WEST of Shetland-focused Hurricane Energy has said it is set to agree a debt-for-equity swap that will leave bondholders with the vast bulk of the company sending shares in the firm plunging around 50 per cent.
Hurricane stoked huge excitement about the potential of West of Shetland after making finds in relatively under-explored areas and achieved a stock market valuation of more than £1 billion at one point.
However, after slashing estimates of the size of finds, Hurricane has been left facing huge challenges amid the fallout from the coronavirus crisis.
The performance of the one field that the company has brought into production, Lancaster, has been disappointing.
READ MORE: West of Shetland field start-up provides vindication for oil pioneer
Hurricane has $230 million (£165m) bonds that are due for repayment next year. The downturn has made it hard for oil and gas firms to raise funding.
The company said yesterday that directors have agreed in principle to a deal that will see bondholders exchange $50m of the debt owed to them for shares in Hurricane.
The bondholders will have 95% of the shares in the company after the proposed restructuring.
The deal will see existing shareholders almost wiped out. However, directors said there appeared to be no other way of keeping the company afloat.
Chief executive Antony Maris said: “We acknowledge that this proposed course of action entails significant dilution for our existing shareholders, but it marks an important and necessary step in the Company’s efforts to secure a viable capital structure.”
READ MORE: Hopes for West of Shetland boom fade with oil price fall
Noting that if the plan did not secure the required court and bondholder approval it could not be implemented, Hurricane warned: “In that scenario it is likely that there would be a controlled wind-down of the Group's operations followed by an insolvent liquidation of the Company”.
The restructuring does not require the approval of shareholders in Hurricane, who have faced months of uncertainty.
Founded by geologist Robert Trice, Hurricane achieved a stock market capitalisation of £1.2bn in June 2019, when its shares sold for more than 60p each. Mr Trice resigned as chief executive in June last year.
READ MORE: Plans to develop billion barrel oil field off Shetland set to be revived
Shares in Hurricane Energy closed down 1.18p at 1.12p yesterday, leaving it with a market capitalisation of around £24m.
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