November 15, 2013 / 1:27 PM / 5 years ago

Canada's Niko raises 'going concern' doubt, shares fall 57 percent

(Reuters) - Canadian oil and gas producer Niko Resources Ltd (NKO.TO) said it might not be able to meet its liabilities and raised “significant” doubt about its ability to continue as a going concern, sending its shares plummeting as much as 57 percent.

The company said it had a working capital deficiency of $110 million as of September 30. Its cash and cash equivalents had dropped to $55 million in the period from $98.1 million a year earlier.

Niko, which is trying to restructure debt and refinance loans to fund drilling in India, has been plagued by falling production at the D6 block off the east coast of India.

Niko shares fell to a life-low of C$1.12 in early trading on the Toronto Stock Exchange on Friday after the company posted its 10th straight quarterly loss. The stock has lost nearly two-thirds of its value this year.

The company said it had not been able to raise funds from usual sources despite “aggressive” efforts and was now looking at “high cost finance package with tight repayment terms.”

Niko said it had secured about $340 million of debt financing, which is dependent on the company settling some rig-related payments with Diamond Offshore Drilling Inc (DO.N) for drilling off Indonesia.

“They have secured some very high costs debt. It raises questions about whether there is going to be anything left for the equity holders,” said Macquarie Research analyst David Popowich.

Niko had $734.5 million in total liabilities, including issued debt, loans and other obligations at the end of September 30, up from $618 million a year earlier.

The company’s quick ratio, an indicator of its ability to meet short-term payments and debt liabilities, stands at 0.54 — its lowest in a year. The ratio has remained under 1 since the end of 2011.

A ratio under 1 suggests that the company might be unable to pay off its debts if they became due immediately.


Sales volumes from the D6 block, in which Niko has a 10 percent working interest, almost halved to 54 million cubic feet of gas equivalent per day in the second quarter ended September 30.

The block accounted for almost half of the company’s total sales volumes in the quarter, down from nearly 61 percent a year earlier.

India’s Reliance Industries Ltd (RELI.NS) operates the D6 block, in which it holds a 60 percent interest. BP Plc (BP.L) holds the remaining interest.

Uncertainty over the Indian government’s decision to double domestic gas prices from April 1, 2014 is also weighing on Niko.

The company is selling assets and had temporarily suspended drilling in Indonesia to focus on its India operations.

Niko agreed in August to sell a 40 percent stake in an offshore exploration block in Madagascar to Austrian oil and gas group OMV (OMVV.VI) and interests in some Indonesian assets for $40 million.

Niko said on Friday it would sell some non-core assets in India and Trinidad.

Calgary, Alberta-based Niko also operates in Pakistan, Bangladesh and the Kurdistan region of Iraq.

The company’s net loss widened to $149 million in the second quarter from $28.6 million a year earlier.

Niko shares were down 50 percent at C$1.30 on the Toronto Stock Exchange.

Editing by Kirti Pandey and Sayantani Ghosh

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