Saratoga Resources curtails development to support interest payments

By Caroline Salls

Pittsburgh, Nov. 14 – Saratoga Resources, Inc. is curtailing development of “proved undeveloped opportunities” to support a total of $9.2 million in interest payments due on Dec. 31 and Jan. 1, according to a 10-Q filed Friday with the Securities and Exchange Commission.

The company said that it believes that cash on hand and cash flows from operations will support operations, but, given declines in crude oil and natural gas prices after Sept. 30, there is no assurance that it will have adequate cash on hand to pay the interest in full.

Even if it does have enough cash to support the upcoming interest payments, absent additional financing, Saratoga said it does not expect to have sufficient funds on hand or available from operations to support planned development operations over the next 12 months.

In addition, if it is unable to have a recent $3.76 million arbitration award reversed and is required to pay the award, the company’s existing cash reserves would be significantly reduced, according to the 10-Q.

Saratoga said it is evaluating options for bringing in additional financing to support its liquidity needs and planned development program, but it does not currently have any commitments to provide financing.

According to the 10-Q, if the company is unable to make the scheduled interest payments or to reach acceptable accommodations with lenders regarding those payments, it may be subject to legal actions filed by lenders, potentially include foreclosure of liens and loss of assets.

As a result of reduced production volumes early in the year and resulting operating losses and declines in cash flow, Saratoga said its liquidity position has worsened during 2014.

Saratoga Resources is an oil and gas development and exploration company with operations in southern Louisiana and offices in Houston and Covington, La.

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