Uchenna Izundu
International Editor
LONDON, Jan. 4 -- Oilexco North Sea Ltd. (OSNL) faces insolvency because its syndicated lenders have refused to advance incremental funding amid the credit squeeze.
The company plans to file petitions for administration in the UK High Court as early as next week. OSNL had sought funding from a syndicate of lenders, led by The Royal Bank of Scotland PLC, and they had agreed to lend as much as $47.5 million in bridge financing to be repaid by Jan. 31. The money was needed to develop projects in the UK Central North Sea, specifically in the Outer Moray Firth and Central Graben areas.
Oilexco Inc., Calgary, the parent of OSNL, will seek other sources of finance or sell OSNL or some of its assets. "Several parties have indicated significant interest in acquiring ONSL or all or substantially all of its assets," Oilexco said. However it warned that although it would seek "to maximize the value of the assets for all stakeholders" there was no certainty that offers would be made or any transaction completed.
Companies reportedly interested are BG Group PLC, Talisman Energy Inc., and Petro-Canada.
OSNL projects under development include Shelley oil field, in which production was scheduled to start this month. However, its start-up also has been affected by bad weather and technical issues relating to the installation of the Sevan Voyager FPSO vessel. Three horizontal production wells were to be tied into the FPSO.
Another project that could be impacted is the major Huntington oil field, potentially one of the largest discoveries in the last 5 years, that was put on a fast track to come on stream early in the next decade.
Smaller operators on the UK Continental Shelf are struggling to raise finance as oil prices plummeted from a peak of $147/bbl in July to $40/bbl, and banks have tightened their lending criteria during the global financial crisis.
Despite the collapse of its subsidiary, Oilexco is solvent. Its senior secured lenders are arranging finances for its insolvency process.
Last summer, the company was worth more than $2.5 billion, but its value has plummeted by more than 90% since the beginning of this year.
Contact Uchenna Izundu at [email protected].
