Petroceltic puts itself up for sale after breaching loan conditions

Petroceltic, the quoted oil and gas company, is up for sale and has appointed Bank of America Merrill Lynch and Davy Corporate Finance to talk to potential buyers. The company is under pressure from its lenders, following a breach of banking covenants on its debts of over $200 million (€183m).

The advisers have also been asked to look at other restructuring options in a strategic review, including a farm out of sale or some assets, a merger with a third party or the raising of new equity or debt capital. Petroceltic has oil and gas assets in Algeria, Egypt, Italy and Greece .

The company is in breach of its senior bank facilities, which are secured on its assets. This has necessitated a number of waivers on loan repayments from lenders, who have now provided further limited conditional financial support. The latest waiver under the senior bank facility extends to January 15th, 2016.

In Wednesday’s statement, Petroceltic said that 2015 “has presented a period of exceptionally challenging market conditions” and consequently it has not been possible to raise additional financing on commercially acceptable terms. The company has been hit by the falling price of oil and its shares have dropped 77 per cent in value this year.

‘All available options’

Company chief executive Brian O’Cathain said that the company had a “world-class asset” in the Ain Tsila gas field in Algeria, which the directors believed would be “the principal driver of the long term future value of the business.” He said the company would explore “ all available options” to maximise value for shareholders.

Petroceltic has debts of $217.8 million, while it has cash balances of $28.1 million, of which $24.6 million is held in local currencies and is “not readily convertible.” The group “does not have certainty on liquidity beyond early January 2016,” the statement said. Lenders have confirmed that they will provide conditional financial support to allow some “ funding and portfolio management” initiatives to take place.

The company has received a number of conditional proposals and expressions of interest in some of its production and exploration assets and negotiations in relation to a potential sale of its Egyptian production interests are continuing. If these are concluded, all proceeds will go to repay debt.

As a result of the announcement, the company said it is now in an “offer period” under Irish Takeover Rules. Petroceltic held talks in 2014 with Dragon Oil on a possible takeover, but they collapsed. The company has had a long-running battle with Swiss-based investment fund Worldview, which holds 30 per cent of its equity and has sought to remove management and restrict the powers of directors.