TIDMSCIR
RNS Number : 5318P
Scirocco Energy PLC
21 June 2022
21 June 2022
Scirocco Energy plc
("Scirocco Energy" or "the Company")
Letter to Shareholders re Ruvuma Disposal
Scirocco Energy (AIM: SCIR), the AIM investing company targeting
attractive assets within the European sustainable energy and
circular economy markets, announces that Alastair Ferguson,
Non-Executive Chairman, has written a letter to all shareholders
providing additional context on the Board's strategic rationale for
its proposed transaction with Wentworth Resources as announced on
13 June 2022.
The full text of that letter is copied below.
"Dear fellow shareholders,
As communicated to you in the circular on 13 June 2022 and the
webinar on 16 June 2022, the Company is proposing to dispose of its
legacy Ruvuma asset and notice was given of a General Meeting of
the Company to take place at 10:30am on 29 June 2022 at Pinsent
Masons LLP, 141 Bothwell Street, Glasgow, G2 7EQ where the
proposition will be put to a vote as an ordinary resolution for
approval by holders of Ordinary Shares.
The circular, which includes the Principal Terms of the Proposed
Transaction with Wentworth Resources PLC, can be found on the
Company's website at the following address:
https://www.sciroccoenergy.com/investors/circulars/
Under the proposed Asset Purchase Agreement, the consideration
for the Ruvuma asset comprises:
-- initial consideration of $3,000,000 in cash payable upon
completion of the Proposed Transaction and prior to Completion and
subject to satisfaction of certain conditions Wentworth will make a
loan of $500,000 available to Scirocco (the "Initial Loan Amount");
plus
-- contingent deferred consideration of up to $13,000,000 in
aggregate, made up of the following payments:
o $3,000,000 to be paid following the date on which the
operating committee provides final approval of a development plan
under the Ruvuma JOA;
o $8,000,000 which shall be payable from first gas on the Ruvuma
Asset where the net revenues payable to Wentworth under any sale
arrangements shall be payable 75% to Wentworth and 25% to Scirocco
until such time as Scirocco has been paid $8,000,000; and
o $2,000,000 following the date on which the cumulative gross
production from the Ruvuma Asset is equal or greater than 50
billion cubic feet.
The Asset Purchase Agreement was the result of an exhaustive
two-year process, and the Directors unanimously agree that it
represents the best possible deal for Scirocco to realise value
from the asset, while retaining material upside exposure in the
success case of Ruvuma.
At the same time, the deal significantly strengthens the
Company's balance sheet by providing an immediate and non-dilutive
injection of funds, allowing Scirocco to pursue its current
investing strategy targeting cash-generative assets within the
sustainable energy and circular economy markets, as approved by
shareholders at the Annual General Meeting of 9 July 2021.
All shareholders are encouraged to vote in favour of the
proposed transaction
It is the duty of the Board and management to safeguard the
interest of all shareholders and make decisions that we believe are
in the best interest of the Company. The intention of the proposed
divestment that we are asking shareholders to vote on has been
communicated clearly by the Company through the two-year sales
process and is wholly consistent with the revised investing
strategy set out by Scirocco's Board.
Completion of the divestment will enable the Company to
accelerate its growth strategy, which we believe will enable the
Board to build a business with a long-term future capable of
generating sustainable returns for its shareholders. As such, the
Board encourages all shareholders to cast their vote and strongly
recommend that shareholders vote in favour of passing the proposed
acquisition at the upcoming General Meeting.
Should the resolution not be passed, the Company will be
required to fulfil its near-term funding obligations on the Ruvuma
asset which can only be achieved by raising further equity, likely
in excess of its current market capitalisation, and at a level of
issuance and price that would be highly dilutive for existing
shareholders. There are no guarantees that the Company will be able
to raise the capital required to meet near-term obligations which
would likely lead to the Company defaulting on its financial
commitments and potentially relinquish its interest in Ruvuma for
zero consideration.
It should also be recognised that success is not guaranteed in
the upcoming CH-1 well and the ultimate approval, extent of or
timing of a related development is also uncertain. The Ruvuma
project involves significant technical and subsurface
uncertainties, meaning the Company would retain material downside
exposure associated with the project, as well as the potential
long-term requirement for large capex expenditure, implying further
dilutive capital raises in order to maintain our interest. Those
factors and the significant concentration in a single asset lead to
the Board and management to conclude that this is not an
appropriate risk/reward profile for Scirocco and does not provide a
reasonably deliverable path to growth or cashflow.
It is therefore the firm belief of the Director's that the
passing of the Resolution is in the best interests of the Company
and Shareholders, and we unanimously recommend shareholders vote in
favour .
The Directors who hold shares, totalling 3.2% of the issued
share capital, will be voting in favour of the proposal.
Additionally, the Company has received letters from significant
shareholders representing 11.1% of the Company's issued share
capital which confirm they are supportive of the proposed
transaction and that it is their current intention to vote in
favour of the resolution at the General Meeting.
Shareholders can submit their vote by completing the below proxy
form (available on the website) and emailing the completed form to
Voting@shareregistrars.uk.com .
https://d1ssu070pg2v9i.cloudfront.net/pex/scirocco/2022/06/13152517/FINAL-PROXY.pdf
For shares held in nominee accounts you have to contact your
appointed broker to instruct them as to your voting intentions.
We look forward to the successful completion of this transaction
and moving forward as a well-funded, strategically focused company
with a clear vision to deliver sustainable long-term value for the
Company's shareholders.
Sincerely,
Alastair Ferguson
Non-Executive Chairman of the Board of Scirocco
For further information:
Scirocco Energy plc
Tom Reynolds, CEO +44 (0) 20 7466
Doug Rycroft, COO 5000
Strand Hanson Limited, Nominated Adviser +44 (0) 20 7409
Ritchie Balmer / James Spinney / Rory Murphy 3494
WH Ireland Limited, Broker +44 (0) 207 220
Harry Ansell / Katy Mitchell 1666
Buchanan, Financial PR +44 (0) 20 7466
Ben Romney / Jon Krinks 5000
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END
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