8-K filed 01/05/07
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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FORM
8-K
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CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported) January 5,
2007
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Blast
Energy Services, Inc.
(Exact
name of registrant as specified in its charter)
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California
(State
or Other Jurisdiction of Incorporation)
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333-64122
(Commission
File Number)
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22-3755993
(I.R.S.
Employer Identification No.)
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14550
Torrey Chase Boulevard, Suite 330 Houston, Texas
(Address
of Principal Executive Offices)
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77014-1022
(Zip
Code)
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(281) 453-2888
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the exchange Act (17 CFR
250.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 250.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 250.13e-4(c))
Item
2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation
or an Obligation Under an Off-Balance Sheet Arrangement.
Item
8.01 Other Events.
Blast
Energy Services, Inc. (“Blast”) used assumptions in the August 2006 acquisition
of the land rig drilling business that included high revenue and full
utilization rate expectations based upon the five two-year term drilling
contracts in place at the time. The subsequent cancellation of these contracts
by two key customers in the fall of 2006 has reduced Blast’s revenue
expectations and consequently its ability to meet the scheduled payments
on the
senior debt incurred for the acquisition of the land drilling business. The
senior debt has an aggregate principal amount of approximately $40.6 million,
and has an interest rate of prime plus 2.5% per annum. Interest is required
to
be paid on or before the first business day of each month. The debt matures
in
full on August 25, 2009. The principal of the debt begins to amortize beginning
on April 1, 2007 at the rate of $800,000 per month until March 1, 2008, $900,000
per month from March 1, 2008 through March 1, 2009, and $1,000,000 per month
thereafter until the debt is paid in full on the maturity date. The loan
is
secured by substantially all of Blast’s assets, including a lien on the
membership interests of Blast’s principal operating subsidiary Eagle Domestic
Drilling Operations LLC, its land drilling rigs, and Blast’s AFJ drilling
rig.
Due
to
the inability of Blast to obtain full utilization of its rigs and due to
a
slowdown in market conditions, Blast has suspended interest payments on its
senior debt, in order to conserve cash. At the current contractual interest
rate, the monthly interest payment on the senior debt is approximately $370,000.
Blast did not pay the interest on its due date. Following a three-day grace
period that expires at the end of business on January 5, 2007, the terms
of the
senior debt provide that there is an event of default. Under the terms of
the senior debt, following an event of default, additional interest accrues
on
the unpaid principal balance at the rate of 1% per month. In addition, an
event
of default would allow the senior lender to pursue remedies under the loan
documents, which include accelerating the indebtedness, charging default
interest, and entering foreclosure proceedings on the loan collateral.
Blast
is
presently in discussions with the senior lender to obtain a waiver, forbearance,
or other accommodation relating to the event of default. It is uncertain
at this
time whether such discussions will be successful, or if successful, whether
the
terms will be favorable to Blast. If Blast is not successful in obtaining
a
waiver, forbearance or other accommodation on acceptable terms, Blast may
be
forced to seek creditor protection under applicable bankruptcy laws or seek
other accommodations from the senior lender.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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BLAST
ENERGY SERVICES, INC.
(Registrant)
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Dated:
January 5, 2007
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By:
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/s/
David M. Adams
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David
M. Adams
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Chief
Operating Officer
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Dated:
January 5, 2007
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By:
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/s/
John O’Keefe
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John
O’Keefe
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Chief
Financial Officer
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