Trap Oil saw hundreds of thousands of pounds wiped off its value yesterday as investors reacted poorly to a survival deal struck with the North Sea firm’s creditors.
The shares sank by 36% to 0.4p after Trap, which recently cast doubt on its ability to continue beyond July, said it had reached an agreement with geoscience company CGG Services (UK) and its Athena development partners.
Details of the complex deal include Trap paying £2million to CGG and the “Athena Consortium”, in return for its contractual liabilities being ring-fenced and/or “expunged”.
Trap will no longer have any outstanding debt due to CGG. All future liabilities, including decommissioning costs, owed to the Athena Consortium will be met by its partners.
Three-fifths of any petroleum sales or net disposal proceeds from certain licences held by Trap will pass to the consortium, as well as all future revenue generated from the firms 15% stake in the Athena field in the outer Moray Firth.
Trap’s repayment obligation to the consortium will end only when it has delivered 125% of its outstanding debt.
After paying the £2million settlement, Trap will have cash reserves totalling £400,000.
The company said it was still in talks with shareholders and potential investors to secure additional funding.
Non executive chairman Marcus Stanton added: “I am pleased that we have been able to achieve a pragmatic solution with our principal creditors.
“This settlement agreement enables Trapoil to remain solvent in the short term and assess additional funding options for the company going forward.
“Although the company’s future is still far from certain, we are now at least in a better position to be able to move forwards, potentially realise value from our existing asset base and seek to identify the best means for creating maximum value for our shareholders.”