Challenger Energy Group PLC Says Balance Sheet Restructuring Reduces Debt By 85%

Oil and gas company reduced debts, debts and potential liability risk from US $ 22 million to US $ 2.5 million as a result of creditors settlements and payment deferrals

Challenger Energy Group PLC (AIM: CEG) said it has completed a restructuring of its balance sheet that it says will reduce debt by about 85% by the end of the first quarter of next year.

In a statement, the oil and gas company said its debts, debts and potential liability exposure of US $ 22 million are expected to be reduced to around US $ 2.5 million following settlements with creditors and payment deferrals.

Additionally, the company said its cost-cutting program reduced its overhead costs by around 70% and added that it was evaluating options to secure additional financing.

Challenger Energy said creditors of the unsuccessful drilling of the Perseverance-1 well in the Bahamas in early 2021, which owed around US $ 11.3 million, settled a total payment of US $ 2.0 million in cash, including 0.6 million US dollars has been paid. nowadays.

Payment of the remaining US $ 1.4 million, which is due by January 31, 2022, will be funded by new capital.

Meanwhile, some US $ 3.0 million of debts and inherited creditors in Trinidad agreed to be settled for US $ 1.0 million in cash, of which US $ 0.6 million was paid to this day and US $ 0.4 million will be paid in the first quarter of 2022.

The remaining US $ 1.5 million of debts and creditors inherited in Trinidad are at the level of the subsidiary entities of Trinidad, without recourse against the company.

The company also said it expects the previously reported US $ 6.5 million of legacy claims, license debts and potential financial exposures in Trinidad to be reduced to less than US $ 1.0 million. US dollars, which has been rescheduled and is expected to be phased out over the next 18 months.

Challenger Energy has US $ 0.7 million in convertible notes outstanding which mature in December 2023. It hopes to reach an agreement with noteholders to convert the notes into equity.

Finally, because of the ultimate cost of the Perseverance-1 well, insurers can ask for an “additional” premium over the final overall cost of insurance, the company said, adding that this issue remains subject to negotiation with insurers.

As a result of the restructuring, all residual amounts are at the level of the Trinidadian operating subsidiaries and are expected to be managed by the Trinidadian subsidiaries over the next 18 months, through deferrals and payment plans.

The cost reduction exercise launched in July of this year is nearing completion and has reduced the company’s continued cash consumption from $ 700,000 per month in February 2021 to less than $ 200,000 today.

Challenger Energy currently has a cash balance of US $ 1.5 million and said it is evaluating various financing alternatives to obtain additional capital.

The new capital would be used to meet creditors’ settlements in the first quarter of 2022, for which the company needs US $ 2 million, and to fund a work program in Trinidad and Suriname next year, for which a minimum of US $ 4 million is required.

Challenger Energy said the South Erin license in Trinidad has been renewed on agreed terms, while the Innis-Trinity license renewal process is expected to be completed shortly.

He said the successful renewal process sets the minimum work program in 2022 and beyond for its main production assets in Trinidad – Tar, South Erin and Innis-Trinity – with the goal of increasing production from 15 to 20% in the first half of next year. .

As the operations in Trinidad are largely self-financing following the implementation of cost reduction measures, the expected increase in production means that the cash flow generated from the operations in Trinidad will be more than sufficient to cover all. operational costs in the country and group overheads, the company said. .

He said he has drastically downsized in recent months and identified new board members and senior executives for key leadership positions.

“With this work largely behind us, attention is now focused on a recapitalization – the last remaining step in what could be described as the ‘clean up’ program intended to put this company back on a solid financial footing for the future, ”said CEO Eytan Uliel.

“This is necessary both to enable the final payment of the creditors’ settlement, but more importantly, to finance the accretive work of production in the future.

“Going forward, I hope 2022 can become a year focused on restoring value, and for which we have planned a comprehensive work program, focused directly on maximizing cash flow from existing production assets. Further updates on our progress will be provided. “

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