TIDMCOP
RNS Number : 0762S
Circle Oil PLC
15 March 2016
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT
JURISDICTION.
15 March 2016
CIRCLE OIL PLC
("Circle" or the "Company")
Operating and Financial Update
Circle Oil plc (AIM:COP) the international oil and gas
exploration, development and production company, today provides an
operating and financial update, and announces that it has initiated
a formal strategic review of the Company's business and assets with
a view to considering all options to maximise value for
shareholders and stakeholders (the "Strategic Review").
Financial Update
On 14 December 2015, the Company announced that following the
redetermination of its Reserve Based Lending ("RBL") borrowing
base, it expected its borrowing base to be reduced, potentially
giving rise to a shortfall. In the interim, given continuing oil
price volatility, Circle has remained in constructive discussions
with International Finance Corporation ("IFC"). Circle is pleased
to announce that those discussions have culminated in agreement by
IFC to suspend the December 2015 redetermination until 15 April
2016 with any repayments required under the RBL facility, which is
currently drawn to $57.5 million, being postponed until that date.
IFC has indicated its willingness to consider further waivers as
may be required to continue the Strategic Review process based on
circumstances applying at the time of any application.
As announced on 8 February 2016, the Company's cash flows and
financial position remain under significant pressure, primarily due
to the uncertainty and irregularity of US dollar receipts from
EGPC. As at 31 December 2015 the Company(1) had Cash and Cash
Equivalents (including restricted Cash) of $10.0 million and
receivables from Egypt and Morocco of $21.6 million. Inclusive of
the $20.0 million convertible loan held by KGL Investment Company,
the total debt position of the Company is $77.5 million and there
is a further $14.1 million of trade creditors. Further the Company
is reliant on extracting US Dollars from its Moroccan operations to
both satisfy its obligations to its creditors and fund
operations.
On a separate note, the Company in its Annual Report for Year
ended 31 December 2014, disclosed 2P Reserves of 16.23mmboe on a
Working Interest basis. Since that date, these reserves are
expected to have reduced, principally due to the production of
hydrocarbons and the lower oil price environment.
Initiation of Strategic Review
As previously announced the Company has been considering a
number of options to reduce debt and ensure that the Company has
sufficient cash flows to fund future operations. The scope of the
options being considered under the Strategic Review include, but
are not limited to, a sale of one or more of the Company's existing
assets, a corporate transaction such as a merger with a third
party, the sale of the entire issued, and to be issued, share
capital of the Company and the raising of capital in the form of a
subscription for new ordinary shares in the Company by one or more
third parties. There can be no certainty as to whether any such
agreement, offer or transaction will be forthcoming or as to the
terms of such agreement, offer or transaction, if any, including
any requirement for shareholder approval.
The Board has appointed Investec Bank plc ('Investec') to act as
financial advisor to the Company in relation to the Strategic
Review.
Operating Update
Egypt
At the end of December 2015 11 wells in the Al Amir SE field
(AASE) and 3 wells in the Geyad field were on production, with a
combined average gross production rate of 8,871 boe/d for the year.
Water injection through 3 wells in field is providing continuing
pressure support to maximise recovery efficiency and optimise
production levels.
The AASE-23 well was first brought on stream on 6 February 2016
and is now being produced at around 800 boe/d.
Drilling continues at the AASE-24 well, which was spudded on 8
February 2016, and an update will be provided in due course.
Morocco
As noted in the interim financial results, the Group continued
to make a number of efficiency improvements in-country over the
course of 2015. Led by Lonny Baumgardner, the recently appointed
country manager, the focus has been on decreasing costs and
improving overall operational efficiency.
The Group also continues to benefit from the use of its own
pipeline which means that no tariffs are payable for the
transportation of gas. Sales from Sebou for 2015 averaged
5.85mmcf/d (gross), 4.39mmcf/d (net to Circle) utilising less than
half of the pipeline capacity. Given the fixed price nature of the
contracts and attractive fiscal terms in Morocco, Circle has been
shielded from falling commodity prices with the average price
realised during 2015 of over US$8.50/Mcf. As noted in the
announcement of 8 February 2016, there is potential for a further
improvement on these pricing levels as highlighted by the
Memorandum of Understanding with SBS Porcher which would represent
an increase of approximately 6% of production volumes compared to
2015.
