A multi-national company that was set to back Independent Oil & Gas (LON:IOG) has got cold feet over its proposed investment because of falling oil prices.
The AIM-listed North Sea-focused firm signed a letter of intent with the unnamed multi-billion dollar valued company back in late May, paving the way for a US$10mln cash injection in return for shares priced at 23.79p each, plus the provision of a sizeable debt facility.
"The decision from our potential investor is unexpected based on the progress made to date and clearly very disappointing. It is a decision based on external factors and not a reflection on our team and assets,” said Mark Routh, chief executive officer of Independent Oil & Gas.
The proposed transaction was approved by Independent Oil & Gas (IOG) shareholders at the end of last month but even so, the board of IOG had other irons in the fire, just in case the deal fell through, and it is now pursuing these alternative options.
“Whilst we anticipated that the transaction was likely to conclude, we have continued to keep other opportunities open. We are now pursuing these opportunities with the aim of maximising value to shareholders,” Routh revealed.
The short term priority is to secure the funding for the Skipper commitment well so IOG can secure a licence extension for Skipper, plus the company is keen to buy out its partner in the Skipper licence, Alpha Petroleum, which owns half of the prospect.
IOG said it is funded up to 4th September 2015 when the Darwin loan of £358,000 is repayable.
The announcement was made after the market closed on Friday. Shares in IOG opened around one-third lower on Monday morning at 7.70p.