Caza Oil and Gas shares halve in value on news of equity financing

“If the potential transaction is consummated, it is likely to take the form of an equity investment in the company which, given the current oil and gas commodity pricing environment, is likely to subject the company's existing shareholders to significant dilution,” it said.

Caza said its objective remains to conclude a financing or a complete refinancing structure that might enable it to retire its debt facilities with Apollo Investment Corporation, together with sums owed pursuant to the convertible loan agreement entered into between Caza and Yorkville.

The company also wants to ensure sufficient additional capital to continue developing its Bone Spring assets.

Caza, which is engaged in the acquisition, exploration, development and production of hydrocarbons, said it has agreed a short period of exclusivity with the counterparty it’s in talks with regarding the financing.

The outstanding balance of the Apollo facility as at June 30 was $45m, which is also the current outstanding balance as at the end of September. Caza said it has been required to comply with certain financial covenants, which are tested quarterly, and to maintain a limit on expenditures for general and administrative costs.

The company said that as disclosed in the second-quarter results, it has previously not been fully in compliance with its financial covenants.

At 1020 BST, Caza shares were down 53.5% at 0.70p.