TIDMTRAP
RNS Number : 2373U
Trap Oil Group plc
28 July 2015
28 July 2015
Trap Oil Group plc
("Trapoil" or the "Company")
Proposed Acquisition of Jersey Oil and Gas E&P Limited,
Placing to raise approximately GBP0.82 million (gross), Directorate
Appointments and Share Capital Reorganisation
Proposed Amendment to Articles of Association, Increase in
Authority to Allot Shares, Disapplication of Pre-emption Rights and
Change of Name to "Jersey Oil and Gas plc"
and Notice of General Meeting
Trapoil (AIM: TRAP), the independent oil and gas exploration,
appraisal and production company focused on the UK Continental
Shelf ("UKCS") region of the North Sea, is pleased to announce,
inter alia, that it has agreed to acquire the entire issued and to
be issued share capital of Jersey Oil and Gas E&P Limited
("JOG") and raise approximately GBP0.82 million (gross), subject,
inter alia, to shareholder approval and completion of a capital
reorganisation.
Highlights:
-- Trapoil to acquire the entire issued and to be issued share
capital of JOG for a consideration of GBP495,000, to be wholly
satisfied by the issue of 2,250,000 New Ordinary Shares (the
"Acquisition").
-- Company has conditionally raised, in aggregate, approximately
GBP0.82 million (before expenses) to provide additional working
capital, through the placing of 3,711,228 New Ordinary Shares at a
placing price of 22 pence per New Ordinary Share with certain
existing and new investors, via WH Ireland.
-- Proposed capital reorganisation which includes, inter alia, a
one for 100 share consolidation to facilitate the proposals and,
conditional on completion of the Acquisition, change in the name of
the Company to 'Jersey Oil and Gas plc'.
-- Andrew Benitz and Ronald Lansdell (currently founding
shareholders and directors of JOG) will be appointed to the
Company's Board as Chief Executive Officer and Chief Operating
Officer respectively on completion of the proposed Acquisition.
-- Refined business strategy:
o To continue to focus on maintaining, developing and exploiting
a portfolio of North Sea assets with a greater focus on producing
assets in order to seek to unlock the inherent value in the Group's
existing tax losses;
o To assess and acquire potential further North Sea oil and/or
gas producing assets, some of which have already been identified by
Jersey Oil and Gas and are currently undergoing due diligence
and/or subject to ongoing commercial negotiations.
-- Irrevocable undertakings obtained from the Directors, Mr
Peter Gyllenhammar, Mr Paul Curtis and certain other Shareholders
in respect of, in aggregate, 73,249,556 Existing Ordinary Shares,
representing approximately 32.2 per cent. of the Company's existing
issued ordinary share capital, to vote in favour of all of the
Resolutions.
Marcus Stanton, Non-Executive Chairman of Trapoil,
commented:
"We look forward to welcoming Andrew, Ronald and the rest of the
JOG team to the Company. We believe that the proposed acquisition
of JOG, refined business strategy and injection of new capital,
presents a welcome opportunity to enable the Company to resume a
growth strategy going forward and benefit from JOG's experienced
management team, in order to maximise shareholder returns in the
medium and longer term. These proposals are therefore strongly
recommended by the Board."
Andrew Benitz, CEO of JOG, said:
"Following the recent settlement agreement with its major
creditors, there is considerable value potential within the Group
with respect to its existing tax losses, its current asset
portfolio - including the carry to first oil on Magnolia and the
high working interest in the Romeo discovery - together with its
remaining cash reserves.
"We believe that the enlarged group will be well placed to take
advantage of the evolving consolidation opportunity in the North
Sea, as may be demonstrated by the billions of dollars of private
equity capital raised to pursue projects in the North Sea in recent
months."
Enquiries:
Trap Oil Group Scott Richardson Brown, Tel: 020 3705
plc Finance Director 9200
www.trapoil.com
Strand Hanson James Harris Tel: 020 7409
Limited Matthew Chandler 3494
James Spinney
Jersey Oil and Andrew Benitz, Director Tel: 01534
Gas E&P Ltd & Proposed CEO 626 818
WH Ireland Limited Paul Shackleton Tel: 020 7220
1666
FirstEnergy Capital Hugh Sanderson Tel: 020 7448
LLP David van Erp 0200
Camarco Billy Clegg Tel: 020 3757
Georgia Mann 4983
Capitalised terms used but not defined in this announcement have
the meanings set out in the appendix to this announcement.
Introduction
The Company has agreed to acquire the entire issued and to be
issued share capital of Jersey Oil and Gas for a consideration of
GBP495,000, to be wholly satisfied by the issue of 2,250,000 New
Ordinary Shares, subject, inter alia, to the receipt of shareholder
authority to allot the Consideration Shares.
In addition, the Company has conditionally raised, in aggregate,
approximately GBP0.82 million (before expenses) through the placing
of 3,711,228 New Ordinary Shares at a placing price of 22 pence per
New Ordinary Share with certain existing and new investors. The
Placing, which has been arranged by WH Ireland pursuant to the
terms of the Placing Agreement, is conditional, inter alia, upon
Shareholders' approval and Admission.
In order to implement the Acquisition and the Placing, the
Company is proposing to carry out a Capital Reorganisation and seek
additional share capital authorities to allot New Ordinary Shares.
In addition, the Company is proposing an amendment to the Company's
Articles of Association to ensure a sufficient level of permitted
borrowings going forward, to afford greater flexibility to the
Directors and satisfy the Company's current and anticipated future
requirements. Conditional on completion of the Acquisition, it is
also proposed that the name of the Company be changed to Jersey Oil
& Gas plc and that certain board appointments be effected.
