Exploration company Tullow Oil is launching a $300m (€271m) bond auction next week as it seeks additional funding amid continuing weak oil prices.
The convertible bonds, which will carry an annual interest rate of 6.625%, will be set for redemption in 2021.
Bondholders will be able to convert their investment into ordinary shares at an initial conversion price between between 30% and 35% above the volume weighted average price of the share listing in London today.
The company said the bond funding will be used for general corporate purposes and to fund capital investment in the group's assets in West and East Africa.
The markets have so far responded negatively to the convertible bonds, with Tullow's share price on the FTSE 250 down over 14% in morning trade.
In April the firm cut its annual capital expenditure plans by $100m to $1 billion and said it could reduce spending further as it adjusted its balance sheet to cope with low oil prices.
The Africa-focused company also said then its lenders had agreed to extend a revolving loan facility by a year and increase flexibility on another.
The move showed that banks are willing to support the company during the oil market downturn.
Meanwhile, last week Tullow said it would not reach its production target of 100,000 barrels per day in 2017 after it said it would have to shut down its Jubilee offshore field in Ghana for up to three months next year for repair work.
As of the end of April, Tullow’s net debt was about $4.5 billion while to had access to unused debt facilities and free cash of roughly $1.3 billion.
Tullow Oil CFO Ian Springett said the exploration company’s “focus will continue to be on strengthening the balance sheet and deleveraging the business".
