(Alliance News) - Hurricane Energy PLC on Friday proposed a financial restructuring plan following talks with its bondholders as its Lancaster Field fails to deliver.
Hurricane shares sunk 48% at 1.20 pence each. The stock is down 52% year-to-date.
The UK-focused oil & gas firm said it has entered into a lock-up agreement with an "ad hoc group of bondholders", who own 69% of the company's USD230 million convertible bonds due July 2022.
Hurricane has been in talks with its bondholders since March.
The agreement will see the ad hoc committee agreeing to support a transaction that will "materially deleverage the company's balance sheet, enhance its liquidity position and extend its debt maturity profile". This will give Hurricane the financial flexibility to pursue a revised business strategy.
As part of the restructuring plan, Hurricane will propose a debt for equity conversion in which USD50 million of the principal amount of bonds will be exchanged for shares.
Hurricane will also amend the terms for the remaining USD180 million of convertible bonds.
Chief Executive Antony Maris said: "This has been a difficult period for Hurricane and its stakeholders. Following the significant downgrade to Lancaster Field reserves and future production profiles, coupled with oil price volatility, current financial projections show we will not be in a position to repay our convertible bonds at maturity from Lancaster Field cash flows.
"Significant time and effort has been focused on all available technical, financial and commercial options and, after careful consideration, we believe that implementation of the proposed Restructuring will deliver the best possible outcome.
"We acknowledge that this proposed course of action entails significant dilution for our existing shareholders, but it marks an important and necessary step in the company's efforts to secure a viable capital structure."
In December, Hurricane announced that its Lancaster oilfield in its West Shetland portfolio was producing at 12,300 barrels of oil per day on artificial lift with an approximately 23% water cut.
This is a decrease from the average rate of 13,600 bopd in its third quarter reported in October.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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