TIDMCEG
RNS Number : 7190K
Challenger Energy Group PLC
30 August 2023
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation ("MAR") (EU) No. 596/2014, as incorporated into UK law
by the European Union (Withdrawal) Act 2018. Upon the publication
of this announcement, this inside information is now considered to
be in the public domain.
30 August 2023
Challenger Energy Group PLC
("Challenger Energy" or the "Company")
GBP3.3 million Funding Facility
Corporate Update
Challenger Energy (AIM: CEG) provides the following update.
Highlights
-- Establishment of a GBP3.3 million convertible loan note funding facility, to:
-- support business development, in particular continuing with
accelerated technical work programs in Uruguay, for both the AREA
OFF-1 block and the newly awarded AREA OFF-3 block; and
-- progress business development opportunities in Trinidad.
-- GBP0.55 million has initially been drawn, with future
drawdown of the remainder at the Company's option.
-- 3-month extension for completion of sale of Cory Moruga asset
in Trinidad and Tobago (presently awaiting regulatory approval).
Relinquishment of the Weg Naar Zee PSC in Suriname, consistent with
the Company's strategy to focus on core assets.
-- Intended purchase of approximately 60 million shares by the
Company's CEO, to increase the CEO's aggregate shareholding to
approximately 6% of the Company.
-- Issue of approximately 315 million new shares to various
service providers, in lieu of cash fees.
Eytan Uliel, Chief Executive Officer, said:
"In the last year, across the broader Challenger Energy
business, we have completed value-enhancing technical work,
improved production operations, high-graded our portfolio, secured
new assets, and ensured a range of options are available to deliver
additional funds into the business. Progress has been substantial,
but the timing of when we need to spend and when we will see cash
inflows is not always within management's control. We have
therefore now taken steps to ensure that we have flexible
additional funding available, if and when needed, so that we can
press on with accelerating new licences and high prospect business
development opportunities in both Uruguay and Trinidad. In the
current market we see benefit in having an established facility in
place, even if we ultimately do not use it all.
Personally, I am excited with how Challenger Energy is now
poised - a honed portfolio, a clear focus on those assets which are
world-class and have the potential to deliver a major value uplift
in the near term, and the financial flexibility to take disciplined
portfolio decisions when opportunity presents. Day by day I believe
we are creating intrinsic value which I strongly believe will
ultimately be rewarded, and which is why I am increasing my
personal holding in the Company at this time. I look forward to
sharing news of continued progress with fellow shareholders over
the coming months."
Funding Facility
Funding Facility - Summary
-- The Company has established a GBP3.3 million unsecured
convertible loan note funding facility (the "Facility") with a UK
based alternative asset management and investment firm (the
"Investor"). GBP0.55 million of the Facility has initially been
drawn to support the Company's immediate work program.
-- The Facility will provide the Company the flexibility, as needed, to:
o provide funding, as necessary, to further develop the
technical case underpinning the AREA OFF-1 farm-out - the formal
farm-out process is progressing well, and the Company's objective
remains to secure a partner for AREA OFF-1 by the end of 2023, so
as to enable 3D seismic acquisition to proceed in 2024;
o fund an initial work program performance bond and thereafter
an accelerated technical work program for the AREA OFF-3 licence in
Uruguay, similar to that initially undertaken on AREA OFF-1 in
support of the AREA OFF-1 farm-out process;
o provide funding for progressing new licence opportunities in
Trinidad and Tobago, if successfully awarded, and allow the Company
to progress certain other high-potential business development
initiatives in that country; and
o bridge working capital needs through to delivery of a number
of cash generative options over the coming 6 months, including
those that may result from a successful AREA OFF-1 farm-out
process, and those anticipated from completion of the sale of the
Company's Cory Moruga asset in Trinidad.
-- The Company considers that having the Facility in place (and
subject to the Facility's draw down conditions continuing to be
met) will ensure that the Company has the ability to meet all of
its capital requirements until at least 2H 2024, regardless of the
amount and timing of any future potential inflows.
