TIDMMTA
RNS Number : 6775G
Matra Petroleum PLC
11 June 2013
11 June 2013
Matra Petroleum plc
("Matra" or the "Company")
Proposed disposal of Arkhangelovskoe Licence
Matra Petroleum ("Matra") is pleased to announce that it has
signed an agreement to dispose of its 100% interest in the
Arkhangelovskoe Licence which includes the Sokolovskoe Field, to a
third party, consisting of an initial payment of US$25 million with
a further payment of US$10 million payable within nine months,
conditional on drilling results.
Having commissioned a seismic survey on the Sokolovskoe Field,
leading to the revised management estimate of 2P Recoverable
Reserves of 13.5 mmbbls, the Board conducted an extensive review of
the conceptual Field Development Plan and associated economic
forecasts, as well as investigating other options for maximising
the value of the Sokolovskoe Field for shareholders.
The Board believes that the disposal of the licence for a
consideration of up to $35 million represents compelling value when
compared to the capital costs required to develop the asset and the
technical risks associated with the field.
The proposed monetisation of the Arkhangelovskoe Licence is
consistent with the Company's growth strategy and will provide the
Company with increased flexibility to pursue new upstream
investment opportunities, with the potential to create significant
value for Shareholders.
The Disposal is subject to Shareholder approval and a circular
and notice of General Meeting will be sent to Shareholders shortly.
Further details of the Disposal and the Company's proposed
Investing Policy are set out below.
Commenting on today's announcement, Chief Executive of Matra
Maxim Barskiy said:
"We believe this sale crystallises significant value for
shareholders, demonstrating our ability to monetise assets at an
appropriate stage and mitigate downside risk. The proceeds provide
financial flexibility, helping to fund future acquisitions which
fits our strategy of building a significant mid-cap oil and gas
company."
For further information, please contact:
Matra Petroleum plc c/o Pelham Bell Pottinger
Henry Lerwill 020 7861 3169
Canaccord Genuity Limited
Henry Fitzgerald-O'Connor 0207
523 8000
PROPOSED DISPOSAL OF THE ARKHANGELOVSKOE LICENCE
1 INTRODUCTION
The Company announces that it has entered into a conditional
agreement to dispose of all of the issued shares in Matra Cyprus.
Matra Cyprus owns 100% of the Licence Holder, which owns 100% of
the Arkhangelovskoe Licence and therefore the Sokolovskoe
Field.
Through its ownership of the Licence Holder, Matra Cyprus is the
Company's principal asset. The Licence Holder represented total
assets (less cash which will remain in the Group) of approximately
US$14 million within the Group's audited balance sheet as at 31
December 2012. All of the Group's production and material revenue
is generated from the Sokolovskoe Field.
Further details on the background to the Disposal, the Principal
Terms of the Disposal Agreement and the Proposed Investing Policy
are set out in paragraphs 2, 3 and 4 of this announcement.
The Disposal triggers the operation of Rule 15 of the AIM Rules
because it is deemed to be a disposal resulting in a fundamental
change of business. It is a requirement of Rule 15 of the AIM Rules
that any such disposal is conditional on the consent of
shareholders at a general meeting. The Disposal is therefore
conditional on the passing of the Resolution, as an ordinary
resolution of the Company.
The purpose of this announcement is to provide Shareholders with
further details of the Disposal and to set out the Directors'
reasons for considering that the Disposal is in the best interests
of the Company and its Shareholders.
On completion of the Disposal, the Company will become an
Investing Company. As a consequence of this, AIM Rule 15 further
requires the Company to state its Investing Policy going forward,
and to obtain the approval of Shareholders for the Investing
Policy. Following approval of the Investing Policy by Shareholders
at the General Meeting, the Company will be required to make an
acquisition or acquisitions which 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 will be suspended from trading on AIM. If
the Company's Investing Policy has not been implemented within 18
months of the General Meeting, the admission to trading on AIM of
the Company's Ordinary Shares will be cancelled and the Directors
will convene a general meeting of the Shareholders to consider
whether to continue seeking investment opportunities or wind up the
Company and distribute any surplus cash back to Shareholders.
2 background to the disposal
Despite the potential of the Sokolovskoe Field, its operational
history to date has been relatively disappointing. In particular,
the A12 well over the last few years experienced high water cuts
and mechanical failures. As a result, total annual production from
the Sokolovskoe Field has been limited to 11,925 bbl in 2012 and
15,753 bbl in 2011.
