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Oilexco enters administration

28 January 2009

Oilexco announced on December 31st 2008 that it intended to file for administration as soon as is reasonable practical due to the Royal Bank of Scotland not being prepared to advance any further funding. Like many smaller oil and gas explorers and producers, Oilexco struggled to find another source for finance to continue its drilling and development programme.

Oilexco enters administration
Oilexco enters administration

As a consequence, as shares continued to slide, on January 7th 2009 Oilexco announced that its wholly-owned subsidiary Oilexco North Sea was subject to an order from the court appointing four administrators from Ernst and Young to take over the function of the Board of Directors.

The administrators are expected to attempt to find buyers for Oilexco or its assets, in the hope of maximising the value for stakeholders and keeping the business as a going concern. Assets include the Huntington field, potentially the biggest oil find in the North Sea for five years. However, oil at about $46 a barrel, as it was on 5th January, threatens to make North Sea investment unviable. The North Sea has many oil fields, but on average they are relatively small, so the cost per barrel is relatively high, a price of at least $60 is needed to get a good level of activity.

The collapse will be the first significant failure of a UK oil company as a result of the global economic crisis causing a drop in the price of crude and the drying-up of debt and equity financing since the downfall of Lehman Brothers in September 2008.

The Aberdeen- based oil exploration company was the most active driller of appraisal wells in the North Sea in recent years, outdoing big international groups such as Royal Dutch Shell and BP. The shares closed up 1¼p in London at 18¼p, but are down 98% over the past six months.

Valued at more than £2bn last June, Oilexco is now worth just £41m

Oilexco has been advised by the administrators of their intention to retain Morgan Stanley and Co. to continue with the process of the sale of the assets of the North Sea Company.


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