Heavily-indebted oil firm Lochard Energy said it was resigned to losing its North Sea operating licence as it continues to streamline and seek a buyer for its business.
The group, which owns a 10% interest in the productive Athena field 111 miles north-east of Aberdeen through its wholly-owned subsidiary Zeus Petroleum, also said it had applied to be delisted from the Australian Stock Exchange in an effort to reduce costs, and in recognition of the small amount of stock held by investors down under.
Lochard, born in 2011 following a buy-out of Perth-based oilfield services and drilling fluids firm Rheochem, put itself up for sale or merger in September last year.
Despite interest, no deal has yet been agreed.
Now the company says it is further simplifying its portfolio of assets, and admitted its drilling licence at the Thunderball gas field would lapse as it was unable to fund the drilling of a well and had not been able to attract new partners.
It faces total outstanding debts of $23.7 million because of unpaid loans and continuing repayments from an adverse High Court settlement.
“The Lochard board continues to believe shareholders would be best served by being part of a larger entity with a more diverse portfolio of oil and gas exploration and production assets,” the firm said yesterday.
“With the expected simplification of the group’s asset portfolio and its improving financial position, the group is now better placed to attract interest from a broader range of potential merger partners.”
A balance of $2.5m must be paid to drilling firm Senergy by the end of next month following agreement of a $9m settlement last June, while $21.5m is repayable to the US-based Gemini Oil & Gas fund as a percentage of production revenues from Athena.
Lochard said its share of income from Athena’s daily production total of 11,000 barrels of oil equivalent amounted to around $1.7m per month, but costs to service the Senergy and Gemini debts meant it did not have the cash to meet the reserve requirements imposed by the terms of licences granted by the Department of Energy and Climate Change.
“Consequently, Lochard no longer qualifies as operator of Licence P1611, including the ‘Thunderball’ natural gas discovery and is therefore currently unable, without operator status and funding, to drill the commitment well specified under the current licence to appraise the Thunderball discovery,” the group said.
“Despite considerable efforts to bring in a partner over a prolonged period, no third party has been prepared to meet the cost of drilling in the time available.”
The company said cash balances would be significantly larger by the end of the year, thanks to further production success from Athena and “significant” savings from the cutting of technical and development costs relating to lapsed fields and the severing of third-party contracts no longer required with the end of its operator status.
It also revealed that in-principle agreement had been reached with an un-named North Sea operator to take on development costs for five North Sea fields in exchange for the transfer of a “proportion of current interests.”
A previously-announced farm-in by Strike Oil on two blocks has been approved by DECC, with Lochard’s interest falling to 50%, while four other promote licenses have also been allowed to lapse.
Meanwhile, Australia-based Peter Youd and technical lead Mike Rose have stepped down from the firm’s board.
Non-executive chairman Clive Carver said the changes marked “the final stages in the clearing-up of Lochard’s legacy issues”.
Shares, to be traded solely on the AIM from April, closed the day down 18.75% at 4.88.
business@thecourier.co.uk