Trap Oil turns to creditors after Niobe well found barren

Trap Oil failed to find hydrocarbons at its North Sea Niobe exploration well and issued a warning that it will need to raise cash to supplement a settlement deal with its two main creditors.

While drilling at the Niobe well fulfilled its license obligation, the absence of hydrocarbons means that the site will be plugged and abandoned.

As shares plummeted, Trap Oil announced that it has entered into a settlement agreement with CGG Services and Athena Partnership Group, its two main creditors, for £2m. In return, Trap Oil will be excused from its outstanding debts to the companies, with contractual liabilities overridden.

The £2m payment will put Trap Oil just £0.4m in the black, leaving it in a precarious position should costs related to its Niobe prospect come in over budget.

"I am pleased that we have been able to achieve a pragmatic solution with our principal creditors - this settlement agreement enables Trap Oil to remain solvent in the short term and assess additional funding options for the Company going forward," said chairman Marcus Stanton.

"Although the company's future is still far from certain, we are now at least in a better position to be able to move forwards, potentially realise value from our existing asset base and seek to identify the best means for creating maximum value for our shareholders," he added.

Trap Oil continues to look to shareholders and potential investors for additional funds.

As of 11:00 BST, Trap Oil was trading 26% lower at 0.5p.