TIDMNOP
RNS Number : 5141Q
Northern Petroleum PLC
30 November 2016
Northern Petroleum Plc
("Northern Petroleum", "Group" or "the Company")
Strategic investment in Canadian assets
Italian and Australian farm out
Subscription and Open Offer
Northern Petroleum, the AIM quoted oil company focusing on
production led growth, announces that it has agreed to divest
interests in its assets, as detailed below, to High Power Petroleum
LLC ("H2P"), for a consideration of US$2.5 million in cash and the
application of US$0.25 million of well stimulation services ("the
Consideration") by Blue Spark Energy Inc. ("Blue Spark"), an
affiliate of H2P based in Calgary.
The Company also announces a proposed direct subscription (the
"Subscription"), subject to shareholder approval, to raise gross
proceeds of up to GBP5.1 million at a price of 3.5 pence per
subscription share (the "Issue Price") through a first tranche
subscription of 124,047,017 new ordinary shares (the "First Tranche
Subscription") and a second tranche subscription of up to
20,600,000 new ordinary shares (the "Second Tranche Subscription"),
both at the Issue Price. The Issue Price represents a premium of
12.0 per cent. to the middle market closing price per ordinary
share of 3.125 pence on 29 November 2016, being the last business
day prior to this announcement.
A proposed open offer for up to 21,500,000 new ordinary shares
with nominal value of 1 pence each in the capital of the Company
("Ordinary Shares") at the Issue Price, raising up to an additional
GBP0.8 million, will be made to existing qualifying shareholders
(the "Open Offer"). Total funds realised from the Consideration,
the Subscription and Open Offer will total up to US$9.7 million
(approximately GBP7.8 million).
Highlights
The Disposals
-- Subject to the approval of the Subscription by shareholders,
the Company will divest to H2P for the Consideration the following
interests in the Group's assets (the "Disposals"):
- a 25 per cent. interest in all of the Company's Canadian
licences, wells and facilities ("Canadian Assets");
- a 10 per cent. interest in the Company's Italian offshore
southern Adriatic exploration permits ("Italian Permits") and
exploration permit applications ("Italian Applications"), if
granted; and
- a 25 per cent. interest in the Company's onshore Australian
licence ("Australian Asset").
-- The Company has also agreed to grant H2P options to increase
its interest in the Group's assets as follows:
- an increase in the Canadian Assets from 25 per cent. to 50 per
cent. by agreeing to pay an additional US$4 million before 31
December 2017;
- an increase in the Italian Permits and Italian Applications,
if granted, from 10 per cent. to 50 per cent. by funding an
appraisal well on the Giove oil discovery in permit FR.40 up to a
cap of US$15 million; and
- an increase in the Australian Asset from 25 per cent. to 50
per cent. by funding US$1 million of seismic acquisition and
processing.
The Subscription and Open Offer
-- The Subscription has been agreed, subject to shareholder
approval, of up to 144,647,017 Ordinary Shares at the Issue Price
as follows:
- H2P, Cavendish Asset Management Limited ("Cavendish"), City
Financial Investment Company Limited ("City Financial") and one
further financial institution have agreed to subscribe for a total
of 124,047,017 Ordinary Shares under the First Tranche
Subscription, raising proceeds of GBP4.3 million, before
expenses;
- an Open Offer will be made to enable all qualifying
shareholders to participate in the fundraising at the Issue Price
for up to 21,500,000 Ordinary Shares; and
- in addition, H2P and Cavendish have agreed to subscribe, once
the results of the Open Offer are known, for up to an additional
20,600,000 Ordinary Shares under the Second Tranche Subscription to
maintain a shareholding of 29.99 per cent. and 19.0 per cent.
respectively.
AMI and board appointment
-- The Company and H2P have entered into an Area of Mutual
Interest Agreement ("AMI") to jointly pursue new opportunities in
Alberta and Saskatchewan, Canada
-- H2P will have the right to appoint a non-executive director
to the board of the Company
-- The proceeds of the Disposals, Subscription and Open Offer
will be used primarily to fund the Company's share of the
forthcoming winter work programme in Canada and further production
redevelopment in Canada in 2017 as well as the acquisition of 3D
seismic in the southern Adriatic and the general working capital
requirements of the Company
H2P
H2P is a wholly-owned oil and gas exploration and production
subsidiary of I-Pulse Inc., a technology company which develops and
commercialises high pulse power solutions with multi-sector and
cross-industry applications, particularly for the natural resources
sector. H2P is investing in a broad portfolio of upstream oil and
gas assets, leveraging the I-Pulse group's unique proprietary
technologies in well stimulation, production optimisation and
electro-magnetic exploration surveying applications, to create an
enhanced economic return.
