TIDMFAST
RNS Number : 7549V
Fastnet Oil & Gas PLC
11 August 2015
11 August 2015
Fastnet Oil & Gas plc
("Fastnet" or the "Company")
Fundamental change of business, proposed new Investing Policy,
proposed name change and Notice of General Meeting
Introduction
Fastnet (AIM: FAST, ESM: FOI), announces its intention to
undertake a fundamental change in its business pursuant to the AIM
Rules and ESM Rules, adopt the Investing Policy and change its name
to Fastnet Equity plc (together the "Proposals"). The Proposals are
conditional upon Shareholders approving the Investing Policy at the
General Meeting.
Fastnet's existing oil and gas assets
The Group currently retains oil and gas exploration assets in
offshore Morocco, consisting of the Foum Assaka Licence, and
offshore Ireland consisting of the Celtic Sea Assets, which is a
portfolio of licensing options. The Group's assets are split by
geography into two separate subsidiaries being Pathfinder
Hydrocarbon Ventures Limited, in respect of the Foum Assaka Licence
offshore Morocco, and Fastnet Oil and Gas (Ireland) Limited in
respect of the Celtic Sea Assets.
Background to the Proposals
The Company was admitted to trading on AIM and the ESM and
simultaneously raised GBP10.0 million in June 2012 with the
strategy of identifying early stage exploration opportunities in
the Celtic Sea and in Africa. Within a year of being admitted to
trading, the Group had established a portfolio of interests in
potentially high impact exploration prospects in both onshore and
offshore Morocco and offshore Ireland.
In June 2013, Fastnet completed what was at the time the largest
ever 3D seismic programme in the Celtic Sea covering 1,910km(2)
over two option areas, creating the only modern 3D seismic database
in the Company's area of interest. In December 2013, Fastnet
successfully executed a farm-out of half of its interest in the
Foum Assaka Licence, offshore Morocco, to SK Innovation
incorporating re-imbursement of back costs, and a US$100 million
capped carry on an exploration well which was drilled in April
2014. The SK Innovation farm-out agreement also provided for a
carry of Fastnet's working interest in an additional well, provided
it was an appraisal well. If an appraisal well was not drilled, the
SK Innovation agreement provided for a carry on a future
exploration well at SK Innovation's sole discretion. As a result
the total cost to Fastnet from acquisition of the Foum Assaka
Licence to completion of the FA-1 exploration well, in April 2014,
was restricted to US$2.75 million. The FA-1 exploration well
drilled was not a commercial success and, accordingly, a subsequent
appraisal well was not warranted. Therefore the future carry for
Fastnet on the Foum Assaka licence is subject to SK Innovation's
election to participate in a second exploration well, which the
Board currently considers is unlikely.
As part of the Company's growth strategy, it accelerated
progress in relation to its exclusive option (the "Option") to farm
into the eight exploration permits comprising the Tendrara Lakbir
Petroleum Agreement (the "Tendrara-Lakbir Licence"), the commercial
terms of which were improved and extended in July 2014.
In conjunction with the ongoing technical work in Ireland and
Morocco, the Company continued in its significant and extensive
efforts to farm-out the Group's Celtic Sea Assets and to secure a
partner to share drilling costs on the Tendrara-Lakbir Licence.
However the overall worldwide decline in oil prices, which
commenced in Q3 2014, has had a materially adverse impact on
economic conditions within the oil and gas sector. In particular,
it has resulted in a strategic shift in the forward planning of
many large oil and gas companies which, the Board believes, has
resulted in the delay of decisions and/or changes in strategy
regarding farm-in opportunities for exploration assets. As a
consequence of the decline in oil prices and despite implementing
an extensive marketing process, the Company has been unable to
successfully conclude a farm-out of its Celtic Sea Assets to date
or of the Tendrara-Lakbir Licence onshore Morocco, prior to the
expiry of the Option on 31 December 2014. In addition to the oil
price affecting the sector as a whole, the Board believes that
Fastnet's offshore Morocco portfolio has become a higher risk /
lower potential reward asset as a result of exploration activities
and results from other operators in offshore Morocco over the last
24 months.
On 31 May 2015, Fastnet's licensing options in the Celtic Sea
relating to the Molly Malone and Mizzen licences expired. In June
2015, Fastnet applied, as part of an open tender process, for
licensing options over portions of the original licensing option
areas. The award of these licence options remains subject to grant
by Minister of State at the Department of Communications, Energy
and Natural Resources and it is at the Company's sole discretion to
accept the award of these options within 28 days of the award
notification. If the Investing Policy is approved by Shareholders,
the Company will elect not to accept the award of these
options.
The Board undertook a detailed asset review of its oil and gas
portfolio in Q4 2014 in light of the rapidly changing economic
conditions in the oil and gas sector. The purpose of the asset
review was to ensure that Fastnet's corporate strategy to create
shareholder value by growing the Company's business and monetise
its assets remained on track.
