Australia’s oil and gas exploration and production company Tap Oil Limited provided Monday an update on the outcome of the Company’s strategic review and financing.
Earlier this year, Tap announced a formal strategic review of its business and asset base to maximise shareholder value in response to the significant change in market conditions affecting the oil and gas sector. The strategic review considered (amongst other things) a number of divestment options for each asset, including the Company’s flagship Manora Oil Development, the Company’s Australian portfolio as well as ‘whole of company’ proposals.
The strategic review process confirmed that there is considerable interest in the Company’s Manora asset. However, the depressed oil price environment and the ongoing payment disputes between the Company and its major shareholder Chatchai Yenbamroong’s Northern Gulf companies (including regarding staged acquisition payments) have added to the complexity of successfully executing any transaction at an acceptable price.
After carefully considering all of the available options, the Board strongly believe the best outcome for shareholders in the current market conditions is to retain its interest in the Manora asset and its current portfolio of assets in Australia and Myanmar. This includes maximizing the value of Manora through near field exploration and the progression and evaluation of growth and acquisition opportunities in the South East Asian region, including Tap’s 95 percent interest in the M-7 block in a highly prospective hydrocarbon region, offshore Myanmar. Additionally, the recent award of acreage in the recent Australian gazettal’s, WA-515-P and WA-516-P, has further enhanced the Company’s Australian asset portfolio.
Tap is pleased to advise that it has signed an exclusive mandate and indicative terms and conditions with Macquarie Bank Limited (Macquarie) for a $55 million Borrowing Base Debt Facility to refinance its existing $56 million debt with BNP Paribas and Siam Commercial Bank. The refinancing is being driven by the lower oil price which may trigger a requirement to make a further repayment of the BNP facility during 2015 in addition to the $16 million debt repayment requirements already forecast. The impact of such repayments on the Company’s free cash flow may result in Tap falling below BNP’s minimum liquidity requirement. A higher interest rate margin will be applicable to the Macquarie facility, and the facility will have a maturity date of Dec. 31, 2018 with no repayments expected in 2015.
The Macquarie refinancing is subject to credit approval and documentation, which is expected to take approximately two months to complete. The facility is expected to be subject to terms and conditions similar to facilities of this type. This will include a requirement to hedge a percentage of reserves in future years. As the size of the borrowing base would be linked to the Manora reserves and revenues (as well as Third Party Gas revenues) the maximum amount available under the facility will fluctuate with changes in the oil price.