Phoenix Global seeks to restructure credit facility

Phoenix Global seeks to restructure credit facility

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Phoenix Global Resources, an oil exploration and production company focused on Argentina, said Tuesday it has entered into discussions to restructure a convertible credit facilities agreement with its controlling shareholder Mercuria, joining the ranks of companies struggling to minimize the carnage to their balance sheets brought by a plunge in international oil prices.

Mercuria, a Swiss commodities trader that owns nearly 84% of Phoenix, has agreed to extend the grace period on the loans to May 15 from February 29 and kick back the first repayment date to May 15 from March 31, Phoenix said in a securities filing.

As part of the agreement, Phoenix said it will cut costs with the view to getting back on track with its loan payments. 

Phoenix is one of a handful of smaller energy companies investing in Vaca Muerta, the biggest shale oil and natural gas deposit in Argentina — and one of the largest in the world. The brunt of the acreage is being developed by larger international players like Chevron, ExxonMobil and Shell, which have deeper pockets to ride out any volatility in oil prices

Most of the investment in Vaca Muerta came to a standstill in March after Brent, the international reference price followed in Argentina, plunged below $23 per barrel at the end of that month from nearly $59 in mid-February, taking prices below the $30-$50 breakeven in the deposit, depending on the asset. Brent settled at $22.71 a barrel, down $0.02 on Tuesday, 

“In these difficult market conditions, Phoenix is reducing its capital expenditure programs and exploring other cost saving initiatives,” the company said. 

The change to a cost-reduction strategy has come abruptly. On March 6, the company increased the credit facility by $6 million to $291 million to support its business plan this year for developing its assets in Vaca Muerta, with a view to boosting output.