In December 2014, the Board appointed Carol Law as Chief
Executive Officer of the Company. This was at a time when the
Company's share price was declining rapidly as a consequence, the
Board believes, of the decline in oil prices and associated adverse
market sentiment regarding the oil and gas sector, particularly for
small cap oil and gas exploration companies. The Board announced at
that time that its focus was set firmly on restoring and creating
shareholder value by implementing its long held strategy of
monetising existing assets and continuing to manage prudently its
significant cash reserves. The Board also announced its intention
to keep all options for the Company under review over the medium
term.
Since December 2014, the Company has undergone a comprehensive
review of general and administrative costs, which were reduced from
December 2014 by more than 40 per cent. to US$1.9 million per year
on an annualised basis. These costs have been reduced further in
recent weeks and, subject to Shareholder approval of the Investing
Policy, the Board intends to make further reductions to such costs
to reduce them to below US$0.6 million per annum on an annualised
basis.
In the context of the Company's ongoing review, the Board is now
of the opinion that the current economic conditions in the oil and
gas sector are likely to persist for the medium term. The Board
believes that these economic conditions have created an environment
in which it is not possible for Fastnet to find partners to carry,
with acceptable terms and conditions, some or all of the Company's
exploration costs on its oil and gas assets going forward. During
the course of 2015, the Company has conducted detailed due
diligence on a broad range of merger and acquisition ("M&A")
opportunities in the oil and gas sector. However, the Company has
not been able to identify an M&A opportunity, in the oil and
gas sector, which would create value for Shareholders and therefore
be a suitable use of the Company's available cash of US$15.9
million (as at 31 July 2015). During this period, the Board has
received certain unsolicited approaches with respect to
opportunities outside the oil and gas sector. These have included
opportunities in the healthcare sector but, to date, the Company
has not pursued these.
In light of the current economic climate within the oil and gas
sector, the Board has determined that it is not in the best
interests of Shareholders to either pursue M&A opportunities in
that sector or to expend further resources on the Company's
existing oil and gas assets. In addition, the Company's share price
has consistently traded at a discount to the Company's cash balance
(equating to 3p per Ordinary Share at 31 July 2015 or 2.8p per
Ordinary Share when adjusted for current liabilities) since Q4
2014, implying limited if any value is being attributed to the
Group's oil and gas exploration assets.
As a consequence and in order to source opportunities aimed at
delivering enhanced value for Shareholders, beyond both the current
share price and the current adjusted cash value per Ordinary Share
of 2.8p, the Board has elected, subject to Shareholder approval, to
undertake a fundamental change in its business pursuant to the AIM
Rules and ESM Rules and accordingly to seek Shareholder approval to
adopt the Investing Policy, focused on investments in the
healthcare sector.
Having undertaken a review, the Board believes that more value
can be achieved for Shareholders by utilising the Company's
existing listings on AIM and the ESM and applying the Group's
corporate infrastructure and cash resources to the proposed
Investing Policy. The Board believes that the healthcare industry,
particularly the biopharma sector, is experiencing strong momentum
and there exist significant M&A and value creation
opportunities for both small cap and large cap companies.
Furthermore the Board believes that it has access to an
international pipeline of such opportunities that could lead to
value creation for the Shareholders. The sector is experiencing
high activity levels in the UK and also in Ireland, a country where
the Company has an existing operating base, with the required
management, commercial, fiscal, operational and technical expertise
all located in the Irish market.
The Board's intentions with the Group's existing assets
Offshore Morocco
Fastnet's running costs in respect of its partnership share in
the Foum Assaka Licence are approximately US$25,000 per month based
on the approved budget to 31 December 2015. Additionally, should
the partnership proceed with drilling a further exploration well
and SK Innovation elect not to participate in a second exploration
well, the Company would be exposed to the cost and would be
required to seek further financing or secure a partner to finance
Fastnet's 12.5 per cent paying interest in the Foum Assaka
Licence.
The Board is of the view that it is not in Shareholders'
interests to maintain this financial exposure given the higher risk
/ lower potential reward for exploration assets offshore Morocco in
the past two years coupled with the prevailing oil price
environment. The Board has therefore, subject to the Investing
Policy being approved, decided to withdraw from the partnership and
surrender its 12.5 per cent. paying interest in the Foum Assaka
Licence and will notify the participants in the partnership ("JOA
Parties") accordingly. In addition to its pro-rata share for the
approved work program and budget items until 31 December 2015,
being approximately US$25,000 per month, once notice has been
served on the JOA Parties, the Company will also be obligated to
pay any cash calls made on the JOA Parties up until 30 September
2015. In addition, the Company will be responsible for all costs
associated with respect to filing changes with the other JOA
Parties and the relevant government authorities. The Board
estimates that the total liabilities in respect of all of the above
should not exceed an aggregate sum of US$150,000.