Keith Bush, Chief Executive Officer, commented:
"The introduction of H2P as a strategic investor at both the
asset level and as a corporate shareholder marks a step-change for
the Company. The investment across the Company's asset portfolio
validates the strategy we have pursued with production led growth
in Canada and the Italian exploration and appraisal portfolio
providing the possibility of very large returns in the medium to
long term. Not only does H2P bring strong financial support, they
provide rigorous technical review and innovative technology to help
enhance our asset value.
"Continued support from our other key shareholders, Cavendish
and City Financial, combined with H2P gives the Company a strong
financial base from which to grow production in Canada and develop
the Italian portfolio. Asset acquisition opportunities are still
coming on to the market in Canada, and through the AMI we can now
pursue these with a well financed and capable partner, to help
accelerate growth in Canada and build a material production
business.
"With the business now strengthened it is important that the
Company's existing private shareholders can invest alongside our
new shareholder through the open offer and benefit from the value
that will result from this new partnership."
Scott Aitken, Chief Executive Officer of H2P, commented:
"We are very pleased to be partnering with Northern Petroleum
across their asset base. Their strategy of building production and
cashflow in Canada while maturing exploration and appraisal
opportunities in Italy is closely aligned with how we are building
our exploration and production operations. We believe H2P can add
technical expertise along with the potential enhancements of our
pulse technology, initially starting with well stimulations in
Canada."
For further information please contact:
Northern Petroleum Plc Tel: +44 (0)20 7469 2900
Keith Bush, Chief Executive Officer
Nick Morgan, Finance Director
Stockdale Securities Limited (Nominated Adviser and Joint
Broker) Tel: +44 (0)20 7601 6100
Antonio Bossi
Robert Finlay
David Coaten
FirstEnergy Capital LLP (Joint Broker) Tel: +44 (0)20 7448
0200
Jonathan Wright
1. Canadian expansion
On 22 January 2016, the Company completed an acquisition of
wells and facilities in the Rainbow area of north west Alberta (the
"Rainbow Assets"), located near its existing operations in Virgo
further to the north (the "Virgo Assets"). During the first half of
2016, a work programme was undertaken to increase production from
approximately 150 barrels of oil per day ("bopd") to in excess of
400 bopd, primarily from the Rainbow Assets. Further investment was
made to develop the production base and review the future
development potential of the Rainbow Assets and Virgo Assets
combined, including mandating McDaniel & Associates Consultants
Ltd ("McDaniel") to produce an updated third party reserves report,
the results of which were published on 27 October 2016.
The work completed during the year and the results of the
McDaniel reserves report supported the Director's initial views on
the potential of the asset base in the region and its ability to
produce much higher levels of daily production. The forecast
investment returns over the medium term, even in the current oil
price environment, were deemed attractive enough to warrant a
larger programme of investment to further develop reserves and
production volumes.
The investment required for the planned programme was greater
than likely to be generated through cashflow from the existing
production levels, at least in the short term. Therefore
discussions were held with a number of third parties concerning a
possible investment into the Canadian Assets to help materially
increase production over the short and medium term. These
discussions resulted in the Company agreeing a broad investment
programme, which is described below, with H2P. Legally binding
agreements have been signed to complete the various acquisitions
and investments which are conditional upon, inter alia, certain
regulatory approvals as well as the closing of the First Tranche
Subscription, as described below, which itself is subject to the
approval by shareholders in a general meeting.
H2P's acquisition and investment at the asset level and the
significant investment as part of the Subscription is fundamental
to the financing of the Company as it grows production in Canada
and progresses the exploration and appraisal projects in Italy. If
the Subscription is not approved by shareholders, sufficient
funding will not be available to the Company to undertake
production development work on the Rainbow Assets and the Company
will need to look for alternative sources of finances to support
the Company during 2017.
2. The Disposals
For a total consideration of US$2.5 million in cash and the
application of US$0.25 million of well stimulation services by Blue
Spark, an affiliate of H2P based in Calgary, H2P has agreed,
conditional upon the required regulatory approvals in Italy and
Australia and the completion of the First Tranche Subscription, in
which H2P is participating, to purchase:
-- a 25 per cent. interest in all of the Canadian Assets;
-- a 10 per cent. interest in the Italian Permits;
-- a 10 per cent. interest in the Italian Applications, if
granted; and
-- a 25 per cent. interest in the Australian Asset.
