(MENAFN- ProactiveInvestors)Circle Oil PLC (LON:COP) has hoisted the 'for sale' sign above its assets and possibly the whole business as the International Finance Corporation (IFC) has given it some leeway over its debts. The IFC has agreed to suspend a tightening of a reserve based lending facility until April 15. Some $57.5mln is currently owed by Circle under the facility and the IFC has agreed to waive debt repayments until April 15 as well. In the meantime Circle has now initiated a formal strategic review of its business. As part of this process it will consider options including possible sales of assets subsidiaries and even the possible sale or merger of the company. Mitch Flegg Circle's chief executive described the agreement with the IFC as 'a welcome development'. He highlighted that it would give the company headroom to progress the review and put in place a sustainable long term financing structure for the business. 'Circle has excellent assets across our regions of operation and our aim mindful of the sustained low oil price environment and the company's stressed financial position is to maximise the value from these assets for the benefit of all stakeholders" Flegg added. City firm Investec has been hired as an adviser for the strategic review process. It comes as Circle's operating business continues to be squeezed by weak oil prices and the impacts relating to payments for crude produced in Egypt. Circle today highlighted that at the end of 2015 it had $10mln of cash and equivalents (including restricted cash) and was due some $21.6mln of receivables from Egypt and Morocco. Its overall debt position totalled $77.5mln and it said it had a further $14.1mln of trade creditors. On AIM Circle Oil shares were down 9.5% in early deals to trade at 2.38p each. At that level the company's market capitalisation is just over £13mln. The reserve based lending squeeze The squeeze on funding from the IFC comes as a result of the loan being 'reserves based lending' (RBL). It received the cash from the IFC by using oil in the ground as collateral for the loan. In simplified terms Circle's borrowing could be compared to a mortgage. For Circle the problem is that due to continued weak oil prices the value of those oil reserves have diminished and it can no longer support the weight of past borrowing. In mid-December Circle warned that redetermination of the RBL borrowing base would potentially 'give rise to a shortfall'. The borrowing base is now due to be assessed on April 15. Since then Circle has been in constructive talks with the IFC the company said. It told investors that the IFC has indicated a willingness to consider further waivers to debt repayments if they are needed whilst Circle continues its strategic review process. Circle as at December 31 2014 had proved and probable (2P) reserves amounting to 16.23mln barrels of oil equivalent but today it confirmed to investors that lower oil prices and production since then meant those reserves will have reduced. Production continues in Egypt and Morocco Circle Oil also provided investors with an operational update. In Egypt up to December 31 2015 production continued from 11 wells at the Al Amir SE field (AASE) asset and three wells at the Geyad field. Together the gross average production rate for 2015 was 8871 barrels oil equivalent per day. Last month Circle brought a new well - AASE-23 - online and it has been producing at around 800 boepd. Drilling is currently underway for another new well AASE-24. Meanwhile in Morocco the group is working to make efficiency improvements over the course of the year. Circle's Moroccan gas sales from the Sebou field averaged 4.39mln cubic feet per day (5.85mln gross) and at that level the operation utilised less than half the pipeline capacity. It highlighted that the gas sales price is fixed and are on 'attractive terms'. As such it says it has been shielded from falling commodity prices.
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