It’s a jungle out there

Author Toby Shelley

It’s tough at the bottom of food chain. Lower oil prices have thrown a myriad of minnows into strategic reviews, frenzied cost cutting, looming insolvency and fundraising drives.

It’s tough at the bottom of food chain. Lower oil prices have thrown a myriad of minnows into strategic reviews, frenzied cost cutting, looming insolvency and fundraising drives.

Prize for innovation perhaps goes to Kea Petroleum, which has resorted to crowdsourcing, more popularly associated with financing independent films and health food start-ups, in a bid to raise £3mn ($4.7mn) to fund drilling in New Zealand. Kea’s working capital position “remains tight but it has sufficient funds for operations until after the extension of the bid period”. If you fancy a punt, you have until 22 May.

Runner up is Northern Petroleum, which last week unveiled an incentive policy for executive directors and senior management that is directly linked to the share price. Not alone among the little independents, Northern has seen its share price tumble by more than 80pc in the past year.

The award for maximum confusion caused goes to New World Oil and Gas’ new share offering. The Takeover Panel was called in when it transpired that a bed and breakfast proprietor in the west of England had ended up the accidental owner of almost 48pc of the company and might be liable to make an offer for the rest, when her son’s move to buy 10pc went horribly awry. I’ll spare you the details and certainly avoid any suggestion as to where the blame lies.

But a close second in this heat is taken by PA Resources and its largest shareholder Gunvor. PA sought protection from creditors in Stockholm in late March. Two weeks later Gunvor petitioned for its bankruptcy, only to withdraw the application two days later. The reorganisation attempt continues under a new chairman.

Beneath the water, others are paddling away like mad looking for finance. Max Petroleum has suspended trading on the AIM junior market in London and is still locked in talks with Sberbank and investor AGR, but concedes that its 2,900 b/d operation in Kazakhstan is “under severe financial stress”.

Kea’s market capitalisation has dipped to below £1mn. Northern’s is now under £5mn. New World is under £2mn.

But it’s not all bad news for everyone. One step up the food chain, North Sea investor Parkmead, headed up by the veteran Tom Cross and with a market capitalisation of over £100mn, today said it had raised some £13mn to give “greater flexibility to take advantage of the current M&A environment in the oil and gas sector”. And further up the chain again, Hungarian integrated oil company Mol has indicated that it is looking for further opportunities after digesting North Sea assets purchased from Premier Oil.

For more information, please contact OilBlog@argusmedia.com

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