Conditional agreement to subscribe for new equity

    RNS Number : 3015K
  Black Rock Oil & Gas PLC
  17 December 2008
   

 For immediate release  17 December 2008


    Black Rock Oil & Gas Plc

    ("Black Rock" or the "Company")

    Conditional agreement to subscribe for new equity

    On 10 December 2008 the Board of Black Rock (the "Board") announced that they were in advanced discussions with a potential investor
regarding the possibility of an equity subscription.

    The Board is pleased to announce that negotiations have now been concluded for the recapitalisation of the Company. Agreement had been
reached with Cetus Investment Resources Inc ("Cetus Investment") to subscribe conditionally �2,000,000 for 200,000,000 new Ordinary Shares
of 1p each (the "First Subscription Shares") at the Subscription Price (being 1p per new Ordinary Share) representing 86.147 per cent. of
the enlarged issued share capital of Black Rock (the "First Subscription").

    The First Subscription is subject to a number of conditions as described below, including the approval by the shareholders of the
Company of the waiver of any obligations of Cetus Investment to make a general offer to Shareholders pursuant to Rule 9 of the City Code on
Takeovers and Mergers.

    Cetus Investment has also conditionally committed to fund, subject to commercial and technical evaluation, the next stage of the
Company's exploration, appraisal and well development programme in Colombia (the "Development Funding"). Subject to the technical and
commercial evaluation by Cetus Investment's management team, Cetus Investment has agreed to provide a minimum of �5,000,000 and a maximum of
�10,000,000 either by arranging third party debt for Black Rock or itself providing the funding either by additional equity or a shareholder
loan. 

    If the Development Funding is provided by way of a further subscription for new Ordinary Shares (the "Second Subscription Shares"),
Cetus Investment has agreed that such Second Subscription Shares will be offered to Black Rock's shareholders on a pre-emptive basis pro
rata to their shareholding in the Company at such time (the "Rights Offer"). Cetus Investment has agreed to subscribe for its full
entitlement for Second Subscription Shares and for any other Second Subscription Shares not subscribed for by Black Rock's other
Shareholders. The subscription price of any Second Subscription Shares will be 1p per Second Subscription Share. On the assumption that
Cetus Investment subscribes for the maximum number of new Ordinary Shares pursuant to the Rights Offer, it will hold a maximum of
1,200,000,000 new Ordinary Shares in aggregate, representing approximately 97.39 per cent. of the then enlarged issued share capital of the
Company.

    Cetus Investment is a newly-formed company established specifically to make the investment in Black Rock and is a wholly-owned
subsidiary of Zaver Petroleum International Inc. ("Zaver Petroleum"). Zaver Petroleum's principal asset is its 55 per cent. interest in
Orient Petroleum International Inc. ("OPII"), an established oil and gas development and production company with operations in Pakistan. 

    On completion of the First Subscription, Peter Kitson and Christopher Moore will resign from the Board. Arif Kemal, Hasan Ali Hashwani,
Rustom Bejon Kanga and Kamran Ahmed as representatives of Cetus Investment will join the Board as non-executive directors. The new Board
intends to build Black Rock as a diversified oil exploration and production company and will, subject to technical and commercial
evaluation, continue to develop the Company's Colombian assets. 

    A circular containing full details of the proposed subscription by Cetus Investment and containing a Notice of an Extraordinary General
Meeting (the "EGM") will be sent to shareholders as soon as feasible. The Board hopes that all necessary approvals will be in place and that
the proposed subscription by Cetus Investment will become unconditional by 31 January 2009.


    2.    BACKGROUND 

    Earlier this year the Company completed its financing arrangements with Prospero Hydrocarbons Inc ("Prospero") which substantially
relieved the Company of its share of the exploration and appraisal expenditures in Colombia in 2008. Following the completion of these
financing arrangements with Prospero, the Board implemented wide-ranging operational cost reductions substantially to reduce the working
capital required by the Company to finance its ongoing central costs for the remainder of 2008. As part of these arrangements, the Directors
of Black Rock agreed substantially to reduce their remuneration. 