Accordingly, the Company is convening the requisite General
Meeting for 11.00 a.m. on 14 August 2015 at the offices of
Fieldfisher, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R
3TT. This announcement explains the background to and reasons for
the proposed Acquisition, the Placing, the Capital Reorganisation
and the Proposed Amendment, and explains why the Directors consider
the proposed Acquisition, the Placing, the Capital Reorganisation
and the Proposed Amendment to be in the best interests of the
Company and its Shareholders as a whole and are unanimously
recommending that Shareholders vote in favour of all the
Resolutions to be proposed at the General Meeting.
Background to and reasons for the Acquisition
Jersey Oil and Gas is a private limited company incorporated in
Jersey on 7 March 2014, established by an experienced exploration
and production ("E&P") team with a multinational track record
of operating assets and managing upstream-focussed oil and gas
companies. JOG is currently at an early stage in its development
with no pre-existing UKCS licence interests or portfolio of oil and
gas assets. For the 16 month period ended 30 June 2015, JOG
recorded an unaudited loss before tax of GBP379,261 and as at 30
June 2015 had unaudited gross assets of GBP81,239, principally
comprising of cash reserves.
Trapoil was incorporated in England & Wales on 24 January
2011 as a public limited company to act as the ultimate holding
company for an independent UK oil and gas exploration and appraisal
business with a geographic focus on the UKCS. Its ordinary shares
were admitted to trading on AIM on 17 March 2011 in conjunction
with a fundraising of GBP60 million (gross) to finance the planned
growth of the group's pre-existing carried interest business model
and exploration portfolio, and the potential acquisition of
additional production and appraisal opportunities in order to
establish a more rounded business with a production base.
In July 2011, Trapoil acquired Reach Oil & Gas Limited
("Reach") for a total consideration of approximately GBP30 million
(GBP20 million satisfied in cash and approximately GBP10 million in
new ordinary shares in Trapoil at a deemed price of 43 pence per
share). The Reach group's asset portfolio comprised predominantly
carried interests in a total of 14 exploration licences governing
24 Blocks and part Blocks in the UK North Sea covering, in
aggregate, an area of approximately 2,000km(2) . The acquisition of
Reach more than doubled the size of Trapoil's then exploration
portfolio.
The expanded exploration portfolio and drilling programme was
subsequently impacted by a number of significant partner issues
and, of the five licences in which Trapoil holds or has held an
interest and where drilling activity has taken place, oil
discoveries were only made on two of the prospects (Licence P.1666,
Block 30/11c ("Romeo") and Licence P.1556, Block 29/1c ("Orchid")),
with each exploration well being plugged and abandoned pending any
decision to conduct future appraisal drilling. The three remaining
exploration wells, on Licence P.1610, Block 13/23a ("Magnolia"),
(Licence P.1658, Block 20/5b) ("Scotney") and Licence P.1889,
Blocks 12/26b and 12/27 ("Niobe") prospects, were all plugged and
abandoned as dry holes.
In March 2012, Trapoil's wholly owned subsidiary, Trap Oil
Limited, acquired a 15 per cent. working interest in the Athena
Field, operated by Ithaca Energy (UK) Limited, for a total notional
cash consideration of approximately GBP34.5 million. As
anticipated, the Athena Field commenced oil production in May 2012
via an FPSO, the BW Athena vessel, but subsequently encountered
numerous technical and operational difficulties resulting in lower
rates of production than originally envisaged by the operator.
Large abandonment provisions were also required towards the end of
2014, with a further instalment expected to be called by the
operator by the end of 2015. However, even at the reduced rates of
production, the Athena Field remained cash flow positive until the
collapse in the Brent oil price in the second half of 2014, with
the Company's average monthly net cash outflow being in excess of
GBP0.5 million in the first quarter of 2015 (after taking into
account both its share of the field's losses and the Group's
general corporate and administrative expenses).
In August 2014, Trapoil commenced a significant cost reduction
programme, over and above certain cost saving initiatives announced
in April 2014 as part of the Group's final results announcement for
its financial year ended 31 December 2013, which included two of
the Company's founding directors stepping down from the Board, and
pursuit of a strategy under which operating costs were to be
reduced to a minimum in order to maintain the Company's existing
assets whilst seeking to maximise the returns from such assets.
Following the reduction in Board members, which took effect on 12
August 2014 with respect to Simon Bragg, the Company's then
Chairman (whose role was immediately assumed by Marcus Stanton, an
existing Non-Executive Director) and on 31 October 2014 with
respect to Mark Groves Gidney and Paul Collins, the Company's Chief
Executive Officer and Chief Operating Officer respectively, Trapoil
announced, inter alia, the sale of its remaining non-core
investment in IGas Energy plc for a total consideration of GBP1.86
million on 4 November 2014.
On 22 September 2014, in the Company's interim results
announcement, it was stated, inter alia, that Total E&P UK
Limited ("Total") had agreed to compensate Trapoil should it not
elect to drill an exploration well on Licence P.2032, Blocks 21/8c,
21/9c, 21/10c, 21/14a and 21/15b ("Valleys"). No election to drill
was subsequently made, however Total is now disputing its
obligation to compensate Trapoil for the amount claimed of GBP1m.
If Trapoil was to proceed into potential administration, the
Company would have limited resources with which to pursue its claim
for compensation, but in the event that the proposed Acquisition
and Placing successfully complete, Trapoil currently intends to
pursue such claim.
