Enegi Oil shares plunge after firm terminates farm-out agreement in Newfoundland

Enegi Oil has terminated a farm-out agreement with Black Spruce Exploration for three of its assets in Newfoundland.

The firm said the decision was taken as the group aims to find a different partner to operate the project, preventing the company from having to raise any capital in difficult market conditions.

The company had entered a farm agreement for three of its assets with Canada-based Black Spruce in July.

"Whilst disappointed that it has not been possible to complete the objectives of the farm-out with Black Spruce Exploration, we recognise the problems of concluding investment for large scale plans in the current climate," said chief executive and chairman Alan Minty.

The firm announced plans to partially sell its interest in Newfoundland to accelerate the development of the project, and said if it was successful in offloading its interest, it would not need to raise any further capital for the project.

"We have known for a long time that more careful management of investment risks, expectations, delivery timeframes and costs are required in the current economic environment in the oil and gas sector,” added Minty.

“Most importantly, though, our plans are based on utilising information and existing licences to attract future staged investment to achieve realistic and relatively short-term goals."

Enegi shares plunged 21.18% at 10:49 on Monday.