17 Mar, 2017
Tullow Oil to battle debt with £607m cash call
Tullow Oil is preparing to issue new shares in a bid to raise £607m to help tackle its $4.8bn (£3.9bn) debts.
The London-based oil company will issue 466.9 million shares at 130p each, which is 45.2% lower than Thursday's final pricing. The substantial discount triggered a market sell-off, sending shares plummeting nearly 15% to 202p.
The Africa-focused oil pioneer racked up its debt stacks after the 2014 oil price crash wrecked revenues while Tullow was investing heavily in an oil project off Ghana. The strain has propelled the company’s debt ratio to more than five times its annual earnings before interest tax, depreciation, and amortisation. Tullow hopes to drive down debt to 2.5 times its yearly earnings.
In response, it has kick-started talks for a full-scale refinancing later this year and a one-year extension to keep its $1bn corporate debt facility open until mid-2019 to increase its financial flexibility as the overhaul begins. Paul McDade, chief executive, said the company was already seeing more money flowing into the business but that the rights issue would accelerate its intention to get rid of its debts. He expects the restructuring talks to conclude by the end of the year.
The multi-million-pound boost will also help it to move the company’s series of projects forward. The company is set to begin exploration and assessment work in its Jubilee and ten fields near Ghana and its fields off the Kenyan coast. Tullow added that it also hopes to take advantage of “other opportunities that industry conditions offer”.
Mr McDade is taking the reins from former chief executive Aiden Heavey who held the executive for more than 30 years. In a contentious reshuffle, Mr Heavey will chair the board for a two-year “transition period” while the company gets back on track.
Today's News - Stockbroker Panmure confirms Bob Diamond takeover