Freedom Oil collapses amid global coronavirus oil plunge
Crashing oil prices and coronavirus market turmoil has sparked Australia’s first corporate collapse in the energy sector.
Crashing oil prices and coronavirus market turmoil has sparked Australia’s first corporate collapse in the energy sector with Freedom Oil and Gas, backed by former BHP petroleum boss Mike Yeager, plunging into administration.
The US shale sector junior appointed administrators on Monday saying it had failed to pull off a recapitalisation due to the crude rout and volatile global equity markets.
“The current oil price environment combined with Covid-19’s impact on the global equity markets has impacted the company’s opportunities to recapitalise and contributed to the director’s decision to put the company into voluntary administration,” Freedom said in a statement.
US shale producers have been racing to cut costs with the plunge in crude to $US22 a barrel placing companies in peril with many suppliers needing a $US40 a barrel price to turn a profit.
However, Freedom struggled in the last few months even before the oil price crisis.
It entered a forbearance deal with lender Wells Fargo in December over an $US18.5m debt and then in January struck a $US30m loan note deal at 12 per cent interest with Ramas Capital Management to try and pay off Well Fargo.
Freedom then issued a bombshell on February 3 saying Ramas had not funded the initial $US14m tranche for the loan deal, meaning it couldn’t pay Wells Fargo.
Mr Yeager, BHP’s petroleum boss in 2011 when the miner splashed $US20bn on US shale, joined Freedom in 2013 as chief executive under its former name Maverick Drilling and Exploration with a focus on conventional oil.
Mr Yeager held a 2.69 per cent stake in Freedom according to a filing from May 28, 2019.
Maverick changed its name to Freedom in November 2016 as part of a shift away from being a drilling contractor to developing acreage it bought in the Eagle Ford Shale region of southern Texas.
Mr Yeager stepped down from Freedom in April 2019 but remained an investor.
Among directors replacing him on Freedom’s board was David Casey, well known in Australian energy circles after heading up Eastern Star Gas whose Narrabri assets were sold to Santos for $924m in 2011.