Celtic Sea Assets
It is the Board's intention to terminate all further expenditure
on its Celtic Sea portfolio of licensing options. Fastnet will seek
to secure a possible disposal or similar transaction of these
options before they expire. All costs incurred to date in respect
of the Company's Celtic Sea work programmes has been accrued for
and is included in the current liabilities figure of US$600,000 (as
at 31 July 2015). The Company has other potential liabilities in
respect of rental fees and work programmes in respect of certain
parts of its Celtic Sea portfolio. The Board estimates that these
amounts do not exceed US$150,000 in aggregate.
Financial position
As at 31 July 2015 the Company had a cash balance of US$15.9
million and current liabilities of US$0.6 million. During the
course of 2015 the Company has undergone a comprehensive review of
general and administration costs and has successfully reduced
overheads by over 40 per cent since December 2014 to US$1.9 million
on an annualised basis. These costs have been reduced even further
in recent weeks and, subject to Shareholder approval of the
Investing Policy, the Board intends to make further reductions in
the annual running costs to reduce it to below US$0.6 million per
annum.
Investing Policy
If the Investing Policy is approved by Shareholders at the
General Meeting, the Company will be required to make an
acquisition or acquisitions which will constitute a reverse
takeover under the AIM Rules or otherwise implement its Investing
Policy within 12 months of the General Meeting, failing which, the
Company's Ordinary Shares would then be suspended from trading on
AIM and ESM. If the Investing Policy has not been implemented
within 18 months of the General Meeting, the admission to trading
on AIM and ESM of the Ordinary Shares would be cancelled and the
Directors will convene a general meeting of the Shareholders to
consider whether to continue seeking investment opportunities or to
wind up the Company and distribute any surplus cash back to
Shareholders.
The proposed Investing Policy is to acquire companies or
businesses in the healthcare sector, particularly those in the
biopharma sector. The businesses will typically have attributed to
them some or all of the following characteristics:
-- Strong management team with attractive track records
-- An established entity with existing intellectual property
-- Markets and products / services with significant commercial opportunities
-- Revenue generating or near to medium term revenue generation capabilities
The Company will initially focus on opportunities located in
Europe but will also consider businesses in other geographical
regions. The Directors believe that they have a broad collective
range of sources of potential opportunities but also intend to
appoint one or more additional directors with the relevant industry
experience, subject to the Investing Policy being approved by
Shareholders. The Directors will identify and assess potential
investment targets and, where they believe further investigation is
required, intend to appoint appropriately qualified external
professionals to assist. The initial objective of the Directors is
to create incremental capital appreciation and any revenue
generated by the Company will be applied to further the Investing
Policy or will be used in the day to day management of the Company.
Dividends may be declared at some future date depending on the
financial position of the Company and the availability of
distributable accounting profits.
The Directors intend that the Company takes an equity interest
in a proposed investment which is likely to be a majority position
to 100 per cent. ownership. The Company's financial resources are
likely to be invested in potentially one or more investments in a
single transaction which will be deemed to be a reverse takeover
pursuant to Rule 14 of the AIM Rules and ESM Rules, in which case
the approval of the Shareholders will be required. Proposed
investments may be made in quoted or unquoted securities in
companies or partnerships at any stage of development.
Proposed changes to the Board
Subject to the approval of the Investing Policy by Shareholders
at the forthcoming GM, the Company will become an Investing
Company. Based on the decision by the Board to change the focus of
the Company from the oil and gas sector to unrelated sectors, Carol
Law will resign as a Director and employee upon approval of the
Investing Policy at the GM but will continue as a consultant to the
Company as she serves out her three month contracted notice
period.
It is expected that further changes will be made to the Board,
with the appointment of parties with the appropriate knowledge and
expertise base to make investments in the healthcare and/or
biopharma industry sectors. Details of any such further changes
will be announced in due course.
Change of Name
In line with the Company's proposed fundamental change of
business the Board proposes that the name of the Company be changed
to Fastnet Equity plc. The change of name requires the approval of
the Shareholders.
Change of Registered Office
The Company's registered office has been changed to Ivybridge
House, 1 Adam Street, London WC2N 6LE.
General Meeting
The General Meeting has been convened for 2pm on 28 August 2015
to be held at the Conrad London St James, 22-28 Broadway, London
SW1H 0BH.
Defined terms in this announcement have the same meaning as
given to them in the circular to Shareholders dated 11 August 2015,
unless otherwise stated, and which is available on the Company's
website, www.fastnetoilandgas.com.
Ends
For further information please contact:
+353 (1) 644
Fastnet Oil & Gas plc 0007
Cathal Friel, Non-Executive
Chairman
+44 (0) 20
Shore Capital 7408 4090
Nomad
Bidhi Bhoma, Edward Mansfield
Corporate Broking
Jerry Keen
+353 (1) 679
Davy 6363
(ESM Adviser & Joint
Broker)
John Frain, Anthony Farrell
+44 (0) 20
Camarco 3757 4980
Billy Clegg, Georgia
Mann
This information is provided by RNS
The company news service from the London Stock Exchange
END
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