PetroNeft seeks debt writedown amid deal to sell key asset to CEO

Dublin-based PetroNeft, the Russia-focused oil and gas explorer whose share price has plunged 98 per cent since the start of the war in Ukraine, said on Wednesday it is seeking a writedown on much of its $5.59 million (€5.18 million) debt, as it plans to sell a key asset to its chief executive.

The company has entered non-binding heads of terms to sell its 90 per cent interest in the company behind the so-called Licence 67 in western Siberia, where commercial oil production started in 2021, to its chief executive, Pavel Tetyakov, for the equivalent of $2.56 million. The deal also involves the assumption of associated debt, PetroNeft said in a statement.

PetroNeft put its Russian assets on the market last November amid challenges faced by the Ukraine war and international sanctions directed at Russian financial institutions and the oil and gas sector. This left the company unable to secure financing for the drilling of development wells on an oilfield on Licence 67 and struggling with the resignation of its auditor, BDO, in light of the invasion.

Mr Tetyakov, who joined the company in 2016 and was promoted to the role of chief executive last October, expressed an interest in February in Licence 67 and PetroNeft’s 50:50 joint venture in another licence, Licence 61, in the same region.

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While two other parties signalled an interest in Licence 61, Mr Tetyakov was the only party to pursue a bid after completing due diligence on the asset, PetroNeft said.

PetroNeft’s joint venture partner in Licence 61, Oil India International, have so far rejected Mr Tetyakov’s bid for that asset. The company behind the licence voluntarily filed for bankruptcy administration in Russia last month, after the group that owns the pipeline off the field stopped accepting oil from the licence last August amid a dispute over tariffs.

The sales process has been overseen by an independent committee of the board, advised by Davy.

PetroNeft has four main debt instruments totalling $5.59, including US$947,003 of accumulated interest. The debt instruments include a loan from Swedish company Petrogrand, two convertible loans, and a loan from Belgrave Naftogas, its partner in Licence 67.

“The company has been engaging with the debt holders to reach a settlement agreement in conjunction with the proposed disposal, which is likely to result in a significant reduction of the principal amount and forgiveness of interest,” PetroNeft in its statement on Wednesday.

Meanwhile, the company said that its shares will be suspended from trading on the junior stock markets in Dublin and London from next month, as it will be unable to publish audited accounts for last year by an end-June deadline, owning to its failure to date to source a new auditor. PetroNeft’s market value is about €535,000.