Xcite shareholders have nothing to be excited about

Bartolomej Tomić

Xcite Energy Limited, an oil company under liquidation, is set to leave its shareholders with nothing subject to the expected completion of the liquidation process and the sale of assets.

The UK North Sea focused company has been put into liquidation as it failed to raise funds for debt payment.

Following the missed payment of a $152 million in debt when bonds issued in 2014 matured on October 31, 2016, the creditors applied to the court to place Xcite into liquidation, and the court on December 5 appointed joint liquidators of the company.

Xcite’s material assets are the licenses its subsidiary XER holds in four blocks in the UK North Sea, the most significant of which is the Bentley field license.
The assets have been put up for sale before the court action, but the process is now monitored by liquidators who will review bids received and determine further course of action.

Four bids in

The liquidators on Monday said only four offers had been received, without saying who the offerors were.

What the liquidators did say is that none of the four offers would result in a return of any value to shareholders based on the values of the offers, and secured creditor consent would be required to complete a sale pursuant to any of the offers.

Since shareholders are not considered creditors, they would only get surplus assets remaining after the costs of the liquidation have been paid, and the claims of XEL’s creditors have been settled in full. So, in order for XEL’s shareholders to receive any distribution from the disposal of XEL’s assets, the sale must realize more than $152 million sought by creditors. It now seems no surplus assets will remain.

“Having reviewed the bids received and consulted with secured creditors, we can now confirm that the Joint Liquidators are in advanced negotiations with a party to conclude a transaction. This transaction will not result in a return of any value to shareholders,” FTI Consulting, the liquidator, said in a statement on Monday.

Open to other offers

FTI further said that while being in advance talks with an unnamed party, these discussions are not exclusive, and therefore, the Joint Liquidators will consider offers from any party who has the technical and financial ability to conclude a transaction in a short timescale.

Whoever might have an interest in pursuing this transaction, they better move quickly, as the liquidators are working to close the deal as soon as possible as the liquidity position of both XEL and XER is tight.

Providing the rationale behind the desire for a quick solution, the liquidators in December that based on the short term liquidity projections, additional funding will be required in January 2017.

“XER is also continuing to incur operating liabilities as well as professional fees associated with the restructuring. Similarly, the Joint Liquidators are
incurring professional fees associated with the liquidation process. As such, absent a material injection of funding, a longer-term M&A process is not a feasible option,” the liquidators said back in December.