LONDON (Alliance News) - Fastnet Equity PLC Friday outlined plans to spin-off its oil and gas assets into a new entity following its plans to become an investment company focused on the healthcare sector.
Fastnet shares were trading down 3.2% to 2.25 pence per share on Friday morning.
The company, which recently changed its name from Fastnet Oil and Gas, has been trying to move away from its old activities by selling its assets in light of the deteriorating environment caused by the fall in oil prices.
The company originally proposed the move into the healthcare sector back in August, and said it would be surrendering its Foum Assaka licence offshore Morocco to save GBP25,000 a month in costs and was looking to sell its licences offshore Ireland after spending around GBP600,000 on them.
At the end of July, Fastnet had a cash balance of USD15.9 million and liabilities totalled USD600,000, with shareholders approving the new healthcare-focused investment policy at the end of September.
However, on Friday the company said it will now transfer its oil and gas assets into a new company called Fastnet Hydrocarbons Ltd, opting not to retain its former name.
Fastnet Hydrocarbons is held by a trust for the "future benefit" of shareholders of Fastnet Equity, in the hope that there will be some funds to return to shareholders.
However, that may be optimistic because in order for the new company to maintain those licences whilst looking for a seller, it has taken out a four year, GBP600,000 unsecured loan to cover its initial running costs which will have to be paid back using the proceeds from any asset sales.
Cathal Friel, non-executive chairman of Fastnet Equity, will head up Fastnet Hydrocarbons.
"In the event that this search process is completed, the company's existing shareholders would receive any value generated from the disposal of these assets," she said.
The demerger will allow Fastnet Equity to kick-start its new investment policy whilst ring-fencing the legacy assets as it continues to seek buyers for them. All of the company's oil and gas assets offshore Morocco and Ireland are held by two subsidiaries, which have been purchased by Fastnet Hydrocarbons for a nominal fee.
All investment of equity and debt in those two subsidiaries that hold the oil and gas assets was written off completely on Fastnet Equity's balance sheet in the financial year that ended March 31, 2015, and all previous loans made by Fastnet to the two subsidiaries that have not been repaid have now been waived and booked as impairments, it said.
Fastnet Equity did not provide any further update concerning its own future following the spin off, but has around 12 months to make an investment, according to AIM listing rules. The company will initially be focusing on the European healthcare sector and has previously said that the biopharma sector is particularly attractive right now, as it chases down both small- and large-cap investment deals.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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