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Highlights
- Brookside Energy Ltd has secured a US$25 million credit facility to support growth initiatives.
- The facility offers financial flexibility with an interest-only agreement over three years.
- Brookside is well-positioned to enhance shareholder value with strong cash reserves and operational cash flow.
Brookside Energy Ltd (ASX:BRK), through its wholly owned subsidiary BRK Oklahoma Holdings, LLC, has successfully secured a credit facility worth US$25 million. This significant financial arrangement aims to bolster the company's ongoing growth and development efforts, providing enhanced financial flexibility during a dynamic market environment.
The credit facility, established with UMB Bank, N.A., provides flexible financing for the ASX-listed energy stock. It features a three-year interest-only term with monthly interest payments on drawn amounts, and the principal due at maturity. This supports the company's liquidity and growth in the energy sector.
Strategic Importance
David Prentice, managing director of Brookside Energy, highlighted the importance of this credit facility as a milestone for the company. The financial backing will enable Brookside to pursue value-enhancing opportunities while maintaining a disciplined approach to capital management. This strategic flexibility will allow the company to navigate changing market conditions effectively and capitalize on emerging opportunities, including the ability to hedge production when deemed prudent.
Facility Details
The US$25 million Master Note establishes an initial borrowing base of US$8.5 million, subject to semi-annual redeterminations. The interest rate on the facility is tied to the WSJ Prime Rate, with additional fees based on borrowing base utilization. Specifically, an additional 0.50% applies when utilization is below 50%, increasing to 0.75% when utilization reaches or exceeds that threshold.
As part of the agreement, Brookside will have the option to hedge its oil and natural gas production, although this is not mandatory unless the borrowing base utilization surpasses 50%. In such cases, a minimum of 50% of projected Proved Developed Producing (PDP) production for the next twelve months must be hedged on a rolling quarterly basis. The facility also includes standard financial covenants, such as a minimum Current Ratio of 1:1 and a Total Debt Leverage Ratio not exceeding 3:1, along with various reporting obligations.
Positioning for the Future
With this credit facility currently undrawn, Brookside Energy retains 100% of the borrowing base for future use. Prentice emphasized that, combined with the company’s strong cash reserves and operational cash flow, this facility positions Brookside to drive long-term value for shareholders. The focus remains on maximizing value within the company's low-risk, high-value SWISH Play reserves.
In summary, this credit facility represents a strategic advantage for Brookside Energy as it continues to advance its growth strategy while navigating the complexities of the energy market.
