12th Feb 2007 07:02
Xtract Energy plc12 February 2007 XTRACT ENERGY PLC ("Xtract") CAMBRIAN OIL & GAS PLC ("COIL") Scheme of Arrangement 12 February 2007 The boards of Xtract and COIL are pleased to announce that they have reachedagreement on the terms of a recommended proposal for COIL shareholders (otherthan Xtract) to acquire shares in Xtract for shares in COIL by way of scheme ofarrangement under section 425 of the Companies Act 1985 (the "Scheme"). TheScheme requires approval by COlL shareholders (other than Xtract) and thesanction of the Court. Xtract currently holds approximately 64% of the currentissued share capital of COIL. Highlights • Under the proposed terms of the Scheme, COIL shareholders will receive 9 new Xtract shares for every 10 COIL shares. The closing mid market prices per share of Xtract and COIL on 9 February 2007 were 5.25 pence and 3.625 pence respectively. • Based on these closing mid prices, the Scheme: • Values each COIL share at 4.725 pence; and • Values COIL at approximately £14.85 million (on an undiluted basis); and • Represents a premium to COIL shareholders of approximately 30.3%. • The directors of COIL unanimously recommend COIL shareholders to vote in favour of the Scheme. The COIL board believes that COIL shareholders will benefit from: • Exposure to a more diversified asset portfolio; • Additional management expertise; • Removal of the multiple holding company discount on COIL's associated investments, especially its major investment in MEO Australia Limited (MEO); • A broader institutional shareholders base; • Improved access to funding, particularly in regard to COIL participating in any future major funding for MEO's planned drilling program, which starts later this year; and • Potential for increased liquidity through the exchange of their COIL shares for Xtract shares. The Xtract board believes Xtract shareholders will benefit from: • Entry into the Australian Oil and Gas industry through COIL's holding in MEO; • COIL becoming a wholly-owned subsidiary which will allow it to consolidate 100% of the future cash flows from the operations of COIL; • The potential unlocking of value through the removal of the double holding company discount on COIL's associated investments; and • Overhead and management synergies. Commenting on the Scheme Neale Taylor, Chief Executive Officer of COIL, said: "The Scheme presents shareholders with the opportunity to receive an immediate30% premium to the current share price and to hold stock in a larger companywith a broad asset base and diversified portfolio of assets while stillparticipating in the existing COIL story." Also commenting on the proposed acquisition, John Newton, Chief ExecutiveOfficer of Xtract, said: "This is a significant step for Xtract to build a direct stake in the AustralianOil & Gas industry and participate in the MEO gas to liquids project, the TassieShoal Methanol Project and the Timor Sea LNG project. The Scheme has the support of the COIL board who have recommended that COILshareholders vote in favour of it. We believe that both Xtract and COILshareholders will benefit from the consolidation which should create a strongercombined company". The Scheme The Scheme extends to: 1. all the existing issued ordinary shares of 1p each in the capital of COIL; 2. any further COIL shares which are issued after the date of the Schemedocument to be posted to COIL Shareholders and before 6.00pm on the date of themeeting of the COIL shareholders convened by order of the Court pursuant tosection 425 of the Companies Act 1985 and the Extraordinary General Meeting ofCOIL convened to approve and implement the Scheme (the 'Voting Record Time')including shares issued arising from the exercise of options and warrants; and 3. any further COIL shares issued at or after the Voting Record Time and beforethe making of the relevant Court order either on the terms that the original orany subsequent holder thereof shall be bound by the Scheme or in respect ofwhich the holder shall have agreed in writing to be bound by the Scheme. Based on the closing mid price of a COIL share of 3.625 pence on 9 February2007, the Scheme values COIL (on an undiluted basis) at approximately £14.85million and each COIL share at approximately 4.725 pence. This represents apremium for COIL shareholders of approximately 30.3% based on the closing midprice of 5.25 pence per Xtract share on 9 February 2007, being the last businessday immediately preceding this announcement. Implementation of the Scheme wouldinvolve the issue by Xtract of up to approximately 100.17 million new Xtractshares for the existing issued COIL shares (representing approximately 15.2% ofXtract's issued share capital as enlarged by this issue)." The Scheme, which will be subject to the conditions and further terms set outbelow and to be set out in Scheme Documentation to be despatched to COILshareholders in due course (as required by the Companies Act), will be effectedon the following basis: 1. COIL shareholders will receive 9 Xtract Ordinary Shares for every 10 COILShares they hold. This represents an approximate premium of 30.3% based onprevailing market prices. 