What happened to the Tap Oil’s share price?
At the time of writing, shares in Tap Oil [ASX:TAP] were up 8.76%, to 7.6 cents on Friday.
Why did Tap Oil shares do this?
Tap Oil has hedged 700,000 barrels of forecast Manora oil production to meet the BNP Paribas and Siam Commercial Bank debt facility requirements. According to the company, ‘Manora production from April 2016 to February 2017 at an average swap price of US$42.15/bbl, representing approximately 47.5% of forecast volumes over the 11 month period’.
Tap operates with a leveraged balance sheet. In addition to the hedging agreement, it’s seeking to raise AU$7.75 million in a rights issue to meet these conditions. This should help stabilise the balance sheet in the short term.
What now for Tap Oil?
Tap’s undergoing a significant corporate and balance sheet restructuring. That said, this doesn’t mean the company’s out of the woods yet. It’s still exposed to any oil price volatility this year. Fortunately, Manora is a lower cost oil producing asset. With this in mind, given the poor demand and supply environment, which I’ve frequently discussed in Money Morning, crude should make a new low before 2017. If this happens, Tap’s share price may fall to lower lows in the months ahead.
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