Short of a Sale, Oilexco Will Go Bankrupt - Tristone Capital

The outright sale of Oilexco Inc. (OILXF.PK) is the only way the North Sea E&P company can stave off bankruptcy, according to a new report from Tristone Capital in London. But analyst Toby Pierce says finding someone to make a bid may prove too tall an order.

Mr. Pierce said in a note to clients Thursday:

[A] corporate sale is the route left to maximize shareholder value. The logical buyers for a company of Oilexco’s size are limited given the relative size of the portfolio, and the unprecedented tightness in markets.

Thanks to a new $47.5-million bridge loan announced Wednesday, Mr. Pierce noted that Oilexco has enough cash to last until Jan 31, 2009.

After that, it appears that short of a sale, Oilexco would be forced into bankruptcy. In November, Oilexco announced that it was exploring strategic options after it canceled a planned offering of $150 million of convertible bonds and up to 20 million common shares because the financings would be too dilutive to current shareholders.

Oilexco shares were down more than 40% in Toronto heading into the afternoon session.

Mr. Pierce lowered his 12-month price target on the stock from C$3 to C$1.58. He also downgraded the stock from “market perform” to “under perform” based on a 50% chance Oilexco will go bankrupt and a 50% chance it will be sold.

The analyst wrote:

Given the limited upside potential in the stock, the major uncertainties around the firm’s ability to continue as a going concern and the risks of completing a potential transaction, we would recommend investors sell Oilexco.

Comments

[Steven Ward:]

Nexen or Talisman would be a good buyer here or maybe a Dana with another partner.Endeavour Internationalkeeps looking for opportunities but probably too big for them.
Maybe they wait to pick the bones in a BK.

2008 Dec 19 11:51 PM