2nd Nov 2005 09:55
Global Petroleum Ltd02 November 2005 Global Petroleum Limited Extension of certain conditions relating to previous acquisition agreement Background On 6 December 2004, Global Petroleum Limited ("Global") acquired 100% of AstralPetroleum Limited ("Astral") from its then owners (the "Vendors") under theterms of an acquisition agreement approved by shareholders on 25 November 2004("the Original Transaction"). The consideration payable under the acquisitionconsisted of three tranches. The Vendors included Peter Blakey, Peter Taylor and TM Services Ltd, a companyassociated with Peter Blakey and Peter Taylor. Peter Blakey and Peter Taylor areboth directors of Global and substantial shareholders. The Company paid cash of 195,000 (A$504,000) and issued one million shares tothe Vendors ("Tranche 1"). Tranches 2 and 3 are contingent upon certainconditions relating to the farmout of the interests acquired by Global in Irishand Maltese permit areas: •if Global enters into a farmout in respect of the Irish Licensing Option, the Company will issue 4 million Global shares ("Tranche 2") to the Vendors on or before 25 November 2005; and •if Global enters into a farmout in respect of the Maltese Exploration Study Agreement, the Company will issue 4 million Global shares ("Tranche 3") to the Vendors on or before 25 November 2005. In accordance with resolutions passed by shareholders at the meeting on 25November 2004 the Company was to enter into conditional farmouts for both theIreland Licensing Option and the Malta Exploration Study Agreement before 25November 2005, otherwise this approval for issue of Tranche 2 and Tranche 3shares would lapse. Due to a delay caused by the serious illness of a consultant engaged by Globalto work on obtaining the farmouts, it is now likely that the necessary farmoutswill not take place before 25 November 2005. The non-associated Directors, beingDr John Armstrong, Mr Peter Dighton and Mr Mark Savage, (together the"Non-associated Directors") recognise that the Vendors were not responsible forthis delay. Proposal Shareholder approval is being sought at the Company's AGM on 24 November 2005for a once-only extension of the approval time for the issue of Tranche 2 andTranche 3 shares until 30 June 2006. The non-associated Directors are requiredto seek shareholder approval for the extension in accordance with ASX Listingrule 10.11, section 208 and item 7 of section 611 of the Corporations Act. Theysupport the proposal because it will allow more time to achieve the farmouts andbecause there are certain potential adverse consequences for non-associatedshareholders if the extension is not approved. The board of Global has amended the Acquisition Agreement to provide for theextension date of 30 June 2006 in respect of the Tranche 2 and Tranche 3 shares.No other amendment was made. Specifically, under the amended Acquisition Agreement, approval is being soughtfor: •the issue to the Vendors of an additional 4 million fully paid shares in the capital of Global on or before 30 June 2006 as additional consideration for the acquisition of the issued share capital of Astral under the Amended Acquisition Agreement ("Tranche 2 shares") if the Company enters into a farmout of the Irish Licensing Option ("Ireland Farmout"); and •the issue to the Vendors of an additional 4 million fully paid shares in the capital of Global on or before 30 June 2006 as additional consideration for the acquisition of the issue capital of Astral under the Amended Acquisition Agreement ("Tranche 3 shares") if the Company enters into a farmout of the Malta Study Agreement ("Malta Farmout"). If a farmout agreement is made with another person such that the other personagrees: (i) to acquire, process and interpret seismic data, at least to the extent of the minimum work commitment Global has undertaken to perform; (ii) to drill at least one well; and (iii) that Global is fully carried for its costs in respect of the work referred to in subparagraphs (i) and (ii) above and Global has at least a 20% remaining interest in respect of the Irish Licensing Option, then Global must pay the Tranche 2 shares to the Vendors. Similarly, if Global enters into a farmout in respect of the Maltese ExplorationStudy Agreement, and the other person agrees with items (i) (ii) and (iii)above, then Global must pay the Tranche 3 shares to the Vendors. Rationale (a) Benefits of approving proposal Global would like to recognise that the Vendors complied with their obligationsbut due to circumstances beyond the Vendors and Global's control Global has beenunable to achieve a Farmout in the relevant areas. Global believes that obtaining a longer period to achieve a Farmout and agreeingto issue the Tranche 2 and Tranche 3 shares if the Farmouts are achieved by 30June 2006 will preserve the goodwill between Global and the Vendors. The Company will have additional time (until 30 June 2006) to undertake furtherwork, mostly remapping and studies combined with some reprocessing to improvethe quality of the seismic lines in the deeper sections to provide informationwhich will be