Today is a day of contrasting fates for two E&P companies whose balance sheets are under strain amid depressed oil prices.
Kazakh-based producer Tethys Petroleum (TPL) is down 25% to 3.3p as it reports that its former suitor Nostrum Oil & Gas (NOG) says it is in default on a $5 million loan while Independent Oil & Gas (IOG:AIM) rises 11.4% to 5.15p in relief as lender Darwin Strategic agrees to convert its debt into equity and to sell subscription shares associated with its financing of the company.
Tethys denies Nostrum’s charge which arises after a deal between the two collapsed thanks to the opposition of Tethys’ largest shareholder Pope Asset Management. The loan in question was agreed in August, is due to mature in February and has an interest rate of 9%. Nostrum issued the notice of default after Tethys’ announcement on Monday that it had missed a deadline for cash-calls relating to an exploration joint venture with Total (FP:PA) and China’s CNPC in Tajikistan.
Notwithstanding today’s rise and the extinguishing of the Darwin liability, Independent remains under severe stress as it is only funded until late November.
Cantor Fitzgerald is keeping its recommendation and price target for Tethys under review and comments: ‘We have long highlighted that in a challenging oil price environment globally, and especially in Kazakhstan (where the selling price at the well head of oil fell to US$13/bbl), that Tethys’ financial constraints will become more pronounced.’
Independent’s house broker FinnCap cuts its price target to reflect likely dilution and comments: ‘It is positive to have resolution on the clearing of the debt facility and as a result of the issuance of the new shares, we are reducing our target price to 59p from 65p previously.’