On 11 February 2015, Trapoil reported that despite continued
stabilised production rates of approximately 4,800 bopd gross (720
bopd net to Trapoil) following the completion of a workover and
certain other intervention works, due to the prevailing depressed
oil price of approximately US$58/barrel, the Athena Field was
significantly loss making such that the Company was incurring a
cash outflow of approximately GBP380,000 per month after absorption
of its share of the field's operating costs. At that time,
Trapoil's only other remaining assets comprised its interests in:
Niobe, for which a well was planned for the second quarter of 2015;
Magnolia, for which seismic evaluation work was ongoing in respect
of a possible extension of the adjacent Liberator discovery; Romeo;
Licence P.1989, Blocks 14/11, 12 & 16 ("Homer") and Licence
P.2170, Blocks 20/5b and 21/1d ("Cortina").
Since embarking on the abovementioned cost minimisation and
value maximisation strategy in August 2014, Trapoil's Board has
periodically received a number of preliminary approaches from
certain third parties expressing potential interest in acquiring
the Company. However, none of these approaches resulted in an
acceptable offer being tabled. In addition, there was further
uncertainty with respect to the outcome of the drilling of an
exploration well on the Niobe prospect in which Trapoil holds a 28
per cent. interest.
Drilling operations on the Niobe prospect commenced on 8 June
2015 and, on 25 June 2015, Trapoil announced that no significant
hydrocarbons had been encountered and that the well was to be
plugged and abandoned. On 25 June 2015, Trapoil also announced that
it had reached a settlement agreement with the group's principal
creditors, such that, in return for an aggregate payment of GBP2m
by Trapoil to CGG Services (UK) Limited ("CGG") and the Athena
Consortium (excluding Trap Oil Limited), all of the Group's
contractual liabilities to these parties would be ring fenced
and/or expunged (the "Settlement Agreement"). Under the terms of
the Settlement Agreement, Trapoil no longer has any outstanding
debt due to CGG and all future liabilities (including
decommissioning costs) owed to the Athena Consortium will now be
met by the Group's partners in the Athena Consortium and repayment
will only be sought by way of future revenue generated from the
Athena Field and 60 per cent. of any petroleum sales or net
disposal proceeds stemming from Trapoil's other existing licence
interests, being Magnolia, Romeo, Niobe, Homer and Cortina. Should
Trapoil not have repaid the outstanding debt obligation by the time
the Athena Field is fully decommissioned the remaining debt will be
written off by the Athena Consortium.
Having entered into the abovementioned Settlement Agreement, the
Company is now in an improved position with respect to establishing
a sustainable footing for its future development and further to
discussions with the Sellers, the Board has decided that the
Company should enter into the Acquisition Agreement in respect of
the proposed Acquisition, further details of which are set out
below. On completion of the proposed Acquisition, the enlarged
group's business will continue to be focused on maintaining,
developing and exploiting a portfolio of North Sea assets, albeit
with a greater focus on producing assets in order to seek to unlock
the inherent value in the Group's existing tax losses. In addition,
the Directors believe that the opportunity presented by the
proposed Acquisition provides the following benefits:
-- Jersey Oil and Gas has an experienced executive management
team that will assist the Company in assessing and acquiring
potential further North Sea oil and/or gas producing assets, some
of which have already been identified by Jersey Oil and Gas and are
currently undergoing due diligence and/or subject to ongoing
commercial negotiations.
-- The Directors believe that the enlarged group will be able to
structure the abovementioned potential acquisitions in a manner
that optimises the utilisation of the Group's existing tax losses
arising from Trapoil's previous North Sea activities and thereby
enable it to exploit its capital more effectively.
-- The Company plans to use the net Placing proceeds to
identify, review and evaluate the abovementioned asset acquisition
opportunities (both technically and commercially) and, where
appropriate, to make conditional offers in respect of the same. Any
potential acquisitions that are pursued, will be financed from one
or more of the enlarged group's balance sheet, the proceeds from
strategic sales of selected parts of the enlarged group's asset
portfolio and further equity and debt capital raises as
appropriate.
The Directors believe that the addition of the new executive
management team from JOG, together with a refined business strategy
and injection of new capital, present a timely and attractive
opportunity to enable the Company to resume a growth strategy going
forward and seek to maximise shareholder returns in the medium and
longer term.
Following completion of the proposed Acquisition, Andrew Benitz
and Ronald Lansdell (currently founding shareholders and directors
of Jersey Oil and Gas) will be appointed to the Board and, together
with JOG's technical team, will work closely with the Company's
existing Directors to implement the refined business strategy
outlined above. Part of that process may include the recruitment of
potential additional Board appointees and a review of the Company's
office location and tax domicile in order to maximise cost
efficiencies and potential tax benefits for the enlarged group
going forward.
Proposed Directors and their service agreements and letters of
appointment
Jason Andrew Benitz (known as Andrew Benitz) (Proposed Chief
Executive Officer)
Mr Benitz is a former CEO and Director of Longreach Oil and Gas
Ltd. Mr Benitz joined Longreach in 2009 as Chief Operating Officer.
He previously worked at Deutsche Bank within the Oil and Gas
Corporate Finance team and within the Equity Capital Markets team.
He is also founder and director of Titan Properties SL, a real
estate business in Spain. Mr Benitz completed his undergraduate
studies at Edinburgh University and the University of Alberta,
graduating with a Bachelor of Commerce (Honours).
Subject to and with effect from Admission, Mr Benitz has entered
into an amendment to his existing service agreement with JOG, and a
letter of appointment as a director of the Company, details of
which are summarised below:
-- Under his amended service agreement with JOG, Mr Benitz shall
receive annual remuneration of GBP75,000 and be entitled to benefit
from the enlarged group's healthcare policy from time to time. His
remuneration will increase to GBP150,000 per annum on the
occurrence of the acquisition of the first production asset by any
member of the enlarged group (as determined by the board of
directors of the Company). His employment shall be terminable on 12
months' notice (falling to 6 months if his salary is increased to
GBP150,000) (the "Notice Period"), save that, if there is a
material breach of his agreement (not remedied within a reasonable
time), material change in his duties, responsibilities or office, a
failure by JOG to continue any material benefit or he is relocated
out of Jersey, he may terminate his employment on 30 days' notice,
upon which he shall receive a payment equal to his monthly salary
for a period of time equal to the Notice Period and a further
payment of his aggregate emoluments for a period of time equal to
the Notice Period.