2. Any 3p COIL warrants which are not exercised prior to the Voting Record Timeshall cease and determine in accordance with their terms. 3. For those COIL options and 3p warrants which are not exercised prior to theVoting Record Time and which under their terms do not cease and determine ifthey are not so exercised, following the completion of the Scheme, Xtract willprocure an amendment to COIL's Articles of Association which will entitle suchCOIL option and warrant holders to receive Xtract shares upon exercise of suchoptions and warrants at the same ratio as in paragraph 1 above. Conditions of the Scheme Xtract and COIL agree that the sanction of the Court in respect of the Schemewill only be sought if: 1. No Material Adverse Change since 30 June 2006, save as otherwise disclosed, no event, change or conditionhas occurred or become known to Xtract where that would have or could bereasonably expected to have a material adverse effect on the business, assets,liabilities, trading or financial position, profitability or prospects of COIL('Material Adverse Change'). 2. No Material Acquisitions, Disposals or New Commitments since 30 June 2006 (other than in relation to the purchases of interests in ElkoEnergy Inc and MEO): • COIL has not disposed of or acquired any assets or businesses, or offered or agreed to announce any acquisitions or disposals, for an amount in aggregate of £0.5 million (or in the case of disposals, where the book value was in aggregate greater than £0.5 million); • COIL has not entered into or offered or agreed to enter into, or announced any arrangement which required expenditure, or the foregoing of revenue, by COIL of an amount in aggregate of £0.5 million; • the business of COIL has otherwise carried on in the usual and ordinary course. 3. Consequences of the Scheme save as otherwise disclosed, no provision of any agreement to which COIL is aparty or by which COIL or any part of its assets may be bound would, as aconsequence of the Scheme, result in a Material Adverse Change. 4. Issue of Equity from the date of this announcement there is no further issue of equity by COILsave for the issue as a result of the exercise of existing warrants or options. 5. Xtract Consents any consents required by Xtract under any existing contractual arrangements orotherwise are granted. The above represents the principal conditions but is not intended to beexhaustive. Detailed documentation will need to be drafted by way of a scheme ofarrangement to be approved by the COIL board and its advisors prior tosubmission to the Court and posting to COIL Shareholders. The City Code on Takeovers and Mergers ("the Takeover Code") As has been previously announced on 17 August 2006, although COIL isincorporated in England, the place of central management of COIL is currentlylocated outside the UK, the Channel Islands or the Isle of Man since the mainplace of business of COIL is in Australia. The majority of Board meetings areheld outside the UK, the Channel Islands and the Isle of Man and the majority ofthe Board are resident outside the UK, the Channel Islands and the Isle of Man.Accordingly, as COIL is a company to which paragraph 3 (a) (ii) of theIntroduction to the Takeover Code does not apply, the Panel on Takeovers andMergers has confirmed that COIL is not subject to the Takeover Code andShareholders will not be afforded any protections under the Takeover Code. Recommendation The directors of COIL have reached agreement with Xtract on the terms of theScheme. The directors of COIL unanimously recommend that COIL shareholders votein favour of the Scheme. General Procedure of the Scheme of Arrangement The basic steps required to implement a scheme of arrangement are as follows: 1. COIL shall apply to Court for an order that a meeting of COIL shareholdersexcluding Xtract be called. 2. if the Court agrees, it will order that the appropriate COILshareholder meeting is held. If a majority in number and 75% in value of theCOIL shareholders (other than Xtract) present and voting at the meeting agree tothe arrangement and it is also approved by the Court, then it is binding on allthe COIL shareholders whether or not they voted in favour or voted at all and onCOIL. 