I am still doing some DD on UPL. If you go to the 10-K report you will find that there are present value and consolidated leverage ratio covenants on the bank line. They also mention a consolidated debt ratio covenant for the Senior Notes.
With little hedges in place for 2013 and no rebound in sight for natural gas prices I am concerned about UPL's ability to comply with these benchmarks in 2013. I don't see them cash flowing to the point where they are out of the bank line by yearend 2012.
Recall the days when UPL was selling gas on the Opal at about 25 cents. They managed through that period and with all-in costs less than 2 bucks they should see themselves through this period as well. Hedges for 2012 are north of 4 bucks. They will likely ramp up the Niobrara oil play for the next few years and take their foot of the natural gas peddle. Insiders were accumulating at around 23 bucks and the CEO is now the third or fourth largest shareholder.
Call the company up directly... just talked to the CFO.. the bank just expanded their line of credit... its based on assets... kind of like getting a mortgage on your house... value of proven and prob. reserves are valued at almost $9 bln.... CHK just sold some assets... UPL could do the same if needed.. dont have significant debt ($100 mln) due till 2015??? Only $70 mln in interest expense... cash cost is only $1.13 on existing wells so at $2.00 still able to produce positive cash flow... capital expenses will always be less than cash flow from here on out.... so no need to raise capital...