Hurricane Energy plc, the UK based oil and gas company, provides an update on the previously announced stakeholder engagement process and discloses operational and financial projections which have been shared with an ad hoc group of bondholders (the “Ad Hoc Committee”), holding in aggregate approximately 69% by value of the Company's $230 million convertible bonds due 24 July 2022 (the “Convertible Bonds”) as part of business planning, financing and balance sheet restructuring discussions.
As part of this process, in recent months, the Company has been engaging with the Ad Hoc
Committee. Hurricane can now announce that it has entered into a lock-up agreement (the “Lockup Agreement”) with the Ad Hoc Committee, pursuant to which the Ad Hoc Committee agrees to
support a transaction that will materially deleverage the Company’s balance sheet, enhance its liquidity position and extend its debt maturity profile (the “Restructuring”), thereby providing Hurricane with the required financial flexibility to pursue a revised business strategy.
To implement the Restructuring, the Company is proposing a restructuring plan with holders of the Convertible Bonds (the "Bondholders") under Part 26A of the Companies Act 2006 (the "Restructuring Plan"). The Company will today issue a practice statement letter to Bondholders, in
which further information in respect to the Restructuring Plan is contained. A copy of the practice
statement letter will also be uploaded to the Company's website at www.hurricaneenergy.com for information purposes only. The Restructuring Plan is expected to be considered by the High Court of Justice at a convening hearing on 21 May 2021 virtually in London. Further information regarding the Restructuring Plan will be announced in due course and, where appropriate, uploaded to the Company's website at www.hurricaneenergy.com. The impact of the Restructuring Plan on the
shareholders of the Company is further explained below.
Further information regarding the Group’s operational and financial projections, which are summarised in this announcement, can be accessed in full through a slide pack, which has been uploaded to the Company’s website at www.hurricaneenergy.com/investors/presentations. These
slides contain information which was provided to the Ad Hoc Committee. The slides are not a standalone presentation and should be read in conjunction with this announcement, which provides important context to the operational and financial information shared with the Ad Hoc Committee.
The main components of the Restructuring are as follows:
- The Company will execute a debt for equity conversion, which entails (amongst other things):
- A $50 million release of the principal amount outstanding under the Convertible Bonds in exchange for the issue of ordinary shares in the Company (the “Exchange Shares”) comprising 95% of the fully diluted pro forma equity of the Company immediately following the Restructuring.
- An amendment to the terms and conditions of the remaining $180 million of
Convertible Bonds in accordance with the revised terms detailed below, including the provision of security and subsidiary guarantees.
- The Company will pursue a revised business strategy which contemplates (i) an extended production case (which would see production from the Lancaster 205/21a-6 well (the “P6 well”) continue until its economic limit is reached) and (ii) if supported by the Bondholders in the future, an opportunity for subsequent investments in the Lancaster field (notably a potential P8 production well drilled during the summer weather window in 2022).
As a result of entering into the Lock-up Agreement, an Event of Default (as defined in the trust
deed dated 24 July 2017 in relation to the Convertible Bonds (the "Trust Deed")) has occurred. However, as explained further below, the Company expects that the Ad Hoc Committee will not take further action in relation to such Event of Default whilst the Lock-up Agreement is in effect.
The Company invites Bondholders who are not currently members of the Ad Hoc Committee to accede to the Lock-up Agreement. Any such interested Bondholder should contact Lucid Issuer Services Limited as Information Agent by email to firstname.lastname@example.org for details on how to accede to the Lock-up Agreement. Further information on accession to the Lock-Up Agreement is
set out in the section entitled “Next Steps for Bondholders” below.
The Company has conducted a thorough review of the various alternatives to the Restructuring and has carefully considered the likely consequences for the Group and its stakeholders if the Restructuring is not implemented. In the course of its review the Company has also consulted
where possible with key stakeholders including the Ad Hoc Committee. Having considered the position carefully, the Company has concluded that in all the circumstances and taking into account
fluctuating oil prices, future production levels and the scope and timing of future activity on the
West of Shetland portfolio and the impact of these on the Company's ability to repay or refinance
its convertible bond debt in full at maturity, the implementation of the Restructuring via the Restructuring Plan is likely to provide the best outcome for the Group and its stakeholders.
Antony Maris, Chief Executive Officer, commented:
“This has been a difficult period for Hurricane and its stakeholders. Following the significant
downgrade to Lancaster Field reserves and future production profiles, coupled with oil price
volatility, current financial projections show we will not be in a position to repay our convertible
bonds at maturity from Lancaster Field cash flows. Significant time and effort has been focused on
all available technical, financial and commercial options and, after careful consideration, we believe
that implementation of the proposed Restructuring will deliver the best possible outcome. We
acknowledge that this proposed course of action entails significant dilution for our existing
shareholders, but it marks an important and necessary step in the Company’s efforts to secure a
viable capital structure.”