Funding Facility - Rationale
-- In March 2022, in conjunction with completion of a
comprehensive corporate restructuring, the Company raised
approximately US$10m. Notwithstanding that the capital raising in
March 2022 was "sized" for approximately 12 months of future
operations, the Company has not required any additional external
funding to-date (i.e., thus far, to end August 2023). This is as a
result of extremely prudent management of capital over the past 18
months, a significant reduction in corporate overheads, and the
sale of identified non-core assets.
-- During the same period of time, the Company has made
significant progress in respect of its core business operations,
including in particular:
o Uruguay AREA OFF-1 - an accelerated and expanded technical
work program, designed to maximise the value of the asset in any
farm-out process, and which work program has been substantially
completed, and with positive outcomes that significantly exceeded
the Company's initial expectations as set out in the Company's
announcements on 26 April 2023 and 31 May 2023.
o Uruguay AREA OFF-3 - a successful bid for the AREA OFF-3
licence, thereby establishing the Company as the 2(nd) largest
acreage holder in Uruguay, with an expanded suite of high-quality
prospects and commercial options.
o Trinidad - a bid for the Guayaguayare licence in Trinidad, the
largest available onshore licence offering both near-term
production and long-term exploration upside - in May 2023 the
Company was nominated as the party with whom the Trinidad and
Tobago Ministry of Mines and Energy Industries will seek to
negotiate a long-term licence agreement, with this process
ongoing.
-- All of these activities are considerably in excess of that
which was contemplated in March 2022, yet have been funded to-date
from within the Company's existing available capital resources. The
Company wishes to maintain momentum on these various opportunities
over the coming 12 months, but expected funding outflows and
inflows are subject to uncertainty as to timing and quantum.
-- Thus, in view of the Company's forward business needs and
general market conditions at this time, the Board considers it
would be prudent to have additional capital available on an
as-needed basis. The Facility has been established accordingly,
with a small portion drawn initially, and future draw-downs at the
Company's election (subject to draw down conditions, as described
further below, being met).
Funding Facility - Key Terms
-- The Facility is arranged into an initial tranche of senior
unsecured convertible loan notes of GBP550,000 and 10 subsequent
tranches of GBP275,000 each, with the first tranche having been
drawn (being the minimum required by the Investor in order to
establish the Facility). The second tranche of the Facility is
available for draw-down at the Company's sole election 90 days
after drawn down of the initial tranche, and each subsequent
tranche is available for draw down at the Company's sole election
45 days after draw down of the previous tranche (and subject to
draw down conditions, described further below, continuing to be met
from time to time).
-- Loan notes, once drawn, are all repayable 36 months from the
date of the first draw-down. Interest is fully pre-paid on
draw-down, such that on draw-down 90% of the value of the notes is
advanced in cash to the Company. The Company has the right to make
early repayments, all or in part, at no penalty, subject to the
Investor's conversion rights as described below.
-- Each tranche of the Facility is convertible into ordinary
shares of the Company ("Ordinary Shares") at the Investor's
election at any time prior to repayment, at the lesser of (i) 140%
of the Company's closing bid price on the trading day immediately
prior to the date of draw-down of the relevant tranche, or (ii) 90%
of the lowest closing bid price in the five trading days
immediately preceding the date of conversion (the "Conversion
Price").
-- The loan notes are redeemable in cash by the Company, all or
in part, at any time after draw down, or in the event of a change
of control of the Company, at 105% of par value. If the Company
notifies the Investor of an intended redemption of any loan notes,
the Investor shall have two trading days to elect to convert some
or all of outstanding amounts or accept the early redemption. In
the event of default, loan notes will be redeemable immediately at
120% of par value of outstanding loan notes.
-- Drawn loan notes are convertible into Ordinary Shares at each
tranche's Conversion Price in whole or in part, subject to any
conversion being for a minimum of GBP50,000.
-- Subsequent drawdowns under the Facility are subject to draw
down conditions continuing to be met, which are (i) the closing
mid-price of the Company's Ordinary Shares on each of the five
trading days preceding draw-down date being at least GBP0.0005
(i.e.: at least 0.05 pence) per ordinary share, and (ii) the
Company maintaining available share issuance authority headroom and
disapplication of pre-emption rights to cover 150% of any draw down
amount divided by the Conversion Price.
