Shares in Circle Oil crashed today, after the oil producer said it was considering a debt restructuring or rights issue to weather the turmoil sparked by plunging oil prices.
Circle Oil shares fell as much as 40 per cent to 2.25p per share today, amid a reevaluation of the value of its reserves which determines how much cash it’s able to borrow, and a slower than expected agreement on an extension of a loan facility. The stock closed down 36.67 per cent, at 2.38p.
The collapse in oil prices, which recently sank to lows not seen since the financial crisis, has dented the value of Circle’s estimated reserves. These are linked to its lending facilities, and determine how much cash it’s able to borrow from lenders.
Circle today said it expects this to result in a small short fall, which it could plug with either a debt restructuring of rights issue.
“Following the redetermination the company expect the borrowing base to be reduced and as a result there will be a moderate shortfall, although both parties are actively engaged in constructive dialogue to find a solution,” it said in a statement today.
The company also said it’s struggling to agree the terms of an extension to its reserve based lending (RBL) facility by an extra year to June 2019 with the World Bank’s International Finance Corporation.
It added that the board is working towards implementing either of the measures by the end of the first quarter of 2016.