3. for the Scheme to have effect, a copy of the Court order shallbe delivered to Companies House. Enquiries in relation to Xtract please contact: Xtract Energy plc +44 (0) 20 7409 0890John Newton, CEO Smith & Williamson Corporation Finance Ltd +44 (0) 20 7131 4000David Jones Azhic Basirov Enquiries in relation to COIL please contact: Cambrian Oil and Gas plcNeale Taylor, CEO +44 (0) 20 7409 0890Paul McGroary, Director +44 (0) 79 3056 8160 W.H Ireland LimitedPaul Dudley +44 (0) 20 7220 1666 About Xtract Energy Plc Xtract's prime assets are its interest in shale oil deposits at Julia Creek inQueensland, Australia and a joint venture with the Australian research group,CSIRO, to develop a process for extracting oil from shale deposits. The initialvalidation tests, comprising small scale batch extractions of oil from the shale,have demonstrated that recovery from Xtract's Julia Creek shales in Queensland,Australia, would be in the order of 150 litres of light crude oil per tonne ofshale. Earlier conventional retorting experiments indicated that the conversionof kerogen to oil yielded about 74 litres of oil per ton of shale. Applying this rate of yield increase to the yields of 50 - 65 litres per tonneused in Xtract's AIM admission document in relation to certain of Xtract'sJulia Creek leases results in estimated in-situ shale oil resources of over 1.6 billion barrels of oil. Other energy assets held by Xtract are: • Approximately 64% of Cambrian Oil and Gas Plc ("COIL") which is developing oil and gas assets in the Kyrgyz Republic. COIL also owns approximately 22% of the issued share capital of ASX listed MEO. MEO is focused on developing a gas-to-liquids project in the Timor Sea, approximately 275 km northwest of Darwin, Australia, in an area known as Tassie Shoal. It has secured Australian Commonwealth Government environmental approvals for two large scale (1.8 mtpa) methanol plants (50% interest) and a 3 mtpa LNG plant (100%), which is the only new Australia LNG project to receive its Commonwealth Government environmental approvals. • Approximately 15% of Wasabi Energy Limited which has rights to the Kallina power technology, uranium exploration interests in the Northern Territory, Australia, interests in the newly-formed Evolution Energy joint venture to produce bio-diesel fuel in Australia and in a coal deposit in Canada. • Approximately 18.6% of Aviva Corporation Limited with promising thermal coal deposits in the mid-west of Western Australia. About Cambrian Oil & Gas Plc COIL has a portfolio of interests in Central Asia, China, the North Sea andAustralia. The Kyrgyz interests held through the Company's wholly owned subsidiary ZhibekResources Plc include a production sharing agreement with Kyrgyzneftegaz toinstigate a water injection project on the Beshkent-Togap oil field, a 72%interest in JSC KNG Hyrdocarbons, which holds several exploration licences inthe Tash Kumyr area and 100% interest in the Toktogul exploration licence. COIL also holds approximately 22% of MEO. MEO has successfully completed theacquisition of new 2D and 3D seismic data over Epenarra, located in MEO's 100%owned Exploration Permit NT/P68 in the Timor Sea. The Epenarra structure is abroad, low relief anticline with mapped closure of approximately 1,200 squarekilometres, located entirely within Australian waters. The data has beenacquired to confirm optimal well locations for the Heron-2 appraisal well andproduction test on the Epenarra structure and the Blackwood-1 exploration well. MEO intends drilling up to three wells (Heron-2, Blackwood-1 and potentiallyHeron-3) in the Permit area and has secured a new jack-up rig to undertake thedrilling. The rig is expected to arrive on location in August 2007. COIL also holds approximately 33.5% of the issued capital of Elko. Elko, an oil and gas exploration company, has been awarded a 5,400 squarekilometre exploration and production licence in the Danish North Sea Sector,which it holds with an 80% interest. The remaining 20% is held by the DanishState, which has a direct and full working interest. Phase I of the technicalstudies has been completed. Following further ongoing technical work it isplanned to farm down Elko's interest during 2007 in exchange for future seismicand drilling obligations being paid for by a new partner. Elko also owns approximately 40% of Dragon Energy Inc., a private Canadiancompany with a significant development project in Gansu Province, China("Dragon"). Dragon has signed a Joint Venture Agreement with a provincialsubsidiary of CNPC of China, the 10th largest oil company worldwide, providingfor the re-development of the Maling Oilfield in Gansu Province, China. In the year ended 30 June 2006 COIL made a loss of £0.4 million and net assetsat that date were £3.6 million. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Xtract