Oilex shores up cash-on-hand as market conditions worsen

Oilex has undertaken a number of “decisive steps” to proactively position it in response to the “challenging” trading conditions in the upstream oil and gas sector, together with volatile capital markets in general, it announced on Monday.

The AIM-traded firm said the steps were focussed on bolstering its balance sheet through curtailing its cash commitments, deferring its debt obligations, and increasing cash on hand. Firstly, it said it has entered into an amendment agreement to vary the terms of its loan funding facility of AUD 0.25m entered into on 11 September 2018, and further extended on 30 September 2019, known as the Series B loan.

Under the amendment, the loan repayment date was extended from 1 April to 31 July 2020.

All other terms remained the same, and were extended to 31 July, except for the issue of new options on different terms and conditions.

The options, which if exercised in their entirety, would result in a cash inflow to the company of £0.13m, with the proceeds from the conversion of options to be applied to the outstanding Series B loan balance, which was fully drawn down.

Seconfly, it has entered into an amendment agreement to vary the terms of its ‘Series C’ loan funding facility of £0.35m, announced on 4 February.

Under the amendment, £0.23m of existing Series C loan facility would be rolled into a new £0.23m loan facility, known as the Series D loan.

The terms and conditions of the remaining £0.13m under the Series C facility would remain unchanged.

Under the new Series D loan, the repayment date was extended from 1 August 2020 to 31 March 2021.

Additionally, in the event GSPC has not transferred their 55% participating interest in the Cambay PSC by 6 November 2020 to a new joint venture partner, Lombard could elect that the loan become repayable within 14 days.

All other terms and conditions remained the same, except for the issue of new options reflecting the revised loan repayment date.

The options, which if exercised in their entirety, would result in a cash inflow to the company of £0.23m, the proceeds of which would be applied to the outstanding Series D loan balance, which was currently drawn down by £50,000.

Oilex said it had also arranged an equity capital raising to secure further funding of £0.25m through the subscription of 227,272,727 new shares at 0.11p per share.

Funds raised from the subscription were intended to be applied towards its working capital and corporate requirements.

Completion of the subscription was expected on or before 31 March, and was conditional, among other things, on admission of the shares to trading on AIM.

The company said it was awaiting the receipt of the executed subscription agreement for the participation in the capital raising, which it was expecting “shortly”.

Finally, Oilex noted that on 23 December, it entered into a binding term sheet to acquire a 100% participating interest in the Doyle-Peel licence, or P2447, in the East Irish Sea, offshore UK.

In addition, it had entered into an exclusivity agreement for the potential acquisition of a 100% participating interest in the Castletown licence, or P2076, in the East Irish Sea.

It advised on Monday that it would not be exercising its rights to acquire the Castletown licence under the agreement, that would lapse in any event on 31 March.

Additionally, it agreed to a number of amendments to the agreement with Burgate Exploration and Production, regarding the acquisition of the Doyle-Peel licence.

It said the completion of the acquisition of the P2447 licence, subject to the applicable conditions precedent, had been extended from 30 June to 31 December,

“The current investment climate is highly volatile with limited availability of risk capital,” said managing director Joe Salomon.

“Accordingly, it is imperative that the company acts decisively to strengthen its balance sheet and curtail its commitments.

“The proposed restructure of our UK Continental Shelf acquisitions reduces our commitments while retaining our focus on our principal asset, the Cambay Project.”

Salomon said the company remained committed to the settlement of the Cambay dispute as agreed with its joint venture partner, which was currently expected to be completed in the June 2020 quarter.

“We thank our cornerstone shareholders for their ongoing support of the company during this challenging period while the company implements the Cambay settlement.”

At 0951 GMT, shares in Oilex were down 1.3% at 0.11p.