Canada oil company Lightstream says risk of mid-June debt default

Mon May 2, 2016 3:25pm EDT
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By Nia Williams

CALGARY, Alberta May 2 (Reuters) - Canadian oil and gas producer Lightstream Resources warned on Monday it could fail to meet a debt payment obligation due in mid-June if it is unable to bolster its balance sheet through asset sales.

The Calgary-based company also said its borrowing base had been cut to C$250 million ($199.52 million), giving it 90 days to repay its credit shortfall of C$121 million or trigger a debt default.

The 28,000-barrel-of-oil-equivalent-per-day producer is the latest Canadian energy company to run into financial difficulty as a result of the prolonged global crude price slump and spring redeterminations, in which lenders reassess how much they are willing to let oil and gas producers borrow.

Last month, Terra Energy Corp went into receivership after its lender, Canadian Western Bank, demanded full repayment of its debt.

In a statement, Lightstream said it was looking at a number of strategies to bolster its balance sheet, including asset sales and restructuring, but warned it could struggle to meet a debt interest payment in just over six weeks' time.

"If we are unable to execute on an appropriate strategic transaction in a timely manner, based on current commodity prices, our funds flow from operations is not expected to be sufficient to fund our upcoming junior debt interest payment obligations, the first of which is due June 15, 2016," the company said.

Lightstream, which operates mainly in the Cardium and Bakken shale plays, said its 16-member lending syndicate cut its borrowing base to C$250 million from C$550 million.

As the company has already used C$371 million of its credit facility, including letters of credit, it must repay the difference in 90 days.

Lightstream shares were last down 29 percent on the Toronto Stock Exchange at 23 Canadian cents a share. ($1 = 1.2530 Canadian dollars) (Editing by Peter Cooney)