Circle Oil shares plunge after loan waiver deal
Published 16/03/2016 | 02:30
Shares in oil and gas exploration firm Circle Oil plunged yesterday after it said it had begun a strategic review of its business and assets.
Circle Oil said it would consider all options, including the sale of its business, to maximise value for shareholders as falling oil prices take their toll on the company.
Shares in Circle fell 19pc to 2.12p in London.
The company said it has agreed with its main lender, International Finance Corporation (IFC), to waive some loan terms until April 15.
Circle chief executive Mitch Flegg said the waiver gives it "the headroom to progress the strategic review and to put in place a sustainable long term financing structure for the business".
The company's drawn debt facility with IFC is $57.5m (€58.1m).
The firm also said IFC has indicated its willingness to consider further waivers as the review process continues.
Circle's has hired Investec as financial advisor for the review.
As part of the strategic review the company said it is open to options including asset sales, mergers and the sale of its entire issued share capital.
Davy Stockbrokers' Job Langbroek said Circle's decision to begin enter into a strategic review points to an "uncertain period for the group and its shareholders".
"This review is a result of a gross debt position that it cannot manage given current industry and oil markets," he said.
The company reported a total gross debt position of $77.5m with total cash resources of $10m and receivables from Egypt and Morocco of $21.6m at the end of 2015.
The debt includes a $20m convertible loan that's held by KGL Investment Company. Circle also says it has a further $14.1m in trade creditors.
The company said cash flows remain under significant pressure, which it largely attributes to the uncertainty and irregularity of US dollar receipts from the Egypt General Petroleum Corporation.
Falling oil prices have wrecked the balance sheets of oil and gas business around the world. Here, Petroceltic was taken into examinership last week, under pressure from its main shareholders after management there effectively put the business up for sale last December.