Seahawk Oil Will Sell Its Domestic Wells to Pay Debt
Debt-ridden Seahawk Oil International Inc. said Tuesday it will sell its domestic oil and gas wells for $4.5 million and use the money to pay debts and possibly enter an entirely new business.
Seahawk had been losing money over much of the last two years as worldwide oil prices fell.
For the record:
12:00 a.m. June 30, 1989 For the Record Seahawk Oil Reduces Debt
Los Angeles Times Friday June 30, 1989 Orange County Edition Business Part 4 Page 6 Column 3 Financial Desk 4 inches; 122 words Type of Material: Correction
Seahawk Oil International Inc. of Irvine was incorrectly characterized in a June 21 story as “debt-ridden” and “unable to pay its debts.” In fact, the company has reduced its long-term debt to about $1.5 million by the end of 1988 from $7.3 million three years earlier, and has missed no required debt payments.
In addition, Seahawk has not bought four oil companies in the last five years and sold off its reserves, as the story reported. The firm has acquired only one other company and continues to produce its reserves.
Seahawk recently arranged to sell all of its domestic oil and gas properties for $4.5 million. After retiring most of its remaining debt, the company will have $3 million in cash it can use to finance new oil ventures or to enter another line of business. The firm also has about $8 million in accumulated tax losses it can use to shelter future income from taxes.
The decline left the small Irvine company unable to pay its debts. But it provided $8 million in losses the company can use to shelter future income from taxes, if Seahawk manages to buy a more profitable business.
What that business might be hasn’t yet been decided, said Tony Prado, Seahawk’s chief financial officer. But the company is leaning toward real estate, he said.
The sale of the wells to Pittencrief America Inc.--part of a Scottish concern--leaves Seahawk with about $3 million in cash for an acquisition. The wells are in California, Texas, Oklahoma, Wyoming, Colorado, Ohio and Kansas.
Seahawk will keep its concessions to drill for oil in Belize, a Central American nation. But the company concedes the concessions have little value since no oil or gas has yet been found in the area.
Seahawk’s recent financial problems began in 1983, when it bought another oil exploration concern and assumed the responsibility for paying off the firm’s bank loans, Prado said.
In 1985, Seahawk also issued bonds to raise cash.
In 1986, when oil prices slumped, Seahawk suddenly found itself hard-pressed to pay the debts, Prado said. The cash it got from the sale of oil and gas wasn’t enough. And its banks were demanding the company come up with even more money to back the wells Seahawk had put up as collateral for loans. As oil prices dropped, the value of the wells dropped too.
Strapped for cash to explore for new oil and gas fields, Seahawk began buying other small oil companies in order to sell their oil and gas reserves and keep the cash coming in, Prado said. In the last few years, Seahawk bought four of them.
Never a large company, Seahawk employed only a few people involved in exploring for oil and getting concessions to drill. When it came time to drill, Seahawk usually brought in a larger partner to share the risks in case the well came up dry.
During the first quarter--its first profitable one in two years--Seahawk earned $45,000 on revenue of $548,000. The slim profit reflects an increase in oil and gas prices since last year.
With a clean slate now, Seahawk is looking for a more profitable business, perhaps a private company that wants to go public easily by merging with publicly held Seahawk. The firm’s thinly traded stock was quoted by one broker Tuesday at 18 3/4 cents per share, unchanged for the day.
Seahawk said it will only search for oil in the United States again if it can come up with the large amounts of money necessary. That seems unlikely now.
“It’s been a very hard struggle,” said Prado. “It may be that the only thing left for us to do is diversify.”
