South africa’s pic, banks may be on the hook as erin energy files for bankruptcy – businessday news you can trust businessday news you can trust b games zombie


“We will work diligently with all parties involved to complete the restructuring as quickly as possible so as to restructure all of the company’s debt obligations in order to achieve financial stability and reposition Erin Energy with a strengthened liquidity position to execute on our extensive asset development opportunities,” said Femi Ayoade, CEO of Erin Energy.

“Subject to the approval of the Court, Erin Energy plans to file a Reorganization Plan with the Court in the near term with a goal to work expeditiously with all parties involved to put together a plan that will result in Erin Energy’s emergence from Chapter 11 bankruptcy protection as soon as practically possible,” Erin Energy announced.

Erin Energy Management had previously indicated publicly that it is pursuing multiple actions including restructuring its debt with lenders, seeking deferment of debt, reducing operating costs, minimizing projected capital costs for the upcoming exploration and development campaign, pursuing additional public or private funding, and finding additional farming-out opportunities.

Previous reports indicates the financially struggling energy firm, which changed its name from Camac Energy to Erin Energy in 2015, entered into a credit facility with Nigeria’s leading tier one Zenith Bank Plc for a five-year senior secured term loan providing initial borrowing capacity of up to $100 million in 2014, as net balance as at 31st December 2015 was $98.1million while accrued interest was $2.5 million.

Erin Energy announced sometime in 2016 it obtained a waiver to the funding requirements of the Debt Service Reserve Account associated with the Zenith Bank Note as the company was also granted a 90-day deferment of the principal and interest repayment of $9million previously due on March 31, 2016, whilst re-modification discussions of the loan structure continued.

Nigeria is the sixth largest producer of crude oil in the world and oil revenue constitutes majority of its revenue, however the Nigerian banking industry has been passing through a difficult period since the middle of 2014 when oil prices slumped, triggering a sharp rise in lenders’ Non-Performing Loans (NPLs). The situation got tougher when the country’s economy slipped into recession in the second quarter of 2016 as banks had to adopt drastic cost cutting measures and restructuring of some loans to stay profitable and in business.

The NPL of deposit money banks stood at 15.18 percent as at September 2017 up from 10.13percent in December 2016, while their loans and advances declined by 1.3 percent to N15.9 trillion in September 2017 from N16.1 trillion in December 2016, data made available by the Nigeria Deposit Insurance Corporation (NDIC) show.

This is due to the rising NPL’s and the need to stop further erosion of the capital base of the banks and discount houses. The directive came barely a week to the release of the 2017 financial year ’ s annual reports by commercial banks and discount houses in the country.

In its World Economic Outlook report released in Washington, the IMF noted that some low-income countries, including Mozambique and Nigeria have experienced financial stress or deteriorating loan quality in recent years as growth moderates and corporate balance sheet weaken.

“Further deterioration in loan quality would impair credit intermediation and the ability of the banking sector to support growth in these countries and would raise the risk of costly recapitalization, which would severely burden already-strained public finances,” the IMF warned in the report.

Erin Energy’s average net daily production for 2017 was approximately 4,900 barrel of oil per day (bopd) compared to approximately 4,800 bopd for 2016. For the fourth quarter 2017, net daily production was approximately 4,000 bopd compared with 5,800 for the comparative period in 2016. Net production volumes for the year were approximately 1.7 million net barrels of oil compared to approximately 1.8 million net barrels in 2016. The Company’s crude oil inventory was approximately $3.6 million at December 31, 2017.

Erin Energy Corporation is an independent oil and gas exploration and production company focused on energy resources in sub-Saharan Africa. Its asset portfolio consists of 5 licenses across 3 countries covering an area of 6,100 square kilometers (1.5 million acres), including current production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana and The Gambia.