Independent Oil & Gas (IOG) had £2.4million wiped off its stock market value yesterday after the company postponed the drilling of a North Sea appraisal well.
IOG had planned to drill the Skipper appraisal well before the end of March.
But yesterday the firm said bad weather conditions and low crude prices had convinced it to wait until later in the year.
The company said tough market conditions would have made it difficult to repay the funds that were needed for drilling to go ahead in the first quarter.
The decision was a difficult one to make for IOG, which had put in a mammoth effort to get Skipper up and running.
In December, it secured £4.75million worth of backing, came to an agreement with Transocean Drilling UK to procure a semi-submersible for the well, and bought the remaining 50% stake in the licence containing Skipper.
IOG said the delay had forced it to look for financing on top of the loans it agreed last month with GE Oil & Gas and London Oil & Gas.
It appears to have found the extra backing already. London Oil & Gas has proposed to stump up a further £10million of convertible debt funding, IOG said yesterday.
IOG said it will have financial security until mid-2018, should the deal go through as expected. If that does not happen, it will have an “urgent funding requirement”, the company said.
The latest developments knocked 36% off the company’s share price on the London Exchange.
It ended the day on 5p per share, with a market capitalisation of £6.7million.
IOG chief executive Mark Routh said: “Whilst it has been a very difficult decision, it has undoubtedly become prudent to postpone the Skipper appraisal well given the significant further oil market weakness in recent weeks, as well as unsettled weather conditions in the North Sea.
“We very much appreciate the support to date from our various stakeholders and are now working hard to get the loan funding fully documented and to enable the Skipper well to be rescheduled to the earliest feasible date.”
Mr Routh was speaking a day after new figures showed the drilling of exploration and appraisal wells on the UK Continental Shelf had gone down between 2014 and 2015.
Oil industry analyst Malcolm Graham-Wood from Hydrocarbon Capital said there are still plenty of positives to take for IOG, despite the setback.
Mr Graham-Wood said: “It seems a shame that the IOG management who have worked so hard all over the winter to finance Skipper now see the project moved back.
“But all is not lost and, as far as I can work out, this way of doing it removes the worst case scenario whilst keeping the upside.
“Apart from weather considerations, which are understandable, I think that there would have been a very small window between finishing the drilling and paying back the multifarious lenders on the project.”
Skipper, a field 87 miles south-east of Shetland, holds a verified 26.2 million barrels worth of oil.
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