Energy Prospectus

In "The greatest nation on earth" (which sounds like the circus), Lonestar
announces today that it's teetering on the edge of bankruptcy.

https://seekingalpha.com/news/3588515-l ... st-payment

Lonestar did file their first quarter 10Q yesterday.

The COVID-19 pandemic is rapidly evolving,and the ultimate impact of this pandemic is highly uncertain and subject to change. The extent of the impact of the COVID-19
pandemic on the Company's operational and financial performance will depend on future developments, including the duration and spread of the pandemic, its severity, the actions
to contain the disease or mitigate its impact, related restrictions on travel,and the duration, timing and severity of the impact on domestic and global oil demand.
In response to these developments, the Company has implemented the following operational and financial measures:
• Reduced budgeted 2020 capital spending from$80-$85 million to $55-$65 million, or 27% at midpoint;
• Deferred its 2020 drilling program;
• Implemented cost-reduction measures including negotiations reducing rates for water disposal,chemicals, rentals,and workovers;
Shut in or stored approximately 4,700 BOE per day of production during late-April and all of May 2020, primarily at the Company's Central Eagle Ford Area. These shut-in
wells were back online during the first week of June.
• Entered into additional commodities derivatives in March 2020 to hedge an additional 2,000 Bbls of oil per day at an average swap price of $41.00 per Bbl and 27,500 Mcf
of natural gas per day at an average price of $2.36 per Mcf in 2021. The Company's current oil hedge position covers 7,498 Bbls per day for the second quarter of 2020,
7,565 Bbls per day for the second half of 2020,and 7,000 Bbls per day for 2021. The Company's current natural gas hedge position covers 20,000 Mcf per day for the
remaining three quarters of 2020,and 27,500 Mcf per day for 2021.

Recent Developments

The Company's present level of indebtedness and the current commodity price environment present challenges to its ability to comply with the covenants in its Credit Facility (see Note 7. Long-Term Debt) over the next twelve months and therefore substantial doubt exists that the Company will be able to continue as a going concern. As of March 31, 2020, the Company had total indebtedness of $522.4 million, including $250.0 million of Senior Notes due 2023 (the "11.25% Senior Notes"), $267.0 million under the
Company's Credit Facility and $8.9 million under the Company's building loan. As of July 2, 2020, the Company's Credit Facility is drawn to $285.0 million and is subject to a $60.4
million borrowing-base deficiency due to the terms of the Forbearance Agreement (see below).

The Company did not satisfy the consolidated current ratio covenant under the Credit Facility as of the March 31, 2020 measurement date and did not make the July 1, 2020
interest payment under the 11.25% Senior Notes. Such failures represent events of default under our revolving credit facility,and the missed interest payment will represent an
event of default under the 11.25% Senior Notes if not cured within 30 days. The Company received a forbearance from the lenders under the Credit Facility until July 31, 2020 for
the defaults in the consolidated current ratio covenant as of the March 31, 2020 measurement date and the missed interest payment pursuant to the Forbearance Agreement.
Despite the forbearance, the defaults under the Credit Facility are continuing,and will continue,absent a waiver or amendment from the Credit Facility lenders.

Forbearance Agreement

On July 2, 2020, the Company entered into a Forbearance Agreement, Fourteenth Amendment,and Borrowing Base Agreement with Citibank, N.A.,as administrative agent
and the lenders party thereto (the "Forbearance Agreement”) with respect to the Credit Facility. Pursuant to the Forbearance Agreement, among other things, (i) the lenders under
the Credit Facility agreed to refrain from exercising their rights and remedies under the Credit Facility and related loan documents with respect to certain defaults until July 31, 2020,
(ii) the borrowing base was redetermined to $225 million from$286 million, (iii)all proceeds of dispositions and terminations or liquidations of swap agreements shall be used to
repay the Credit Facility and shall automatically reduce the borrowing base by the amount of the repayment and (iv)certain exceptions to the covenant restriction on investments
shall no longer be available.

The rights of the Credit Facility lenders to exercise rights and remedies resulted from the Company's failure to comply with the current ratio with respect to the quarter
ended March 31, 2020 and the defaults expected with respect to the quarter ending June 30, 2020 under the current ratio and the leverage ratio covenants, and the default with
respect to the failure to make the interest payment due on July 1, 2020, under the 11.25% Senior Notes.

The Forbearance Agreement can be terminated by the lenders upon (i) the occurrence of any default or event of default under the Credit Facility other than those
disclosed above, (ii) the failure of the Company to comply with any of the terms and requirements of the Forbearance Agreement, (iii) the breach of any representation or warranty,
(iv) the exercise of any rights by other debt holders relating to foreclosure or acceleration (including acceleration of the 11.25% Senior Notes in the event of default)and (v) the
commencement of any bankruptcy proceeding with respect to any loan party. Additionally, the Forbearance Agreement can be terminated if the Company fails to deliver a detailed
restructuring proposal to the lenders by July 16, 2020. If the Forbearance Agreement terminates and any then-current and ongoing events of default have not been waived or
cured, the lenders will be able to accelerate the loans and pursue their rights and remedies.
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They have a couple of weeks to work out something with the debt holders. Chapter 11 is not a "win" for debt holders, so they should be open to some kind of restructuring.

Operational Highlights for the First Quarter of 2020

During the first quarter of 2020, we achieved the following operating and financial results:
• Production increased by 27% compared to the first quarter of 2019,averaging 14,436 BOE per day versus 11,372 BOE per day. Compared to the fourth quarter of 2019,
production decreased 18%, or 3,111 BOE per day, from 17,547 BOE per day.
• Drilled and completed five new wells.
• Continued to lower our operating expenses on a per-BOE basis. Compared to the first quarter of 2019, lease operating and gas gathering,and production and ad valorem
taxes decreased on a per-BOE basis due to the continued increase in production throughout the year and our focus on controlling costs. General and administrative
expense and interest expense also continue to decrease on a per-BOE basis.

Changes in operating results between the first quarters of 2020 and 2019 were primarily driven by the following:
• Revenues decreased by $3.7 million, or 9%, between the two quarters, primarily driven by a 38% decrease in commodity prices partially offset by a 28% increase in
production.
• Our first quarter 2020 net loss includes a $199.9 million impairment charge on oil and gas properties, while our first quarter 2019 net loss includes a $33.5 million loss on
sale of oil and gas properties.
• Compared to the first quarter of 2019, lease operating and gas gathering expense decreased $0.08, or 1%, per BOE, production and ad valorem taxes decreased $0.44, or
20%, per BOE, general and administrative expense decreased $2.12, or 50%, per BOE,and interest expense decreased $1.57, or 15%, per BOE.
• Derivative financial instruments had a net gain of $101.2 million in the first quarter of 2020,compared to a net loss of $36.2 million in the first quarter of 2019.

During the first quarter of 2020, we recognized net loss attributable to common stockholders of $113.0 million, or $4.52 per diluted common share,compared to a net loss
attributable to common stockholders of $60.6 million, or $2.45 per diluted common share, in the first quarter of 2019. We generated $13.8 million of cash flow from operating
activities during the first quarter of 2020, which was $4.0 million more than the $9.8 million generated by operating activities during the first quarter of 2019.