Accordingly, a key focus of the current management team, since
joining the Company in the first half of 2012, has been to reduce
the technical uncertainties associated with the Sokolovskoe Field,
optimise near term cash flow from the Sokolovskoe Field and assess
the options for further risk reduction with the intention of
securing the maximum financial return from the asset.
A key step forward in this process was the carrying out of a
seismic survey between July 2012 and March 2013 on the Sokolovskoe
Field, which included 100 square kilometres of 2D seismic data and
60 square kilometres of 3D seismic data. This was to assist the
Company to better understand the geological structure of, and
potential reservoir distribution within, the Sokolovskoe Field.
Importantly, the seismic survey results demonstrated the
complexity of the field configuration compared to what was
previously mapped as one structure. The seismic data interpretation
identified that the Aphoninsky reservoir splits into four separate
domes within the boundaries of the area covered by the
Arkhangelovskoe Licence from south-west to north-east.
The interpretation of the seismic survey results together with
the integration of all other available geologic data enabled the
Company to carry out, internally, a full probabilistic
re-evaluation of the Resources of the Sokolovskoe Field. The
conclusion of this evaluation was as follows:
Category OOIP Recovery Recoverable Resources
Factor
(10(3) bbl) (%) (10(3) bbl)
1P 28,255 20.0 5,651
2P 50,152 27.0 13,541
3P 90,856 34.0 30,982
The above represented a small reduction in most likely
recoverable Resource volumes to that previously independently
estimated by ERC (Energy Resource Consultants) in 2010 being a P50
recoverable Contingent Resource of 15.1 mmbbls. By virtue of the
Company completing an internal FDP, the Directors felt sufficiently
comfortable to be able to classify their revised internal estimate
as recoverable Reserves.
Although supporting the declaration of recoverable Reserves, the
FDP also modelled that the development of the Sokolovskoe Field
would require approximately US$30 million of capital expenditure
over the next 3 years to bring it into full production. The
estimated cost of the field development is expected to have
increased as a consequence of the Aphoninsky reservoir being mapped
as four separate domes as opposed to previously being interpreted
as one structure.
The Board conducted an extensive review of the FDP and
associated economic forecast as well as investigating the available
financing options for the development of the Sokolovskoe Field.
Given the prevailing market conditions facing junior natural
resource companies, it was determined by Board that it was unlikely
to able to successfully raise the required capital, on reasonable
terms, to develop the asset in the short to medium term.
Additionally the Board considered that the downside risks
associated with the Sokolovskoe Field, reflected by the 1P Reserves
estimate, and the historic well productivity challenges represented
an unacceptably high risk profile for the Company.
The Board is of the opinion that the minimum consideration under
the Disposal Agreement of US$25m represents compelling value when
taking account of the capital costs required to develop the
Sokolovskoe Field, the Company's internal view of the net present
value of the Sokolovskoe Field, the downside technical risks that
the Company believes are associated with the Sokolovskoe Field and
the current implied value per barrel of Russian oil assets for
companies listed in London (including on AIM). Additionally the
Contingent Consideration (which is defined in paragraph 3.1 below)
enables the Company to participate in, and benefit from, the full
value of the Sokolovskoe Field once that value has been proven by
the Purchaser, at no cost to the Company. Under the Disposal
Agreement, the Contingent Consideration becomes payable in the
event that the Purchaser does not deliver to the Company negative
drilling results on the Well by the date which is approximately 9
months following execution of the Disposal Agreement. The
Contingent Consideration will therefore become payable if, for
example, the Purchaser encounters certain agreed technical
parameters on the Well that are no less than those currently
expected by the Company from its recent geological interpretation
within the specified timeframe or the Purchaser fails to complete
drilling of the Well within the specified timeframe.
The Board understands that the Purchaser holds significant
acreage to the east and southeast of the Sokolovskoe Field with
existing infrastructure and estimated production of approximately
6,000 bopd, meaning that the economic value of Sokolovskoe Field to
the Purchaser is likely to be materially in excess of that
attainable by the Company.
As set out in the Company's Investing Policy, the Company
intends to use the proceeds of the Disposal to acquire alternative
oil and gas assets with material production potential and
exploration upside. The initial focus will remain on Russia and CIS
but the Company may consider projects elsewhere should attractive
opportunities arise.
Following completion of the Disposal, and should the Contingent
Consideration become payable, the Company will have up to US$35
million of cash (less expenses). This cash, combined with any
available debt and the potential to issue Ordinary Shares as
consideration for an acquisition, means that the Company should
have considerably more resources and financial flexibility to
pursue attractive value enhancing opportunities than it currently
enjoys.
