Shares in North Sea oil firm Antrim Energy tumbled by 31% yesterday after it said there were significant doubts regarding its ability to continue as a going concern.
The Canada-based business has assets in UK waters – including a stake in the Causeway field – and Ireland, plus an option interest in Tanzania, east Africa.
Antrim set out its difficult financial situation in its first-quarter results.
In January, it entered into a £19.7million payment swap transaction subject to financial and operating covenants. In addition, funds received from the swap arrangement were subject to restrictions as to their use. The firm added: “Subsequent to March 31, additional restrictions were imposed following lower-than-anticipated production volume during the quarter.
“The company is working with the lender to reduce the impact of these additional restrictions, however, there is no certainty that the funds will be made available which may cast further doubt on the company’s ability to continue as a going concern. The restrictions may impact the company’s ability to fund capital expenditure and operations.”
Antrim said there were material uncertainties which raised significant doubts as to the company’s ability to continue as a going concern, including the performance of producing wells, oil prices, ability to finish the planned development programme within budget, ability to secure additional financing, relinquishment of commitments on certain licences and settlement of contingencies.
But it added: “If the lender does not reduce the restrictions, the company has other viable options such as issuing new equity and/or debt, selling and/or acquiring assets, and controlling capital-expenditure programmes.”
Antrim also said that, although there had been improvements in the global economy and financial markets, restrictions on availability of credit remained and might limit its ability to access debt or equity financing for its exploration and development projects. Shares in the company closed down 3.38p at 7.5p. Oil and gas transaction partner Ally Rule, at Ernst and Young in Aberdeen, said last night that, as global economic growth fell short of expectations in 2012, the path ahead was far from straightforward for many undercapitalised groups. He added: “Overall we consider there to be more upside opportunities than downside risks facing the oil and gas industry.
“We have predicted for quite some time that the capital imbalance created by the current environment is likely to lead to further consolidation in the sector, with the better-capitalised players focusing on portfolio optimisation and cost efficiency, while those on the opposite end of the capital spectrum looking to strike deals or raise additional equity or debt funds to survive.
“This is especially so for those organisations which are low on funds where production volume does not materialise as expected or unforeseen exploration, development or production costs arise.
“Improving investor and business confidence should provide a supportive backdrop for new public market equity raising, although it is likely to be necessary for existing Aim (Alternative Investment Market) oil and gas companies to seek alternative financing routes. Increased flexibility and creativity is a necessity.
“There is a diverse range of potential buyers open to companies looking to maximise shareholder value through a sales process, with junior oil and gas companies finding themselves attractive to national oil companies, majors, larger independents and Aim-listed peers with stronger balance sheets.”
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