Mining and energy companies have recorded several serious successes recently, ranging from Energean (ENOG) flipping its mature oil and gas fields in the Mediterranean for close to $1bn (£790mn) to Hochschild Mining (HOC) building a new gold mine just in time to capitalise on record prices for the precious metal.
But several companies on the brink underline that investors need to be careful in their search for quality. Energy services and construction specialist Petrofac (PFC) is currently working on a major refinancing and restructuring programme, having been overwhelmed by debts coming due and requirements to put up cash ahead of starting major projects. Given its importance in the oil and gas and renewables world, there is certainly a business still to salvage – even if its past corruption issues have kept it in check in recent years.
This type of refinancing is not uncommon. Petra Diamonds (PDL) handed most of its equity to debtholders in 2021, with previous investors left holding just 9 per cent of the company. A weak diamond market and operational difficulties have meant the subsequent rebound has not been spectacular, but it does show there is a future after these deals.