Connacher Oil and Gas finallly recapitalizes

 Workathon is the blog I use for irregular company reports and those with sketchy data.This is one of those reports.Connacher Oil and Gas has talked about recapitalizing for some time and it appeared as though it would never happen.But they brought in a completely new board of guys with experience in turnarounds and startups.And they have pulled it off.
     Recapitalizatuion


  The conversion starts  by exchanging approximately $1 billion of debt (including unpaid interest) for new common shares.They will also issue $35 million of "new convertible notes" and the interest will be compounded and accrued.The recapitalization will save $80 million of annual interest expense.The First Lien Term Loan Credit will replace the old revolving credit facility which was less secure.This will result in a consolidation of the common shares on the basis of 800 new shares for each old common share.Connacher Oil and Gas will then have 28,300,000 outstanding shares.
      Conclusion
 This blog has followed Connacher Oil and Gas for some time.The advice given in this blog was to keep increasing production and not to recapitalize.When we first started looking at Connacher, production was only 11,000 barrels per day;now it is at 15,100 barrels per day.Of course,neither Connacher nor this blog counted on the drop in the price of oil.Now Connacher has replaced it's debt with new common shares and reduced interest expenses by almost $100 million(in total).The new board seems very sharp and experienced and if anybody can pull this off it looks like they can.Connacher has already worked hard to get their production up to 15,100 barrels per day and their chances of succeeding are better now than when production was at 11,000 barrels per day.However now they are limiting capital  expenditures to maintenance and production increases are even more important.A lot of money has been spent on their second facility called Algar and they need to spend a little more to get production from this facility they have been working on since 2010.This blog predicts gradual declines for revenues,and the stock price unless they get more production from their second facility at Algar.Or else they will have to sell off some non-core assets to get capital needed to bring the stock price back to the original conversion price.