Corporate update
Director Intended Share Purchase
-- The Company's CEO, Mr Eytan Uliel, has advised the Company
that following the release of this announcement, and subject to the
Company not being in a closed period, he intends to purchase
approximately 60 million Ordinary Shares. If purchased, this would
increase his total shareholding in the Company to approximately 605
million Ordinary Shares, or approximately 6% of the Company. The
Company will advise once a TR-1 is received from Mr Uliel in
respect of any shares purchased.
Cory Moruga Sale Extension
-- On 8 March 2023, the Company announced that it had entered
into an agreement ("Agreement") with Predator Oil and Gas Holdings
Limited pertaining to the sale of the Cory Moruga asset in
Trinidad. In that announcement, it was noted that completion of the
transaction was conditional on consent of the Trinidadian Ministry
of Energy and Energy Industries ("MEEI") to a revised work
programme for the Cory Moruga licence proposed by the Company, as
well as agreement of MEEI to a revision of future fees for the Cory
Moruga licence and a settlement / cancellation of past claimed dues
pertaining to the Cory Moruga licence. The Agreement stipulated a
long stop date of 31 August 2023 for securing the relevant consent
and agreements from MEEI.
-- Dialogue with MEEI continues, with the parties and MEEI
having made progress on reaching acceptable terms, and the parties
remain confident that appropriate consents and agreement will be
forthcoming. However, completion of the transaction will not be
possible by 31 August 2023. Accordingly, the parties have mutually
agreed to extend the last date for completion of the intended
transaction by 3 months, to 30 November 2023.
-- As part of the Agreement, and as advised on 8 March 2023, the
parties had also agreed to establish a collaboration in relation to
CO(2) EOR activities and projects in other areas in Trinidad,
including but not limited to potential application of CO(2) EOR
techniques across the Company's other fields. Pursuant to this
collaboration agreement, and in parallel to the ongoing process to
complete the s ale of the Cory Moruga asset in Trinidad, the
parties have progressed discussions seeking to re-establish
partnering arrangements in relation to other assets, including in
particular a potential joint-venture or acquisition of the
Inniss-Trinity field - further announcements will be made as
appropriate.
--
Weg Naar Zee PSC Relinquishment
-- The Company has agreed with Staatsolie Hydrocarbon Institute,
the Surinamese hydrocarbons industry regulator ("SHI"), to
terminate the Suriname Weg Naar Zee Production Sharing Contract
("WNZ PSC") between Columbus Energy Resources South America B.V., a
wholly-owned subsidiary of the Company and Staatsolie Maatschappij
Suriname N.V., the Surinamese state-owned oil & gas company
("Staatsolie"). The termination of the WNZ PSC is effective
immediately.
-- This portfolio optimisation and capital allocation decision
reflects the fact that the WNZ project, which whilst not without
long-term potential, is early-stage and will thus require both time
and substantial investment to take forward, for an ultimate
production potential that is relatively small. By contrast, the
Company's newly secured opportunities in both Uruguay and Trinidad
are of much higher potential impact, in that they offer greater
scale and opportunity for near-term value creation from deployment
of the same capital that would otherwise be required for WNZ. The
Company thanks Staatsolie for the opportunity and the cooperation
over the past several years.
Service Provider Share Issuance
-- A number of service providers that have provided services to
the Company over the past 6 months, including in respect of
technical work for the AREA OFF-1 licence in Uruguay (principally
seismic reinterpretation and amplitude variation with offset
analysis), have indicated a desire to receive a significant part of
their fees, otherwise payable in cash, in the form of shares in the
Company.
-- The Company considers that the willingness of service
providers to become shareholders in the Company demonstrates a high
degree of confidence in the Company generally, and more
specifically in the technical and commercial attributes of its AREA
OFF-1 licence, and the merits of that asset to potential farm-in
partners.
-- Accordingly, the Company has agreed to the issue of
315,533,332 Ordinary Shares ("New Issue Shares") in total to
various service providers, in lieu of payment of cash fees. The New
Issue Shares will be issued from the Company's standing share
issuance authority.
Option Plan
-- On 7 March 2022, the Company advised of the terms and
structure of the Company's approved option plan, which provided for
the potential issue of up to 1,080,000,000 options in four tranches
of 270,000,000 each. At the time, the Company advised on an initial
allocation of 240,000,000 options from each tranche of that
approved option plan. Within this allocation, 40,000,000 options
from each tranche were allocated to the Company's former director
and CFO, Mr. Tim Eastmond.
