The company is running out of cash may have to petition for insolvency or lapse into administration in 12 weeks’ time after last week reporting plunging losses of £44.4 million for the year ending 31 December 2014 – compared to £10.3 million the previous year.
Despite cutting overheads by more than 60% from £3.5 million to £1.3 million – including relocating from its high rent premises at 35 King Street – and relinquishing a number of exploration licences, ‘significant’ cash outflows on its Athena oil field continued to drag.
The company attributed the losses to bad weather – which extended maintenance time and repairs costs – and also a ‘depressed’ Brent oil price.
Trap Oil’s sole producing asset is its 15% share in the Athena oilfield, on which it had to pay an additional £2.25 million for its share of repair work. The field has been producing albeit at a reduced capacity. In light of this lower flow rate, the significant drop in global oil prices and the fixed nature of certain of the field’s key operating costs, at the then prevailing Brent oil price of approximately $58-barrel, the field was significantly loss making and incurring a cash outflow of approximately £380,000 per month net to Trapoil.
Trap Oil only has adequate working capital to support its activities until around July 2015. The directors are actively engaged in seeking fresh investment and/or asset sales but warned that ‘in the event that further funding is not secured in the short term, the Board believes that it is highly likely that the company will become insolvent, and appropriate insolvency proceedings, such as administration or liquidation, will consequently need to be commenced.”
A further announcement will be made in due course.