PMO FY Results & Going Concern

Interesting to see where PMO1 bond opens today. FY results contained this:

"The risk that the Group will be unable to either achieve appropriate mitigating actions prior to 30 June 2016 or secure an appropriate relaxation or amendment of its financial covenants in order to avoid a breach of covenant is a material uncertainty "

Think it was expected that they needed to speak to the PP & Bank lenders again. However, Solan delay and lack of hedging in 2017 could make the re-negotiation trickier than last time...

Full GC statement below from this morning's results.

"Going concern
The Group monitors its funding position and its liquidity risk throughout the year to ensure it has access to sufficient funds to meet forecast cash requirements. Cash forecasts are regularly produced based on, inter alia, the Group's latest life of field production and expenditure forecasts, management's best estimate of future commodity prices (based on recent forward curves, adjusted for the Group's hedging programme) and the Group's borrowing facilities. Sensitivities are run to reflect different scenarios including, but not limited to, changes in oil and gas production rates, possible reductions in commodity prices and delays or cost overruns on major development projects. This is done to identify risks to liquidity and covenant compliance and enable management to formulate appropriate and timely mitigation strategies.

At year-end, the Group had significant headroom on its borrowing facilities and related covenants. However, although the Group expects to have sufficient availability of liquidity under these existing facilities during the next 12 months, the Group's projections currently indicate, unless mitigating actions can be taken, that a breach of one of the financial covenants within the Group's borrowing facilities is likely to arise in respect of the testing period ending 30 June 2016. If an agreement cannot be reached with the Group's principal lenders in relation to the amendment or relaxation of such covenants and a covenant breach therefore occurs then, under the terms of the group's borrowing facilities, the Group's debt holders on all of the Group's facilities will have the right to request re-payment of the outstanding debt from October 2016 onwards and to cancel the relevant facilities.

The Group continues to work towards the completion of the acquisition of the E.ON E&P UK assets. If this transaction completes, it is expected to have a significant positive effect on the Group's near term financial covenant calculations. However, at current oil prices, in the absence of other mitigating actions, this is unlikely to fully mitigate any potential covenant shortfall in respect of the testing period ending 30 June 2016. Therefore, the Group will seek to modify or temporarily waive the existing covenants, ahead of the end of the testing period.

The risk that the Group will be unable to either achieve appropriate mitigating actions prior to 30 June 2016 or secure an appropriate relaxation or amendment of its financial covenants in order to avoid a breach of covenant is a material uncertainty which the Financial Reporting Council Guidance on Risk Management, Internal Control and Related Financial and Business Reporting requires us to report may cast significant doubt upon the Company's ability to continue to apply the going concern basis of accounting.

Nevertheless, after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group will avoid a covenant breach. Therefore, the Group and Company are expected to have adequate resources to continue in operational existence for the foreseeable future, being at least the next 12 months from the date of approval of the 2015 Annual Report and Accounts. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing these consolidated financial statements."

@IlliquidTrader
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