Longboat Energy (LON: LBE) has warned it risks forfeiting its share in a joint venture with Japan Petroleum Exploration Co (JAPEX) due to “disappointing” production from its Norwegian assets.
Shares slumped by 50% in early trading to 9p. By close of play stock prices dropped even further to just over 7p per share, a 59.44% reduction.
In a statement to the London Stock Exchange, the Norway and Malaysia focused energy and production firm said it is “currently exploring all options available” to realise value for shareholders in the Longboat Japex Norge AS (LJN) joint venture, in which Longboat is a 50.1% owner.
The firm has also launched a “detailed review of its cost base” and said it would update the market n this around the time of its AGM at the end of June.
In today’s update, the firm admitted production from its stakes in the Equinor-operated Statfjord Satellites had been “disappointing”.
It added that production from January to April this year was “significantly below both Longboat’s internal and operator forecasts”.
In addition to this, Equinor informed Longboat that planned spending on the Statfjord Øst for this year well has almost doubled NK685m ($64m).
The listed firm has admitted the “significant negative impact” on its working capital has made it reliant on funding provided by the joint venture.
It has drawn down $17m of a $100 million facility provided to the LJN joint venture by JAPEX.
However, the Japanese partner has insisted the funding can not be used to fund working capital shortfalls.
As a result, the Longboard has warned: “In the event Longboat cannot meet its share of additional working capital shortfalls at LJN in a timely fashion, the terms of the shareholder agreement and acquisition facility could result in Longboat forfeiting some-or-all of its shares in LJN.”
Longboat CEO Nick Ingrassia remains confident the plan will work.
In the statement, he said: “While Longboat faces a series of near-term financial challenges, I am confident that the steps we are currently taking will allow the slimmed down business to create significant shareholder value from our high-quality positioning in Norway and our emerging portfolio in Malaysia.”
Longboat said the underperformance largely stemmed from “operational issues” associated with well completions on Statfjord Øst. It said two out of the five redevelopment wells drilled in 2023 were still off-line. It added “Equinor is working to rectify these multiple issues utilising an offshore vessel during Q2 and Q3 2024”.
Ingrassia took over the role of CEO from Helge Hammer at the start of the month.
Hammer stepped down from the board of Longboat at the same time on 1 May and became chairman of the LJN.
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