The Company's management team has, over the last 12 months,
actively progressed a number of acquisition opportunities, many of
which had to be terminated or delayed because of a lack of
immediately available funding. Following completion of the
Disposal, the Company will be in a position to actively pursue some
of these opportunities as well as re-invigorating the process of
identifying new opportunities.
The Directors believe that their broad collective business
experience in the areas of oil and gas, acquisitions, accounting,
corporate and financial management will assist them in the
identification and evaluation of suitable opportunities and will
enable the Company to achieve its investing objectives.
In light of the current market conditions and the historic
difficulty of securing additional equity and debt financing, the
Board believes that, taking into account the proceeds of the
Disposal, the Company will have a much improved ability to acquire
attractive oil and gas assets.
3 PRINCIPAL TERMS OF THE DISPOSAL Agreement and related agreements
3.1 Disposal Agreement
Scope
Under the Disposal Agreement, the Company has agreed to sell to
the Purchaser, and the Purchaser has agreed to purchase from the
Company, all of the issued shares in Matra Cyprus (the "Sale
Shares").
The sale and purchase of the Sale Shares is conditional on,
among other things, Shareholder approval for the Disposal having
been obtained, entry into by the Company and the Purchaser of the
First Assignment Agreement and the Second Assignment Agreement and
the delivery by the Purchaser to the Company of the Guarantee (as
defined below). The Guarantee is subject to credit approval of the
issuing bank and such approval may not be given until the Disposal
Agreement has been entered into. The Guarantee cannot, therefore,
be issued until the Disposal Agreement has been entered into and
its delivery (in a form satisfactory to the Company) is a condition
of the Disposal Agreement.
Consideration
On completion of the sale and purchase of the Sale Shares, the
Purchaser has agreed to pay to the Company US$25,000,000,
comprising US$ 1,305,986.93 (as payment for the Sale Shares) and
US$23,694,013.07 (as payment for a debt of the same amount owed by
Matra Cyprus to the Company to be assigned by the Company to the
Purchaser pursuant to the First Assignment Agreement).
In addition, the Purchaser has agreed to make a contingent
payment to the Company of US$10,000,000, comprising US$6,807,557
(as payment for the Sale Shares) and US$3,192,443 (as payment for a
debt of the same amount owed by Matra Cyprus to the Company to be
assigned by the Company to the Purchaser pursuant to the Second
Assignment Agreement), in the event that the Purchaser does not
deliver negative drilling results on the Well based on certain
parameters to the Company by the date which is approximately 9
months following execution of the Disposal Agreement (the
"Contingent Consideration").
The Contingent Consideration is secured by a bank guarantee for
US$10,000,000 (the "Guarantee") provided by JSC joint stock
commercial bank "Jugra" of Megion City, Russia (the "Russian
Bank"). If payment by the Purchaser of the Contingent Consideration
becomes due and is not made within the timeframe prescribed in the
Disposal Agreement, the Company may obtain payment of such amount
by enforcing the Guarantee.
Representations and warranties
The Company has given certain representations and warranties to
the Purchaser in connection with the sale of the Sale Shares,
including, without limitation, in relation to the capacity of the
Company to sell the Sale Shares, title to the Sale Shares and the
Arkhangelovskoe Licence and goodstanding of the Company and the
Licence Holder.
Limitations on liability
The Company's liability under the Disposal Agreement (including
in relation to the representations and warranties) is subject to
certain specified limitations on liability.
Governing law, jurisdiction and language
The Disposal Agreement is governed by English law and the
parties submit to the non-exclusive jurisdiction of the English
courts.
The Disposal Agreement is in Russian and has been translated
into English. In the event of any inconsistency between the Russian
and English texts, the Russian is expressed to prevail.
3.2 First Assignment Agreement
Scope
Under the First Assignment Agreement, the Company (as assignor)
agrees to assign to the Purchaser (as assignee) a debt in the
amount of US$23,694,013.07 payable by Matra Cyprus to the
Company.
The assignment under the First Assignment Agreement is
conditional on, among other things, Shareholder approval for the
Disposal having been obtained and the performance by the Company
and the Purchaser of certain obligations under the Disposal
Agreement.
Consideration
The consideration payable by the Purchaser to the Company for
the assignment of the debt shall be US$23,694,013.07.
