Resaca Exploitation Inc Corporate Update (1490M)

TIDMRSOX

RNS Number : 1490M

Resaca Exploitation Inc

13 September 2012

 
 for immediate release   13 SEPTEMBER 2012 
 

Resaca Exploitation, Inc.

("Resaca" or "the Company")

Corporate Update

Resaca (AIM:RSOX), the oil and natural gas production, exploitation, and development company focused on the Permian Basin in the USA, announces an update on certain corporate matters.

As announced in the Company's interim results release on 30 March 2011, the Company has not been in compliance with certain financial covenants, under both our subordinated credit facility and our senior credit facility (the "Facilities"). We have not been in compliance with the debt to EBITDA ratio and the EBITDA to interest ratio covenants of the subordinated facility, which caused us to also be in non-compliance with our senior facility and the non-compliance has required classification of these Facilities as current assets on our balance sheet, in turn causing a failure of the current asset to current liability ratio covenant of both Facilities. As a result of the covenant non-compliance, the Company is currently unable to draw down further funds from the senior facility and the resulting capital constraints limit the Company's ability to increase its production and operating cash flows sufficiently to bring these Facilities back into covenant compliance. As a result of the covenant non-compliance, the interest rate on the Company's subordinated facility has increased by 2 per cent to 14 percent and the interest rate on the Company's senior facility by 3.5 percent to 7.5 percent since May and September, respectively. At 30 June 2012, the Company's net indebtedness was approximately $57 million.

Since the Company drew the remaining balance available under its senior credit facility in February 2012, the Company's capital projects have been limited to those projects that can be funded through operating cash flow. With this limited capital, the Company has focused on maintaining and increasing the scope of its waterflood operations at its Copper Jal, Langlie Jal and Edwards Grayburg properties where the Company has received favorable waterflood performance. For the twelve months ended 30 June 2012, the Company's production averaged 716 barrel of oil equivalents per day ("boepd"). However as a result of the capital constraints detailed above, the Company is not now anticipating being able to increase its production levels to its previous targets, which were in excess of 1,000 boepd for the twelve month period ending 30 June 2013. The Company now anticipates that total production for the year will remain broadly constant with the production rates achieved in the previous twelve month period, with a consequential reduction in the company's revenue and profit expectations for the financial period ending 30 June 2013. Since 30 June 2012, the Company's production averaged 740 boepd in July and 741 boepd in August 2012.

The Company is currently exploring a variety of strategic alternatives, including the possible sale of a number of its assets, with the aim of reducing indebtedness and bringing the Facilities into compliance. Further announcements as to progress in this regard will be made as and when appropriate.

Resaca's third party reserve engineers are currently finalizing their annual reserve studies on the Company's properties as of 30 June 2012. Resaca expects to receive the final reports from its engineers and provide a reserve update by the end of September. The Company does not expect a material change in its 3P reserves as compared to its 3P reserves as of 31 December 2011.

The Company expects to release its annual audited results for the fiscal year ended 30 June 2012 by mid October.

J.P. Bryan, Resaca Chairman and CEO commented

"While we are disappointed that we need to reduce our production goals for the year ending 30 June 2013 and continue to be in non-compliance on our credit facilities, we continue to believe in the value of our long-lived, oil weighted properties. We are considering all possible alternatives to address the non-compliance with our credit facility covenants, with the ultimate aim of easing our capital constraints and therefore being able to increase production rates."

For further information please contact:

 
 Resaca Exploitation, Inc. 
 J.P. Bryan, Chairman and Chief Executive 
  Officer                                             [phone] 
 John J. ("Jay") Lendrum, III, Vice Chairman          [phone] 
 Dennis Hammond, President and Chief 
  Operating Officer                                   [phone] 
 Chris Work, Chief Financial Officer                  [phone] 
 
 Buchanan (Investor Relations)                    [phone] 
 Tim Thompson 
  Helen Chan 
  Ben Romney 
 
 finnCap Limited (Nomad and Broker)             + 44 (0) 20 7220 0500 
 Matt Goode, Corporate Finance 
  Christopher Raggett, Corporate Finance 
  Victoria Bates, Corporate Broking 
 

About Resaca

Resaca is an independent oil and gas development and production company based in Houston, Texas. Resaca is focused on the acquisition and exploitation of long-life oil and gas properties, utilizing a variety of primary, secondary and tertiary recovery techniques. Resaca's current properties are located in the Permian Basin of West Texas and Southeast New Mexico. Additional information is available at www.resacaexploitation.com.

This information is provided by RNS

The company news service from the London Stock Exchange

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