Cano Petroleum Inc., Fort Worth, Texas, (NYSE Amex: CFW) has provided an update regarding its ongoing strategic alternatives review and a cash-flow maximization plan for the near-term.
Upon the termination of its merger agreement with Resaca Exploitation Inc., Houston, (London AIM: RSOX, RSX), the company altered its operating strategy from growth mode to a cash maximization mode. As part of this effort, Cano proceeded to reduce field-level and corporate general and administrative expenses.
The company has reduced the size of its board from six independent directors to two independent directors. The independent directors remaining are Donald W. Niemiec and Garret Smith. The company has also implemented staffing reductions as part of reducing its overall general and administrative expense. Additionally, certain field level expenses which solely served the company's growth strategy have been eliminated, thus increasing the company's net cash flows.
Cano chairman and chief executive Jeff Johnson says, "We would like to thank our former directors Bill Powell, David Wehlmann, Randall Boyd and Bob Gaudin for their service to Cano and its shareholders. I am proud of the steps that our board and employees have taken to streamline processes and reduce costs."
On Sept. 24, Cano's lenders delivered a reservation of rights letter in response to its inability to deliver a letter of intent as specified in a forbearance agreement. Presently, the lenders have not taken any action in conjunction with the delivery of this letter. While Cano is in compliance with its asset coverage ratio covenant and continues to meet its secured indebtedness interest payment obligations, the company is not in compliance with its debt to EBITDA and EBITDA to interest covenants.
Per the NYSE Amex Company Guide, Section 610(b), Cano is providing a press release notification of the fact that its auditor, Hein & Associates, rendered a going concern opinion for the company. This opinion was previously disclosed in its Form 10K filing for the period ended June 30.
Cano has oil and gas operations in Texas, Oklahoma and New Mexico.
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