Interim losses have widened at troubled energy service company Sovereign Oilfield Group.
The Aberdeen firm has revealed that the pre-tax deficit for the half year to the end of September was £3.3million – compared to losses of £1.8million for the same period in 2008. However, the deficit would have narrowed to £1.6million if it had not been for exceptional items totalling £1.7million.
Turnover for the latest half year fell to £28.2million – down £2.6million on the previous figure.
New chief executive John Strachan said in his statement with the results: “The board is continuing to pursue further strategic disposals to focus the group as a fabrication business and has resolved to discontinue or dispose of all companies within the drilling division.
“The board is also continuing its cost-reduction plan, particularly with regard to corporate overheads, with a view to a reduction in overall borrowing to a level that can be satisfactorily serviced by a smaller group.”
Mr Strachan’s statement said the group had met its banking covenants for the quarter to June 30, but breached them in the quarter to September 30 as a result of continued poor trading performance of the drilling division.
He added: “The company is in dialogue with the lenders regarding the covenant breaches and the board provided revised financial forecasts which are presently being reviewed by our lender group.
“One of the options being considered by the lender group and the board is a debt-for-equity swap, which would be dilutive to current shareholders, but would reduce debt and increase the capital base of the group. While these negotiations are not complete, the lending syndicate provided additional short-term funding of £0.8million on November 27.”
It emerged at the start of this month that two top bosses had gone at Sovereign. The firm announced the resignations of chairman and chief executive Graham Burgess plus finance director Julie Cowie. Mr Strachan, who is said to have more than 20 years’ experience in areas such as acquisitions, disposals and project development, was named as the new chief executive last week.
Shares in Sovereign closed more than 10% down at 6.5p on Thursday.