August 10, 2010 / 5:43 PM / 7 years ago

UPDATE 1-Delta Petroleum says new credit facility likely by Q3

* Co had warned of covenant default in January 2011

* Sees H2 production of 6.9-7.2 bcfe

BANGALORE, Aug 10 (Reuters) - Independent oil and gas company Delta Petroleum Corp DPTR.O Tuesday said it is in talks with prospective lenders for a larger senior credit facility and expects to reach an agreement by the third quarter this year.

In a filing with the U.S. Securities and Exchange Commission on Monday, Delta warned it does not expect to have the liquidity to repay the borrowings under its credit facility due on Jan. 15, unless it completes a refinancing of the existing credit facility prior to that date.

“With the closing of the transaction and the resulting improved liquidity created for Delta, the company will now focus its efforts on operational improvements of the companies’ core oil and gas assets,” Chief Executive Carl Lakey said on a conference call on Tuesday

Delta said it will spend about $28 million of its full-year capital budget on completing 15 previously drilled wells in the Vega region, in the second half of the year.

The company was compliant with its covenants at the end of the second quarter and expects to remain in full compliance for the remainder of the year, Delta said on the call.

Shares of the company, which dropped as much as 7 percent to 78 cents in morning trade, recouped some of its losses to trade down 3 percent at 81 cents Tuesday afternoon on Nasdaq.

On Nov 30, Delta, whose core areas of operations are the Rocky Mountain and Gulf Coast regions, said it is exploring strategic alternatives, including a possible sale of the company. [ID:nBNG421774]

As part of its plan to evaluate strategic options, Delta agreed in July to sell various non-core assets to privately held Wapiti Oil & Gas LLC for $130 million, to repay some debt.

The company now expects production of 6.9 billion cubic feet equivalent (bcfe) to 7.2 bcfe in the second half of the year, after accounting for the sale of assets to Wapiti. (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Gopakumar Warrier)

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