Connacher Oil and Gas bonds today traded at fresh record lows for a second consecutive session after the company reported third-quarter results that included a going concern warning. The 8.5% second-lien notes due 2019 changed hands at an all-time low of 54.5 earlier today, for a net decline of 10 points since the report, according to sources and trade data.
For the third quarter, production increased 20% to a record of 14,163 barrels per day, but costs also increased due to higher natural gas pricing. Costs were up 29% year over year, to $26.4 million, according to a company filing.
The Nov. 13 report carried an ominous warning that stated the following: “The company’s current debt structure and limited access to additional financing … create material uncertainties that may cast significant doubt about the company’s ability to continue as a going concern.”
Management additionally warned about an ability to service debt given the current projected cash flows from operations, the filing shows. To this end, Feb. 1 coupons loom for the abovementioned secured notes as well as a C$350 million series of 8.75% second-lien notes due 2018, which have also sunk to the 50s, according to sources.
Management furthered stated that they will “continue to monitor” capital balances and commitments amid “changing economic and risk conditions,” the filing shows. Based on current projections, the company will need additional funds in 2015, according to the firm.
The two series of B/Caa3 second-lien notes date to May 2011 issuance via Credit Suisse and RBC as part of a refinancing exercise on previously outstanding 11.75% first-lien notes due 2014 and 10.25% second-lien notes due 2015. Pricing was par apiece, which was an eighth wide of guidance, with split ratings of BB-/Caa2 at offer.
Calgary-based Connacher is an oil company focused on harvesting bitumen with principal assets at the Great Divide oil sands property near Fort McMurray, Alberta, as well as Thornbury and Quigley lands. The company trades publicly in Toronto under the symbol CLL. Large current and pending investors include Audley Capital Advisors, Fidelity Management & Research Company, Pinetree Capital, and West Face Capital, according to S&P Capital IQ. – Matt Fuller
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