Emerald Oil forbearance deal expires; ISDA master agreement terminated

By Caroline Salls

Pittsburgh, Feb. 8 – Emerald Oil, Inc. was found to be in default on its credit agreement with Wells Fargo Bank, NA following expiration of an amendment to a forbearance agreement, according to an 8-K filed Monday with the Securities and Exchange Commission.

The forbearance agreement amendment expired on Jan. 29.

As a result of the credit agreement default, the Bank of Nova Scotia (BNS) notified the company that it had designated Feb. 3 as the early termination date of an ISDA master agreement between Emerald Oil and BNS.

BNS applied $17.5 million of proceeds from the termination to amounts owed to BNS by Emerald Oil under the credit agreement.

According to the 8-K, the payment of the agreement termination proceeds, as well as the proceeds from other transactions completed by Emerald Oil, cured a borrowing base deficiency.

The company said the borrowing base under the Wells Fargo facility is currently $113 million, with about $111 million currently outstanding.

However, despite the cure of the borrowing base deficiency, Emerald Oil said it remains in default under the Wells Fargo facility based on the continuing covenant defaults under the credit agreement, and there is no credit available under the facility.

The company said the exercise of lender remedies may have a significant adverse effect on its liquidity, financial condition and results of operations, and, because its liquidity position continues to deteriorate, the company may still become bankrupt or insolvent.

Emerald Oil is a Denver-based oil exploration and production company.

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