NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION
14 January 2014
Sound Oil plc
("Sound Oil" or the "Company")
Director Appointments, Underwritten Open Offer and Loan
Sound Oil, the European / Mediterranean focused upstream oil and gas company, announces the following Directorate and funding changes, aimed at positioning the Company to exploit the full potential of its Italian portfolio:
· The intention to appoint Simon Davies and Gerry Orbell as Non Executive Directors, after completion of the open offer.
· The initiation of an approximately £1.6 million discounted open offer, which is fully underwritten by Peel Hunt and Simon Davies.
· The securing of an asset backed loan of up to £1.5 million from Simon Davies, on more favourable terms than the existing bridge loan facility, which has been cancelled undrawn without incurring significant fees.
The Company announces its intention to appoint Simon Davies and Gerry Orbell to the Board as Non Executive Directors following the conclusion of the open offer.
Simon Davies has 30 years experience as a financier in the City of London and was previously Executive Chairman of Threadneedle Asset Management. Simon currently owns 7 million shares in the Company (some 2.5% of the issued share capital) and brings key institutional relationships and expertise to evaluate alternative financing options. Gerry Orbell is a petroleum geologist with over 40 years of international experience, including with Premier Oil and Petrofina, and brings an intimate knowledge of Sound Oil's Italian assets. (Note 1)
The Sound Oil plc Board now has the right balance of technical and financial skills to drive the Company forward.
Sound Oil is also pleased to announce the initiation of a discounted open offer ("the Open Offer") to eligible shareholders to raise up to approximately £1.6 million (before expenses). The Open Offer structure has been selected to minimise dilution to existing shareholders and reward loyal shareholders. The Open Offer will be made at 4.2 pence per share (representing a discount of 32.8% to the closing market price of the Company's shares on 13 January 2014), will be proportional to individual holdings and will be capped at approximately £1.6 million. Shareholders subscribing for their full entitlement under the Open Offer may also request additional New Ordinary Shares through the excess application facility (further details of which will be set out in the shareholder circular). The Open Offer will involve the issue of up to 38,349,139 shares on the basis of 2 Open Offer shares for every 15 existing shares held at 5pm on 15 January 2014 (the Record Date).
The Company's Chairman, its Chief Executive and Simon Davies have each agreed to apply in full for their allocation under the Open Offer which is fully underwritten (£1.2 million by Peel Hunt and £0.4 million by Simon Davies). The expected timetable of principal events in relation to the Open Offer is set out below (Note 4).
Asset Backed Loan
The asset backed bridge loan facility announced on 4 September 2013 was not required, has not been drawn and has now been cancelled without having incurred significant facility fees. This bridge loan has been replaced by an 18 month asset backed loan from Simon Davies of £1 million, which may be increased at the Company's discretion to £1.5 million ("the Loan"). The Loan is provided on the same financial terms as the earlier bridge loan however repayment and covenant conditions have been improved and tailored to meet the short term funding needs of the Company (Note 2).
Update on Funding Initiatives
The Company announces that it is in discussion with third parties on various potential funding structures at both the individual asset and subsidiary company level. The drilling of both Badile and Nervesa are therefore expected to be financed by the introduction of partners.
The Open Offer and Loan proceeds (Note 3) will be used to fund the business' working capital requirements as it executes its 2014 work programme, including a second well on the Nervesa field and the drilling of the Badile prospect. The recent CPR on the Badile prospect has confirmed a Best Case estimate NPV10 of Euro 486 million (based on gross prospective resources of 178 Bscfe) an increase of 60% on the previous CPR.
The Company is pleased to invite investors to a conference call on 16 January at 10:30a.m. Details can be obtained from Olivia Copleston on email@example.com
James Parsons, Sound Oil's Chief Executive Officer, commented:
"2013 has been an important year for Sound Oil - repositioning the Company, establishing first production at Rapagnano and successfully appraising the Nervesa discovery.
Following the announcement of the successful Nervesa well in September the Company has been focused on finalising the development plan (prioritising bringing this flagship asset into production as early as possible), preparing for the drilling of the world class Badile prospect, exploring funding alternatives and working up various growth opportunities.
Funding structures which minimize equity dilution are under discussion at both the asset and corporate level and are expected to be put in place during 2014. It is also anticipated that a substantial asset based debt structure can be secured following a successful second Nervesa well, also in 2014. In the meantime, the Open Offer and Loan will fund the business and the Board will continue to prioritise funding methods that are fair to our existing shareholders, minimising dilution and rewarding loyalty.
We have high expectations for 2014. Our plans include the drilling of two high impact wells, the securing of a significant non equity dilutive funding facility and diversification of our portfolio within and beyond Italy."
Andrew Hockey, Sound Oil's Chairman, commented:
"I am pleased to announce the proposed appointment of Simon Davies, one of our larger shareholders, to our Board of Directors. Simon's willingness to join the Board and to provide up to £1.9 million in debt and equity is a testament to Sound Oil's progress and potential.
Simon's distinguished City record, his willingness to back our story and his connections will be invaluable as our CEO James Parsons and his executive team position the Company for further growth.
I am also pleased to welcome Gerry Orbell back to the Board as a Non Executive Director with the specific intent that the Company will benefit from his intimate knowledge of the Company's Italian assets."
Simon Davies commented:
"I believe Sound Oil has a very attractive portfolio and am pleased to join the Board and commit capital to fund its development."
For further information please contact:
James Parsons, Chief Executive Officer
Stuart Joyner, Chief Financial Officer
Smith & Williamson - Nominated Adviser
Tel: 44 (0)20 7131 4000
Peel Hunt - Broker
Tel: 44 (0)20 7418 8900
Your attention is drawn to the announcement made today by the Company entitled "24 month Work Programme", a copy of which is available on the Company's website: www.soundoil.co.uk.