    As announced at the Annual General Meeting held in April 2008, against a background of challenging stock-market and credit market
conditions for smaller exploration companies such as Black Rock, the Board reviewed the options to raise the additional working capital
required by the Company while maximising the value of the Company and its Colombian interests for all its shareholders. The Board embarked
on an active process of identifying potential opportunities and seeking providers of funding. The Board has been active throughout this
period in identifying potential opportunities and undertaking discussions with a wide number of potential business partners regarding the
Company and its assets.

    As announced on 13 June 2008, the Company sold its 15 per cent interest in the R3 retention lease in offshore Western Australia operated
by Tap Oil Limited which contains the currently non-commercial Cyrano Field to Oil Basins Limited Pty ("Oil Basins") for A$40,000 in cash
and 500,000 new ordinary shares in Oil Basins. Oil Basins is an ASX-listed oil and gas development company based in Australia. Following
this disposal, the Company's principal remaining assets comprise its interest in the Las Quinchas association contract and the Alhucema E&P
contract in Colombia. In addition, the Company continues to hold a 15% interest in Block 49/8c within the UK Southern North Sea, which is
operated by Wintershall Noordzee.

    3.    CONDITIONS

    The First Subscription is conditional on, inter alia, the following matters:
(a)                 the passing of the necessary resolutions at the EGM, including inter alia the approval of the waiver of Rule 9 of the
City Code;
(b)                the confirmation from the Panel that the waiver of Rule 9 of the City Code will be approved;
(c)                 there being no material breach of any of the Company*s warranties contained in the Agreement for the First Subscription
prior to completion thereof; and
(d)                the First Subscription Shares being admitted to trading on AIM.

    4.    RELATIONSHIP AGREEMENT

    Cetus Investment has also conditionally entered into a Relationship Agreement, pursuant to which the Company, Cetus Investment and OPII
have agreed certain arrangements in order to regulate their relationship and to avoid potential conflicts of interest. Pursuant to this
Relationship Agreement, Cetus Investment, OPII and the Company have agreed, inter alia, that:

(a)        Cetus Investment will be entitled to appoint four directors to serve on the Board;
 
(b)        Any purchase or sale of assets, any farm-in agreement or other transaction between any connected company of Cetus Investment
(including OPII) and the Company which exceeds 5 per cent. in any of the class tests as determined pursuant to Rule 13 of the AIM Rules,
shall be subject to the preparation of a competent persons* report, the approval of the independent directors from time to time (one of whom
will be suitably qualified to appraise oil and gas projects) and the approval of the Company*s shareholders (excluding Cetus Investment
which will abstain); and
 
(c)        Unless otherwise agreed, Cetus Investment (and any connected company) will be precluded from participating directly or indirectly
in any oil or gas exploration or production activity in Central America, South America, Europe or Australia and the Company will be
precluded from participating directly or indirectly in any oil or gas exploration or production activity in North America, Africa, the
Middle East or Asia.
 


    Cetus Investment, which will on completion of the First Subscription be interested in 200,000,000 Ordinary Shares, representing 86.147
per cent. of the then enlarged issued share capital, has undertaken conditionally to the Company and Beaumont Cornish Limited that (and
subject to the exceptions permitted under Rule 7 of the AIM Rules) they will not dispose of any interest in Ordinary Shares for a period of
twelve months from Admission without the prior written consent of Beaumont Cornish Limited. 

    5.    REASONS FOR THE INVESTMENT

    The Directors believe that the new funds provided by the First Subscription will stabilise the Company's financial position and will
enable the New Board to consider potential opportunities for the future development of the group. 

    Should the proposals not be approved by the Shareholders at the EGM then the Company would urgently need to recommence previous
discussions with parties who had expressed an interest in providing finance to the Company or purchasing its assets. There could be no
assurance that these parties will have any continuing interest nor that an investment or asset sale could be agreed in a timely manner or on
acceptable terms. In such circumstances the Company may have no future and could become insolvent by virtue of its financial position and
the Directors may have no choice but to appoint a liquidator.


    Enquiries:

 Black Rock Oil & Gas Plc                      Tel: 01189 001350 
 Dr John Cubitt, Managing Director             www.blackrockoil.com

 Beaumont Cornish Limited (Nominated Adviser)  Tel: 0207 628 3396
 Michael Cornish                                


    ENDS

This information is provided by RNS
The company news service from the London Stock Exchange
 
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