The Company has also agreed, conditional on the completion of
the Disposals outlined above, to grant H2P options to increase its
interest in the Group's assets as follows:
-- H2P can increase its interest in all of the Canadian Assets
from 25 per cent. to 50 per cent. by agreeing to pay an additional
US$4 million before 31 December 2017;
-- H2P can increase its interest in the Italian Permits and
Italian Applications, if granted, from 10 per cent. to 50 per cent.
by funding all the work required to plan, contract drill, case, run
temporary drill stem testing string and perforate an appraisal well
on the Giove oil discovery in permit FR.40 up to a cap of US$15
million, an option which must be exercised within three months of
receiving the results of the proposed 2017 3D seismic acquisition
in the southern Adriatic; and
-- H2P can increase its interest in the Australian Asset from 25
per cent. to 50 per cent. by funding all the work required to
acquire and process seismic data with a seismic acquisition
programme value of US$1 million, an option which must be exercised
before the licence transitions into its second year in Q3 2017.
The Company and H2P have entered into an AMI agreement to pursue
jointly new opportunities to acquire assets in Alberta and
Saskatchewan for three years.
3. The Subscription
The Company announces that it has, conditionally, inter alia,
upon the passing of the resolutions to be proposed at a general
meeting (the "Resolutions") to be convened shortly and upon
admission of the Ordinary Shares to trading on AIM, raised
GBP4,341,646 before expenses through the First Tranche Subscription
at the Issue Price. The Issue Price represents a premium of
approximately 12.0 per cent. to the middle market closing price per
ordinary share of 3.125 pence on 29 November 2016, being the last
business day prior to this announcement.
Certain of the investors participating in the First Tranche
Subscription have agreed to subscribe for further Ordinary Shares
once the results of the Open Offer are known in order to maintain
the same percentage equity interest in the Company after the
completion of the Open Offer that they held before the Open Offer.
Accordingly, depending upon take-up under the Open Offer, up to
20,600,000 Ordinary Shares may be subscribed pursuant to the Second
Tranche Subscription at the Issue Price, raising up to GBP721,000
(before expenses).
4. The Open Offer
The Board has decided to make an Open Offer so that all
qualifying shareholders have an opportunity to participate at the
Issue Price, as investors have done under the Subscription.
Accordingly, up to 21,500,000 Ordinary Shares are being made
available to qualifying shareholders at the Issue Price under the
terms of the Open Offer, raising up to a further GBP752,500 before
expenses. The Directors intend to take up at least their
entitlements under the Open Offer. The full details of the proposed
Open Offer will be disclosed in a further announcement and a
circular to shareholders ("Circular"), which will be posted
shortly.
The net proceeds of the Subscription and the Open Offer will be
used primarily for the development of the Company's assets in
Canada, progressing the Company's offshore permits in the southern
Adriatic, as well as supporting the ongoing working capital
requirements of the Company.
5. Related Party Transactions
Cavendish and City Financial are substantial shareholders of the
Company as defined in the AIM Rules for Companies ("AIM Rules").
Accordingly, the subscription for Ordinary Shares by each of
Cavendish in the First Tranche Subscription and Second Tranche
Subscription and City Financial in the First Tranche Subscription
are related party transactions pursuant to the AIM Rules. The
Directors of the Company consider, having consulted with the
Company's nominated adviser, Stockdale Securities Limited, that the
terms of the subscriptions by Cavendish and City Financial are fair
and reasonable insofar as the Company's shareholders are
concerned.
6. General Meeting
The Subscription and Open Offer are conditional upon the
approval of the Resolutions by shareholders in general meeting.
However, the Subscription and the Open Offer are not
inter-conditional. The Circular, setting out the details of the
Subscription and Open Offer and the Resolutions and a notice
convening the general meeting, expected to occur in December, will
be posted to shareholders shortly. A further announcement will be
made at that time with additional details concerning the
Resolutions, along with a proposed timetable for the Subscription
and Open Offer.
-Ends-
In accordance with the AIM Rules - Guidance for Mining and Oil
& Gas Companies, the information contained in this announcement
has been reviewed and signed off by the CEO of Northern Petroleum,
Mr Keith Bush, who has 25 years' experience as a petroleum
engineer. He has read and approved the technical disclosures in
this regulatory announcement. The technical disclosure in this
announcement complies with the SPE/WPC standard.
Note to Editors
Northern Petroleum is an oil and gas company focused on
production led growth. The Company is undertaking a redevelopment
and production project in Alberta and has a broader portfolio of
exploration and appraisal opportunities in countries of relatively
low political risk, primarily Italy. Comprehensive information on
Northern Petroleum and its oil and gas operations, including press
releases, annual reports and interim reports are available from
Northern Petroleum's website: www.northernpetroleum.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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