1. Simon Davies retired as Executive Chairman of Threadneedle Asset Management in 2012 having joined Threadneedle as Chief Investment Officer in 1995; over this period Threadneedle's assets under management increased from £22 billion to approximately £70 billion. Simon is currently Chairman of JP Morgan Overseas Investment Trust, a Non Executive Director of Grainger and a Director of a number of subsidiaries of Old Mutual Wealth Management. Simon was previously a Non Executive Director of Sound Oil.
Gerry Orbell is currently Chairman of the AIM company Antrim Energy and serves as a director on a number of private company Boards. He retired as Executive Chairman of Sound Oil in 2012. He is a petroleum geologist with over 40 years of international experience including Board positions at Premier Oil and Fina.
2. The Loan provided by Simon Davies replicates the financial terms of the earlier bridge loan, carrying a coupon of 10% per annum and a fee of 17.5%, however has been improved to meet Sound Oil's requirements. The improvements include matching the term with the expected date of first revenues from Nervesa, deferring the fee by six months and providing for early repayment without penalty from a future Reserve Based Lending facility or other funding event.
3. The Open Offer and Loan proceeds, including the current cash of £0.6 million, total some £3.7 million. The Nervesa well is expected to cost Euro 5 million (100% interest). The Badile well is expected to cost Euro 23 million (100% interest). Both wells are expected to be funded with the introduction of a partner.
4. EXPECTED TIMETABLE OF PRINCIPAL EVENTS IN RELATION TO THE OPEN OFFER
Record Date for entitlement under the Open Offer
5.00 p.m. on 15 January 2014
Existing Ordinary Shares marked 'ex' by London Stock Exchange
8.00 a.m. on 16 January 2014
Posting of the Circular and Application Forms
16 January 2014
Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts in CREST of Eligible CREST Shareholders
8.00 a.m. on 17 January 2014
Recommended latest time for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST
4.30 p.m. on 27 January 2014
Latest time for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements into CREST
3.00 p.m. on 28 January 2014
Latest time for splitting of Application Forms
(to satisfy bona fide market claims only)
3.00 p.m. on 29 January 2014
Latest time and date for receipt of Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions
11.00 a.m. on 31 January 2014
Expected date of announcement of results of the Open Offer
3 February 2014
Expected time and date for Admission and commencement in dealings in the New Ordinary Shares on AIM
8.00 a.m. on 4 February 2014
Expected date for crediting of the New Ordinary Shares in uncertificated form to CREST accounts
4 February 2014
Expected date of dispatch of definitive share certificates for the New Ordinary Shares
12 February 2014
A circular will be posted to shareholders shortly setting out in more detail the background to and reasons for the Open Offer and its terms. All capitalised terms in the timetable above are as defined in the circular which will be available on the Company's website at www.soundoil.co.uk.
The geological information contained in this announcement has been reviewed by Sound Oil's Italian Managing Director, Luca Madeddu, a qualified petroleum geologist. Scmd means standard cubic metres of gas per day; MMscfd means million standard cubic feet of gas per day; Bscf means billion standard cubic feet of gas; Bscfe means billion standard cubic feet of gas equivalent; MMbbl means million barrels; NPV10 refers to a net present value at a discount rate of 10%; Low, Best and High Case estimates refer to finding a given volume consistent with SPE (The Society of Petroleum Engineers) guidelines on Prospective Resources.
This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer to sell or subscribe for or any invitation to purchase or subscribe for any securities in any jurisdiction pursuant to the Open Offer or otherwise. The Open Offer will be made solely pursuant to the terms of the Open Offer document, which will contain the full terms and conditions of the Open Offer. Any decision in respect of, or other response to, the Open Offer should be made only on the basis of the information contained in the Open Offer document. This announcement does not constitute a prospectus or a prospectus equivalent document.
The availability of the Open Offer, and the release, publication or distribution of this announcement, in jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions. In particular, the Open Offer will not be made directly or indirectly in any jurisdiction where to do so would constitute a violation of the relevant securities laws of such jurisdiction ("Restricted Jurisdiction"). Therefore persons into whose possession this announcement comes should inform themselves about and observe any applicable restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. To the fullest extent permitted by applicable law, the Company disclaims any responsibility or liability for the violation of such restrictions by any person. The Open Offer is not being, and will not be made, directly or indirectly, in or into or from, whether by the use of mails or any means of instrumentality (including, without limitation telephonically or electronically) of interstate or foreign commerce of, or any facilities of a national securities exchange of, any Restricted Jurisdiction and the Open Offer should not be applied for by any such use, means, instrumentality or facility from or within any Restricted Jurisdiction. Accordingly, copies of this announcement and any documentation relating to the Open Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from whether by the use of mails or any means of instrumentality (including, without limitation telephonically or electronically) of interstate or foreign commerce of, or any facilities of a national securities exchange of, any Restricted Jurisdiction. Persons receiving this announcement (including without limitation custodians, nominees and trustees) must not forward, mail or otherwise distribute or send it in, into or from any Restricted Jurisdiction, as doing so may invalidate any purported application under the Open Offer. Any person (including, without limitation, custodians, nominees and trustees) who would, or otherwise intends to, or who may have a contractual or legal obligation to, forward this announcement and/or any documentation relating to the Open Offer and/or any other related document to any jurisdiction outside the United Kingdom should inform themselves of, and observe, any applicable legal or regulatory requirements of any relevant jurisdiction.