14th Nov 2005 15:40
Emerald Energy PLC14 November 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THEUNITED STATES OF AMERICA, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF IRELAND ORTHE REPUBLIC OF SOUTH AFRICA EMERALD ENERGY PLC ("Emerald" or the "Company") Acquisition of 50 per cent. participating interest in Block 26 in Syria (the "Acquisition") and placing of 5,090,000 new ordinary shares of 10p each in the capital of the Company (the "Placing Shares") at a price of 158p per Placing Share (the "Placing") raising approximately £8.0 million Highlights • Acquisition of 50 per cent. participating interest in the Contract for the Exploration, Development and Production of Petroleum covering Block 26 in Syria (the "Block 26 EDP Contract") • Total consideration for the Acquisition is US$16.9 million, comprised of US$7.3 million payable in cash on completion and the issuance of 3.5 million new ordinary shares after 18 months • A placing of 5,090,000 Placing Shares raising approximately US$13.1 million (net of expenses) to fund the Acquisition and related working capital requirements of approximately US$5.8 million • Admission expected to become effective and dealings in the Placing Shares to commence on 17 November 2005 (the "Admission") Introduction Emerald announces that it has entered into a Share Purchase Agreement withSoyuzneftegas Limited (the "Vendor") to acquire the entire issued share capitalof SNG Overseas Limited ("SNGO"), a special purpose investment vehicle used bythe Vendor to hold and fund its participating interest in the Block 26 EDPContract, for a total consideration of approximately US$16.9 million. Theconsideration payable comprises: • a cash payment of US$7.3 million, payable on completion of the transaction, for the entire issued share capital of SNGO and to settle the outstanding shareholder loan granted to SNGO by the Vendor; and • 3.5 million new ordinary shares of 10p each in the capital of the Company to the Vendor on 18 May 2007, the date falling eighteen months after completion of the Acquisition, these shares being worth approximately US$9.6 million at the Placing price. The gross assets of SNGO, which total approximately US$7.3 million, consistsolely of the investment in the Block 26 EDP Contract; this investment has beenfunded by a shareholder loan granted to SNGO by the Vendor. As SNGO is a specialpurpose investment vehicle, there are no profits or losses attributable to it. The Placing Emerald is raising approximately £7.5 million, net of expenses, (approximatelyUS$13.1 million at the dollar/sterling exchange rate of 1.7405) through theplacing of 5,090,000 new ordinary shares at 158 pence per share. The netproceeds of the Placing will be used to fund the US$7.3 million cashconsideration to purchase SNGO and to fund the Company's working capitalrequirements in respect to its obligations pursuant to the Block 26 EDPContract. Evolution Securities Limited is acting as financial adviser to theAcquisition and as sole book runner, co-lead manager and underwriter to thePlacing. Haywood Securities (UK) Ltd is acting as co-lead manager to thePlacing. Application has been made to the UK Listing Authority and to the London StockExchange for the Placing Shares to be admitted to the Official List and totrading on the London Stock Exchange's market for listed securitiesrespectively. Admission is expected to become effective and dealings in thePlacing Shares are expected to commence on 17 November 2005. Information on Block 26 Block 26 covers an area of approximately 11,000 sq km and surrounds existingdiscovered oil fields that currently produce over 85,000 bopd. The 20-26 degreesAPI gravity crude oil with a high sulphur content that is produced from theCretaceous limestone reservoirs in these fields is processed and thentransported through the existing pipeline infrastructure either for domesticconsumption or for export. Besides the Cretaceous, particularly in the deeper Palaeozoic horizons, there isfurther hydrocarbon potential. Several wells have been drilled on Block 26 tothe Palaeozoic, some with indications of hydrocarbon presence, but no commercialdiscovery. The leads and prospects currently mapped in the Palaeozoic are largerthan those mapped in the Cretaceous and they are the focus of current technicalstudies in the lead up to the drilling campaign. The rights under the Block 26 EDP Contract include rights under the discoveredfields within Block 26 and undivided rights elsewhere within the block. TheBlock 26 EDP Contract also conveys rights of access to and use of existingproduction and transportation infrastructure. Block 26 is operated by GulfsandsPetroleum Plc ("Gulfsands"), an AIM listed company, who, following thecompletion of the Acquisition, will continue to own a 50 per cent. participatinginterest in the Block 26 EDP Contract. The Government of the Syrian ArabRepublic and the Syrian Petroleum Company are also parties to the Block 26 EDPContract. In the event of commercial discovery, a Syrian operating company is to be formedto conduct and oversee development and production. The operating company wouldbe owned as to 50% by the Contractor (defined as the owners of the participatinginterest in the Block 26 EDP Contract), and 50% by Syrian Petroleum Company.Under the terms of the Block 26 EDP Contract, commercial oil production isallocated first to satisfy the 12.5% royalty, part of the remaining productionis used for cost recovery of the Contractor's investment and the remainingsurplus is shared between the Contractor