Petroceltic put up for sale as oil price slump takes its toll
IRISH oil and gas explorer Petroceltic is exploring a potential sale after it breached its bank covenants and said it had been unable to pay its bank debts.
The distressed process now under way is the clearest sign yet of the hammering the Irish oil and gas sector is under as a result of the collapse in prices.
In a statement last night, the company laid bare how desperate its position is. In unusually blunt language, Petroceltic said it does not have "certainty on liquidity beyond early January" and has initiated a "strategic review" that could result in a sale of more assets or of the entire business. It has hired Bank of America Merrill Lynch and Davy Corporate Finance to run the strategic review.
The company, which is focused primarily on north Africa and Italy, has been struggling for some time. Its share price has tumbled 77pc in the last year, and it has been hit hard by the drop in oil prices, which have more than halved in 18 months. Shares yesterday though rose 4.9pc.
It said the drop in oil prices and a reduction in capital investment programmes in relation to the company's assets in Egypt and Bulgaria had "impacted on availability under the group's senior bank facility during 2015".
"These circumstances led to the requirement to make material repayments, which the group has not to date been in a position to satisfy and other breaches to the covenants of the senior bank facility, which is secured over substantially all the assets of the group."
The company's lenders have given Petroceltic breathing space by grangting a waiver on its banking covenants until January 15.
It's main asset is the Ain Tsila project in Algeria, and while it said work on the project is "progressing", 2015 "has presented a period of exceptionally challenging market conditions, especially for smaller oil and gas companies such as Petroceltic and consequently it has not been possible to conclude the required financing on commercially acceptable terms".
Petroceltic's main debt - its senior debt facility - totals $217m. While the firm has cash of $28.1m, as much as $24m of that is held in local currency and so is not easily accessed.
Davy and Bank of America Merrill Lynch will now go into the market to size up interest in the company and what its next steps should be. The advisers will be expected to come back with recommendations as to whether the company should try to formally sell itself, or look at other options such as a fundraising.
However, the clock is clearly ticking. The company warned "there is a material risk that [its] lenders may withdraw their financial support and/or require immediate repayment of all amounts outstanding, which the company would not be in a position to effect".
Petroceltic boss Brian O'Cathain appeared to pin his hopes on its Algerian assets.
"The company possesses a world-class asset in the Ain Tsila gas field, which we continue to believe will be the principal driver of the long term future value of the business," he said.
"We remain committed to maximising value for our shareholders and will explore all available options in order to select the best way forward for our stakeholders," Mr O'Cathain added.
Petroceltic has been heavily criticised by Swiss investor Worldview, which tried to remove Mr O'Cathain earlier this year. In February, Worldview's Angelo Moskov said his strategy made Petroceltic "unsaleable".