11th May 2016 07:48
LONDON (Alliance News) - Hague & London Oil PLC launched a huge restructuring plan on Wednesday which will lead to its higher-risk assets being spun-out into a subsidiary, and said it has also had to terminate its deal to acquire a stake in an Indonesian asset.
Hague & London shares were down 28% to 6.0 pence per share on Wednesday morning.
Hague & London said the restructuring plans will allow the business to move towards lower risk opportunities within the oil and gas market whilst retaining exposure to higher risk assets. The plans will also generate some liquidity for the business without diluting its existing shareholders.
The company plans to spin-out its higher risk assets into its wholly-owned subsidiary, Vemeer Exploration BV, including all licence interests in the Western Sahara. Hague & London is currently in the process of acquiring five more Western Sahara licenses from fellow London-listed Premier Oil PLC, which will push its total licenses in the area up to eight.
Vemeer will also be participating in the Guyane Maritime licence offshore French Guyana.
Once completed, Hague & London will then sell a 51% stake in Vemeer to a group of private investors for USD500,000, half of which would be paid on completion and the second half would be paid when the licence offshore French Guyana is extended, it said.
That cash injection will "provide Hague & London Oil with sufficient funding to take the company into 2017 within its current budget".
Vemeer will be a private entity with its own board and with Hague & London as a major shareholder. However, the company said it may sell down its stake in Vemeer in the future or decide not to participate in future share issues, which would also result in its stake falling.
Although the Western Sahara licenses have potential, Vemeer's primary asset is likely to be the licence offshore French Guyana, in which Hague & London owns a very small stake. The licence is expected to expire in June, but the partners are now planning to extend the licence.
Hague & London said this would allow Vemeer to increase its working interest in the licence, which has had over USD1.00 billion invested to date.
The company also was set to acquire an 85% stake in the Duyung production sharing contract in Indonesia, but said on Wednesday the deal has been terminated as it took too long to secure the required approvals.
With the Duyung deal off the table and the majority of its assets spun-out into Vemeer, Hague & London plans to focus on lower-risk assets that can deliver near-term production, and said it is pursuing assets closer to home in the UK and in Europe, "including the Netherlands".
"It helps us create a more focused portfolio for the company going forward whilst bringing additional liquidity to Hague & London for the pursuit of lower risk opportunities, closer to home, in the current environment," said Chairman Andrew Cochran.
"The creation of Vermeer with a clear strategy of pursuing higher risk, longer-term, further afield but potentially higher reward opportunities offers to Hague & London shareholders some exposure to frontier exploration without the full risk or a negative impact on the company's balance sheet," he added.
By Joshua Warner; [email protected]; @JoshAlliance
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