UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Date
of Report (Date of earliest event reported):
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June
6, 2008
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AURORA
OIL & GAS CORPORATION
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(Exact
name of registrant as specified in its charter)
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UTAH
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000-25170
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87-0306609
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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4110
Copper Ridge Drive, Suite 100, Traverse City, MI
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49684
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
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(231)
941-0073
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(Former
name or former address, if changed since last
report.)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
2.04
Triggering
Events That Accelerate or Increase a Direct Financing Obligation.
On
January 31, 2006, Aurora Antrim North, L.L.C., a wholly owned subsidiary of
Aurora Energy, Ltd. (currently Aurora Oil & Gas Corporation,
successor-by-merger to Aurora Energy, Ltd.), entered into a senior secured
credit facility (the “Senior Secured Credit Facility”) with BNP Paribas (“BNP”).
The borrowing base was $50 million for drilling, development, and acquisitions,
as well as other general corporate purposes. As proved reserves are added,
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borrowing base may increase to $100 million.
On
August
20, 2007, Aurora Oil and Gas Corporation (the “Company”) and certain
subsidiaries, as guarantors, entered into a second lien term loan agreement
(the
“Term Loan”) with BNP, as the arranger and administrative agent, and several
other lenders forming a syndication. The initial term loan was $50 million
for a
5-year term which may increase up to $70 million under certain conditions over
the life of the loan facility. In connection with the Term Loan, the Company
also agreed to the amendment and restatement of its Senior Secured Credit
Facility with BNP and other lenders forming a syndication, pursuant to which
the
borrowing base thereunder was increased to $70 million.
The
Term
Loan and the Senior Secured Credit Facility contain, among other things, a
number of financial and non-financial covenants and maintenance of certain
financial and operating ratios, including current ratio and specified coverage
ratios (collateral coverage and proved developed producing reserves coverage
ratios).
Senior
Secured Credit Facility
On
April
29, 2008, management became aware and notified BNP that the Company failed
to
meet certain covenants required by the Senior Secured Credit Facility. According
to the Senior Secured Credit Facility, the Company had 30 days to remediate
the
covenant failures in order to avoid an event of default. At that time, the
Company also began negotiations for a waiver in the event the Company was
unsuccessful with covenant remediation efforts. Subsequently, the Company was
unable to remediate the covenant failures.
On
June
6, 2008, BNP notified the Company that the syndicate had redetermined the
Company’s borrowing base to be $50 million.
As
a
result, there was a potential
deficiency of as much as $20 million.
According to the Senior Secured Credit Facility, the Company would be required
to repay any deficiency in three equal monthly installments within 90 days
following notification, subject to, among other things, the Company’s right to
request an interim redetermination of the borrowing base.
On
June
12, 2008 (but as of June 2, 2008), the Company and certain subsidiaries, as
guarantors, entered into a forbearance agreement and amendment no. 1 to the
Senior Secured Credit Facility (the “Forbearance and Amendment Agreement”) with
BNP and the syndication. In accordance with the Forbearance and Amendment
Agreement, BNP has permanently waived any defaults or events of default
resulting from the non-compliance with any covenant failures for any date of
determination prior to and including March 31, 2008. BNP has also agreed to
forbear and refrain from (i) accelerating any loans outstanding (including
any
borrowing base deficiency), (ii) exercising all rights and remedies, and (iii)
taking any enforcement action under the Senior Secured Credit Facility or
otherwise as a result of certain potential covenant defaults during the period
from June 2, 2008, until August 15, 2008 (the “Standstill Period”), provided the
Company complies with certain forbearance covenants (collectively, the
“Forbearance Covenants”). The Forbearance Covenants are (i) the Company shall
deliver to the syndication on or before the twentieth business day of each
month, a detailed monthly financial reporting package for the previous month
that shall include account receivable payables, working capital, monthly
production reports and lease operating statements, (ii) the Company shall
participate in monthly conference calls with the syndication during which a
financial officer of the Company shall provide the syndication with an update
on
restructuring and cost reduction efforts, and (iii) no later than August 18,
2008, the Company will execute (or cause to be executed) additional mortgages
such that, after giving effect to such additional mortgages, the syndication
will have liens on not less than 90% of the PV10 of all proved oil and gas
properties evaluated in the reserve report most recently delivered prior to
such
date. The Company’s failure to comply with the Forbearance Covenants will
terminate the Forbearance and Amendment Agreement and allow the syndication
to
exercise any or all of their rights and remedies under the Senior Secured Credit
Facility. The Forbearance and Amendment Agreement also increased the interest
rate associated with outstanding borrowings.
Second
Lien Term Loan
On
April
29, 2008, management became aware and notified BNP that the Company failed
to
meet certain covenants required by the second lien Term Loan. According to
the
Term Loan, the Company had 30 days to remediate the covenant failures in order
to avoid an event of default. At that time, the Company also began negotiations
for a waiver in the event the Company was unsuccessful with covenant remediation
efforts. Subsequently, the Company was unable to remediate the covenant
failures.
On
June
12, 2008 (but as of June 2, 2008), the Company and certain subsidiaries, as
guarantors, entered into a forbearance agreement and amendment no. 1 to the
Term
Loan (the “Term Loan Forbearance and Amendment Agreement”) with BNP and the
syndication. In accordance with the Term Loan Forbearance and Amendment
Agreement, BNP has permanently waived any defaults or events of default
resulting from the non-compliance with any covenant failures for any date of
determination prior to and including March 31, 2008. BNP has also agreed to
forbear and refrain from (i) accelerating any loans outstanding, (ii) exercising
all rights and remedies and (iii) taking any enforcement action under the Term
Loan or otherwise as a result of certain potential covenant defaults during
the
Standstill Period, provided the Company complies with the Forbearance Covenants,
as applicable to the Term Loan. The Company’s failure to comply with the
Forbearance Covenants will terminate the Term Loan Forbearance and Amendment
Agreement and allow the syndication to exercise any or all of their rights
and
remedies under the Term Loan. The Term Loan Forbearance and Amendment Agreement
also increased the interest rate associated with outstanding borrowings and
modified the treatment of interest payments under the Term Loan.
Item
9.01
Financial
Statements and Exhibits.
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10.19
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Forbearance
Agreement and Amendment No. 1 to Credit Agreement dated June 2, 2008,
among Aurora Oil & Gas Corporation, the Borrower, BNP Paribas, as
Administrative Agent for the Lenders, the Lenders and the Secured
Swap
Providers.
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10.20
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Forbearance
Agreement and Amendment No. 1 to Second Lien Term Loan Agreement
dated
June 2, 2008, among Aurora Oil & Gas Corporation, the Borrower, BNP
Paribas, as Administrative Agent for the Lenders and the
Lenders.
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SIGNATURE
According
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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AURORA
OIL &
GAS CORPORATION
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Date: June
12, 2008
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By:
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/s/ Barbara
E. Lawson
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By:
Barbara E. Lawson
Its:
Chief Financial Officer
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