-- Under his appointment letter with the Company, Mr Benitz
shall be appointed as Chief Executive Officer of the Company. No
fees are payable in respect of this appointment and it continues
until terminated as set out in the amended service agreement.
Ronald John Lansdell (Proposed Chief Operating Officer)
Mr Lansdell was Vice President of Exploration and Director at
Longreach Oil and Gas Ltd. Mr Lansdell has held a number of senior
technical and commercial roles during a 15 year career at ENI
S.p.a./Agip ("ENI/Agip"). These roles included being posted to
Nigeria, Kazakhstan and the United Kingdom. Mr Lansdell began his
career in 1972 in seismic data acquisition and processing,
initially at Digicon Inc. and then CGG in London, before joining
Elf in Norway and then BHP Petroleum as Exploration Coordinator
Western Australia. He spent nine years with Elf Aquitaine S.A. (in
Norway, France and Syria) and then joined Qatar General Petroleum
Corporation as Chief Geophysicist in Qatar before joining Eni/Agip.
Mr Lansdell graduated in geology from the University of London.
Subject to and with effect from Admission, Mr Lansdell has
entered into an amendment to his existing service agreement with
JOG and a letter of appointment as a director of the Company,
details of which are summarised below:
-- Under his amended service agreement with JOG, Mr Lansdell
shall receive annual remuneration of GBP75,000 and be entitled to
benefit from the enlarged group's healthcare policy from time to
time. His remuneration will increase to GBP150,000 per annum on the
occurrence of the acquisition of the first production asset by any
member of the enlarged group (as determined by the board of
directors of the Company). His employment shall be terminable on 12
months' notice (falling to 6 months if his salary is increased to
GBP150,000) (the "Notice Period"), save that, if there is a
material breach of his agreement (not remedied within a reasonable
time), material change in his duties, responsibilities or office, a
failure by JOG to continue any material benefit or he is relocated
out of Jersey, he may terminate his employment on 30 days' notice,
on which he shall receive a payment equal to his monthly salary for
a period of time equal to the Notice Period and a further payment
of his aggregate emoluments for a period of time equal to the
Notice Period.
-- Under his appointment letter with the Company, Mr Lansdell
shall be appointed as Chief Operating Officer of the Company. No
fees are payable in respect of this appointment and it continues
until terminated as set out in the amended service agreement.
Current trading and future prospects
Further to the Company's announcement of 25 June 2015, its
contractual liabilities to its principal creditors have been ring
fenced and/or expunged. Accordingly, the Directors believe that the
business now represents a more attractive and robust investment
proposition, for potential funding providers and vendors of North
Sea assets, as an AIM quoted company with sizable pre-existing tax
losses and a number of promising licence interests. The Directors,
in conjunction with the Company's advisers, have for some time been
assessing opportunities to secure additional funding and executive
management to drive the Company forwards and believe that the
proposed Acquisition and Placing affords the best means for
maximising shareholder value.
The Group's general and administrative cost-base is currently
approximately GBP1.3m per annum and, in accordance with the terms
of the Settlement Agreement, all future revenues generated from the
Group's interest in the Athena Field is to be passed over to the
Athena Consortium. It is therefore critical that prompt action is
taken to secure the injection of new working capital, as the
Company's net unrestricted cash reserves currently amount to only
approximately GBP0.4 million.
The Directors believe that the net proceeds of the Placing will
be sufficient to meet the Company's near term working capital
requirements.
In the event that Resolutions 1, 3 and 4 are not passed and the
proposed Acquisition and Placing are not completed, Trapoil will
have only limited remaining cash reserves and will be forced to
seek alternative sources of potential funding which may or may not
be on similar commercial terms and may or may not be obtainable on
a timely basis or at all. If any such alternative sources of
potential funding are not available, the Directors believe that it
is highly likely that the Company would be forced to enter into
administration within the next two to three months.
Details of the Placing
The Company has conditionally placed the Placing Shares to
raise, in aggregate, approximately GBP0.82 million (gross) (the
"Placing Proceeds") conditional upon, inter alia, the passing of
Resolutions 1, 3 and 4 at the General Meeting and Admission
occurring on or before 17 August 2015 (or such later date as WH
Ireland may agree, not being later than 30 September 2015). The
Placing Price represents a discount of approximately 32.3 per cent.
to the closing middle market price of 32.5 pence (as adjusted for
the Capital Reorganisation) per New Ordinary Share on 27 July 2015,
being the last business day prior to the announcement of the
Placing. Following their Admission, the Placing Shares will
represent, in aggregate, approximately 44.5 per cent. of the
Company's Enlarged Share Capital. The Placing Shares will be fully
paid and will rank pari passu in all respects with the
Consideration Shares and the other New Ordinary Shares.
