Teton Energy exploring strategic alternatives to improve liquidity

By Caroline Salls

Pittsburgh, Aug. 14 - Teton Energy Corp. is exploring its strategic options to improve its liquidity, including a public or private placement of equity or debt, conversion of its 10.75% senior secured convertible debentures into equity, a merger or a pre-packaged bankruptcy filing, according to a 10-Q filed with the Securities and Exchange Commission.

According to the 10-Q, current developments in the capital markets, combined with the company's lack of a drilling program, have led to a decrease in its borrowing base.

Also, Teton said a significant decline in commodity prices since the summer of 2008 resulted in a reduction of the senior lenders' price decks, the commodity prices upon which the lenders base their borrowing base determinations.

As of June 30, the company had $22.5 million of outstanding borrowings and a borrowing base of $14 million.

Teton said it has until Aug. 25 to cure the deficiency, but it does not have adequate funds at this time to repay it.

The company said it implemented a feasibility plan in the first half of 2009, which has strengthened its financial position and sustained Teton Energy through the first six months of the year.

Teton said it is continuing to act on the plan in the third quarter, and an integral component of its evolving strategy includes a focus on restructuring its balance sheet and raising new capital.

Under the feasibility plan, the company said it reduced its outstanding debt with the senior lenders by 27% from March 31 to June 30; divested all of its non-operated non-core assets; sold crude oil hedges; reduced its general and administrative expenses by 56%; became substantially current on its accounts payable; and created an operating environment with positive monthly recurring cash flow beginning in July.

In addition to exploring its alternatives, the company said it is working with its senior lenders and the debenture holders on an extension of its forbearance agreement beyond the Aug. 25 due date of its credit agreement borrowing base deficiency.

Teton is a Denver-based developer, producer and marketer of natural gas and oil properties.

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