TIDMCERP
Columbus Energy Resources PLC
16 July 2020
16 July 2020
COLUMBUS ENERGY RESOURCES PLC
("Columbus" or the "Company")
Q&A on potential merger with Bahamas Petroleum Company
plc
Columbus, the oil and gas producer and explorer focused on
onshore Trinidad and Suriname, is pleased to provide a set of
Q&A's on the potential merger with Bahamas Petroleum Company
plc. The Q&A's are set out below and can also be accessed on
the Company's website at
https://columbus-erp.com/investors/scheme-of-arrangement/
Leo Koot, Executive Chairman of Columbus, commented:
"I would encourage all our shareholders to read the Q&A's,
which are some of the most common questions related to the
potential merger that we have received from our shareholders. As
set out in the Scheme Document, the Board is unanimous in their
recommendation to accept the offer. I would encourage shareholders
to consider the merits of the offer for the reasons set out in the
Scheme Document and to vote at the relevant shareholder meeting via
the proxy forms."
Contact Information
Columbus Energy Resources plc
Leo Koot / Tony Hawkins +44 (0)20 7203 2039
VSA Capital Limited
Broker and Rule 3 Advisor
Andrew Monk / Andrew Raca +44 (0)20 3005 5000
Beaumont Cornish Limited
Nominated Adviser
Roland Cornish / Rosalind Hill Abrahams +44 (0)20 7628 3396
Columbus Energy Resources plc - Bahamas Petroleum Company
plc
Proposed Merger - Q&A
Q. Why do the merger now? Columbus announced the results of
Saffron on 27 April 2020, why not wait until after Saffron 2 was
drilled or after the Trinity Inniss CO2 results before negotiating
a merger or contemplating other transactions?
A. In January and February 2020, the Company was focussed on
safely completing the drilling of the Saffron well and commencing
its testing regime (see the Corporate Update dated 13 February
2020). By mid-March 2020, the Company was aware of the potential
impact of Covid-19 on its operations and the industry (see the RNS
dated 17 March 2020). The subsequent fall in the oil price (most
notably in April 2020) highlighted the need, in the Board's view,
for the Company to be part of a larger business that will be better
placed to weather the storm than Columbus as a standalone entity -
our assets will be more advanced and the balance sheet stronger.
The overlap of assets, people and finance with Bahamas is, in the
Board's view, very good and there was no guarantee that the
opportunity to undertake the merger would be available later in the
year, especially given BPC's intention to drill the Perseverance
well in Q4 2020/Q1 2021. It is also worth noting that the Board met
remotely almost every day during the deliberations with BPC (early
April to early June 2020) to consider progress and examine
alternative options for the Company, including remaining a separate
entity. The Board was unanimous that the merger was in the best
interests of all the Company's stakeholders, taking account of all
relevant information available to it.
Q. Why is it that the transaction was announced without Columbus
management previously announcing that that some form of action
(corporate merger, capital raise, asset sale) was contemplated?
A. As set out above, in early 2020, the Company did not
prioritise merger or other corporate actions prior to the
completion of the Saffron drilling and testing. The impact of
Covid-19 and Opec+ decisions in February to April 2020 accelerated
the Company's planning for the next stage of the Company and led,
ultimately, to the proposed merger with BPC. Discussions with BPC
began in April 2020 and as with any merger or sale involving a
publicly traded company (including Columbus), the obligation of
secrecy, one of the fundamental requirements of the Takeover Code,
needed to be maintained. Oil and gas companies around the world -
from the majors, to medium to smaller-sized entities - were also
taking actions in Q2 2020 to respond to the new business
environment they were facing. This has resulted in well-publicised
actions across the industry including significant cost reductions,
deferral of work programmes, reduction or cancellation of dividends
and other M&A activities. In seeking to take a new approach,
the Boards of BPC and Columbus were responding to circumstances in
a manner consistent with their oil & gas industry peers.
Q. Is Leo Koot still committed to the business post-merger?
A. Absolutely. Leo will become a Non-Executive Director of BPC
post-merger and be responsible for driving the progress of the
South West Peninsula and Suriname projects. He will also be
entitled to attend and contribute to the BPC leadership team
meetings.
Q. How did the parties agree the relative valuations and how
does this relate the net present value ("NPV") of each party's
assets? Does the transaction undervalue Columbus?
A. The merger valuation was agreed based on the relative share
price and market capitalisations of each company using several
reference points in time, as described on pages 33 and 36 of the
Scheme Documents. The NPV of each party's assets will depend upon a
number of assumptions for that NPV to be realised. For example, the
NPV for the Saffron appraisal and development project (as set out
in Columbus' Corporate and Operational Update dated 27 April 2020)
depends on funding for the project of circa US$3m (as set out on
page 12 of that update). As such, the share price and market
capitalisation of each party is a more appropriate measure of
value. The Columbus Board looked at the proposed transaction with a
6 - 12 month horizon. In the event of BPC's drilling success with
the Perseverance well, the Board believes the merits of the deal
will be self-evident. In the event the Perseverance well result is
ambiguous, the Board's view is that by that time the combined
business will be better placed than if Columbus didn't undertake
the merger.
Q. Why does the Scheme Document not contain more information on
the current performance of the Columbus assets, including
information on current production levels?
A. With regards to production levels of the Columbus assets, as
previously announced, the Company has since Q1 2019 been focussing
on maximizing the profitability of our production rather than the
absolute level of production. As such, the Company has not
regularly reported production numbers and does not expect to do so
prior to the shareholder meetings to vote on the proposed merger.
Of course, the total valuation of the Company is made up of,
amongst other things, the value of current production, the South
West Peninsula portfolio and the Weg Naar Zee asset in
Suriname.
Q. Will the merger have any impact on the commercial license
terms or will the license terms need to be renegotiated
post-merger? Specifically, in relation to the lease with Singh
Estates which has a provision that "no royalties are payable until
10m barrels of oil have been produced".
A. The terms of the Singh Estate lease are not affected by the
Merger. In general, the Merger will not trigger any changes the
commercial terms of the SWP licences, including the timing of any
future royalty payments upon a successful development. The Scheme
Document sets out the conditions related to various approvals from
Heritage and Staatsolie related to the Merger.
Q. Why has the signing of the Goudron IPSC/EPSC been postponed
multiple times? Is the delay in signing the ESPC a cause for
concern due to broader oil policy issues in Trinidad?
A. The delays in signing the new Goudron EPSC have been
exacerbated to a large extent by Covid-19 restrictions in Trinidad
affecting ongoing regulatory and administrative approval processes.
The Company is not aware of any new oil policy issues which have
affected the signature process. The same delays are being faced by
other IPSC/EPSC licence holders.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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