The Placing Shares have been conditionally placed by WH Ireland,
as agent of the Company, with certain existing and new investors
pursuant to the Placing Agreement. Under the terms of the Placing
Agreement, WH Ireland will, conditional on Admission, receive
certain fees and commission from the Company, together with
warrants to acquire up to 70,454 New Ordinary Shares at 22 pence
per share for the 18 month period to 27 January 2017 and the
Company will give customary warranties and undertakings to WH
Ireland in relation, inter alia, to its business and the
performance of its duties. In addition, the Company has agreed to
indemnify WH Ireland in relation to certain liabilities that it may
incur in undertaking the Placing. WH Ireland has the right to
terminate the Placing Agreement in certain circumstances prior to
Admission, in particular, in the event that there has been, inter
alia, a material breach of any of the warranties. The Placing is
not being underwritten. The enlarged group will also pay certain
commissions via WH Ireland, and may directly pay a contingent
success fee to RFC Ambrian in accordance with its role as
sub-broker for the Placing.
The Company has also agreed to allot and issue the Fee Shares to
a consultant in payment of part of his fees for advising the
Company in connection with the transaction which will be allotted
and issued pursuant to the general authorities being sought under
Resolutions 3 and 4 at the General Meeting.
Application will be made for the Placing Shares and the Fee
Shares to be admitted to trading on AIM and it is currently
expected that admission to trading and dealings in the Placing
Shares and Fee Shares will become effective at 8.00 a.m. on 17
August 2015.
Acquisition Agreement
On 27 July 2015, the Company conditionally agreed to acquire the
entire issued and to be issued share capital of Jersey Oil and Gas
in consideration for the issue of the Consideration Shares,
conditional on, inter alia: (i) the passing at the General Meeting
of the Resolutions; (ii) the Placing Agreement having become
unconditional (save for any condition relating to Admission or the
Acquisition Agreement); and (iii) Admission. Under the terms of the
Acquisition Agreement, Messrs Benitz and Lansdell (together the
"Seller Warrantors"), the two largest shareholders of Jersey Oil
and Gas, have provided certain warranties to the Company in respect
of Jersey Oil and Gas. Such warranties are subject to certain
financial caps and other limitations. In addition, the Company and
its Directors (together the "Buyer Warrantors") have provided
certain warranties to the selling shareholders of Jersey Oil and
Gas in respect of the Company. Such warranties are also subject to
certain financial caps and other limitations. Both the Seller
Warrantors and the Buyer Warrantors have given undertakings and
covenants to each other in respect of the conduct of Jersey Oil and
Gas and the Company, respectively, during the period from the date
of the Acquisition Agreement until satisfaction of the conditions
thereunder. If the conditions under the Acquisition Agreement are
not satisfied by 30 September 2015, or there is a material breach
of certain warranties, undertakings or covenants given under the
Acquisition Agreement, it will terminate without liability to
either party.
In addition, each of the Seller Warrantors has undertaken not to
dispose of any interest they, and their connected persons,
respectively hold in any shares of the Company during the period of
12 months commencing on Admission, including the Consideration
Shares that they each shall receive under the Acquisition
Agreement, and any shares they each may subsequently acquire during
such 12 month period, except in certain restricted
circumstances.
Application will be made for the Consideration Shares to be
admitted to trading on AIM and it is currently expected that
admission to trading and dealings in the Consideration Shares will
become effective at 8.00 a.m. on 17 August 2015.
Share Capital Reorganisation
Terms of the Capital Reorganisation
Under English company law, a company is not allowed to issue
shares at a price per share which is lower than the nominal value
of its shares. The Placing Price is the equivalent of 0.22 pence
per Existing Ordinary Share, which is below the current nominal
value of the Existing Ordinary Shares.
Accordingly, subject to Shareholder approval, the Directors
propose to reorganise the Company's share capital as explained
below with a view to reducing the number of ordinary shares in
issue by a factor of 100 whilst maintaining the same low nominal
value.
The terms of the proposed Capital Reorganisation are such that
on the Record Time every 100 Existing Ordinary Shares of 1 pence
each will be consolidated and subdivided into one New Ordinary
Share of 1 pence and one Deferred Share of 99 pence.
Save as explained below with regards to fractional entitlements,
following the Capital Reorganisation each Shareholder will hold
such number of New Ordinary Shares as is equal to 1/100th of the
number of Existing Ordinary Shares that he or she held immediately
beforehand, but the nominal value of the New Ordinary Shares will
remain as 1 pence.
The New Ordinary Shares resulting from the Capital
Reorganisation will have exactly the same rights as those currently
accruing to the Existing Ordinary Shares under the Company's
Articles of Association, including those relating to voting and
entitlement to dividends.
The Deferred Shares created pursuant to the Capital
Reorganisation will have no voting rights or rights to receive a
dividend, will have only a very limited right to any distribution
on a return of capital and are non-transferable. They will not be
listed on AIM. Accordingly, the Deferred Shares will be practically
worthless. The full rights attaching to the Deferred Shares are set
out in Resolution 1 in the notice of General Meeting, which, if
passed, will amend the Company's Articles of Association to set out
the rights of the Deferred Shares.
Resolution 1 contained in the notice of General Meeting at the
end of the circular convening the General Meeting (the "Circular"),
which will be posted to Shareholders today, will, if passed by
Shareholders, effect the proposed Capital Reorganisation as
detailed above. The passing of Resolution 1 effects the
consolidation and redesignation of the Existing Ordinary Shares
into New Ordinary Shares and Deferred Shares and effects the
amendments to the Company's Articles of Association to set out the
rights of the Deferred Shares. If approved, the Capital
Reorganisation will take place at 5.00 p.m. on 14 August 2015 and
Admission and dealings in the New Ordinary Shares will become
effective at 8.00 a.m. on 17 August 2015.
A copy of the Company's Articles of Association, showing the
intended amendments to be made pursuant to Resolutions 1 and 2 will
be made available for inspection at the General Meeting.
