Shares in Gulf Keystone Petroleum slid more than seven per cent this morning as the Kurdistan-focused oil producer completed a finance restructuring deal that has left its investors with next to nothing.
The transaction, which was announced in mid-July, will shrink the company's debt burden from $600m (£492m) to $100m and help it raise $25m of new equity, via a debt-for-equity swap.
The agreement also allows the oil group to maintain production at 40,000 barrels of oil per day, with the potential to increase production to 55,000 barrels per day subject to gaining approval from Kurdistan regional government officials.
Chairman Keith Lough said:
Throughout the restructuring we have focused on balancing the interests of all of GKP’s stakeholders. Given the challenging set of circumstances that we faced, I am pleased with the outcome of what has been a long and complex process. With its restructured balance sheet, the company is now in a far stronger position than it has been for several years and we can look forward to continuing to develop Shaikan and rebuilding value for all stakeholders.
But investors voiced their dissent over the deal in the market this morning. The agreement leaves shareholders holding on to just five per cent of the company, with bondholders now owning a majority stake.
Gulf Keystone's stock had fallen more than seven per cent to 1.18p per share at the time of writing.
Gulf Keystone is burdened with large debts that it took on when oil prices were high. It's also been crippled by late payments from the Kurdish Regional Government.
Its debt pile became harder to service as oil prices fell from more than $110 per barrel in the middle of 2014 to less than $40 at the end of last year.