North Sea oil and gas company Trap Oil Group (Trapoil) saw its shares nearly halve in value yesterday after it warned it may go bust.
In a bleak outlook with 2014 results, the firm said it was in urgent need of a “viable funding solution” – without which it was “highly likely” that it would run out of money by July.
Trapoil is one of the once-ambitious new entrants to the market which emerged in much healthier times for the industry not so long ago.
Founded in 2007, it raised £60million when it floated on London’s Alternative Investment Market in April 2011.
After swooping to buy husband and wife-run Banchory firm Reach Oil and Gas for £30million it quickly embarked on a mission to become one of the most active explorers in the North Sea.
It also had ambitions to also become a producer, which it achieved with its “game-changing” £34.5million acquisition of a 15% stake in the Athena development in the outer Moray Firth from Dyas UK early in 2012.
But the firm was forced to part company with senior management last year, including founding duo Mark Groves Gidney and Paul Collins, in an attempt to reduce the wage bill after hefty losses.
The more recent plunge in oil prices has hit it hard and yesterday’s results showed pre-tax losses widened to £44.4million in 2014, from £10.3million previously.
London-based Trapoil said poor weather in the first half of last year, downtime to complete a workover on Athena in the fourth quarter and substantial impairment charges, including £15.1million of Athena-related losses and a further £12.5million hit from the firm relinquishing “uneconomic” licences, also drove losses.
Revenue plummeted to £13.4million, from £30.3million in 2013.
Chairman Marcus Stanton said Trapoil achieved a significant cut in overheads – to about £1.3million, from £3.5million a year earlier – during 2014.
He added: “We also relinquished a number of our exploration licence interests as they reached the end of their scheduled terms, which has accordingly resulted in a significant impairment charge being recognised in our final results for 2014.
“We are actively seeking to advance the remainder of the group’s attractive exploration portfolio, which includes a well expected to be drilled on the Niobe prospect (inner Moray Firth) during the second quarter of 2015.
“However, such activities have been overshadowed by the significant cash outflows currently being incurred in respect of our interest in the producing Athena oilfield.”
“Despite the significant overhead reductions achieved, the group is currently under-capitalised due to the depressed Brent oil price and consequently significant losses incurred in respect of its 15% equity interest in Athena, representing its sole producing asset.
“The group has insufficient financial resources to continue in operation other than in the short term in the absence of additional funding.”
Mr Stanton said Trapoil was “continuing to urgently assess a number of potential funding sources”, including the potential disposal of certain of the group’s licence interests.
“The directors are taking appropriate advice as to the options available,” he added.
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