Xcite Energy, a UK-based oil and gas company, is in talks with creditors to try and renegotiate the terms of its $139.05 million bond ahead of debt maturity on June 30, 2016.
The company says its current and forecast cash position is insufficient to repay the bond capital in full by the June 30 deadline, and hopes the potential deal with bondholders will provide financial flexibility to pursue its development funding initiatives. The company’s cash balance as at March 31, 2016 was $14.13 million.
Xcite Energy, whose sole operational focus is to develop its Bentley field in the UK sector of the North Sea, said it also continues its efforts to secure a development financing package that meets its long-term field development funding requirements, in addition to the funds required for the settlement in full of the Bonds.
Providing update on the Bentley field progress, the company said it has reached agreement on the principal commercial terms for the development funding proposals for the first phase of the Bentley project.
These proposals will require a partner to join the development group and the company says it “believes its ability to offer a funding package to potential partners is an innovative structure which potentially mitigates the capital constrained environment in which the oil and gas industry is currently operating.”
In addition, Xcite said it has also continued to progress the tender process to select an EPCIC contractor for the Mobile offshore production unit, and floating storage and offloading vessel, and to finalize a drilling rig contract.
“The eventual outcome of the funding proposals and the Company’s continuing review of market opportunities to reduce costs may influence the future structure of the current contractor group as it continues to pursue the principles of its collaborative model which the Company believes creates value for all stakeholders,”the company said in a statement on Wednesday.
The company in February received extension of the P.1078 licence containing the Bentley field, in the UK North Sea, until June 30, 2017, and said it hope to submit the field development plan for Bentley in 2016.
Excite took over the licence in 2003, and has been working to bring Bentley oil into steady production ever since. The Bentley field is located on the East Shetland Platform in the UK Northern North Sea. Xcite in 2012 completed pre-production phase, producing 147,000 barrels of Bentley crude oil in the process.
According to a recent note by analysts Edison Research, Xcite worked hard over 2015 to reduce costs and optimize its Bentley development scheme. This included extensive due diligence of the field’s First Phase Development with the UK Oil & Gas Authority, and potential funding partners (either through farm-ins or ‘asset light’ development funding schemes). Edison said that the result is an economically robust development scheme over a wide range of macro factors.
What is less in Xcite’s control, Edison said, is the third-party funding required to progress Bentley to the next stage; this remains close but difficult to secure given market sentiment that remains depressed with continued low oil prices.