Nexus under Pressure with Longtom Project

Submitted by Jim Thesiger on 2 September, 2009 - 07:16

Bank of Scottland has forced Nexus Energy (NXS) to raise its capital in order to finish its Longtom gas project in Bass Strait. The latest delay with the project has pushed the company’s $155 million worth of deal with AED oil into uncertainty. According to the deal, AED is suppose to buy half of the project. Through raising managed by Southern Cross Equities, Nexus is expected to raise about $50 to $100 million. The targeted fund will be sufficient for the company to fulfill its Longtom project. On July, in an announcement Nexus Energy declared that its Longtom gas project would be delayed for a month to 15th of October because of some complications with the contractors and also due to a bad weather. The increased cost was identified as another major reason for the delay with the project.

The Nexus authority stated on Tuesday that the cost hike and delay had led to a review of the Bank of Scotland financing facility. According to the revised conditions, Nexus is required to raise its equity to fund rest of the Longtom project. Nexus planned to use the fund of the AED agreement to pay off the project debt for which AED's finance was dependent on the completion of Longtom project by the middle of October. Nexus shares were halted yesterday as a result of the pending declaration regarding the raising which is expected to be announced within tomorrow. Before the halt, Nexus shares traded at 40c.

Nexus saw a collapse in its share price from close to $1.50 to below 50c on October last year when Mitsui decided to walk out on an arrangement to acquire into Crux corresponded with drop of global oil price. Failing to find a Crux partner lead the company into a difficult scenario while most other resource companies managed to rebound in the recent months amid a recovery of the global economy.