peru."
http://www.theglobeandmail.com/globe-investor/news-sources/?date=20100804&archive=cnw&slug=C8408
Comment: Well it looks like the amendment to the reserve-backed credit facility has finally been completed. So it is done. Complete. Petrolifera had to pay $11.75 million dollars in cash immediately to arrange for the amendment and must continue to pay $3.75 million dollars each quarter until June 30 , 2012. In addition to these cash payouts, if Petrolifera acquires cash from "the recovery of sunk costs" from future farm in partners who Petrolifera signs through farm ins on Petrolifera's land in Columbia and Peru, Petrolifera must pay a portion of this money to its bankers as well. it seems to me like Petrolifera is paying through the nose for a reduced credit facility that has been extended until 2012. Petrolifera's problem going forward now appears to be that Petrolifera now has a severely reduced amount of cash on hand to exploit and develope it's huge find at the Brilliante field. While Petrolifera has some great fields at Brilliante and possibly at La Pinta, it seems to me that it is going to take years to develop any of this without taking on a partner with deep pockets. Petrolifera at present barely has enough money to complete it's capital program for 2010, and now the amended reserve-backed credit facility hamstings it substantially going forward. I must assume that the alternative to the amendment to the reserve-backed credit facility was that Petrolifera's bankers would have demanded that Petrolifera start selling off assets in order to pay its debt. We know that Petrolifera's property in Argentina isn't worth a whole lot, so without this credit facility, Petrolifera basically would have been forced out of business by it's bankers. Yet with the new credit facility Petrolifera will slowing haemorrhage to death over the next couple of years unless it finds a wealthy partner or it merges with another company such as Petrominerales or Gran Tierra Energy. Does anyone else have a view on this? It's too bad that the bankers don't have the same faith that the shareholders do that Brilliante will be a company maker and that they could wait inline with the shareholders for a huge future pay off. Instead all they care about is the cash.
Cheers; Scott
