Shares of Hurricane Energy PLC (LON: HUR) fell after announcing a tender offer to repurchase the convertible bonds worth $230 million due in 2022 using some of its current cash balances.
Investors were displeased by the announcement, which will significantly reduce the group’s operating cash flow and have a positive long-term effect by reducing its outstanding liabilities.
Hurricane Energy has had a tumultuous year following the downgrading of the proven and probable oil reserves at its Lancaster oil field that threw its previous plans into disarray, plunging the company into financial distress.
The offer to repurchase outstanding bonds is an olive branch from the oil company’s new management team after the UK High Court rejected the previous management team’s restructuring plan favouring bondholders.
While the new management team is yet to be formed, the resignation of the previous management left the company in the hands of Crystal Amber. This majority shareholder had opposed the restructuring plan.
Hurricane Energy noted that the move to redeem the bonds was in good faith given the multiple uncertainties facing the North Sea oil-focused company beyond its control, such as the downgraded proven and probable oil reserves.
The oil company also noted that it was holding approximately $40 million in a restricted account to cover the decommissioning costs of the Lancaster oil field in case the firm has to cease production activities at the field.
Hurricane also revealed that the P6 well at Lancaster was producing 11,100 bopd with an associated water cut of 31%. The company also said it would book an accounting gain of $48 million after refusing to extend the current lease of the Aoko Mizu vessel up to 2025.
Hurricane Energy share price.
Hurricane Energy shares edged lower after the firm offered to repurchase bonds worth $230 million.
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