LONDON (Alliance News) - Cabot Energy PLC on Friday said it has sufficient funds to continue operations until its USD3 million February fundraise and has negotiated a settlement discount with creditors.
Shares in Cabot Energy were up 14% at 0.54 pence on Friday morning.
The oil and gas firm has been working to review its overdue and outstanding Canadian trade creditors throughout January in order to secure its cash flow position. Cabot Energy has been seeking to reduce, reschedule, and defer its settlement payments and achieve certainty on its supply terms for 2019.
Cabot Energy said it is securing voluntary agreements with a majority of its creditors and expects to secure a USD700,000 settlement discount, or 17% of its total Canada creditor trade balance.
As at Thursday, Cabot Energy's consolidated unaudited cash balance was around USD500,000. The company believes this will be "sufficient to maintain operations" until it receives the proceeds of its upcoming February fundraise.
At present, Cabot Energy its concluding talks with its significant shareholders, including High Power Petroleum LLC, over a USD3 million fundraising. This would be used to settle "material overdue Canadian trade creditors and certain creditors in the UK".
Some of the money raised would also be used for short-term working capital with plans to "approach the market again" in the second quarter of 2019 for further debt and equity funding in support of a growth business case.
A successful February fundraise is key to the continuation of the company and its failure would put Cabot Energy's future in jeopardy, it said.
"Failure to complete a first fundraising in February 2019 would cast significant doubt upon the group's continued ability to operate as a going concern as it may be unable to realise its assets and discharge its liabilities in the normal course of business," Cabot Energy said.
More positively for Cabot Energy, the spread between the Edmonton Light Oil benchmark price and West Texas Intermediate benchmark crude price has returned to usual historical levels. Cabot Energy predicts this will improve the average sale price per barrel of oil received by the firm.
The cuts, which started in January, are not expected to hurt Cabot Energy as it received an exemption for its first 10,000 barrels per day of production.