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Debt-laden intermediate oil&gas firm Lightstream given 90 days to pay down debt

CALGARY – Shares in Lightstream Resources Ltd. (TSX:LTS) fell by nearly a third Monday after announcing that lenders had slashed its borrowing base to a level $121 million less than what it owes, starting the clock on a 90-day timeline to default.

The Calgary-based intermediate oil and gas producer said its 16-lender syndicate had chopped its base to $250 million from $550 million, the second reduction in six months.

It owes $371 million and said it will continue to negotiate while seeking other loans and trying to sell assets to “cure” the shortfall. Failure could allow the lenders to place the company in receivership.

“One of the things we would do is an asset sale,” said president and CEO John Wright in an interview.

“But that would have to be sizable enough and profitable enough for us … that it would allow us to pay out the banks, reinvest the excess proceeds in our other properties and probably put a new bank line in place.”

The stock, which traded for more than $30 in 2009, closed down 29 per cent to 23 cents Monday on the Toronto Stock Exchange after going as low as 21 cents.

Analyst Michael Harvey of RBC Dominion Securities said in a morning note the action by lenders is negative for the company.

Lightstream was built through a string of acquisitions starting in 2009. It boasts a strong base of light oil production in Alberta and Saskatchewan but its debt totalled $1.6 billion at the end of 2015.

Lightstream launched a sales process for its core Bakken light oil producing assets in Saskatchewan in late 2014 but has been unable to find a suitable buyer in a down market, Wright said.

The company’s annual average production in 2015 fell 22 per cent to 31,392 barrels of oil equivalent a day due to asset sales and lower investment in new wells. It reported a net loss of $946 million, including a non-cash writedown of $661 million to account for lower anticipated future commodity prices.

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Note to readers: This is a corrected story. A previous version had an incorrect borrowing base difference calculation.