Another smallish, Calgary-based independent oil company is staring bankruptcy in the face over its overseas operations, with holidaying shareholders and bondholders at risk of losing.
Canadian outfit Artumas declared Thursday it had a tentative agreement with an unnamed farm-out partner for a large share of its Mozambique acreage and a small amount of its productinve Tanzanian gas field Mnazi, where it now says operatorship is also up for grabs.
The farm-outs would produce cash in third-quarter, too late to stave off two big bond payments. As a result, the company’s Norwegian advisors propose converting $115 million in bondholders debt into equity, and then raising up to $40 million in stock.
The alternative is likely to be a shortfall for bondholders and bankruptcy protection for the company. Either outcome could compel the Mozambiquan and Tanzanian governments to withdraw the company’s permit to work.
In a statement, management said converting bonds to equity would clean the balance sheet so investors could take an interest.
Like First Calgary in Algeria and Oilexco’s North Sea operation, Artumas outperformed area players in locating resources and developing a development plan. But, the new pitfalls of foreign finance became their achilles heel, as all three companies faced steep development costs to realize the value of the vast reserves they had proven
Artumas’ producing Mnazi gas field, though not flowing to market like it could, contains a trillion cubic feet of gas.
By 22 May and June 30 2009, bond payments will wipe out company cash on-hand with $35 million in committed spending still to go for Artumas in 2009. Unless, bondholders play ball.
“The financial situation of the company requires immediate action,” a statement to shareholders in Oslo said on Thursday, a holiday in the Norwegian capital.
It’s decision time for a company hoping to avoid the fate of compatriot companies First Calgary in Algeria and Oilexco North Sea. This time, bondholders can hold the store open for the giant new players recently arrived in this, East Africa's "last basin" (see complete report, The Last Basin, in Scandinavian Oil-Gas Magazine).