Niko Resources (TSX:NKO, StockForum), exploring, developing and producing oil & natural gas in South Asia and the Middle East, announced second quarter results with funds from operations coming in at $32 million, more than doubling the previous quarter's recorded figure of $15 million and expenditures skyrocketing to $122 million from just $32 million in the previous quarter.
All of this resulted in a net loss for the quarter of $149 million compared to the net profit of $59 million Niko reported in the previous quarter.
The company news release stated, “In the second quarter of fiscal 2014, the Company announced a shift in its strategic focus to developing and appraising the assets in the D6 Block in India, while maintaining optionality on the balance of its exploration portfolio.”
It explained, “The management of Niko has been aggressively engaged in active pursuit of a comprehensive financing arrangement since the beginning of the fiscal year. To date it has secured net proceeds of $110 million from two short term "bridge" financings and has received proceeds of $61 million from its program of farm-outs, asset sales and other arrangements.”
However, despite these aggressive efforts, the company hasn't been able to secure funding from conventional sources necessary to reset Niko's capital structure. Now the company is facing the prospect of approaching lenders willing to involve themselves in what would be considered a high-risk transaction.
Edward S. Sampson, president and CEO of Niko, commented, “Admittedly, this will be a very high cost finance package with tight repayment terms and other highly restrictive terms. However, the proposed debt financing is to be repaid in four years and there is the ability to prepay in two years with certain premium considerations.
Sampson illustrated further, “The D6 Block is a valuable and growing asset that is expected to have a long life with higher production and revenue from new wells, new fields and increases in the price of natural gas.”
He then summed up, “Bridging the gap from the Company's current condition to the expected higher value and production from D6 and other Niko assets is worth the high cost of the arrangements."
Niko was also in the news recently when it dropped 9% last month.
Shares plunged 50% on the news to $1.31 per share.
Currently there are 70,215,911 outstanding shares with a market cap of $92.69 million.