SOGP Sovereign Oil

 

TIDMSOGP 
 
RNS Number : 9470C 
Sovereign Oilfield Group plc 
23 November 2009 
 

SOVEREIGN OILFIELD GROUP Plc 
("Sovereign" or "the Company" or "the Group") 
Update on re-financing activities 
 
 
 
 
The Board of Sovereign announces that it is in new discussions with its lending 
consortium ("the Consortium") regarding the terms of its existing loans. 
 
 
In May 2009 the Company concluded an agreement with the Consortium, which 
resulted in a standstill on all outstanding defaults and debt repayment until 31 
May 2010, a reduction in the cost of finance through lower interest rate margins 
and a revised covenant package. The Board considered that these measures 
alleviated the Group's short to medium term funding concerns. 
 
 
During the last fifteen months, the Group has disposed of a number of its 
subsidiaries, in line with its strategy to refocus the Group as a fabrication 
business. Sovereign has disposed of Diamant Drilling Services SA, Vertec 
Engineering Limited and the cabin rental business of Labtech, Prodrill 
Engineering Limited, four properties, and some of the assets of SFRS. 
 
 
During that period GBP13 million was realised from these disposals which has 
been used to reduce the Group's debt facilities with the Consortium. 
 
 
The Group continues to implement cost reduction strategies and the disposals of 
the drilling businesses and the Directors continue to focus on the core areas 
with the greatest opportunities for growth. 
 
 
Despite continuing difficult market conditions, the fabrication division has 
maintained revenues and continues to trade profitability and generate positive 
cashflow. However a number of the fabrication division's customers have delayed 
payment due to their own working capital constraints, and this in turn has led 
to a reduction in the short term working capital facilities supporting the 
Group. 
 
 
The Group's drilling division, consisting of Serco SA, Maxwell Downhole 
Technology Limited and RDT Precision Engineers Limited (which is being closed) 
has remained loss making in the current financial year. 
 
 
As a result of the drilling division's losses and delays in a number of customer 
payments to the fabrication division the Group has not achieved its 2nd quarter 
covenant and has therefore had to re-open financing discussions with its lending 
consortium. The Board is confident of a successful resolution and will update 
shareholders in due course. 
 
 
Further information: 
Sovereign Oilfield Group Plc    Tel: 01224 261900 
Graham Burgess, Chief Executive Officer 
Julie Cowie, Finance Director 
 
 
Charles Stanley Securities - Nominated Adviser    Tel: 0207 149 6000 
Mark Taylor/Freddy Crossley 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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