27th Jan 2015 10:18
LONDON (Alliance News) - Afren PLC shares lurched to another low on Tuesday morning, losing more than half their value after the company said it has entered into talks with a committee of bondholders, warning that it will require equity funding beyond its market capitalisation if its debt structure remains as it is.
Shares in the company were down 55% to 7.94 pence on Tuesday, by far the worst performer in the FTSE 250, having touched a low of 5 pence per share during the morning. Since the start of this year, the company has seen its shares drop 83% already and shares in the company are down 95% over the past 52 weeks.
The FTSE 250-listed oil and gas explorer reiterated that is is in talks with the lenders of its USD300 million Ebok facility with a view to obtaining a deferral on the USD50 million amortisation payment due on January 31. It is also considering whether to utilise a 30-day grace period under its 2016 bonds regarding USD15 million in interest due on February 1 as it completes the work on its capital structure review and seeks alternative funding arrangements.
Afren said it has been advised that an ad hoc committee comprising its largest bondholders has been created, and it has initiated talks with this committee over the immediate liquidity and funding needs of the company.
Afren said it has reviewed its business plan with a view to minimise its funding requirements given the collapse in the oil price in order to focus on its key assets in Nigeria. But assuming its current debt structure remains as it is, the company will require equity funding which is likely to be "significant" and which would be in excess of its current market capitalisation, which sat at around GBP195.7 million before its shares tumbled further Tuesday.
The company said it would need new funds to meet interest and principal repayments, provide working capital and to cover a reduced capital expenditure programme. It is in talks with its current stakeholders and third party investors over recapitalising the business, it said.
The board of Afren is implementing efficiency and cost-cutting measures in order to improve its liquidity position and said it has hired Alvarez & Marsal in the role of chief restructuring officer to advise on its options.
The group also briefly noted it remains in talks with SEPLAT Petroleum Development Co PLC regading a possible merger, but said there is no certainty an offer will be made, nor what the terms of an offer would be.
The latest share price fall marks a nadir for the company, which became a takeover target after its shares dropped heavily in the second half of 2014, hit by the falling oil price and a payments scandal which eventually resulted in the sacking of its chief executive and chief operating officer. That has been exacerbated since the turn of the year by the volatility in the oil price and by poor results for the company from its Barda Rash field in the Kurdistan region of Iraq.
On January 12, Afren said an updated competent person's report on the Barda Rash field is expected to show a material reduction to its previously-published estimates on reserves and resources. The explorer said it expects the total reserve estimate for the field to be revised down to 250 million barrels of oil from 1.24 billion barrels previously.
As a result of the downgrade and the anticipated expense involved in developing the field, Afren said it is considering its options for Barda Rash.
The payments scandal effectively came to a close for the company on January 2, when it said it reached a settlement with its former CEO, Osman Shahenshah, and former COO, Shahid Ullah, over payments the pair received which were not authorised by the company.
Afren fired both Shahenshah and Ullah back in October, having initially suspended them in July after the payments came to light following an independent review. It has yet to appoint a new chief executive, with Toby Hayward taking on the role on an interim basis, and has not appointed a new chief operating officer.
By Sam Unsted; [email protected]; @SamUAtAlliance
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