Shares in Petroceltic International (LSE: PCI) fell by as much as 65% to a new low of 6p when markets opened this morning.

The cause of this crash was news that the company has received a 3p per share takeover offer. Given that the stock closed at 18p on Thursday, you might expect an offer like this to be instantly dismissed. The problem for Petroceltic is that it’s in default on debts of $217.8m, and has been unable to raise fresh cash.

Today’s offer comes — as expected — from Petroceltic’s largest shareholder, hedge fund Worldview, which has a 29.6% stake in Petroceltic.

The deal is simple. Worldview’s subsidiary, Sunny Hill Limited, will pay 3p per share for Petroceltic’s equity. Worldview and Sunny Hill will also do a deal with Petroceltic’s lenders to take ownership of the firm’s debt and refinance its operations.

Lenders in control

Petroceltic shareholders may feel that this deal, which values Petroceltic’s equity at just £6.42m, doesn’t reflect the value of the firm’s flagship Ain Tsila gas field in Algeria. This may be true, but it doesn’t really matter. As Petroceltic is in default, its lenders are calling the shots and equity holders have few rights.

Petroceltic bonds currently trade at a big discount to their face value. The top priority for the firm’s lenders is to minimise their own losses. This is why they’ve been giving Petroceltic extra time to try and find a buyer.

If today’s offer isn’t approved, I suspect that Petroceltic’s lenders will call in their debts, forcing the firm into administration. The shares will be suspended while the administrators try and find investors willing to buy the assets or refinance the debt. This process would almost certainly end with Petroceltic shares being delisted with zero value.

Today’s offer is probably the best possible result for Petroceltic shareholders. However, as I write, the shares are still trading well above the offer price, at 10p. In my view this is a great opportunity to sell before they fall further, as I believe they will.

Gulf Keystone could be next

Another firm with problematic debts is Gulf Keystone Petroleum (LSE: GKP). Although the firm’s current valuation means that its 639m barrels of reserves are priced at around $1/barrel, Gulf still hasn’t been able to attract a buyer.

This isn’t entirely surprising, given that Gulf is owed around $280m for past production by the Kurdish authorities. The Kurds have big problems of their own, so cash for foreign oil companies is tight.

Gulf is currently receiving $12m per month, or $144m per year, from the Kurdish authorities. Based on Gulf’s interim results, I estimate that this is probably just enough to allow the firm to break even with minimal capital expenditure. Gulf also has some cash on hand, so the firm isn’t going to fold tomorrow.

The problem is that in 2017, Gulf will have to repay or refinance $575m of debt. It’s hard to see how this will be possible. Indeed, the firm’s bonds currently trade at a big discount to their par value, suggesting that bond market investors are expecting a default.

For this reason — and because further payment problems may arise in the meantime — I rate Gulf Keystone as a strong sell. For equity investors, the risks are simply too high.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.