Leed Petroleum PLC (AIM: LDP), the oil and gas exploration and production company focused on the Gulf of Mexico, today announces its half yearly report for the six months ended 31 December 2010.Chairman and Chief Executive Officer's statement
During the period under review, the Company experienced adverse production performance issues from which it has yet to recover. At Eugene Island, oil and natural gas production from the A-8 well continued to decline but not to a level that would warrant approval from the Bureau of Ocean Energy Management, Regulation and Enforcement ("BOEMRE") to recomplete the well in the more prolific T-1 sand reservoir. Additionally, the Ship Shoal 201 A-6 well declined at a much sharper rate than projected, as the well appears to have reached the gas-water contact transition zone earlier than anticipated. As a result, the Company has not been able to generate sufficient cash flows to satisfy the covenants included in its credit facility with UniCredit Bank AG. In view of the Company's deteriorating financial position, on 25 November 2010 UniCredit Bank AG notified the Company that a principal payment of $12.0 million would be due on its credit facility by 31 March 2011.
The Company announced on 23 December 2010 that it had commenced a strategic review process and had retained Macquarie Tristone as financial adviser to assist with this review. It was further announced that Macquarie Tristone would undertake a review of a broad range of strategic options including, but not limited to, divesting some or all of the Company's oil and natural gas assets, securing a new bank credit facility and/or other potential transactions such as a merger with another company.
As part of the strategic review process referred to above, in early 2011 Macquarie Tristone had discussions with a number of parties who had expressed potential interest in either acquiring some or all of the Group's principal assets or providing capital to permit continued drilling. None of these discussions resulted in a clear proposal that would resolve satisfactorily the Company's position with regard to its credit facility with UniCredit Bank AG. At the date of this report, the Group does not have the financial ability to make the $12.0 million principal payment owed under the terms of its credit facility on or before the 31 March 2011 due date.
In bringing the strategic review process to a close, on 28 March 2011 UniCredit Bank AG informed the Company of its decision to pursue a near term cash sale of the Company's oil and natural gas assets, with the proceeds of the sale being applied against the Company's outstanding borrowings. In response to UniCredit Bank Ag's decision, on 29 March 2011 the Directors voted to cease business operations and either have the bank appoint a receiver or, if they refuse, place before the shareholders a proposal for voluntary liquidation. The Board therefore requested that trading in the Company's shares be suspended pending further clarification of the Company's financial position and, accordingly, the Company's ordinary shares were suspended from trading with effect from 30 March 2011.
The Company's Directors have determined that the Company and its subsidiaries are currently insolvent and the Group will not continue into the future as a going concern. Accordingly, the carrying value of the Company's oil and gas assets has been written down to its expected liquidation value of $10.0 million (net of decommissioning obligations of $6.6 million), which was determined by the Directors. Adjustments have also been made to reflect additional costs that arise as a consequence of the Company ceasing to be a going concern.
The past year has been a tough and bruising period for us all. There are uncertain times ahead. We appreciate all of the support we have received from our shareholders and we would like to thank all at Leed for their hard work during these challenging times.
Source: LEED
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