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Is There Any Way Back For Struggling Hardy Oil & Gas plc, Circle Oil Plc And Enquest Plc?

We’ve seen how badly things can go for overstretched oil companies in these cheap times, with Afren effectively bust and at the mercy of its creditors. Are we going to see the same thing repeated across the sector? Here are three more that are struggling:

Hardy

Shares in Hardy Oil & Gas (LSE: HDY) have slumped 88% over the past five years, to 27p, showing just how risky investment in the oil exploration business can be — especially when it comes to companies not yet in profit.

At the halfway stage back in November, Hardy, which operates in India, told us that it had no debt and had cash and short-term investments amounting to $22.9m — and assured us that it was “well funded to meet its future work commitments“. But since then we’ve heard nothing about financing, with full-year results not due until June, so we really have no idea of Hardy’s cash situation right now.

The firm has also relinquished one of its exploration licences in India, which will lead to the writedown of $22m in intangible assets this year. Hardy doesn’t look in immediate danger of collapse, but 2015 could turn out to be a critical year.

Circle

Circle Oil (LSE: COP), focused on the Middle East and Africa, has seen its shares drop 73% over five years to just 10p, and that includes a 64% fall just since last September. Circle is at least profitable, though we have a big fall in earnings expected for the year just ended in December followed by a more severe fall in 2015.

The most recent financial update we’ve had, in February, told us that Circle was still funding its operations from its own operational cashlow and had $34m of available cash. On the debt side it had drawn $45m from one loan facility, and had a further $30m convertible loan due for redemption in July 2015 — although the terms of that loan have since been renegotiated.

Recent operational updates have been disappointing, with the company’s Shisr-1 well in Oman and its KAB-1bis well in Morocco both being plugged and abandoned. Still, Circle does look safe, and should benefit nicely from an uptick in the oil price if and when it comes.

Enquest

Enquest (LSE: ENQ) has suffered the biggest one-year fall, of 72% to 39p, as profits are set to plummet all the way to a forecast loss in 2016. In fact, in 2014 results just released this week, Enquest reported a basic loss per share and told us its net debt had ballooned to $933m (from $381m a year previously) — and that comes from a year of rising production, so low oil is hurting Enquest badly.

The firm is engaged in hedging and is cutting its capital expenditure, and has “successfully negotiated a relaxation of covenants to its revolving credit facility“, but says that “continued compliance with […] covenants is a priority“.

Brent crude has slipped back to around $55 a barrel, which is really not what any of these three want — but it looks likely to hurt Enquest more in the short term. Would I invest in any of these? No, I wouldn’t myself — they’re really for experts with steely nerves.

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