Fractional Entitlements
Under the Company's Articles of Association, if as a result of
the Capital Reorganisation any Shareholders would become entitled
to fractions of a New Ordinary Share, the Directors are entitled,
on behalf of such Shareholders, to sell the shares representing the
fractions for the best price reasonably obtainable and distribute
the net proceeds of sale in due proportion amongst those
Shareholders, provided that any amount otherwise due to a
Shareholder which is less than GBP5 may be retained for the benefit
of the Company. Given the Company's current share price it is not
expected that any such amounts would be distributed to
Shareholders. Shareholders who hold fewer than 100 Existing
Ordinary Shares at the Record Time will not receive any New
Ordinary Shares or Deferred Shares.
To facilitate the Capital Reorganisation, following the General
Meeting but prior to the Record Time the Company Secretary will
subscribe for such number of Existing Ordinary Shares (being fewer
than 100 Existing Ordinary Shares) as is necessary to ensure that
the Company's issued ordinary share capital is divisible by exactly
100.
For purely illustrative purposes, examples of the effect of the
Capital Reorganisation are set out below:
Number of Existing Number of New Number of Deferred
Ordinary Shares Ordinary Shares Shares received
held at the Record Received
Date
Fewer than 100 Nil Nil
100 1 1
150 1 1
500 5 5
1,000 10 10
5,000 50 50
10,000 100 100
Share Certificates and CREST Entitlements
Shareholders who hold their Existing Ordinary Shares in
certificated form will receive a new share certificate representing
their New Ordinary Shares following the Capital Reorganisation. If
Shareholders hold their Existing Ordinary Shares in uncertificated
form, the shares held in their CREST account will be updated
accordingly. Shareholders will not be issued with a share
certificate in respect of the Deferred Shares.
Background to and reasons for the Proposed Amendment
Resolution 2 contained in the notice of General Meeting at the
end of the Circular sets out a proposed amendment to the Articles
of Association with respect to the Company's level of permitted
borrowings going forward, to afford the Board greater flexibility
and enable the Company potentially to secure debt funding of a
sufficient and more appropriate quantum to satisfy the Group's
current and anticipated future requirements. In the event that
Shareholders do not approve Resolution 2, the Directors believe
that their ability potentially to secure meaningful debt funding
going forward would be unduly restricted by the prevailing
borrowing limit set out in the Articles of Association. In such
circumstances, the Directors would be obliged to seek alternative
sources of funding which may not be obtainable on similar
commercial terms or at all.
Disapplication of pre-emption rights and share capital
authorities
The Directors are seeking authority to allot New Ordinary Shares
in relation to the Acquisition and the Placing and up to a further
2,780,670 New Ordinary Shares (representing approximately 33.33 per
cent. of the Enlarged Share Capital following completion of the
Acquisition and the Placing), together with an authority to
disapply pre-emption rights in respect of the Placing and up to a
further 1,668,402 New Ordinary Shares (representing approximately
20 per cent. of the Enlarged Share Capital following completion of
the Acquisition and the Placing), subject to such exclusions or
other arrangements as the Directors may deem necessary or expedient
in relation to fractional entitlements or any legal or practical
problems relating to such an allotment.
These renewed authorities will enable the Directors to carry out
the Company's objectives going forward and will ensure that the
Company is in a position to pursue and take advantage of growth
opportunities as and when they arise. In particular, the proposed
authorities are intended to provide the Directors with the
flexibility to issue New Ordinary Shares, and rights to subscribe
for New Ordinary Shares, as consideration to vendors of potentially
attractive assets and/or to fund the cash consideration element of
such potential acquisitions. The proposed authorities will also
enable the Directors to: (a) raise additional working capital to,
inter alia, fund potential future work programmes without having to
incur the time delay and cost of convening a further general
meeting; and (b) up to an amount of 10 per cent. of the fully
diluted share capital from time to time, to satisfy allotments
under any share incentive arrangements that may be established for
the benefit of the enlarged group's employees and directors from
time to time. Any options or similar awards to be granted under any
such share incentive arrangements will be at the discretion of the
Board's Remuneration Committee.
Change of Company Name
To reflect the proposed changes to the Company, its management
and refined business strategy as a result of the Acquisition, it is
proposed that, conditional on, and with effect on and from,
completion of the Acquisition, the Company will change its name to
Jersey Oil and Gas plc.
Use of proceeds
The Company intends to use the net proceeds from the Placing for
the enlarged group's general working capital purposes.
General Meeting
Set out at the end of the Circular, which will be posted to
Shareholders today, is a formal notice convening a General Meeting
to be held at the offices of Fieldfisher, 9th Floor, Riverbank
House, 2 Swan Lane, London EC4R 3TT on 14 August 2015 at 11.00 a.m.
to consider, and if thought fit, pass the following
Resolutions:
Resolution 1: a special resolution to authorise and effect the
Capital Reorganisation and amend the Company's Articles of
Association;
Resolution 2: a special resolution relating to a proposed
further amendment to the Company's Articles of Association to
ensure a sufficient level of permitted borrowings going forward to
afford greater flexibility to the Directors and satisfy the
Company's current and anticipated future requirements;
Resolution 3: an ordinary resolution to grant the Directors
general authorities to allot New Ordinary Shares, including for the
Acquisition, the Placing and in relation to employees' and
directors' share incentive arrangements to be adopted and
implemented at the discretion of the remuneration committee of the
board of Directors; and
Resolution 4: a special resolution to grant the Directors power
to allot equity securities for cash as if statutory pre-emption
rights did not apply, including for the Placing and in relation to
employees' and directors' share incentive arrangements to be
adopted and implemented at the discretion of the remuneration
committee of the board of Directors.
For the ordinary resolution to be passed, more than half of the
votes cast must be in favour of the resolution.
