"Lightstream Resources Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. Lightstream is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with a significant inventory of opportunities in the Horn River and Montney gas resource plays in northeast BC. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield". From the LinkedIn Profile.
HISTORY: Company was initially called PetroBakken Energy Ltd. and was formed in fall of 2009 through the spin-out of Petrobank’s Canadian Business Unit. In conjunction with the spin-out, the newly formed PetroBakken acquired TriStar Oil and Gas Ltd. on October 1, 2009. PetroBakken commenced trading on the Toronto Stock Exchange on October 6, 2009 under the symbol PBN
On May 22, 2013, PetroBakken Energy Ltd. changed its name to Lightstream Resources Ltd. It now trades on the Toronto Stock Exchange under the symbol LTS. In 2016 the Company filed for bankruptcy protection and is negotiating a debt for equity swap with certain lenders.
This publicly traded Canadian oil company began to under-perform almost immediately after the oil price began to drop in mid-2014, burdened both by weakening cash flows and a huge debt load. In mid-2015 certain debt holders, including all the BDCs involved (see below) negotiated a debt restructuring with the Company wherein new debt was injected, certain old debt was written off and the remainder upgraded from a subordinated debt position to a second lien status, with only the Revolver lender with a superior claim. This effectively leapfrogged these debt holders to the top of the capital structure and structurally subordinated all other non-Revolver debt outstanding. Lawsuits followed. However, a year later the Company was in deep trouble again and sought to restructure with its lenders out of bankruptcy. That attempt failed and the Company filed for bankruptcy protection in October 2016. Since then, the second lien lenders have submitted a bid to acquire the Company, which has been accepted by the Company and requires court approval. The Company and its new owners/former lenders hope to be out of bankruptcy by year end 2016.
BDC exposure to the Company is substantial. As noted above the debt owned was initially unsecured and aggregated $57mn. After the July 2015 debt restructuring the amount increased to $75mn, the maturity date brought back to 2019 from 2020 and the yield pegged at 10.0%. However, with the bankruptcy the debt went on non-accrual in the IIIQ 2016, and that should continue in the IVQ.
The BDC Credit Reporter has the Company as Non Performing because of the bankruptcy and non-accrual. The Credit Rating is a 5, implying we are expecting Realized Losses to occur once the restructuring is completed. Worth noting, we expect the Credit Trend will be UP in the IVQ 2016 (after being flat in the IIIQ as restructuring negotiations continued) because of the successful debt-for-equity swap. However, we are concerned that the modest write-down by 10% of the second lien debt at IIIQ 2016 reflects an overly optimistic view by the BDC lenders (all FS Investment funds and all managed by GSO Blackstone) of the investment value once everything settles out.