Representations and warranties
The Company has given customary representations and warranties
to the Purchaser in connection with the assignment of debt,
including, without limitation, in relation to title to the
debt.
Limitations on liability
The Company's liability under the First Assignment Agreement
(including in relation to the representations and warranties) is
subject to the limitations on liability contained in the Disposal
Agreement.
Governing law, jurisdiction and language
The First Assignment Agreement is governed by English law and
the parties submit to the non-exclusive jurisdiction of the English
courts.
The First Assignment Agreement is in Russian and has been
translated into English. In the event of any inconsistency between
the Russian and English texts, the Russian is expressed to
prevail.
3.3 Second Assignment Agreement
Scope
Under the Second Assignment Agreement, the Company (as assignor)
agrees to assign to the Purchaser (as assignee) a debt in the
amount of US$3,192,443 payable by Matra Cyprus to the Company.
The assignment under the Second Assignment Agreement is
conditional on, among other things, Shareholder approval for the
Disposal having been obtained, the performance by the Company and
the Purchaser of certain obligations under the Disposal Agreement
and the Purchaser having either delivered negative drilling results
on the Well based on certain parameters to the Company or paid the
Contingent Consideration to the Company.
Consideration
The consideration payable by the Purchaser to the Company for
the assignment of the debt shall be: (a) US$3,192,443 if the
Purchaser does not deliver to the Company negative drilling results
on the Well by the date which is approximately 9 months following
execution of the Disposal Agreement (the "Contingent Debt
Payment"); or (b) US$1 if the Purchaser delivers to the Company
negative drilling results on the Well by the date which is
approximately 9 months following execution of the Disposal
Agreement. The Contingent Debt Payment forms part of the Contingent
Consideration and is secured by the Guarantee. If payment by the
Purchaser of the full amount is not made within the timeframe
prescribed in the Disposal Agreement, the Company may obtain
payment of such amount by enforcing the Guarantee.
Representations and warranties
The Company has given customary representations and warranties
to the Purchaser in connection with the assignment of debt,
including, without limitation, in relation to title to the
debt.
Limitations on liability
The Company's liability under the Second Assignment Agreement
(including in relation to the representations and warranties) is
subject to the limitations on liability contained in the Disposal
Agreement.
Governing law, jurisdiction and language
The Second Assignment Agreement is governed by English law and
the parties submit to the non-exclusive jurisdiction of the English
courts.
The Second Assignment Agreement is in Russian and has been
translated into English. In the event of any inconsistency between
the Russian and English texts, the Russian is expressed to
prevail.
4 Proposed investing policy
Following completion of the Disposal, the Company will be an
Investing Company. The Company's proposed Investing Policy, which
is subject to Shareholder approval at the General Meeting, is as
follows:
(a) the Board intends primarily to invest in onshore or near
shore oil and gas assets, in existing proven hydrocarbon basins,
with current or near term production potential and with exploration
and/or appraisal upside. The Board intends to focus on those assets
where it believes that the Company's particular technical and
operating skills provide it with a competitive edge and an
opportunity to deliver material shareholder value. It is the
intention to build an oil and gas exploration and production growth
company, through value-accretive acquisitions and organic growth,
with an initial focus on Russia and CIS where the Directors believe
there exists attractive opportunities. However, oil and gas assets
in other areas and countries (including, without limitation, Latin
America and the USA) may also be considered by the Board;
(b) the intention will be to acquire operatorship of any assets
or at least a controlling stake in such assets. However, if
opportunities emerge with transparent licensing and contract terms,
and with reputable operators, where the Company can make a
meaningful strategic contribution, a minority position may be
considered;
(c) the Company will continue to carry out a comprehensive and
thorough project review process in which all material aspects of
any potential investment will be subject to rigorous due diligence,
as appropriate. Where necessary the Company will appoint
appropriately qualified advisers to assist;
(d) the Company's financial resources are likely to be invested
in a small number of investments. One or more of these investments
is likely to be deemed to be a reverse takeover under Rule 14 of
the AIM Rules. The investments or acquisitions may be funded wholly
by cash, the issue of new shares or debt, or a mix thereof, as the
Board deems appropriate;
(e) the Company intends to deliver Shareholder returns through
capital growth. As such, the Board do not envisage the distribution
of dividends in the short to medium term. Over the longer term the
Board intends to establish a well-balanced and profitable oil and
gas exploration and production company which would support a
sustainable dividend distribution;
(f) the Board believe that their broad collective business
experience in the areas of oil and gas, acquisitions, accounting,
corporate and financial management will assist them in the
identification and evaluation of suitable opportunities and will
enable the Company to achieve its investing objectives;
(g) following on from adopting an Investing Policy, the Company
will be required to make an acquisition or acquisitions which
constitute a reverse takeover under the AIM Rules or otherwise
implement its Investing Policy within 12 months of the General
Meeting, failing which the Ordinary Shares will be suspended from
trading on AIM. If the Investing Policy has not been implemented
within 18 months of the General Meeting the admission to trading on
AIM of the Ordinary Shares will be cancelled and the Board 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.
