TIDMPXOG
RNS Number : 8149D
Prospex Oil and Gas PLC
12 October 2018
Prospex Oil and Gas Plc / Index: AIM / Epic: PXOG / Sector: Oil
and Gas
12 October 2018
Prospex Oil and Gas Plc ('Prospex' or the 'Company')
Issue of Loan Notes
Highlights
-- GBP480,000 raised via issue of unsecured Loan Notes
-- Proceeds to help fund 2019 development costs at the Selva gas
discovery on the Podere Gallina Permit, Italy
-- Loan Notes and additional non-equity funding expected to fund
the full development of Selva as well as further exploration in the
proposed production concession
-- This debt financing follows first gas production in Romania
in September 2018, which has opened up non-equity funding to the
Company
Prospex Oil and Gas Plc, the AIM quoted investment company, is
pleased to announce that it has raised GBP480,000 via the issue of
unsecured Loan Notes ('the Loan Notes') to new and existing
investors ('the Subscribers'), including several directors of the
Company. In addition, the Subscribers have been issued with 55
warrants ('the Warrants') for each GBP1 of Loan Note subscribed.
Each Warrant confers to the Subscriber the right to acquire one
Ordinary Share at 0.6p.
The proceeds of the Loan Notes will be used to fund the
Company's share of the budgeted early stage development costs
(including environmental monitoring) at the Selva gas discovery
('Selva') on the Podere Gallina Permit in Italy ('Podere Gallina')
in 2019 and cover the Company's general expenditure in 2019. The
Company anticipates being able to fund the full development of the
gas discovery and further exploration in the proposed production
concession from this and further non-equity funding as the project
progresses.
The Loan Notes will pay 10% interest biannually, capitalised to
30 June 2019, with the first cash payment 31 December 2019.
Repayments start in December 2020 with final repayment on 30 June
2022 (four equal payments) and fit conservatively with expected
first production at Selva in Q1/Q2 in 2020.
The Directors believe the issue of the Loan Notes reflects the
considerable progress made by Prospex over the last twelve months
across its portfolio of European onshore projects. In addition to
the Podere Maiar discovery, the Company participated in a gas
discovery on the EIV-1 Suceava Concession in onshore Romania which
has since been brought into production (see announcement of
September 2018 for further details). This marked a significant
milestone as following first gas production from this discovery,
Prospex is now a revenue generative oil and gas investment company.
Cash flow from Romania and expected cash flow from Italy, which
will significantly scale up Prospex's revenue profile, have opened
up non-equity financing options to the Company to fund future
development, as demonstrated by the issue of the Loan Notes.
Prospex holds a 17% interest in Podere Gallina where a
significant gas discovery was confirmed in January 2018 following
highly positive flow testing results at the Podere Maiar-1d
appraisal/redevelopment well ('Podere Maiar'). A production
concession application has since been submitted to the Italian
Government to develop the gas field with first phase production
targeted to commence in Q1/Q2 2020 at a rate of up to 150,000 cubic
metres (5.3 mmscf/day). The operator, Po Valley Energy, estimates
the gross capex required to bring the discovery into production is
EUR2.4 million (EUR408,000 net to Prospex).
Prospex non-executive Chairman, Bill Smith, said, "The market
may not have fully recognised the significance to the Company of
first gas production in Romania and ongoing work to advance the
Selva gas field in Italy towards development, but the Subscribers
to the Loan Notes have done. Not only is Prospex generating
revenues for the first time, but the presence of copycat prospects
at Suceava and large structures at Podere Gallina offer multiple
low cost, low risk opportunities to rapidly scale up production and
revenues. To fully monetise the potential of these two assets as
well as the Tesorillo project in Spain, which we believe could hold
up to 2TCF (gross) of unrisked prospective resources, development
capital will be required. With this in mind, it is highly
encouraging that first production in Romania has opened up
non-equity funding options to the Company.
"Our focus on generating shareholder value is dual focused:
build and develop a portfolio of high quality European projects
with clear lines of sight towards high impact activity such as
drilling and production; and protect the capital structure of the
Company by minimising dilution. We firmly believe a huge disconnect
has opened up between the underlying value of our projects and our
current market valuation. We expect this valuation gap to close as
the various workstreams that are underway to monetise our
investments are advanced to the point where their considerable
potential is visible to all. Until this value gap closes, however,
we intend to take full advantage of the non-equity funding
opportunities we now have at our disposal."
Further Information on the Warrants
The Subscribers have been issued with 55 warrants ('the
Warrants') for each GBP1 of Loan Notes subscribed for. Each warrant
confers to the Subscriber the right to acquire one ordinary share
at 0.6p. This equates to the Subscribers having the right to invest
a further 33p for each GBP1 of Loan Note subscribed to. The
warrants expire two years from issue of the Loan Notes. Assuming
full exercise the Company would issue 26,400,000 ordinary 0.1p
shares for a total subscription of GBP158,400.
Further Information on the Subscribers and the Loan Note
The GBP480,000 Loan Notes have been issued to eleven individual
subscribers, including the following three Directors of the
Company:
Director Amount
Bill Smith GBP50,000
----------
Richard Mays (and GBP50,000
family)
----------
James Smith GBP25,000
----------
Interest up to 30 June 2019 shall be capitalised on 30 June
2019. Interest thereafter shall be paid biannually beginning on 31
December 2019 and thereafter 30 June and 31 December of each
succeeding year until all Loan Notes are repaid.
The Company can elect to pay the interest in Euros by giving 10
business days' notice. Loan Note holders can elect, on a change of
control of the Company, where a single party has over 50% of the
issued share capital of the Company, to convert some or all of
their Loan Notes, including capitalised interest, into ordinary
shares at the prevailing market price. Likewise, Loan Note holders
in the limited period, from 1 September 2019 to 30 August 2020, can
convert into the same class of shares as are issued in any future
equity financing of GBP1.5m or less and at a 10% discount to the
price paid per share in that financing. In addition, Loan Note
holders can at their election redeem their Loan Notes on any future
equity financing of GBP2.5m or more before 31 August 2020.
The Company can elect to repay the Loan notes in full or part at
any time by giving the holders 30 days' notice otherwise the
Company shall repay the Loan Notes in four equal instalments on 31
December 2020, 30 June 2021, 31 December 2021 and finally on 30
June 2022.
Related Party Transaction
The issue of the Loan Notes to the Directors is a related party
transaction pursuant to Rule 13 of the AIM Rules for Companies.
Accordingly, Edward Dawson, independent Director in relation to the
Loan Notes, having consulted with the Company's Nominated Adviser,
Strand Hanson Limited, considers that the terms of the Directors'
Participation in the Loan Note subscription are fair and reasonable
insofar as the Company's shareholders are concerned.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
* * ENDS * *
For further information visit www.prospexoilandgas.com or
contact the following:
Edward Dawson Prospex Oil and Gas Plc Tel: +44 (0) 203 9481619
Rory Murphy Strand Hanson Limited Tel: +44 (0) 20 7409
Ritchie Balmer 3494
Jack Botros
Duncan Vasey Peterhouse Corporate Finance Tel: +44 (0) 20 7469
0932
Frank Buhagiar St Brides Partners Ltd Tel: +44 (0) 20 7236
Charlotte Page 1177
Notes
Prospex Oil and Gas Plc is an AIM quoted investment company
focussed on high impact onshore and shallow offshore European
opportunities with short timelines to production. The Company's
strategy is to acquire undervalued projects with multiple, tangible
value trigger points that can be realised within 12 months of
acquisition and then applying low cost re-evaluation techniques to
identify and de-risk prospects.
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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