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24 November 2014
Sound Oil plc
("Sound Oil" or the "Company")
Intended offer for Antrim Energy Inc.
Sound Oil, the European focused upstream oil and gas company, announces that it intends to launch a public offer (the "Intended Offer") for 100 per cent. of the share capital of Antrim Energy Inc. ("Antrim").
The combined business would leverage Sound Oil's technical, financial and commercial expertise to maximise the potential of the combined group, creating a high impact exploration company with producing assets generating revenue covering its cost base and with both the scale and geographic diversity to appeal to a wider range of institutional and retail investors.
Sound Oil's strategy is to build a pan-European oil and gas business of scale, leveraging off its strong Italian portfolio. Sound Oil views a combination of Antrim and Sound Oil as representing an attractive step in the implementation of this strategy. Sound Oil believes the transaction has the potential to create significant value for both sets of shareholders. In particular, a combination would:
· Add a third significant exploration asset (the offshore Skellig Block in Ireland) to Sound Oil's existing exploration portfolio (including the Badile and Zibido prospects in Italy). The prospect in Ireland is due to commence drilling in 2016 and therefore dovetails with the 2015 drilling of Badile, providing shareholders with exposure to multiple exploration prospects;
· Combine two strong balance sheets to create a larger European focused upstream vehicle with a pro forma cash balance of circa £23M through which further asset or corporate acquisitions can be undertaken;
· Secure wider (institutional and retail) investor appeal due to increased scale, increased newsflow and trading liquidity; and
· Capture significant cost synergies, leveraging off Sound Oil's strong team and European presence. This includes the closure of Antrim's Calgary office and associated headcount reduction.
The Intended Offer for Antrim would:
· Offer for each Antrim share, 0.3198 new Sound Oil ordinary shares.
· Value each Antrim share at 3.44p (based on the closing market price of 10.75p per Sound Oil share on 21 November 2014 on the AIM market of the London Stock Exchange, (the last business day preceding this announcement). This values the entire issued share capital of Antrim at approximately £6.35M.
Sound Oil reserves the right to change the terms of the Intended Offer.
Background to the Intended Offer:
Following a number of financial transactions, the divestment of its producing UK subsidiary and the restructuring of its Calgary based executive team, Antrim's market capitalisation has fallen to less than £6M, below its net cash as at 30 September 2014. The Board of Sound Oil believes that this creates a situation where Antrim has:
· ongoing costs which represent a disproportionate and unsustainable share of Antrim's market capitalisation;
· reduced appeal and credibility as a standalone investment proposition and as a partner to other oil and gas companies;
· geographic disconnect between its Calgary management team and its European assets; and
· a reduced ability to technically and commercially execute its work programme.
Sound Oil submitted an indicative proposal to the Board of Antrim at the end of October with a view to making a recommended all share offer to combine the two companies. However, the Board of Antrim has not responded to this indicative proposal and appears only prepared to engage in discussions if Sound Oil agrees to restrict its ability to proceed with a public offer. The Company strongly believes that the proposed combination is in the interests of both sets of shareholders.
Having been unsuccessful in securing continued engagement with the Board of Antrim and given the strong commercial logic of the transaction, the Board of Sound Oil has decided to announce its Intended Offer for Antrim.
James Parsons, Sound Oil's Chief Executive Officer, commented:
"Over the last two years, Sound Oil has built a high quality European team with solid foundations in Italy. Sound Oil now manages a balanced portfolio which combines solid production with low risk appraisal and significant exploration potential. The Company is approaching a very busy 2015 drill programme, which includes the drilling of the Badile prospect (Euro 486M NPV10) and the securing of first gas from our flagship Nervesa discovery.
By combining with Sound Oil, Antrim's portfolio can be managed as part of a wider European portfolio and run by a Europe based team with a strong track record of delivering value to shareholders. The combination provides a pan European platform to enable further consolidation in the sector whilst delivering a more diverse portfolio, added scale and increased investor appeal.
We are excited by the potential of the combined group and believe that the Intended Offer is enhancing to both sets of shareholders."
