6th May 2014 15:40
LONDON (Alliance News) - Shares in Sefton Resources Inc dropped Tuesday after the oil and gas producer said it has entered into a Letter of Intent with a private US-based energy company, which will provide it with interim working capital, but will also see the funder acquire a 80% stake in its operating subsidiary in California.
The oil and gas exploitation and production company with interests in California and Kansas, said that it has been operating under significant cash constraints for several months, and oil production has been reduced in both California and Kansas as some wells have been off line due to servicing requirements.
It said that declining production has resulted in declining cash flows, which has further limited the group's available resources.
"During recent months, the board has evaluated several proposals for refinancing and/or recapitalising the group, addressing both the demand for repayment by the Bank and seeking additional working capital to support the group's existing operations in California and Kansas," the company said in a statement.
Sefton Resources said that it has now entered into a letter of intent with a private US-based energy firm which provides interim working capital to the group, an intention to repay and replace the borrowings from the bank, and provides additional capital for growing the assets in California.
However it said that the refinancing would include the issue of new equity in its operating subsidiary in California, TEG USA Inc, that would result in the new funder acquiring an 80% shareholding in TEG USA.
It said that other elements of the refinancing will include the provision of new loans to both Sefton and TEG USA, and the agreement to provide further capital to TEG USA to enable it to further develop the steaming operations at TEG USA's Tapia field.
Sefton said that that the investments will require the approval of its shareholders. It said that pending the agreement of final contractual terms and approval of the investment by shareholders, the new private funder has provided interim working capital to TEG USA by way of a security agreement.
Sefton Resources shares dropped 22.2% to 0.175 pence Tuesday afternoon.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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