PostRock Energy Corp. (OTC: PSTR) said Nov. 17 that the borrowing base on its bank credit facility was set at $39 million.
The amount reflects a $37 million reduction from the $76 million borrowing base, which was last redetermined in May. The reduction is due to the decline in oil and natural gas prices, the roll off of hedges, and production of reserves since the last redetermination, according to the release.
As expected, the magnitude of the reduction has led to a deficiency which could ultimately lead to a default under the credit agreement, the release said.
On Nov. 12, PostRock had $76.18 million (including issued but undrawn letters of credit) utilized on its bank credit facility resulting in a borrowing base deficiency of $37.18 million.
In accordance with the bank credit facility, PostRock has 30 days, after being notified of such deficiency by the administrative agent under the bank credit facility, to indicate in writing its course of action to eliminate such deficiency.
PostRock is currently in discussions with its lenders regarding alternatives if a default does occur but can give no assurances that an agreement can be reached on terms acceptable to the company, the release said.
Additionally, in March 2015, PostRock engaged Evercore Group LLC to assist the board of directors in evaluating its strategic alternatives which include, among other things, merging or selling PostRock and/or selling operating assets.
The new borrowing base will remain in effect until the next date the borrowing base is redetermined pursuant to the bank credit facility.
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