INDEPENDENT Oil & Gas has warned it will have an urgent funding requirement unless it secures £10m loan funding which it is discussing after delaying plans to drill a well off Shetland amid the crude price plunge and bad weather.
Shares in the London-based company tumbled 36 per cent yesterday when it said: “Following recent oil price movements and bad weather in the North Sea, IOG believes that it is in the best interests of shareholders that the Skipper appraisal well is delayed until there is greater stability and clarity in the oil market.”
Led by chief executive Mark Routh, Independent said it anticipates drilling the well later this year.
The company said it is eyeing North Sea acquisitions amid the industry downturn, which creates significant opportunities.
However, the proposed delay in drilling the Skipper well has left the company facing funding complications.
Independent told investors that to achieve the revised timetable the company will need agreement from its principal lenders and contractors and agreement from the Oil and Gas authority to extend the Skipper licence beyond 30 March 2016.
“These critical discussions are ongoing,” it said.
Independent said privately-owned London Oil and Gas (LOG) has agreed in principle to provide £10m debt subject to contract.
Directors said the new loan combined with £3.55m debt offered previously by London Oil and Gas, subject to conditions which have yet to be met, would give the firm financial security until at least mid-2018.
Seven million pounds would be used to add value to the portfolio, including through acquisitions.
However, Independent said: “Given IOG’s current inability to drawdown on the existing loans from LOG, in the event that IOG is unable to close this additional funding deal with LOG and draw down on the sums committed in short order, the Company will have an urgent funding requirement.”
Directors said the downturn in the oil and gas market creates significant opportunities and IOG is reviewing several potential acquisitions that could add materiality and diversity to its current portfolio.
Sector watchers have noted that lots of North Sea assets are up for sale as some firms look to raise funds.
Shares in AIM-listed Independent Oil & Gas closed down 3.12p at 5.5p.
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