WEST of Shetland oil pioneer Hurricane Energy is facing renewed uncertainty after the High Court rejected a plan that directors have said is the only realistic option open to the firm.
Hurricane achieved renown after making promising finds West of Shetland but has faced big challenges following problems on its flagship Lancaster field.
The company has $230 million (£165m) bonds outstanding which are due for redemption next year.
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Directors proposed the company complete a restructuring that would have left bondholders in control of the firm. The plan was fiercely opposed by some investors on the grounds it would have seen shareholders virtually wiped out and was premature.
After a hearing to consider the plan last week, Hurricane announced yesterday that the court has not sanctioned the Restructuring Plan.
In his judgement Mr Justice Zacaroli noted: “The Plan would remove, immediately and irrevocably, all but a fraction of the current shareholders’ equity in the Company.”
Referring to the ad hoc committee (AHC) of bondholders with which Hurricane has been negotiating, he added: “The AHC’s desire to obtain control of the Company is not a good reason to deprive the shareholders, now, of all but a fraction of their equity in the Company rather than waiting to see if actual performance over the coming months improves the outlook for the shareholders.”
Mr Justice Zacaroli also observed: “The Company is profitable, and anticipated to remain profitable for at least the next year.”
The decision was described as a victory for shareholders big and small.
Some 92 per cent of votes cast by shareholders at a meeting that the court required Hurricane to hold opposed the plan, which won overwhelming backing from bondholders.
The company had originally planned to allow only bondholders to vote on the plan.
However, the decision by the judge may cast the future of the company in its present form into question.
The company said: “The existing Hurricane board is considering all options, including an appeal.”
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It noted that if the restructuring plan is not implemented bondholders have rights which, if enforced, could result in the company being wound up through an insolvent liquidation.
“As a result there is a significant risk of no value being returned to shareholders,” said Hurricane.
The uncertainty is heightened by the fact that Hurricane is facing a boardroom coup attempt.
Activist investor Crystal Amber Fund has called for the chairman of Hurricane, Steve McTiernan, and all four non-executive directors to be removed from office with immediate effect.
Shareholders will vote on the proposal at an extraordinary general meeting on Monday July 5.
Tomorrow chief executive Antony Maris and chief financial officer Richard Chaffe could be voted off the Hurricane board at the company’s annual general meeting.
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They could continue to work for Hurricane without having seats on the board.
However, Hurricane told investors: “It is the Company’s understanding that, in the event all of the Executive Directors are removed from the Board, the Company’s Nominated Adviser is likely to resign with immediate effect. This is likely to have the result that the shares of the Company are suspended from trading and, if a replacement Nominated Adviser is not in place within a period of one month, it may result in the shares of the Company being de-listed from AIM.”
Shares in Hurricane closed up around 30 per cent, 0.64p, at 2.8p yesterday. They sold for 60p in June 2019 after Hurricane started production from Lancaster.
Analyst Daniel Slater at Arden Partners said the court decision left Hurricane in a very uncertain position.
He said potential alternatives to the restructuring could include buying bonds back in the market; trying to refinance the bonds and raising new equity. A sale of the company could be explored.
However Mr Slater added: “We would be surprised if all these options had not been considered by the current Hurricane board … it remains a very moot point as to whether a better deal for shareholders than the current proposed restructuring could actually be achieved in practice.”
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Crystal Amber has a near 15% interest in Hurricane and has invested more than £25 million in the business. The value of its holding has plunged in recent months.
On Friday Crystal Amber said it would formulate proposals to be put to its shareholders to reorganise, reconstruct, or wind up the fund after a leading shareholder said it would vote against the continuation of the fund in its current form.
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