The Motley Fool

Lamprell’s share price sinks on ‘severe’ cash crisis! Is now the time to buy?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Silhouette of an oil rig
Image source: Getty Images.

Tuesday is proving to be a miserable day for the Lamprell (LSE: LAM) share price. Prices of the oilfield services provider have collapsed 24% to 51.8p per share as it has warned of a severe funding shortfall.

The UK engineering share fell as low as 45.4p per share early in the session. This was its cheapest since the middle of December. But does the Lamprell share price collapse provide a great dip buying opportunity for long-term investors like me? 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Cash crisis

In today’s update Lamprell said that it needs to raise between $120m and $150m by the end of the third quarter. The company needs to embark on fresh fundraising “to fulfil its near-term working capital needs and to then meet its medium-term strategic objectives.”

Lamprell is aiming to raise the cash through a combination of debt and equity or purely by raising equity. The oil rig builder’s balance sheet has deteriorated since the start of the year. And the $112m in cash it ended 2020 with dropped to $78.1m as of May as project milestones were achieved.

The UK small-cap has warned that its cash pile will continue falling too, “as projects progress and in particular the IMI rig projects draw working capital as part of the normal project cycle.” Lamprell inked a three-year engineering design services contract with International Maritime Industries (IMI) in November.

“Severe liquidity constraints”

Lamprell is in “advanced stages of discussion” with lenders to soothe “severe liquidity constraints.” The engineer is seeking to secure working capital facilities of up to $90m with the banks, and the business noted that approval is expected.

However, it warned that the full $120m-$150m may need to be tapped from shareholders if talks fall flat. The money will be used to deliver two rigs under the IMI contract in the second half, to fund a joint venture with IMI in Saudi Arabia, and to boost its exposure to renewable energy.

Lamprell is “actively managing its liquidity position by deferring creditor payments” in the meantime, it said. And it warned that “there is significant risk that the group will be unable to meet its contractual obligations as they arise.” This could threaten the UK share’s ability to continue as a going concern.

Is Lamprell a buy?

Clearly, Lamprell isn’t a British stock that’s for the faint of heart. Okay, the company’s drive towards providing services for green energy could be the foundation for robust long-term profit growth. The business could also see demand for its services improve sharply as the economic recovery kicks in.

But, for me, the risks Lamprell face remain too high to tempt me to buy on today’s dip. The UK share’s liquidity issues are obviously front and centre right now. But the problem of falling fossil fuel demand makes me extremely concerned for the firm over a longer time horizon.

Indeed, I'd much rather buy this top UK share as identified by The Motley Fool's team of analysts.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.