Circle CEO, Mitch Flegg said
"The agreement we have reached with IFC to defer the December
2015 redetermination and to provide a waiver in relation to any
immediate repayments is a welcome development and one which gives
us the headroom to progress the Strategic Review and to put in
place a sustainable long term financing structure for the business.
Circle has excellent assets across our regions of operation and our
aim, mindful of the sustained low oil price environment and the
Company's stressed financial position is to maximise the value from
these assets for the benefit of all stakeholders"
For further information contact:
Circle Oil Plc (+44 20 7182 4913)
Mitch Flegg, CEO
Investec (+44 20 7597 5970)
Chris Sim
George Price
James Rudd
Jonathan Wynn
Murray (+353 1 498 0300)
Joe Heron
Pat Walsh
Glossary
mmboe - million barrels of oil equivalent
boe/d - barrels of oil equivalent per day
EGPC - Egyptian General Petroleum Corporation
mmcf/d - million cubic feet per day
Mcf - thousand cubic feet
Notes to Editors
Circle Oil plc (AIM: COP) is an international oil & gas
exploration, development and production company holding a portfolio
of assets in Morocco, Tunisia, and Egypt with a combination of
low-risk, near-term production, and significant upside exploration
potential. The Company's shares were admitted to trading on AIM in
October 2004.The Company has assets in the Rharb Basin, Morocco;
the Ras Marmour Permit in southern Tunisia; the Beni Khalled permit
in northern Tunisia, the Mahdia Permit offshore Tunisia and the NW
Gemsa permit in Zeit Bay area of Egypt.
Circle's strategy is to locate and secure additional licences in
prospective hydrocarbon provinces and, through targeted investment
programmes, monetise the value in those assets for the benefit of
shareholders. This could be achieved through farm-outs to selected
partners who would then invest in and continue the development of
the asset into production, or Circle may opt to use its own
expertise to appraise reserves and bring assets into production,
generating sustained cash flow for further investment.
Further information on Circle is available on its website at
www.circleoil.net.
Investec is authorised in the United Kingdom by the Prudential
Regulation Authority and regulated in the United Kingdom by the
Financial Conduct Authority and the Prudential Regulation Authority
and is acting exclusively for the Company and no one else in
connection with the matters referred to in this announcement and
will not regard any other person (whether or not a recipient of
this announcement) as a client in relation to the matters referred
to In this announcement and will not be responsible to anyone other
than the Company for providing the protections afforded to clients
of Investec for providing advice in relation to the matters
referred to in this announcement.
Investec is authorised and regulated in Ireland by the Central
Bank of Ireland and is acting exclusively for the Company and no
one else in connection with the matters referred to in this
announcement and will not regard any other person (whether or not a
recipient of this announcement) as a client in relation to the
matters referred to in this announcement and will not be
responsible to anyone other than the Company for providing the
protections afforded to clients of Investec or for providing advice
in relation to the matters referred to in this announcement.
The Directors of Circle Oil plc accept responsibility for the
information contained in this announcement. To the best of their
knowledge and belief (having taken all reasonable care to ensure
that such is the case), the information contained in this
announcement is in accordance with the facts and does not omit
anything likely to affect the import of such information.
Parties with a possible interest in making a proposal should
contact Investec, at the contact details set out above. Any party
wishing to participate in the formal sales process will be required
to enter into a non-disclosure agreement with the Company on
reasonable terms satisfactory to the Board and on the same terms,
in all material respects, as other interested parties before being
permitted to participate in the process. Following execution of
such an agreement, the Company intends to provide interested
parties with information on the Company, following which, such
parties will be invited to submit proposals to Investec. The Board
reserves the right to alter any aspect of the process as outlined
above or to terminate it at any time and will make further
announcements when appropriate. The Board reserves the right to
reject any approach or terminate discussions with any interested
party or participant at any time.
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