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Lochard needs to build 'significant cash reserve'

By BFN News | 08:29 AM | Friday 07 June, 2013


Lochard Energy has told shareholders it needs to build a significant cash reserve to cover operational contingencies on the Athena field. Yesterday (6 June), Cornhill Capital said it now represented shareholders with 25.19% of Lochard Energy who intended to vote against the offer by Parkmead Group offer. Today, Lochard issued a detailed operational update which pointed out that while initial production at Athena was below expectations, output was relatively consistently to date. It said that on average, between 80% and 85% of production comes from two wells, P3 and P4. Any loss of either of these wells would lead to a significant loss of revenue. The company said: "The directors do not see the recent operational issues as a serious impediment to the longer term performance of Athena, although there may be a requirement for remedial investment and the recent pump failures have led to a reduction in current production." It said recent events had highlighted the need for Lochard to build up a significant cash reserve over the medium term to cover the contingencies of operational down time and the cost of remediation. It adds: "In summary, the board remains positive about the long term potential for Athena and believes that drilling further wells in the future may be justified to increase reserves; any drilling will be subject to partner approval. "There are currently no plans for such investment in the next two years. "However, a critical issue to be noted is that sustained cash flow from Athena is dependent on two wells continuing to perform without interruption and one of these is now operating on its second pump. Loss of production is also possible from the two lower production wells which will not be recompleted in the event of failure. "n making their decision regarding the Parkmead offer, Lochard shareholders should take into consideration the fact that contingent investment that may be significant for Lochard could be required in the next one to two years and that the board's first priority is to be able to meet its share of costs." At 8:29am: (LON:LHD) share price was +0.01p at 4.13p (LON:PMG) PC Medics Group share price was -0.12p at 11.88p Story provided by StockMarketWire.com

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