Lamprell Holdings (LSE:LAM), the oilfield services company specialising in jackup rigs, saw shares suspended Thursday following Lamprell’s failure to report its full year results. This follows news last week that Lamprell would not be able to meet its immediate funding obligations – shares dropped 70% from 22.37p to an almost all time low of 5.04p.
Lamprell currently owes around $75 million: a debt facility repayment of $26.4m which was due on 27 June and which Lamprell confirmed it has not paid, as well as some payroll commitments of $20m and project costs of $19m. Further payments due include $44m in December 2022 and $44m again in March 2023 and a further $164m is due by end of December 2023.
Liquidity issues started back in 2021
But Lamprell’s liquidity issues have been around for a while. Last year, despite raising equity of $30m and securing a $45m UAE Export Credit Agency (ECA) backed trade loan facility, the company warned mid way that it was experiencing severe liquidity concerns. The ECA trade loan was a working capital loan relating to equipment used for the construction of two newbuild jackup rigs at the Saudi-based IMI yard – a joint venture agreement with Saudi Aramco, national shipping carrier Bahri, Hyundai Heavy Industries and Lamprell. The load out and float off was completed in May 2022 and delivery of Rig 1 is expected at the end of this year while delivery of the second rig is scheduled to be in Q1 2023.
Finance – between a rock and a hard place
As part of the terms of the initial loan facility, there was a non-committed option for a second facility which Lamprell had expected to be available in Q1 2022. However, Lamprell’s lenders indicated that they would only be prepared to provide a further loan facility following completion by Lamprell of a significant equity fundraise. So far Lamprell has not been able to reach an agreement with the major shareholders (Blofeld and Lamprell Holdings) or the major institutional investors (Schroders and Premier Miton which have 16% and 6% respectively) in respect of an equity-based financing solution.
Meanwhile, a significantly discounted offer last week from Blofeld Investment Management – a 25.06% shareholder in Lamprell – to buy its entire share capital, effectively taking it private, has done nothing to shore up confidence in the company. The actual offer has not been disclosed, but Lamprell stated that the offer would only be accepted if it includes an interim funding solution or bridge financing.
Focus on renewables?
Amidst the doom and gloom Lamprell has nevertheless, made headway in the renewables sector. Over half of the total bid pipeline of $9.4 billion this year is attributable to renewables ($5.1bn) with a further $1.4 billion of potential renewables contracts scheduled for award in 2022.
Also, in March Lamprell signed a capacity reservation agreement for the Moray West Offshore Wind Farm, a major project in Scotland. The reservation agreement secures capacity in Lamprell’s UAE Hamriyah yard for the work as the project moves towards financial close and full contract award. As a result, it has commenced a significant yard upgrade programme, including the construction of a state-of-the-art renewables serial production line, where they will be able to construct jacket components, transition pieces and monopiles.
Lamprell believes that this major capital expenditure project amounting to approximately $55m of capex over the next nine months is critical to delivering its growth strategy in renewables. The project has the potential to double Lamprell’s annual renewables revenue capacity from around $400 – $600m to $800 – $1,200m while lowering unit production costs and materially improving gross margin contribution by over 2.5x on offshore wind foundations projects.