-- Since that time, the options issued to the former director /
CFO have been returned to the Company and cancelled, consequent on
his resignation in July 2022. These options have now been re-issued
to the non-executive directors of the Company. Apart from the
re-issue of a prior director's options to other directors, no new
options have been allocated at this time. Accordingly, 35,000,000
options in each tranche of the Company's approved option plan
remain available for future issue as may be determined by the Board
from time to time. The terms of the Company's option plan remain
unchanged from that advised in March 2022.
-- Thus, the total number of options currently in issue remains
unchanged from March 2022, but are now distributed as follows:
Optionholder Current D istribution Previous Distribution
Iain McKendrick 28 , 000,000 in 25,000,000 in each
Non-Executive Chairman each of Tranche of Tranche A, B,
A, B, C and D C and D
--------------------------------- ---------------------------------
Stephen Bizzell 18,500,000 in each Nil
Non-Executive Director of Tranche A, B,
C and D
--------------------------------- ---------------------------------
Simon Potter 18,500,000 in each Nil
Non-Executive Director of Tranche A, B,
C and D
--------------------------------- ---------------------------------
Eytan Uliel U nchanged 85,000,000 in each
Executive Director and of Tranche A, B,
CEO C and D
--------------------------------- ---------------------------------
Executives and Staff Unchanged 90,000,000 in each
(1) of Tranche A, B,
C and D
--------------------------------- ---------------------------------
TOTALS 240,000,000 in each 240,000,000 in each
of Tranche A, B, of Tranche A, B,
C and D C and D
960,000,000 in total 960,000,000 in total
--------------------------------- ---------------------------------
o Note 1: these are distributed to key members of the executive
and operating staff base, to secure retention and incentivisation
.
-- The terms and conditions applicable to each tranche of
options remain unchanged - refer to the Company's announcement of 7
March 2022 for details. The exercise price for each of Tranche A,
B, C and D under the option plan remains 0.1p, 0.15p, 0.225p, and
0.3p respectively - that is, in all case, a substantial premium to
the current share price, such that the ability of option-holders to
benefit will only be possible if there is a material upward
rerating of the Company's market value from current levels.
Admission and Total Voting Rights
-- Application will be made for admission ("Admission") of the
New Issue Shares to trading on AIM, and it is expected that on
Admission the New Issue Shares will rank pari passu with the
Company's existing ordinary shares.
-- On Admission, the total issued share capital of the Company
will consist of 9,935,732,811 Ordinary Shares. The Company does not
hold any Ordinary Shares in treasury. Therefore, the total number
of voting rights in the Company is 9,935,732,811 and this figure
may be used by shareholders in the Company as the denominator for
the calculations by which they will determine if they are required
to notify their interest in, or a change in their interest in, the
share capital of the Company under the FCA's Disclosure Guidance
and Transparency Rules.
For further information, please contact:
Challenger Energy Group PLC Tel: +44 (0) 1624 647
Eytan Uliel, Chief Executive Officer 882
WH Ireland - Nomad and Joint Broker Tel: +44 (0) 20 7220
Antonio Bossi / Darshan Patel 1666
Zeus Capital - Joint Broker Tel: +44 (0) 20 3829
Simon Johnson 5000
Gneiss Energy Limited - Financial Tel: +44 (0) 20 3983
Adviser 9263
Jon Fitzpatrick / Paul Weidman / Doug
Rycroft
CAMARCO Tel: +44 (0) 20 3757
Billy Clegg / Hugo Liddy / Sam Morris 4980
Notes to Editors
Challenger Energy is a Caribbean and Americas focused oil and
gas company, with a range of oil production, development,
appraisal, and exploration assets in the region. The Company's
primary assets are located in Uruguay, where the Company holds high
impact offshore exploration licences, and in Trinidad and Tobago,
where the Company has a number of producing fields and
earlier-stage exploration / appraisal projects.
Challenger Energy is quoted on the AIM market of the London
Stock Exchange.
https://www.cegplc.com
ENDS
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UPDDZGZRNLZGFZM
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August 30, 2023 02:00 ET (06:00 GMT)
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