Businessman Ian Suttie is pulling the plug on his flagship oil and gas business after failing to find a buyer.
First Oil will be put into voluntary administration ahead of a now unaffordable multi-million pound injection due on Kraken, a major North Sea development in which it had a 15% stake.
The firm said the move was caused in part by being forced to sell oil price hedges, which had protected its income, as it faced the “brutal” collapse in the oil price.
First Oil also said its bank had also pulled out of lending on the basis of oil reserves, making refinancing impossible.
In a statement seen by Energy Voice, the company said: “After 15 years of almost continuous company growth, including participating in the drilling of over 100 wells, it is with great disappointment that the company is no longer able to trade.
“With the unforeseen, brutal, collapse of the oil price, we and our bankers felt that we could not continue to meet the challenging budget expenditure.
“Indeed, our lead banker, has now pulled out of the business of reserve-based lending, and our hedges which were in place, were required to be sold, therefore making it impossible for the business to protect itself from the vagaries of the oil and gas price.
“Even with considerable effort, a full refinance or sale has not proved possible, largely due to the continuing projections of a very low oil price, and the large capital programme for the Kraken field which is due to come on stream in May 2017 or earlier.”
The company’s obligation to the Kraken development, which is operated by Enquest, is estimated to be £68million. Edinburgh Cairn Energy also has a 25% stake in the field, which is one of the biggest oil field projects under development in the UK sector of the North Sea.
The move came despite Mr Suttie injecting the firm with a “substantial” capital investment in July.
The move could cost up to ten jobs.
“Fortunately, we do not operate any of our fields and therefore we do not have any offshore personnel,” it added.
First Oil, which describes itself as the largest, privately-owned UK company producing oil and gas in the North Sea, went on to say that the move into administration would make sale of its assets easier. It expects to announce disposals as early as next week.
The firm has non-operated stakes in 16 producing North Sea fields including 36% stake in Taqa-operated Cormorant East and a 30% stake in GDF Suez’ Juliet field.
The company said: “Everyone within the management team, lead by managing director Steve Bowyer, is extremely disappointed with the outcome but in the current oil price environment, the challenges of the last 18 months were just too great.
“Cash and stamina are required to survive the current conditions. We certainly had the stamina.”
According to First Oil’s most recent accounts, BNP Paribas was listed as its lead lender.
French bank BNP Paribas last week confirmed it would halt funding oil and gas companies with large capital requirements, particularly in the US.
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