North Sea oil company Iona Energy is facing insolvency after a proposed restructuring deal fell through.
The company confirmed the proposed farm out by Iona of the Orlando project, a key component of the restructuring plan, would not proceed.
Iona’s shares have been suspended. The Toronto and Aberdeen-based firm said it was highly likely its wholly-owned UK subsidiaries, Iona Energy UK and Iona Huntington, will commence insolvency procedures to protect the interests of all stakeholders in coming days.
Iona employs 13 people in Aberdeen with additional 16 contractors also working for the firm. It has not confirmed how many jobs will be lost, but chief executive Tom Reynolds said he “deeply regretted” the effect it would have on employees.
The Canadian-owned company said the parent company of the proposed farm out counterparty, an unnamed global energy company, had chosen allocation to its upstream operations and therefore the Orlando farm out will not be completed.
In a statement, Iona said: “In the absence of the Orlando farm out and the lack of a deliverable funding solution for Atlantic Petroleum’s share of Orlando costs, significant additional funding is required to ensure Iona can finance its share of capital expenditures related to the Orlando project.
“Having reviewed a range of alternatives and met with a large number of equity and debt providers and strategic counterparties during 2015, the management and Board of Iona do not believe there is any reasonable prospect of obtaining alternative funding in the current commodity price environment and within the required timeframes,” it added.
Given the level of senior secured debt owed by Iona, it is highly unlikely that there will be any residual value for shareholders.
Reynolds said: “Despite tireless, collaborative and innovative work by the Iona team and suppliers to effect the restructuring, we have not been able to overcome the severe difficulties in today’s oil and gas environment.
“We deeply regret the detrimental effect this will have on our shareholders, employees, creditors and suppliers.”
Last week, Iona Energy called for a two-month extension on its debt restructuring plan after it raised concerns about the “funding position” of its partner, Atlantic Petroleum, which has a 25% stake in Orlando.
First oil from Orlando, which is north-east of Shetland and was discovered by Chevron in 1989, was expected by the end of 2016. Iona is operator of the Orlando field, with a 75% stake.
Canadian-owned Iona had raised £185million from the sale of bonds before falling oil prices and production problems at the Huntington field, in which it has a stake, forced it to seek an extension of terms on the debt until the start-up on Orlando.
Atlantic Petroleum said in a statement: “The board will convene and will discuss with its advisers what the implications are for Atlantic Petroleum and what the appropriate actions are. The company will provide a further update to the market once implications and actions are clear.”