×

Oil shock? Firm tanks 36% amid latest rout

An Irish-based oil and gas exploration and production company has seen more bruising losses amid plummeting oil prices as the full extent of its cash flow problems come to light.

London-listed shares of Circle Oil, already trading at "distressed levels", tanked over £1.40 ($2.11), around 36 percent Monday with an investor update detailing new plans that could involve an equity raise or some sort of debt restructuring.

It said current financing expectations had "not progressed as quickly as envisaged" and said trading was very challenging due to a raft of reasons, including the further weakening of global oil prices.

oil and gas platform
Currahesshutter | Getty Images

Expecting a "moderate" shortfall in its funding, Circle Oil said it was considering a number of options to "right-size" its balance sheet and ensure that the company has sufficient cash flows to fund operations.

"It's become apparent the cash flow squeeze and balance sheet liquidity position is even more severe than we had first thought," an analyst at Werner Riding at stockbroker PeelHunt told CNBC via email.

"Circle is rapidly becoming a perfect case study as to why you should not fund exploration drilling with debt."

The company is engaged in the exploration, development and production of oil and gas in North Africa and the Middle East. PeelHunt still officially has a "buy" rating on the stock and has previously noted recent exploration success in Morocco alongside stabilized oil and gas production in Egypt.

Crude oil futures fell for a seventh straight session on Monday, their longest losing streak since mid-2014, on growing fears that the global oil glut would worsen in the months to come in a pricing wars between key producers.

Front month WTI was down 85 cents at $34.77 a barrel, while Brent was down $1.10 to $37.23 a barrel. This furthered the fall oil exploration stocks with firms like Tullow Oil and Seadrill also seeing heavy losses.

Malcolm Graham-Wood, founding partner at independent advice and consultancy firm Hydrocarbon Capital, was a little more optimistic on Circle Oil's investor update in what he described as "squeaky bum time" for the oil industry in light of the recent price falls.

"The headline discussions regarding funding looked a bit more frightening than I suspect they are," he said in a research note Monday.

"It is not surprising that there is some shortfall given current oil and gas prices and production levels. Although times are tough in the industry and the market may not have expected an equity issue, the work being done by the new management team should ensure long term survival."

—Reuters contributed to this report.