LONDON (Alliance News) - Gulfsands Petroleum PLC on Wednesday said its net loss widened in the first half, and warned that uncertainty about finance could cast doubt on its ability to continue as a going concern.
Gulfsands reported a bigger net loss in the first half due to exploration and evaluation asset impairment charges amounting to USD22.1 million in connection with its Moroccan Fes permit.
It made a USD31.3 million net loss in the six months to the end of June, compared with the USD9.2 million net loss reported in the corresponding half of 2014.
The AIM-listed oil and gas exploration and production company has projects in Syria, where operations are suspended, and in Morocco and Tunisia, and owns interests in two exploration licences in Colombia.
"The financial commitments of the Fes contract are inconsistent with the group's revised strategy, and therefore Gulfsands has initiated a farm-out process for the Fes contract," Executive Chairman Alastair Beardsall said in a statement.
"However, given the Fes licence expiry date in September 2015, the outstanding work commitments on the permit which could not physically be fulfilled before this date, and the uncertainty of securing an industry partner before the licence expiry date, the expenditure to date attributed to the Fes permit of USD22.1 million, inclusive of USD10.5 million fair value attributed at acquisition, has been fully impaired at 30 June 2015," Beardsall said.
Gulfsands confirmed it is working on its planned USD22 million fundraising, which will be made through an open offer to all shareholders.
At the end of June the company had said that the majority of the money would be raised through a placing of shares with institutional investors, with a smaller element being through an open offer. One month later, Gulfsands said it expected to raise the funds through an open offer.
The open offer requires the publication of a prospectus.
Gulfands intends to repay the Weighbridge loan facility, under which it has drawn down USD11 million, as soon as its fundraising is complete, though it said a further draw-down of USD1 should be possible and may be required before then.
Beardsall said that Gulfsands is in talks to restructure its minimum work obligations and to bring in partners to cut its net exposure to those obligations so it can reach a "sustainable and financeable" stage. Otherwise, it could divest assets "as is deemed necessary".
If the obligations aren't met, the company could be "forced to forfeit both its interest in these contracts/licences and any sums of restricted cash lodged with host governments as guarantees for our performance of the minimum work obligations".
"Notwithstanding the confidence that the board has in its ability to finance the group's re-shaped business, the directors conclude that at this time there is material uncertainty that such finance can be procured and failure to do so might cast significant doubt upon the company's and the group's ability to continue as a going concern and that the company and the group may therefore be unable to realise their assets and discharge their liabilities in the normal course of business," Beardsall said.
"The group faces many challenges over the coming months, including seeking extensions to contracts/licences and completing our work programmes, securing new funds sufficient to repay the Weighbridge loan facility and to provide the necessary working capital to allow progress to be made on our assets," the executive chairman added.
Gulfsands shares were untraded on Wednesday at 8.75 pence.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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