RNS1 Apr 2020 08:08
RNS Number : 3202I
Zoetic International PLC
01 April 2020
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
1 April 2020
Zoetic International plc
("Zoetic" or the "Company" or the "Group")
COVID-19 Update
Zoetic, the London listed vertically integrated CBD company, provides a further update regarding the impact of Covid-19.
Oil & Gas Division
The steep fall in oil & gas prices has inevitably put considerable pressure on margins at the Company's East Denver project, where it has an interest in eight producing wells, and the project is operating at a loss given the current oil price. The operator has determined that the most prudent course of action is to curtail production until such time as there is a recovery in oil & gas prices. Five wells will be shut in, with the remaining three choked back to produce around 240 barrels of oil equivalent per day between them. This is calculated to generate sufficient revenue to cover the fixed overheads of the project and to ensure that none of the partners is obliged to cover these from their own resources.
The Board is supportive of the operator's proposal, although its consequence is to remove the sole revenue stream of Zoetic's oil & gas division. A considerable amount of progress had been made since September last year in reducing this division's overheads and ceasing unnecessary expenditure, but certain liabilities do remain, including an outstanding bank facility. This was originally drawn down as US$500,000 but the Company has adopted a policy of repaying the principal in line with the projected revenue from the East Denver project and the current outstanding balance is US$325,000. Zoetic is in constructive dialogue with the bank about a rescheduled payment plan and, although final details are to be agreed, the bank is supportive in principle.
In the circumstances, Zoetic is exploring the aid packages that are being made available by the US federal and state governments in response to the Covid-19 outbreak and the Company is working with its bank to apply for loans to cover its short term operating costs, including payroll, rent, utilities and loan interest. Further details will be announced in due course.
In addition to this, the Board is examining the feasibility of selling certain assets from its oil & gas division, in part to reduce ongoing liabilities and to generate short term cash. Given macro-economic difficulties worldwide, it is unrealistic to expect a high value from these assets, but the Board believes it may be possible to obtain part-payment for any sale upfront and the balance on a deferred basis in addition to retained overrides.
As part of the reorganisation of the Group put in place in the peri