Upstream producers have been waiting with held breath in dreadful anticipation of the feared borrowing-base redetermination season. This is when lenders will evaluate credit limits based on year-end price decks---price decks some 70% lower than at the last bi-annual reviews when commodities were high flying mid summer. Now, they're here. Many E&Ps with high balances are in for a fiery ride, and some simply won't survive it with anemic cash flows and no where else to turn for liquidity. Delta Petroleum finds itself in such a battle. Year-end 2008 the Rockies explorer was fully drawn on its $295-million facility with $65 million in the bank. Following a February redetermination, it found itself $140 million in arrears and has until June 15 to come up with the funds. The company says it will pursue joint ventures and asset monetizations, but the outlook is slim chances at best. Delta is not alone. Others facing redetermination firestorms include:
- Edge Petroleum---Knocked to its feet following the busted merger with Chaparral Energy, the company reports it is on the brink of bankruptcy following a redetermination of its credit facility, resulting in a $114-million deficiency. It hired Akin Gump to find strategic alternatives for its mostly South Texas assets. May 15 is its drop-dead date.
- Crusader Energy---The newly public Oklahoma City producer came up a mere $5 million short following a review, but $5 million is a lot of greenbacks if you don't have them. The company with assets in the Midcontinent and Bakken play hired Jefferies & Co. to seek strategic alternatives.
- Energy Partners Ltd.---Borrowing base plunged from $150 million to $45 million, leaving a $38 million deficit. It hired Parkman Whaling as financial advisor. CEO Richard Bachmann resigned. Its assets are onshore Louisiana and Gulf of Mexico.
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