Last week, the Long Run reported it lost $50.1-million in the second quarter, compared with a $20.8-million profit a year earlier. It blamed weaker commodity prices and lower oil production.Larry MacDougal/The Canadian Press
Long Run Exploration Ltd. has agreed to a $200-million cash infusion from a Hong Kong-listed company in the latest in a series of moves across the battered energy sector aimed at coping with falling oil prices and high debt.
The private-placement transaction, with a unit of MIE Holdings Corp., triggered a 23-per-cent jump in Long Run shares in Toronto on Tuesday. Stock in the Calgary-based producer had fallen by 89 per cent in the past year.
Long Run is issuing 155 million units, comprising shares and purchase warrants, at $1.30 apiece to MIE's Maple Marathon Investments. If shareholders vote in favour of the transaction, Maple Marathon will own 43.9 per cent of Long Run's shares. A meeting will be scheduled before Nov. 15.
Long Run is one of numerous small and mid-sized energy companies whose debt position has worsened with waning cash flow amid the crude-price collapse. The situation has left many with no choice but to slash drilling budgets, lay off staff and seek concessions from lenders.
Proceeds from the private placement will be used to reduce debt, which stood at $709-million on June 30, said Long Run, which is led by chairman and veteran oil man Bill Andrew.
Last week, the company reported it lost $50.1-million in the second quarter, compared with a $20.8-million profit a year earlier. It blamed weaker commodity prices and lower oil production.
Sprott Resource Corp., the current top shareholder with 11.9 per cent, said on Tuesday that it will vote in favour of the transaction.
Each side has agreed to pay a $25-million break fee if the other terminates the deal.
Bank of Nova Scotia and National Bank Financial were Long Run's financial advisers.
Jeffrey Jones