For the special resolutions to be passed, at least
three-quarters of the votes cast must be in favour of the relevant
resolution.
Completion of the Acquisition and the Placing is conditional
upon the passing of Resolutions 1, 3 and 4. If any of these
Resolutions are not passed then the Acquisition and the Placing
will not complete. Trapoil will only have limited remaining cash
reserves and will be forced to seek alternative sources of
potential funding which may or may not be on similar commercial
terms and may or may not be obtainable on a timely basis or at all.
If any such alternative sources of potential funding are not
available, the Directors believe that it is highly likely that the
Company would be forced to enter into administration within the
next two to three months.
Related Party Transaction
The Union Discount Company of London Limited ("UDCL") and Peter
Gyllenhammar AB ("PGAB"), existing shareholders in the Company, are
100 per cent. owned by Mr Peter Gyllenhammar and together are
interested, in aggregate, in 51,102,026 Existing Ordinary Shares
representing approximately 22.5 per cent. of the Company's existing
issued share capital. Accordingly, UDCL and PGAB are deemed to be
related parties of the Company for the purposes of the AIM Rules
for Companies. PGAB has subscribed for 1,136,364 Placing Shares
pursuant to the Placing, such that following completion of the
Placing UDCL and PGAB will be interested, in aggregate, in
1,647,383 New Ordinary Shares representing approximately 19.75 per
cent. of the Enlarged Share Capital. The Directors consider, having
consulted with the Company's nominated adviser, Strand Hanson, that
the participation of PGAB in the Placing is fair and reasonable
insofar as Shareholders are concerned.
Irrevocable undertakings
The Company has received irrevocable undertakings from each of
the Directors, Mr Peter Gyllenhammar (in respect of the shares held
by UDCL and PGAB), Mr Paul Curtis and certain other Shareholders in
respect of, in aggregate, 73,249,556 Existing Ordinary Shares,
representing approximately 32.2 per cent. of the Company's existing
issued ordinary share capital, to vote in favour of all of the
Resolutions and not dispose of any such Existing Ordinary Shares
prior to the General Meeting.
Recommendation
The Directors consider that the Acquisition, the Placing, the
Capital Reorganisation and the Proposed Amendment are in the best
interests of the Company and its Shareholders as a whole and,
accordingly, unanimously recommend that Shareholders vote in favour
of all of the Resolutions to be proposed at the General Meeting, as
they have irrevocably undertaken so to do or procure to be done in
respect of their own beneficial and other connected interests,
amounting in aggregate to 3,681,414 Existing Ordinary Shares
representing approximately 1.62 per cent. of the Company's existing
issued ordinary share capital.
In the event that Resolutions 1, 3 and 4 are not passed and the
proposed Acquisition and Placing are not completed, Trapoil will
have only limited remaining cash reserves and will be forced to
seek alternative sources of potential funding which may or may not
be on similar commercial terms and may or may not be obtainable on
a timely basis or at all. If any such alternative sources of
potential funding are not available, the Directors believe that it
is highly likely that the Company would be forced to enter into
administration within the next two to three months.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of the Circular 28 July 2015
Latest time and date for return 11.00 a.m. on
of Forms of Proxy 12 August 2015
11.00 a.m. on
General Meeting 14 August 2015
Record Time and date for the 5.00 p.m. on
Capital Reorganisation and final 14 August 2015
date of trading for the Existing
Ordinary Shares
Admission effective and dealings 8.00 a.m. on
in the New Ordinary Shares, Consideration 17 August 2015
Shares, Fee Shares and Placing
Shares expected to commence on
AIM
Completion of the proposed Acquisition 17 August 2015
Expected date for CREST members' 17 August 2015
accounts to be credited (where
applicable) with New Ordinary
Shares, Consideration Shares,
Fee Shares and Placing Shares
in uncertificated form
Expected date for despatch of by 31 August
definitive share certificates 2015
in respect of the New Ordinary
Shares, Consideration Shares,
Fee Shares and Placing Shares
in certificated form (where applicable)
Notes:
1. References to times and dates in this announcement are to
times and dates in London (unless otherwise stated).
2. The timing of the events set out in the above timetable and
in the remainder of this announcement is indicative only. If any of
the above times and/or dates should change, the revised times
and/or dates will be notified via an announcement through a
Regulatory Information Service.
3. Temporary documents of title will not be issued
**ENDS**
APPENDIX
Table of Definitions
Capitalised terms used but not defined in the body of this
announcement have the meanings set out below.
