Oil Report

Norway's Saga Oil says unable to service debt

OSLO, Feb 18 (Reuters) - Norwegian Saga Oil SAGO.NFF said on Wednesday the future of its operations was uncertain as it was unable to service its debt.

“There are considerable uncertainties with continued operations,” Saga Oil’s board said in a statement. “This is due to weak earnings, weak liquidity and the fact that the company is unable to service its loan commitments.”

Saga Oil, an unlisted company which has energy assets in Russia, said it owed 165 million Norwegian crowns ($23.5 million) and was in breach of terms on all debt.

Saga Oil said it had been unable to agree with creditors on bankruptcy protection but said it had “a clear understanding with creditors to continue operations within set guidelines.” Saga Oil has cancelled office lease contracts and laid off all employees except Chief Executive John Arne Farstad, it said. “Even with a considerably lower cost level, the liquidity situation and ongoing revenues suggest there are not enough means to run operations further than April 2009,” Saga Oil said.

It hired brokerage ABG Sundal Collier to market and sell its Rodnikovsky and Kudryashovsky oil and gas licences and other activities in Russia.

Although it said it hoped to receive bids, it was not realistic to expect bids “that in a reasonable way reflect the value” within a few months, the board said.

Saga Oil’s board will call an extraordinary shareholder meeting at a later stage to discuss several matters, it said.

Saga Oil’s over-the-counter shares dropped 43 percent to 0.08 crowns, Norwegian Stockbrokers Information Services’ system for unlisted shares showed at 1422 GMT. (Reporting by Richard Solem; Editing by David Holmes)