BRK Oklahoma Holdings, LLC, a wholly owned subsidiary of Brookside Energy Ltd (ASX:BRK, OTC:RDFEF), has secured a US$25 million credit facility, which provides enhanced financial flexibility to support ongoing growth and development initiatives.
This facility with UMB Bank, N.A., a financial services company headquartered in Kansas City, Missouri, is an interest-only agreement with a three-year term. Monthly interest payments on drawn amounts and the principal are due upon maturity.
“Important milestone”
Brookside’s managing director David Prentice said: “We are delighted to have secured this credit facility with UMB Bank, which represents another important milestone for the company as we continue to execute our growth strategy.
“This facility provides us with the flexibility to pursue value-enhancing opportunities, while maintaining a disciplined approach to capital management.
“It allows us to navigate changing market conditions and take advantage of opportunities as they arise, with the optionality to hedge production when it is prudent to do so.”
Facility terms
The US$25 million Master Note establishes an initial borrowing base of US$8.5 million, with semi-annual redeterminations. The interest rate is based on the WSJ Prime Rate, with an additional 0.50% for borrowing base utilization below 50%, increasing to 0.75% when utilization reaches or exceeds 50%.
As part of the agreement, Brookside will have the ability to opportunistically hedge its oil and natural gas production.
However importantly hedging is not required unless the borrowing base utilization exceeds 50%, at which point BRK will need to hedge a minimum of 50% of its projected Proved Developed Producing (PDP) production for the upcoming 12 months, on a rolling quarterly basis.
The facility includes customary financial covenants, such as a minimum Current Ratio of 1:1 and a Total Debt Leverage Ratio not exceeding 3:1, alongside various reporting obligations.
Well-positioned
“Combined with our strong cash reserves and operational cash flow, this positions Brookside to drive long-term value for our shareholders as we look to maximise value in our low-risk, high-value SWISH Play reserves,” Prentice added.
The credit facility is currently undrawn, with 100% of the borrowing base available for future use.