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Songa Slumps as Delays, Funding Hole Dent Prospects: Oslo Mover

Songa Offshore SE, a Cyprus-based offshore drilling contractor, slumped the most in six months in Oslo trading as delays in rig construction and a possible funding gap raised investor concern about future cash flows.

Shares in the Limassol-based company fell as much as 13 percent, the most since Feb. 5. The stock lost 9.1 percent to 7.16 kroner at 3:17 p.m. in the Norwegian capital with trading volume at 281 percent of the three-month average daily volume.

Songa said today delivery of Songa Equinox rig, the first of four rigs on order with Daewoo Shipbuilding & Marine Engineering Co, will be delayed as long as six months. There may also be delays of as many as three months on the remaining rigs being built, said Songa, which ordered the rigs to fulfill contracts with Statoil ASA for rigs equipped to operate in the harsh waters of the North Sea and the Barents Sea.

“This creates a lot of uncertainty,” Kristoffer Riis Iden, an analyst at Arctic Securities ASA, said by phone. The delay will mean cash flows are postponed and Songa will incur financing costs for longer, said the analyst, who has a sell recommendation on the stock.

Songa signed term sheets in the second quarter for about 1 billion kroner ($166 million) in loans to fund the first two rigs, it said. Funding still needs to be obtained for the remaining two rigs and it continues to consider options to strengthen its balance sheet, according to the statement.

“I still see a significant funding gap and I do expect an equity issue at some point in time,” Riis Iden said.

Songa, with five rigs and four on order, has struggled with higher-than-anticipated spending as it expands to meet rising demand from oil and gas producers. The stock fell to a record low of 4.1 kroner in November on operational setbacks and amid investor concerns about the strength of the company’s balance sheet.

Songa lost about half its value the past 12 months, giving it a market valuation of 1.45 billion kroner.

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