Niko Resources* (NKO : TSX : $9.93), Net Change: -0.12, % Change: -1.19%, Volume: 443,744
"The bank's on line 1, sir." Niko Resources announced that its current credit facility has been cut by 60% to US$100 million.
Following a severe cut to Niko’s reserves in June, a lending syndicate has now reduced Niko’s borrowing limit from US$250
million to US$100 million. The syndicate has assumed a gas price of ~US$4.20/mcf for the life of Niko’s D6 field offshore
India. Given the prevailing energy shortages in India, the D6 gas price should be revised upward when the contract expires in
March 2014. Although the cut is higher than anticipated, Canaccord Genuity Oil & Gas Analyst Christopher Brown believes the
company should be able to fund its capital commitments by deferring discretionary exploration expenses and eliminating (or
significantly reducing) its dividend. Brown stated that the company’s current quarterly dividend of C$0.06/share is
unsustainable. As such, he has eliminated it from his cash flow projections. He has also deferred discretionary exploration
expenses from F2014 to F2015/16. Going forward, Niko has multiple high-impact drilling catalysts expected over the next two
years.