Cash proceeds could allow Caza to advance assets in the Bone Springs play
Caza Oil & Gas (LON:CAZA, TSE:CAZ) has revealed it is at an advanced stage of talks over a potential equity financing.
Such a financing would allow the company to retire its debt arrangement with Apollo and repay sums owed to Yorkville Advisers.
Cash proceeds could also allow the company to continue development of assets in the Bone Springs play, in New Mexico.
The proposed funding is being discussed with a counterparty which has been granted a short period of exclusivity in connection with the talks. Closing a deal is subject to a number of conditions including due diligence, board approval, and the signing of definitive agreements.
Caza, in a statement, said: “If the potential transaction is consummated, it is likely to take the form of an equity investment in the company which, given the current oil and gas commodity pricing environment, is likely to subject the company’s existing shareholders to significant dilution.”
The facility with Apollo – of which US$45mln of the original US$50mln remains undrawn – requires the company to comply with certain covenants, tested quarterly, and it also imposes certain caps on spending.
Caza has previously disclosed that it has not been in full compliance of the Apollo covenants, though the lender has agreed to a period of forbearance of those terms.
That agreement, among other things, requires Caza to diligently pursue “a transaction substantially similar” to the potential equity financing that’s being discussed, and if Apollo deems that Caza is not complying with this obligation then it can bring forward the end to the forbearance period to October 15.
By Jamie Ashcroft
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