Further information on Sound Oil
Sound Oil is a well-funded European business with a balanced Italian gas portfolio consisting of low risk existing discoveries, high upside exploration and cost-covering production. The Company expects to end 2014 with some £13M cash. The recent investment via Continental Investment Partners allows Sound Oil to drill the Badile exploration prospect, whilst a reserve based lending facility has recently been arranged to fully fund Sound Oil's commitments to a second appraisal well at Nervesa. Additional drilling will be undertaken at Laura and Santa Maria Goretti in the near term. Furthermore, the Company has recently brought a second producing asset on-stream at Casa Tiberi, in addition to the existing Rapagnano production. Sound Oil's recent activity has demonstrated the Company's ability to secure permits in Italy and safely and successfully execute complex drilling programmes. The Company's portfolio provides a solid platform for growth in Europe from which to deliver its objective of creating significant total shareholder return.
Further information on Sound Oil may be found on the Company's website: www.soundoil.co.uk
Further information on Antrim
Antrim is a Canadian-based international oil and gas exploration company whose principal asset is the Skellig Block offshore Ireland (25% interest). Further information on Antrim's operations may be found on Antrim's website: www.antrimenergy.com. Antrim's shares are traded on the TSX Venture Exchange and on AIM; Antrim's unaudited interim financial report for the nine months ended 30 September 2014 showed revenue of nil, pre-tax loss from continuing operations of US$5.7M, cash and cash equivalents (before disclosed liabilities including decommissioning and severance) of US$16.8M and net assets of US$12.7M.
Gerry Orbell is a non-executive director of both Sound Oil and Antrim. Dr Orbell has confirmed that he has not participated in deliberations and discussions concerning the Intended Offer either as a member of the Board of Sound Oil or of Antrim, and will not do so in the future.
For further information please contact:
James Parsons, Chief Executive Officer
Vigo Communications - PR Adviser
Tel: 44 (0)20 7016 9573
Peel Hunt - Financial Adviser and Broker
Tel: 44 (0)20 7418 8900
Smith & Williamson - Nominated Adviser
Tel: 44 (0)20 7131 4000
Peel Hunt LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser to Sound Oil and no one else in connection with the Intended Offer and will not be responsible to any person other than Sound Oil for providing the protections afforded to clients of Peel Hunt LLP, nor for providing advice in relation to the Intended Offer or any matters referred to herein.
This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise. Any offer will be made solely by certain offer documentation, which will contain the full terms and conditions of any offer, including details of how it may be accepted.
The distribution of this announcement in jurisdictions other than the United Kingdom and Canada and the availability of the Intended Offer to shareholders of Antrim who are not resident in the United Kingdom or Canada may be affected by the laws of relevant jurisdictions. Therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom or Canada or shareholders of Antrim who are not resident in the United Kingdom or Canada will need to inform themselves about, and observe, any applicable requirements.
This announcement contains forward-looking statements regarding the Intended Offer, expected future earnings, revenues, cost savings, operations, and other such items, based on Sound Oil's plans, estimates and projections. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statements. Such factors, include, but are not limited to, the possibility that the Intended Offer will not be pursued, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the combination, adverse effects on the market price of Sound Oil's shares and on Sound Oil's operating results because of a failure to complete the combination, failure to realise the expected benefits of the combination, negative effects of announcement or consummation of the combination on the market price of Sound Oil's shares, significant transaction costs and/or unknown liabilities and general economic and business conditions that affect the combined companies following the combination. Sound Oil disclaims and does not undertake any obligation to update or revise any forward-looking statement in this announcement except as required by applicable law or regulation.
The NPV10 estimate for Badile shown above is based on a P50 estimate of recoverable gas and is sourced from the October 2013 Competent Persons Report prepared by ERC Equipoise. NPV10 refers to a net present value at a discount rate of 10%; P50 refers to a 50% chance of finding a given volume, consistent with SPE (The Society of Petroleum Engineers) guidelines. The geological information in this announcement has been reviewed by Sound Oil's Italian Managing Director, Luca Madeddu, a qualified petroleum geologist.