Ed, I saw the release. I wouldn't touch the debt with a ten foot pole. <g> In effect the release is saying that as things are currently going, the debt will be further subordinated to the bank debt and that Kelley doesn't have sufficient funds to carry out both its debt servicing and exploration.
Moody's used Q3 figures which, of course, understate Kelley's reserves since their Nov announcement indicated that they had drilled a net of new seven wells in areas that were previously unproven. The Bourg well,if successful, should also increase proven reserves.
So, I think that Kelley will be able to continue in business, but unless they find additional financing, it is unlikely that they will be able to fund capex (to use Moody's term) in 1999.
It looks to me, and from a conversation that I had with the CFO, I think it is apparent to them, that they need to either merge, or be acquired by someone who can push forward their capex programs.
The real question now is what is the breakup value of KOGC? I think that figure would give some idea of what KOGC would fetch in a takeover. Of course, if the proffered sum is too small, then Bessemer could always step in, increase their investment and keep Kelley drilling. |