"Acquisition" the acquisition of Jersey Oil
and Gas by the Company pursuant
to the Acquisition Agreement;
"Acquisition Agreement" the conditional agreement dated
27 July 2015 between the Company
and the Sellers in respect of
the Acquisition;
"Admission" admission of the New Ordinary
Shares, Consideration Shares,
Fee Shares and the Placing Shares,
as the case may be, to trading
on AIM and such admission becoming
effective in accordance with
Rule 6 of the AIM Rules for
Companies;
"AIM" the market of that name operated
by the London Stock Exchange;
"AIM Rules for the London Stock Exchange's
Companies" rules and guidance notes contained
in its "AIM Rules for Companies"
publication relating to companies
whose securities are traded
on AIM, as amended from time
to time;
"Articles" or the articles of association
"Articles of Association" of the Company as amended from
time to time;
"Athena Consortium" Ithaca Energy (UK) Limited,
Dyas Exploration UK Limited,
Parkmead (E&P) Limited, Spike
Exploration UK Limited, Zeus
Petroleum Limited and Trap Oil
Limited;
"Athena Field" the Athena Oil Field, Licence
P.1293, Block 14/18b;
"Block" an areal subdivision of the
UKCS of 10 minutes of latitude
by 12 minutes of longitude measuring
approximately 10 by 20 kilometres,
forming part of a quadrant;
"Board" or "Directors" the board of directors of the
Company;
"bopd" barrels of oil per day;
"Capital Reorganisation" the proposed consolidation and
subdivision of the Existing
Ordinary Shares to be effected
at the General Meeting;
"Companies Act" the UK Companies Act 2006 (as
or "Act" amended from time to time);
"Company" or "Trapoil" Trap Oil Group plc, a company
incorporated in England and
Wales with registered number
07503957, whose registered office
is at 10 The Triangle, NG2 Business
Park, Nottingham NG2 1AE;
"Consideration the 2,250,000 New Ordinary Shares
Shares" to be issued by the Company
as consideration for the Acquisition;
"CREST" the computerised settlement
system (as defined in the CREST
Regulations) operated by Euroclear
which facilitates the transfer
of title to shares in uncertificated
form;
"CREST Regulations" the Uncertificated Securities
Regulations 2001 (SI 2001/3755)
including any enactment or subordinate
legislation which amends or
supersedes those regulations
and any applicable rules made
under those regulations or any
such enactment or subordinate
legislation for the time being
in force;
"Deferred Shares" the proposed new deferred shares
of 99 pence each in the capital
of the Company to be created
pursuant to the Capital Reorganisation;
"Enlarged Share the total number of New Ordinary
Capital" Shares in issue upon completion
of the Capital Reorganisation,
the Placing and the Acquisition;
"Euroclear" Euroclear UK & Ireland Limited,
a company incorporated in England
& Wales with registration number
02878738, being the operator
of CREST;
"Existing Ordinary the existing ordinary shares
Shares" of 1 penny each in the capital
of the Company;
"FCA" the United Kingdom's Financial
Conduct Authority;
"Fee Shares" the 109,090 New Ordinary Shares
to be issued to a consultant
of the Company in payment of
certain consultancy fees;
"FPSO" Floating Production, Storage
and Offloading, a vessel used
to produce offshore fields;
"General Meeting" the general meeting of the Company
to be held at the offices of
Fieldfisher, 9th Floor, Riverbank
House, 2 Swan Lane, London EC4R
3TT on 14 August 2015 at 11.00
a.m., formal notice of which
is set out at the end of the
Circular;
"Group" the Company together with its
subsidiaries from time to time;
"Jersey Oil and Jersey Oil and Gas E&P Limited,
Gas" or "JOG" a company incorporated in Jersey
with registration number 115157,
whose registered office is at
Howard House, 9 The Esplanade
St. Helier, Jersey JE2 3QA,
Channel Islands;
"London Stock London Stock Exchange plc;
Exchange"
"New Ordinary the proposed new ordinary shares
Shares" of 1 penny each in the capital
of the Company following implementation
of the proposed Capital Reorganisation;
"Placing" the conditional placing of the
Placing Shares by WH Ireland
at the Placing Price pursuant
to the Placing Agreement;
"Placing Agreement" the conditional agreement dated
27 July 2015 between
(1) the Company and (2) WH
Ireland, relating to the Placing;
"Placing Price" 22 pence per Placing Share (which
is equivalent to 0.22 pence
per Existing Ordinary Share);
"Placing Shares" the 3,711,228 New Ordinary Shares
to be issued by the Company
and subscribed for pursuant
to the Placing;
"Proposed Amendment" the amendment to the Company's
Articles of Association set
out in the notice of General
Meeting at the end of the Circular;
"Proposed Directors" Andrew Benitz and Ronald Lansdell;
"Record Time" the record date and time for
implementation of the Capital
Reorganisation, being 5.00 p.m.
on 14 August 2015 (or, if the
General meeting is adjourned,
5.00 p.m. on the date of the
passing of the Resolutions);
"Regulation D" Regulation D as promulgated
under the Securities Act;
"Regulation S" Regulation S as promulgated
under the Securities Act;
"Regulatory Information any information service authorised
Service" from time to time by the FCA
for the purpose of disseminating
regulatory announcements;
"Resolutions" the resolutions to be proposed
at the General Meeting, as summarised
in this announcement and set
out in more detail in the notice
of the General Meeting attached
to the Circular;
"Securities Act" the United States Securities
Act of 1933, as amended;
"Sellers" Bryan Benitz, Clive Needham,
J. Andrew Benitz, Chateau Management
Limited, Jonathan Morley-Kirk,
Louisa Stokes, Ronald Lansdell,
Satinder Purewal and The Gascoigne
Trust;
"Shareholders" the holders of Existing Ordinary
Shares or (following the Record
Time) New Ordinary Shares from
time to time;
"Strand Hanson" Strand Hanson Limited, the financial
and nominated adviser to the
Company;
"subsidiary" or have the meanings given to them
"subsidiary undertaking" in the Act;
"UK" or "United the United Kingdon of Great
Kingdom" Britain and Northern Ireland,
its territories and dependencies;
"UKCS" United Kingdom Continental Shelf;
"uncertificated" recorded on the relevant register
or "in uncertificated of the share or security concerned
form" as being held in uncertificated
form in CREST and title to which,
by virtue of the CREST Regulations,
may be transferred by means
of CREST;
"US" the United States of America,
its territories and possessions,
any state of the United States
of America and the district
of Columbia and all other areas
subject to its jurisdiction;
"US$" United States Dollars, the lawful
currency of the United States
of America from time to time;
"US Persons" bears the meaning ascribed to
such term by Regulation S promulgated
under the Securities Act;
"WH Ireland" WH Ireland Limited, broker to
the Placing; and
"GBP" pounds sterling, the lawful
currency of the UK from time
to time.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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