Leyshon Energy warned Wednesday it is “considering strategic options” as it deals with three non-commercial finds, three failed asset acquisitions and dwindling revenues as oil prices continue to drop.
The China based company has been performing an interim testing program at three wells in the Zijinshan gas project to determine if it should undertake a $17 million onshore exploration and appraisal program.
Leyshon tested three zones in well ZJS7 and one zone in well ZJS5 with all zones flowing at discontinuous rates with “significant” water production.
“These results have been well below our expectations for this area of the field,” the company said.
Leyshon tried to farm out the drilling of well ZJS8 Zijinshan but has so far been unsuccessful in finding a partner.
The company is also having trouble acquiring new assets.
Leyshon made three “substantial” bids for major oil and gas assets but was either outbid or lost the purchases “due to circumstances outside of the company’s control.”
Low oil prices have made existing projects” marginal or uneconomic” making it “very difficult” to fund acquisitions, the company said.
Leyshon currently has $25 million cash on hand excluding $8 million in outstanding liabilities.
Costs have been cut to preserve cash reserves and the board has decided to eliminate director fees.
“Although the company has been very active in pursuing growth, the sharp fall in oil prices has made it very difficult for us to pursue operational expenditures and acquisitions that would add value for shareholders,” Chairman Kim Howell said.
The company is currently evaluating a range of plans including a cash return to shareholders.