LGO Energy rebounds after agreement with bank

Trinidad oil developer LGO Energy has agreed to reduced repayment terms with its bank that will allow it to maintain its oil production operations after an unusual drilling accident.

The AIM-listed company and BNP Paribas have agreed to an early termination of old pre-paid swap agreements at their current value of $10.8m.

This will see LGO begin repayment at a reduced rate of $75,000 per month for the next three months before the remaining outstanding balance will be repaid over the following 19 months at a rate of approximately 5% per month.

LGO's cash had run dry after a drilling accident in September proved very costly, later estimated to result in $4m of capital costs, including for unsuccessful attempts to recover downhole equipment and the cost of the lost equipment.

The existing covenants, including previous breaches until remedied, and the associated security arrangements will remain in place until all outstanding repayments have been made, LGO said, with the final payment under the new repayment schedule due no later than September 2017.

Chief executive Neil Ritson said LGO, which produced just shy of 900 barrels of oil per day in the third quarter of the year, and BNP continued to have regular and constructive discussions to help the company develop a "secure and sustainable" financial platform.

"As the company and the industry as a whole adjusts to the sustained low oil price environment, we are pleased to have reached this agreement with BNP Paribas. This will provide a firm financial platform for LGO to maintain the momentum of our oil production operations in Trinidad."

Shares in LGO bounced 37% to 0.65p as the news emerged just after midday on Thursday.