The private equity company, Kerogen Capital, is proposing to invest US$35m in IGas, it was announced this morning. The deal depends on a restricting of IGas’s bonds and may require approval from the Takeover Panel.
IGas chief executive, Stephen Bowler, said:
“This potential investment recognises the underlying value in the IGas Group, both through its stable production assets, significant Shale acreage and c.US$230m carry from its partners.
“Upon completion of the Potential Transaction, we would have a capital structure that we believe is sustainable in the current oil price environment and that will enable the Company to capitalise on value accretive opportunities.
“We look forward to working with Kerogen Capital and our existing stakeholders to finalise the terms of the Potential Transaction.”
Kerogen specialises in the oil and gas sector and says it manages $2 bn in investment funds across the world. In November 2016, Kerogen agreed to waive and amend conditions in its finance agreements with A J Lucas, a major investor in Cuadrilla Resources.
In December 2016, IGas announced it was in talks with a potential strategic investor as it headed towards a predicted failure to meet its financial obligations. A company statement forecast it would not comply with leverage covenants as at 31 December 2016. It also forecast a breach of daily liquidity covenants in late March 2017.
IGas said the deal announced today could be reached before the deadline of early June for curing breaches of leverage commitments.
The IGas statement said the deal was subject to approval of its share and bondholders. It would result in significant reduction in outstanding debt, the statement said, but also a “significant dilution of existing shareholders”.
Under the deal, IGas said third party secured bonds (totalling US$125.6m) would be restructured by a partial re-purchase for cash, partial equitisation and exchange of remaining secured bonds for new ones with amended terms and extended maturity.
Third party unsecured bonds (US$27.4m) would be fully equitized.
Company owned secured and unsecured bonds (US$10.5m and US$2.6m) would be cancelled.
IGas said it would also seek to raise additional equity funding, including from existing shareholders. The placing price was expected to be about 4.5p.
The company said it held cash resources of US$31.8m at 27 February and a total gross carried shale gas work programme of US$230m. It said average production during 2016 was 2,355 barrels of oil equivalent per day. This was expected to rise slightly to about 2,500 in 2017.
IGas has been negotiating with Nottinghamshire County Council over conditions on a planning permission for shale gas drilling at Misson, in Bassetlaw. The conditions include a Section 106 legal agreement which was due to be concluded yesterday (28 February 2017).
A decision on IGas’s other Nottinghamshire site, at Tinker Lane, has been delayed because the county council asked for more information.