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Market's Downward Spiral Sinks Forcenergy

Market's Downward Spiral Sinks Forcenergy

Inability to find a buyer for its "high-quality" Gulf of Mexico properties pushed Miami-based Forcenergy over the edge into Chapter 11 bankruptcy this week, Chairman Stig Wennerstrom said in a conference call.

"We had a lot of interest in [the properties] but no success in getting to closing. It's a soft market. It's a buyers' market out there, and, by the way, these properties are not for sale anymore."

Forcenergy, which has current production of about 200 MMcf/d of gas and 22,000 barrels/d of oil and condensate, is laden with debt. The company owes $315 million from a $320 million credit facility as well as $50 to $60 million of payables to vendors, some of which are overdue. On a net basis, the company has about $40 million of negative working capital.

"We also attempted to raise capital basically for the last 12 months in a market with downward spiraling product prices, both in oil and gas. We didn't succeed in raising capital to the terms we were looking for," Wennerstrom said. "Lately, what made us act over the weekend is that we heard rumors that trade vendors tried to organize and were talking about pushing us into involuntary bankruptcy. We said that is not in the best interest of all the stakeholders in the company."

The last trade in Forcenergy shares was Friday. The stock closed at 2 1/8. The stock's 12-month high is 27 _ and low is _.

Independent Forcenergy for the nine months ended Sept. 30 had total revenues of $210.6 million and a net loss of $19.8 million versus net income of $18.9 million for the period one year prior. Activities are in the Gulf of Mexico, Alaska, Australia and offshore Gabon. Forcenergy began life as a Swedish company which then created an American subsidiary based in Miami. Forcenergy Inc. and subsidiary Forcenergy Resources are the two entities filing for bankruptcy protection. Most of the company's assets are held by Forcenergy Inc.

Wennerstrom touted the company's asset base, saying it has much upside potential. "And we had a positive discretionary cash flow, even in months like January. It is clearly on the positive side. The immediate plan for the near future is to contact our bondholders to discuss conversion of debt to equity.

"We will complete our debt financing, which is well underway. We are looking at a pretty sizeable debt financing to provide us with ample capital through the bankruptcy process. We also will be working to secure new capital to strengthen the company and increase its ability when we emerge from bankruptcy to act on opportunities in the marketplace."

One analyst listening to the company's conference call questioned how Forcenergy could have positive discretionary cash flow in January or more recently when the company owes vendors $50 to $60 million, at least some of it overdue.

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