LONDON (Alliance News) - Kea Petroleum PLC on Thursday provided a glum outlook for shareholders after conceding it will have to raise funds within the next three weeks if it is to avoid having its shares cancelled from trading on AIM as its financial position "remains critical".
The oil and gas company turned investment company also is struggling to complete the sale of its assets because they are being snagged by various problems.
The news comes after Kea shareholders approved the company's plan to sell its oil and gas assets and become an investment company back in June, when Kea had already said its cash resources were almost "totally depleted".
On Thursday, Kea said its financial position "remains critical" as it is forced to rely on its creditors and its directors, none of which are currently being paid. That comes even after Kea reduced its workforce from 17 to 6, which includes its 4 board members, in order to reduce costs.
Since shareholders approved its change in direction, Kea has been waiting to receive government approval to sell its 70% interest in the PEP51153 licence area, which includes the Puka asset in New Zealand.
Kea said it expects to obtain approval "shortly", after which it plans to reactivate as a shell company to focus on a "different activity". However, the company will need more funds before it can go through with its plans.
"The company expect[s] to receive [approval] shortly and, subject to that happening, the company will have sufficient funds to complete the divestment phase, but will need to raise further funds to seek a restoration of trading in the company's shares and begin reactivation as a shell company with a different activity," it said in a statement.
"The company has made progress towards identifying opportunities that it may pursue as an investing company," it added.
The fact Kea will have to raise more funds is significant because the company's shares were suspended back in May whilst the company clarified its financial position, after it failed to raise GBP3 million of new equity to progress those assets in New Zealand which are now up for sale.
To avoid having its shares cancelled from trading on AIM, Kea must get its shares restored to trading before November 26, leaving the company racing to raise the required funds needed to implement a strategy and bulk up its struggling balance sheet.
That failed equity raise forced the company to sell the PEP51153 licence which has the Puka asset, its flagship project, for only GBP222,550. Kea made that sale after an "exhaustive marketing exercise".
In addition to that, the company's PEP381204 licence in New Zealand is now in the control of authorities because Kea liquidated two subsidiaries that were involved in a litigation.
Kea had a deal in place to sell the licence for GBP222,550 to New Endeavour Resources (NZ) Ltd, however the future of that sale now seems uncertain. Kea has been battling NRG Drilling over claims about costs related to drilling conducted by NRG on the licence, which includes the Mauku prospect.
On Thursday, Kea said: "Whilst the company viewed the claim as vexatious, and believed that it had a robust defence to the claims and a strong counter-claim, albeit against a company with no assets, and given the decision to cease as an oil and gas company it was decided to place those New Zealand subsidiaries involved in the litigation into liquidation rather than to run up additional costs associated with a High Court hearing."
"The effect of this is that the asset held by Kea Exploration Ltd, PEP381204 that includes the Mauku prospect, falls under the control of the Official Assignee who will make a decision on the proposal to sell the asset that had been subject to a conditional heads of terms with New Endeavour Resources," it added.
Kea did not clarify whether the Official Assignee is deliberating whether to let Kea sell the asset to New Endeavour, or at all.
A spokesperson for the company was not immediately available to comment.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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