(Reuters) – Oil and gas company Max Petroleum Plc (LSE: MXP.L – news) said the slump in crude oil prices would render its business insolvent unless it restructured its debt and secured a significant investment, wiping out 86 percent of its market value.
The board has not put the company into administration as there was “reasonable prospect” that it could raise sufficient refinancing, the company said in a statement.
“However, there is only a short period remaining to achieve such a refinancing and if current efforts are unsuccessful then the consequences will be negative for all stakeholders in the company,” Max said on Monday.
Max said that it was still in talks with creditor Sberbank to restructure its debt. It is also in fresh talks with AGR Energy Ltd for an equity investment that along with the restructured debt would “render the company viable at current oil prices.”
The company, which began a review of its operations in July, said it would no longer proceed with a 37.1 million pound ($56.6 million) share subscription deal with AGR Energy.
AGR Energy, an investment vehicle of the well-connected Assaubayev family, would have controlled 51 percent of the company by acquiring 2.26 billion new shares at 1.64 pence each.
The company’s shares have since fallen sharply since Aug. 1, just before the deal with AGR Energy was announced.
Max, which has most of its assets in Kazakhstan, received shareholder approval for the plan in December, but warned at that time that a continued slump in oil prices would hurt future cash flows.
Energy companies across the globe have been forced to review operations, cut jobs and shelve exploration programmes as crude oil and commodities prices suffered steep falls.
Max shares were down 74 percent at 0.14 pence at 0906 GMT on the London Stock Exchange (Other OTC: LDNXF – news) . ($1 = 0.6555 pounds) (Reporting by Abhiram Nandakumar in Bengaluru; Editing by Gopakumar Warrier)