and Syrian Petroleum Company in variousproportions according to the level of production. If commercial production doesnot occur within four years of the discovery with respect to oil, or seven yearswith respect to gas, then the development area is to be surrendered. Under the terms of the Block 26 EDP Contract, the minimum work programme for theinitial phase that must be completed by August 2007 includes the reprocessing ofexisting seismic data, the acquisition of at least 500 km of new seismic dataand the drilling of four wells, two of which have to be drilled to testPalaeozoic reservoirs. Gulfsands is currently acquiring 1,170 km of 2D seismicand planning the drilling of at least two exploration wells in 2006. Benefits of the Acquisition • Emerald has entered into a new geographic area with a partner already established in country. • Emerald has gained participation in a block with 27 leads and prospects at an attractive cost. • The exploration programme for Block 26 is already underway. • The risk/reward profile for exploration in Block 26 is similar to that successfully pursued by Emerald in Colombia. • Gulfsands, Emerald's partner in Block 26, is an experienced operator. Update on existing operations and interests • Colombia The expansion of production facilities at Vigia is progressing and the Companycontinues to produce from 6 wells a gross volume of 4,800 bopd. The Company isadvancing preparations for its 2006 drilling programme and other capitalprojects to enhance its operations in Colombia. The Company has recentlyannounced its third exploration discovery at Silfide #1 and is evaluatingvarious artificial lifting methods to place this well on test production. • Russia On 11 November 2004, the Company announced that it had entered into aconditional Sale and Purchase Agreement with Star Capital Research Limited toacquire a 25 per cent. interest in JSC Krasnoyarskgazprom (the"Krasnoyarskgazprom Agreement"). Subsequently, on 9 March 2005 the Companyannounced that it had extended the longstop date for completion to 31 December2005. However, as the Company has been unable to satisfy itself with regard tothe security of title to the said 25 per cent. interest in the licencespreviously announced to be held by JSC Krasnoyarskgazprom, theKrasnoyarskgazprom Agreement has been terminated. Commenting on the Acquisition and Placing, Chairman and Chief Executive,Alastair Beardsall, said: "The acquisition of 50 per cent. of Block 26 provides Emerald with access to aportfolio of exploration opportunities to be developed in partnership withGulfsands, an experienced E&P operator. A seismic programme to acquire 1,170 kmof 2D data is underway and plans are well advanced to drill two explorationwells next year. We look forward to being able to deliver value to ourshareholders whilst working with Gulfsands on this exciting project." Presentation on the Acquisition and Placing A copy of the presentation entitled "An acquisition for growth" used for thePlacing has been placed on the Company's web site at www.emeraldenergy.com. 14 November 2005 Enquiries: Emerald Energy plc: Helen Manning: 020 7925 2440 Evolution Securities Limited: Chris Sim Gina Gibson: 020 7071 4300 Haywood Securities (UK) Ltd: Simon Catt, Investment Adviser, Institutional Sales & Trading: 020 7031 8000 This announcement does not constitute, or form part of, an offer or solicitationof an offer, to purchase or subscribe for, underwrite or otherwise acquire, anyrights, shares or other securities. Members of the general public are noteligible to take part in the securities offering. The securities are not andwill not be offered other than to persons who trade or invest in securities inthe conduct of their profession or trade (which includes banks, securitiesintermediaries (including dealers and brokers), insurance companies, pensionfunds, other institutional investors and commercial enterprises which as anancillary activity regularly invest in securities). In the United Kingdom thisannouncement is directed exclusively at (a) persons who have professionalexperience in matters relating to investments who fall within article 19(5)(investment professionals) of the Financial Services and Markets Act 2000(Financial Promotion) Order 2005) ("the Order") or (b) are persons fallingwithin article 49(2)(a) to (d) (high net worth companies, unincorporatedassociations etc) of the Order or (c) other persons to whom it may be lawfullydirected (all such persons together being referred to as "Relevant Persons").This announcement must not be acted on or relied on by persons who are notRelevant Persons. Any investment or investment activity to which thiscommunication relates is available only to Relevant Persons and will be engagedin only with Relevant Persons. The information contained in this announcement is not an offer of securities forsale or a solicitation of an offer to purchase securities in the United States.The securities have not been, nor will they be, registered under the UnitedStates Securities Act of 1933, as amended (the "Securities Act"), or with anysecurities regulatory authority of any state or other jurisdiction of the UnitedStates and may not be offered, sold or delivered within the United States or toUS persons (as defined in Regulation S) except pursuant to an exemption from, orin a transaction not subject to, the registration requirements of the SecuritiesAct and applicable state securities laws. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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