The only convenant that they are in danger of violating is the EBITDAX/interest expense = 2.5 to 1.0. Thus, if they have negative return for a sustained period, they will be in trouble. However, this measure is for annualized. Thus, they are in no real danger until the end of this year.
I have also confirmed my reasoning for the markdown in proven reserves. It is based on "recoverable" economically produce the oil. As the year-end 2008 oil price was $32.92, a big chunk of the reserves are not "recoverable" now (but could be again in the future).
Also, I think with the price of oil down in Jan and Feb this year, the Q1'09 will be horrible as there is oil hedge (only a small portion of natural gas is hedged). But for Q2-Q4' 09, there is a hedge of about $50 or almost their breakeven point.
This is the stock where their cumulative losing years 2003-2005 of $16.9M is more than covered by their winning years of $59M from 2006 to 2008. The great uncertainty is 2009-2010 as they have a hedge of $61.8 for half their volume in 2011.
Bottom: This company is not going BK as they have sufficient revolving credit If you think the price of oil will be higher than $60 in the future, this is a good bet