Limerick-founded Circle Oil mulling fresh shares issue

Irish-founded exploration firm Circle Oil is considering a fresh equity raise in the new year in a bid to “right size” its balance sheet.

The Limerick-founded company, which is mainly active in northern Africa, yesterday announced it is considering “a number of options” including a debt restructuring and/or an equity raise, within the first quarter of 2016, in order to “right-size the balance sheet and ensure that the company has sufficient cash flows to fund operations”.

While Circle has made progress in talks to extend its lending facility with the International Finance Corporation, it said the process has not progressed as quickly as envisaged.

The borrowing base and the size of the overall facility are likely to be reduced, via these talks, leading Circle to consider its options.

The company added that trading remains “very challenging” due to weakening oil prices and varying production rates.

“Circle’s statement demonstrates how even a company with good performing assets can struggle in the conditions in which the oil and gas industry currently operates,” Job Langbroek of Davy Stockbrokers said.

“Circle has properly drawn attention to the actions it feels will be required to satisfy lenders.

"We suspect that in the world of small-to-medium-sized oil and gas companies, its frankness will be mirrored by many others.

“The challenge facing Circle and the industry, in general, has been led by depressed oil prices but compounded in the case of Circle by late payments from its main Egyptian debtor and variable production rates from the mature Gemsa field.”