Circle Oil nearing asset sale agreement

Circle Oil could reach a deal to sell its main production assets in the next couple of months, allowing it to repay the bulk of its $78m (€70m) debt.

Trading in the Irish exploration firm’s shares was suspended yesterday after it said it needs to renegotiate its funding arrangements and obtain additional funds.

Circle owes its chief lender, the World Bank-affiliated International Finance Corporation $57.5m, which would be payable if the IFC were to stop issuing waivers.

That support is expected to remain while Circle finalises its strategic review. A separate $20m convertible loan, with KGL Investment Company, is not due for repayment until the middle of 2017.

A major problem for Circle has been the slow payment habits of the Egyptian General Petroleum Corporation, the main buyer of oil generated by Circle in Egypt.

The issue has “continued to worsen”, according to Circle, and the company has indicated it will be unable to meet ongoing debt interest payments and operational cash requirements after August “without additional funding”.

Circle yesterday reported operating losses of $112.6m, a 54% drop in revenue to $38.9m and a 76% fall in available cash levels to just over $8.2m.

The company has received bids for single and combined assets, without these being accepted. However, it is understood that a number of fresh bids are on the table and management is hopeful of a deal in the next couple of months.

That would likely include Circle’s two big producing assets and leave it with a small number of exploration and appraisal assets in Tunisia and Morocco.