LONDON (Alliance News) - Independent Oil and Gas PLC Friday said it has secured a new GBP800,000 loan to allow the company to progress the delayed Skipper appraisal well in the UK North Sea.
The loan has been secured by Independent Oil's subsidiary, Independent Oil and Gas North Sea Ltd, and provided by London Oil and Gas Ltd.
Importantly, the loan is in addition to the loan agreements announced last week with GE Oil and Gas UK Ltd and London Oil and Gas.
On December 4, Independent Oil entered agreements with GE Oil and London Oil, whereby the two parties would provide a total of GBP4.75 million in loans, of which GBP2.0 million would come from GE Oil and the remaining GBP2.75 million would come from London Oil.
Following the additional loan of GBP800,000, London Oil will be providing Independent Oil with a total of GBP3.55 million, pushing the total loan amount to GBP5.55 million when combined with the loan to be provided by GE Oil.
Independent Oil said the terms of the additional GBP800,000 loan are the same as the terms for the original loan agreements.
However, Independent Oil said it anticipates granting London Oil with a fixed and floating charge over the company and its assets as security against the additional loan. Independent Oil has also agreed to issue warrants to London Oil over 7.5 million shares exercisable at 8.0p per share before the end of 2016.
The funding is significant, with the additional loan coming only a day after the company said it would drill the Skipper well in either January or February following delays. Independent Oil was originally planning on drilling the well before the end of 2015, and had said plans for the well were in the "advanced stages" as far back as September.
In addition, Independent Oil said its salary sacrifice arrangements, whereby directors sacrifice part or all of their salaries to be paid in shares rather than cash, will remain in place until the end of 2016, or earlier if it can source GBP10.0 million in funding.
In the six months to the end of August, directors were owed a total of GBP173,697 in sacrificed salaries and fees, and accordingly the company has issued them with options to subscribe for over 1.5 million shares at an exercise price of 1.0p per share.
Independent Oil is sourcing GBP10.0 million of funding after an "internationally listed group" pulled out of a deal which was set to inject USD10.0 million of equity funding, alongside a large debt facility, into the company, earlier this year.
Independent Oil currently owns 50% of the Skipper licence, but struck a deal earlier this year to purchase the other 50% of the licence held by Alpha Petroleum Resources Ltd to take full control.
Although it has signed that deal, Independent Oil cannot complete the transaction until it sources some funding to ensure it can afford to drill the well on the licence. The acquisition is dependent on securing funding for the well.
Back in October, Independent Oil's financial position became dire as it warned it only had enough funds to last a month or two, before raising GBP150,000 to keep it ticking over.
Independent Oil shares were down 4.3% to 7.30 pence per share on Friday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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