Petroleum Africa
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Wednesday, March 16, 2016
Circle Oil is performing a strategic review of its business and assets with a view to considering all options to maximize value for shareholders and stakeholders. On December 14 Circle announced that following the redetermination of its Reserve Based Lending (RBL) borrowing base, it expected its borrowing base to be reduced, potentially giving rise to a shortfall. The company said that in the interim, given continuing oil price volatility, it has remained in constructive discussions with the IFC.
Circle is pleased to announce that those discussions have culminated in agreement by IFC to suspend the December 2015 redetermination until April 15 with any repayments required under the RBL facility, which is currently drawn to $57.5 million, being postponed until that date. IFC has indicated its willingness to consider further waivers as may be required to continue the Strategic Review process based on circumstances applying at the time of any application.
Due to the receivables owed to the company from Egypt and Morocco, Circle’s cash flows and financial position are under significant pressure. As of the end of 2015 Egypt and Morocco owed the company $21.6 million. Inclusive of the $20.0 million convertible loan held by KGL Investment Company, the total debt position of the company is $77.5 million and there is a further $14.1 million of trade creditors. Further the company is reliant on extracting US dollars from its Moroccan operations to both satisfy its obligations to its creditors and fund operations.
Circle is considering a number of options to reduce debt and ensure that the company has sufficient cash flows to fund future operations. The scope of the options being considered under the Strategic Review include, but are not limited to, a sale of one or more of the company’s existing assets, a corporate transaction such as a merger with a third party, the sale of the entire issued, and to be issued, share capital of the company and the raising of capital in the form of a subscription for new ordinary shares in the company by one or more third parties. There can be no certainty as to whether any such agreement, offer or transaction will be forthcoming or as to the terms of such agreement, offer or transaction, if any, including any requirement for shareholder approval.
The Board has appointed Investec Bank to act as financial advisor to the company in relation to the Strategic Review.
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