attractive to potential farminees for both of the Ireland andMalta interests. No further extensions of time will be sought from shareholders. Global will only be obliged to pay additional consideration, namely Tranche 2shares and Tranche 3 shares, to the Vendors if Global achieves a Farmout asdescribed above. (b) Risks associated with approving ResolutionEven if farmouts as described above are achieved, there is no guarantee that oilor gas will be found. (c) Risks associated with not approving ResolutionThe delay caused by the serious illness of the consultant engaged by Global towork on obtaining Farmouts has resulted in a Farmout being unlikely to occur bythe end date set out in the original 2004 Astral Acquisition Agreement. Thenon-associated Directors recognise that the Vendors were not responsible forthis delay. The non-associated Directors formed the view that to preserve the goodwillbetween Global and the Vendors they should seek shareholder approval for anextension in relation to the Tranche 2 andTranche 3 shares. The Non-associated Directors consider that there are certainpotential consequences of not obtaining shareholder approval for an extension. These potential consequences are: (i) Jeopardising business relationship with Peter Blakey and PeterTaylor Peter Blakey and Peter Taylor have built up a significant contact network over25 years experience in the resource industry in Europe and the Middle East. Thisexperience and network delivered the key exploration asset of the four KenyaBlocks to Global in May 2002. The expertise of Peter Blakey and Peter Taylor hasproved invaluable to the board of Global. The non-associated Directors believethat it is commercially sensible to maintain a good business relationship withPeter Blakey and Peter Taylor and believe they will continue to play animportant role in the growth of the Company. This relationship may be jeopardised if shareholders do not approve an extensionof time for the issue of Tranche 2 and Tranche 3 until 30 June 2006. (ii) Shareholders could lose confidence If the relationship is jeopardised, shareholders could lose confidence in theCompany's ability to grow and expand the explorations assets, without the futureinvolvement of Peter Blakey and Peter Taylor given the role that they haveplayed in the short history of the Company to date. The non-associated Directors believe that the Company's ability to raise furthercapital to pursue its strategic goals could also be affected. (iii) Company's reputation and standing in the industry damaged Global's business relies on good relationships within the resource industry. TheDirectors believe that if shareholders do not approve an extention of time inrelation to the Tranche 2 and Tranche 3 shares, the resource industry mayperceive that Global has failed to act in good faith in its dealings with theVendors. Such a perception may result in the Company's reputation throughout theresource industry suffering. Interests of Peter Blakey, Peter Taylor and TM Services Ltd The following table sets out the interests of Peter Blakey, Peter Taylor and TMServices Ltd: Peter Blakey Peter Taylor TM Services Ltd (including (including (including associates*) associates*) associates*)Global shares in whichrelevant interests are held(by the person named or theirassociates) at date of thisannouncement 55,136,637 55,136,637 55,136,637 Voting power held at date ofthis announcement 32.40% 32.40% 32.40%Global shares in whichrelevant interests will beheld after issue of Tranche 2shares 57,996,566 57,996,566 57,996,566 Voting power after issue ofTranche 2 shares 33.30% 33.30% 33.30% Global shares in whichrelevant interests will beheld after issue of Tranche 3shares 60,856,495 60,856,495 60,856,495 Voting power after issue ofTranche 3 shares 34.10% 34.10% 34.10% * Peter Blakey, Peter Taylor and TM Service Ltd are associates of each otherbecause they act in concert in relation to the affairs of Global. Recommendation Peter Blakey, Peter Taylor and TM Services Ltd are to be regarded as relatedparties for the purposes of Rule 13 of the AIM Rules. The non-associated Directors believe, on balance that the interests ofshareholders are better served by approving an extension of six months to 30June 2006. They believe that obtaining an extension is in keeping with thespirit and good faith of the 2004 Astral Acquisition agreement. They accordinglyrecommend that shareholders vote in favour of Resolution 5. The non-associatedDirectors therefore consider that, having consulted with KBC Peel Hunt Ltd, theterms of the transaction are fair and reasonable insofar as its shareholders areconcerned. Shareholder approval Under the rules of the ASX, Global is required to seek approval from itsshareholders for the proposals and as a result has convened a general meetingfor 24 November 2005 to consider, and if thought fit, pass a resolution toimplement the proposals. Further details, including various technicalinformation required under the ASX rules, can be found at http://www.global-petroleum.co.uk/agm/agm0510.htm. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Global Petroleum