Cabot Energy, the AIM quoted oil and gas company focussed on creating predictable production growth in Canada, balanced with high impact exploration in Italy, provides an update on its financial position, fundraising plans and the Edmonton Oil Price.
In January 2019, the directors of Cabot Energy and its wholly owned Canadian subsidiary worked with specialist professional advisers based in Canada to conduct a managed, thorough and pragmatic review of the outstanding and overdue Canadian trade creditors, with a view to safeguarding the Company's cash flow position. The Directors have subsequently engaged with these creditors and are securing voluntary binding agreements with a significant majority of them, by value, in order to reduce the settlement payments, to reschedule and defer these payments and to secure certainty about the future cost of supply terms during 2019. Whilst still in progress, the Company is confident that a minimum of US$0.7 million of settlement discounts will be secured, representing approximately 17% of the total Canada creditor balance. These successful negotiations underscore the continuing support which the Group receives from its suppliers.
As at 30 January 2019, the Group's consolidated unaudited cash balance was approx. US$0.5 million. The Directors believe that these funds are sufficient to maintain operations until the receipt of the proceeds of subscription funds in February 2019.
As announced on 31 December 2018, the Company intends to undertake an equity fundraising in February 2019, which would be subject to shareholder approval, together with an equity fundraising on the same terms as subscribers by way of an open offer. The Company is concluding its discussions with High Power Petroleum and other significant shareholders regarding an equity fundraising of approximately US$3 million to enable the settlement of the material overdue Canadian trade creditors and certain creditors in the UK as well as provide short term working capital through to the end of Q1 2019.
The Company would then plan to approach the market again, probably in early Q2 2019, to seek further debt and equity funding for a growth business case. The Directors believe that the Company's assets and reserves remain fundamentally strong, but the new management team have needed to first address areas of business control in order to realise this growth potential.
The Directors are reasonably optimistic that the Company can raise debt and additional equity funding from existing and new shareholders, as it has done in the past, but it is not wholly within the Company's control and as such represents a material financial uncertainty. Failure to complete a first fundraising in February 2019 would cast significant doubt upon the Group's continued ability to operate as a going concern as it may be unable to realise its assets and discharge its liabilities in the normal course of business.
Edmonton Oil Price
Further to previous announcements, Cabot Energy is pleased to report that the spread between the West Texas Intermediate benchmark crude price ('WTI') and the Edmonton Light Oil benchmark price ('Edmonton') from December 2018 onwards has been restored to normal historical levels (Edmonton at 8%-10% below WTI on average).
The Edmonton crude sales price per barrel sold by the Company is based upon the average WTI benchmark crude price for the month of sales, less the local Edmonton percentage discount to WTI measured during the first half of the previous month and less a contractual transportation tariff per barrel sold.
The restoration is largely due to the positive impact on the Edmonton price of the temporary restriction on oil production mandated by the Alberta government announced on 2 December 2018. This is expected to lead to a further improvement in the average sale price per barrel of oil received by the Company. The cuts, which began on 1 January 2019, do not impact Cabot Energy due to an exemption each producer receives for their first 10,000bbl/d of production.