Shares in North Sea oil company Xcite Energy plunged yesterday after it warned shareholders that their stakes could be all but wiped out by a debt restructuring.
The Aim-quoted firm, which has its operational headquarters in Aberdeen, is locked in talks with lenders over an overhaul of $135 million (£101.8m) of its senior secured bonds, which may lead to a debt-for-equity swap.
The company now believes that there will be a minimal residual equity stake attributed to the company’s existing shareholders following the restructuringXcite statement
Xcite, owner of the Bentley field about 100 miles east of Shetland, said in June that its bondholders had given it some breathing space by agreeing to extend the repayment of the bonds by three months, pushing back their maturity date until the end of this month while talks continue with the aim of resolving terms for a restructuring of the debt.
“At the time of this maturity extension, the company highlighted that while those discussions had been constructive, no terms had yet been agreed, and that should agreement on the terms of a restructuring be reached, it was likely that this would involve a reduction in the balance of the bonds in return for an equity stake in the company,” Xcite told investors.
“Whilst terms of the restructuring have still to be agreed, the company now believes that there will be a minimal residual equity stake attributed to the company’s existing shareholders following the restructuring. The company will update shareholders as soon as any further information relating to the restructuring of the bonds can be made available.”
Shares in the firm closed down 70 per cent at 2.5p, having slumped as low as 1.66p in early trading. They had risen sharply during Friday’s session, fuelling speculation that the group had closed a deal regarding the restructuring of its senior secured bonds.
Xcite, headed by chief executive Rupert Cole, last month revealed that its first-half net losses had widened to $900,000, up from $800,000 for the first six months of 2015, as it said a partner would be needed to join its Bentley development “to either guarantee the full funding package or to provide any balance of funding required”.
In its results statement, the group warned that its “current and forecast cash position is insufficient to repay the bond capital in full by the extended maturity date of 30 September 2016”. The bonds were issued by its subsidiary, Xcite Energy Resources, in June 2014.
The Bentley field, discovered in 1977, is estimated to contain recoverable reserves of some 267 million barrels, making it one of the largest undeveloped oilfields in UK waters.