1st May 2015 10:21
LONDON (Alliance News) - Sirius Petroleum PLC Friday said it has decided not to issue new equity and convertible loans to fund development of the Ororo field in Nigeria because it would dilute existing shareholders, and is instead looking at alternative funding structures with Nima International Ltd, continuing a long, drawn-out attempt to find necessary funding.
The oil explorer also said it has been in talks about participating in a significant oil block located in the shallow waters of the Niger Delta Basin on Nigeria's continental shelf and is reviewing the data and geological reports and starting full technical due diligence.
In a statement, the company said it had decided not to proceed with a USD25 million fundraising by issuing new equity and convertible loans, money it needs to fund the Ororo-2 well.
"The Sirius board has concluded that whilst the Ororo Field remains profitable at the current oil price, if the funds needed were raised directly by Sirius Petroleum PLC there would be significant dilution of existing shareholders interests and this would not be in the best interests of the company's existing shareholders. On a fully diluted basis, the existing shareholders would own only a small minority of the company's enlarged equity post investment," it said.
Sirius has therefore gone into new talks with Nima, which is an affiliate of Levant Energy Ltd, about alternative funding structures for the field. These alternatives include Nima providing funding to Sirius Oro Ltd, the Sirius Petroleum subsidiary that directly owns the OML 95 licence, or obtaining funding at the project level. Sirius is also mulling other alternatives including debt structures that would be less dilutive than the equity and convertible loan note issue it had proposed last December.
"Consequently, Nima and Sirius have mutually agreed not to extend the previously announced Long Stop date of 30 April 2015, whilst they review these options. The board is hopeful of a successful outcome although there can be no guarantee," it cautioned.
"Both the Ororo Field and other potential assets are key development targets for the company. In the current climate, management believes that any decision on funding the group going forward should be done by seeking to minimise dilution for existing shareholders to the extent possible and thereby maximise shareholder value from our pipeline of assets, with the intention of delivering them to production," Chief Executive Bobo Kuti said.
However, the company will issue Juniper Capital Partners Ltd with 20 million new shares to settle fees it owes Juniper, and 10 million warrants that vest immediately and are exercisable at any time until May 1, 2020. It has also agreed to issue a further 15 million new shares to settle GBP150,000 in fees relating to a working capital loan deal.
Sirius has been struggling with raising the funds it needs for the well development at Ororo. Last July it did a share placing and subscription to raise up to USD20 million, which was conditional on getting further funding in the form of debt, equity or a pre-payment for crude offtake, and said it was in talks with potential providers of that funding.
In September it extended the long stop date on the placing and subscription because the separate funding still hadn't been agreed. In early November, it said it was in talks about a USD15 million convertible loan with a Dubai-based investment firm, as well as a new equity fundraising of another USD15 million, as the previous placing and subscription lapsed because it wasn't completed before the extended long-stop date.
In December, Sirius said it had entered a deal under which Nima would subscribe for loan notes and a definitive loan note instrument for GBP9.6 million, but the second planned USD15 million share placing and subscription also lapsed. One condition of the Nima loan was that Sirius raised not less than GBP9.375 million in a placing or subscription, and Sirius said some of the shareholders who had pledged to take part in the second attempted placing had indicated they would support a third attempt.
In February, Sirius and Nima extended the date for completing their loan agreement until mid-March, and then extended it again in mid-March until the end of April as talks continued with no agreement finalised.
In the meantime, Sirius has on several occasions issued equity to cover fees as well as other loans it had taken out to cover working capital.
Sirius said it is in talks with two African-centric parties with regards to a farm-in arrangement to develop the asset it is looking at in the Niger Delta Basin.
"This asset has significant 2P reserves and existing wells have been drilled. Any agreements in respect of this potential opportunity remain subject to due diligence and therefore may not proceed," it said.
Sirius Petroleum shares were down 7.5% at 0.995 pence Friday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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