30th Sep 2015 13:37
LONDON (Alliance News) - Independent Oil and Gas PLC shares dropped on Wednesday after it said it only has enough cash to keep going until the end of October, and it is considering all of its options as it scrambles to find a financing solution.
Independent Oil shares were down 13% to 5.75 pence per share on Wednesday.
"The group's current cash balance only gives the directors comfort that its liquid reserves are sufficient to satisfy its near-term general and administrative costs until late October 2015 but not any operational work. Accordingly, the group continues to seek additional funding which may include a partial farm-down of assets, an additional debt facility or an equity fundraising," it said.
The North Sea-focused gas company reported a GBP198,000 pretax loss in the first six months of 2015, narrowing from the GBP1.5 million loss a year earlier, after it cut its administrative expenses by over 50% and reduced the amount of share-based payments.
"The company has been working hard to continue the development of our portfolio, both towards the drilling of the Skipper well and de-risking our southern North Sea gas hub. These efforts continue amid a very challenging industry environment with the significant ongoing cyclical downturn in commodity prices," said Chief Executive Mark Routh.
"We are making good progress on an innovative funding solution to enable the Skipper appraisal well to be drilled in the coming months and are confident this will provide a substantial uplift in terms of reserves and company value," he added.
Independent Oil agreed during the half year to buy the remaining 50% stake in the Skipper discovery from Alpha Petroleum Resources Ltd. However that deal has not yet been completed and has had the completion date extended to December 7. Following that, Independent Oil will own all of the Skipper licence.
Independent Oil plans to choose a "contractor-led approach to funding" for the licence and said planning is now at an advanced stage and essential long lead items have been ordered to facilitate drilling later in 2015. Advanced discussions are ongoing with a number of service companies including rig owner, well operator, subsea equipment supplier and an essential rig services provider.
However, attention now will be turned to Independent Oil's financing situation as it struggles to source money for working capital purposes, let alone to develop the Skipper licence. The company said it only has enough funds to last until the end of October.
Its current lender, Darwin Strategic, has extended the company's loans until December 7, the same date by which the Skipper acquisition is expected to be completed, and Independent said it is in talks with several potential funders.
By Joshua Warner; [email protected]; @JoshAlliance
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