5 Circular and Notice of General Meeting
A circular, including a notice convening the General Meeting of
the Company, will be sent to Shareholders shortly.
DEFINITIONS
1P proved Reserves according to SPE standards
2P proved and probable Reserves according
to SPE standards
3P proved, probable and possible Reserves
according to SPE standards
AIM the market of that name operated by the
London Stock Exchange
AIM Rules the AIM Rules for Companies, governing
admission to AIM and the responsibilities
of companies the shares of which are admitted
to trading on AIM, published by the London
Stock Exchange from time to time
Arkhangelovskoe Licence licence 15063 for the production of hydrocarbons
in the Sokolovskoe field in the Orenburg
region of Russia
bbl barrels of oil
Board or Directors the directors of the Company
bopd barrels of oil per day
Company Matra Petroleum Plc (incorporated in England
and Wales with registered number 05375141)
Contingent Resource those quantities of hydrocarbons which
are estimated, on a given date, to be
potentially recoverable from known accumulations,
but which are not currently considered
to be commercially recoverable
Disposal the proposed disposal of the Arkhangelovskoe
Licence, by the sale of all of the issued
shares in Matra Cyprus, pursuant to the
terms of the Disposal Agreement
Disposal Agreement the conditional agreement dated 11 June
2013 made between the Company and the
Purchaser relating to the sale by the
Company of all the issued shares in Matra
Cyprus, further details of which are contained
in paragraph 3.1
FDP the conceptual field development plan
in relation to the Sokolovskoe Field
First Assignment Agreement the assignment agreement described in
paragraph 3.2
General Meeting a general meeting of the Company expected
to be convened at the offices of BDO LLP,
55 Baker Street, London, W1U 7EU on 28
June 2013 at 12 p.m. and any adjournment
thereof, notice of which will be set out
at the end of the circular to be sent
to shareholders
Group the Company and its subsidiary undertakings
including, without limitation, Matra Cyprus
and the Licence Holder
Investing Company has the meaning given to it in the glossary
to the AIM Rules
Investing Policy the investing policy of the Company following
completion of the Disposal, further details
of which are set out in paragraph 4 of
this annoucment
Licence Holder "OOO" Arkhangelovskoe (incorporated in
Russia with incorporation number 1075658001517),
the holder of 100% of the Arkhangelovskoe
Licence
London Stock Exchange London Stock Exchange plc
Matra Cyprus Matra Cyprus Petroleum Limited (incorporated
in Cyprus with registered number 194371),
the owner of 100% of the Licence Holder
mmbls million barrels of oil
Ordinary Shares ordinary shares of GBP0.001 each in the
capital of the Company
Purchaser Taldom Trading Limited (incorporated in
Cyprus with registered number 251382)
P50 50 per cent. probability that volumes
will be equal to or greater than stated
volumes
Reserves has the meaning given to such term in
the "Note for Mining and Oil & Gas Companies
- June 2009" published by the London Stock
Exchange plc
Resolution the resolution approving the Disposal
and the Investing Policy, as set out in
the Notice of Meeting
Resources has the meaning given to such term in
the "Note for Mining and Oil & Gas Companies
- June 2009" published by the London Stock
Exchange plc
Second Assignment Agreement the assignment agreement described in
paragraph 3.3
Shareholders holders of Ordinary Shares
Sokolovskoe Field the oil field discovered under the Arkhangelovskoe
Licence located to the North of the city
of Orenburg within the Volga-Urals basin
SPE has the meaning given to such term in
the "Note for Mining and Oil & Gas Companies
- June 2009" published by the London Stock
Exchange plc
Well the well to be drilled by the Purchaser
in the Sokolovskoe Field at a location
agreed between the Company and the Purchaser
following completion of the sale and purchase
of Matra Cyprus under the Disposal Agreement
This information is provided by RNS
The company news service from the London Stock Exchange
END
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