History
CanArgo bought Ukrainian and Georgian oil assets, added Kazakh gas, funded it with heavy debt, and ended in 2009 Chapter 11 with assets passed to Blake Oil & Gas.
2001-2005: Building in Ukraine and Georgia
CanArgo's record opens in July 2001, when it advanced Cdn. $929,811 to complete its purchase of Lateral Vector Resources, which holds a joint production agreement with Ukrnafta on the Bugruvativske oil field in eastern Ukraine. It also closed a private placement of about 16 million shares for net proceeds of about $6.8 million, replacing a planned convertible bond. In June 2003 PricewaterhouseCoopers resigned as auditor after its report on the 2002 accounts carried a going-concern warning, meaning doubt about the company's ability to continue. In April 2004 the American Stock Exchange cleared its securities for listing.
The company then leaned on loans and share issues. In August 2004 it borrowed a further $1 million from Salahi Ozturk, convertible at $0.69 a share. In September 2004 it issued 6 million shares to NPET Oil Limited for NPET's 25% interest in CanArgo Norio Limited, and raised US$37.5 million gross in a global public offering, which let it repay its short-term loans.
In 2005 attention turned to Georgia. Subsidiary Ninotsminda Oil Company signed Saipem to drill the M12 appraisal well on the Manavi discovery and renegotiated its oil sales contract. CanArgo took a US$15 million note from Cornell Capital Partners in April. In July it reported that Weatherford was leaving Georgia after three Ninotsminda wells in which less than 150 metres of horizontal section was drilled against a plan of up to 650 metres per well. The same update disclosed a Kazakhstan interest, the Kyzyloy gas field. Later that month CanArgo placed US$25 million of Senior Secured Notes, with interest rising to 15% from 2007, partly to repay about US$7.5 million owed to Cornell, and it ended its equity funding arrangement with Cornell.
2006-2007: Kazakh gas, more debt, and the Tethys sale
In January 2006 the Kazakh subsidiary BN Munai signed a take-or-pay gas contract (the buyer pays whether or not it takes the gas) for all Kyzyloi output. In February CanArgo withdrew from the Samgori production sharing contract in Georgia after its partner could not fund its share. In March it raised US$13 million of convertible notes with warrants over 13 million shares, and in June sold US$10 million of 12% convertible notes to Persistency. In October it issued 12,263,368 shares in a Norwegian placement for about $16.7 million gross.
In February 2007 the Kazakh subsidiary Tethys Petroleum Limited sold about 33% of itself to outside investors for about US$17.3 million. In June, US$15 million of notes were swapped for 6 million Tethys shares, leaving CanArgo with about 29.7% of Tethys, and about US$2.1 million of interest was paid in new notes instead of cash. In August 2007, after the sale of its Tethys interest, about US$21 million of proceeds repaid all the Senior Secured Notes and part of the subordinated notes. Warrants were issued to compensate noteholders, and CanArgo agreed to sell 2,500,000 shares at US$1.00 to fund fracturing of the Manavi M12 well. In October the Kumisi #1 well in Georgia was plugged and abandoned after tests gave water and non-commercial gas.
2008-2009: The failed rights offering and delisting
The record is quiet for the rest of 2007 and early 2008. In July 2008 eight foreign investors agreed to underwrite up to 242,000,000 unsubscribed shares (up to $24.2 million) at $0.10 in a proposed rights offering, which lets existing holders buy new shares. In October the subscription period was extended to seven weeks because the underwriters said they might be unable or unwilling to meet their obligations. By January 2009 CanArgo had sued three of them in the Oslo Conciliation Board.
Pressure mounted. In January 2009 NYSE Alternext US questioned whether the company could continue operations. In February CanArgo settled the WEUS Holding arbitration, which had claimed $4,931,332, for $1.2 million. In March the exchange rejected its compliance plan and began delisting, citing subordinated debt in default, and the company then missed its 10-K deadline because it could not obtain audited accounts. Shares were delisted on April 6 and moved to the Pink Sheets. By May 2009 CanArgo said it was in default on interest on both note series and under the WEUS settlement. The Oslo Børs delisted the shares from September 14, 2009.
2009-2010: Chapter 11 and wind-down
On October 28, 2009 CanArgo filed a prepackaged Chapter 11 petition in New York, backed by noteholders including Persistency, which committed up to $1.2 million of debtor-in-possession financing. About $18.1 million of principal and interest was accelerated. The court approved the plan on December 23, 2009.
The plan took effect on January 8, 2010. CanArgo ceased operations and transferred all its operating assets to Blake Oil & Gas, a Guernsey company. Persistency's loan was converted into Blake preferred stock, and some creditors receive Blake shares or notes. The common stock stopped trading, all officers and directors left office, and CanArgo is to be dissolved. A liquidating trust, run by Walker Truesdell & Associates, pursues the lawsuit against the defaulting underwriters. Record holders at January 8 will receive restricted, unregistered trust interests, whose value depends on any litigation proceeds, which are uncertain and unquantified.
Written from the 38 story beats below (2001 to 14 Jan 2010), which come from the company's own announcements and filings.