TIDMUKOG
RNS Number : 1643I
UK Oil & Gas PLC
07 August 2019
UK Oil & Gas PLC
("UKOG" or the "Company")
UKOG net share of Horse Hill oil field increases to 86% via
purchase of Tellurian's 35% interest
UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce
that it has signed a binding heads of terms with Tellurian
Investments LLC ("Tellurian") to acquire the entire share capital
of its subsidiary Magellan Petroleum (UK) Investment Holdings
Limited ("Magellan") for a total consideration of GBP12 million in
cash and shares. Magellan holds a 35% direct interest in the Horse
Hill oil field and surrounding highly prospective PEDL137 and
PEDL246 licences, UKOG's flagship asset.
Upon completion of a share purchase agreement ("SPA"), this key
acquisition will see UKOG's Horse Hill net oil sales revenues, net
reserves and recoverable resources increase by over 69% from our
current 50.635% interest to a material 85.635% net share.
Crucially, the acquisition will also give the Company full control
over the forward Horse Hill drilling programme and production
schedule, together with sole ownership of the Horse Hill oil field
site lease.
As a consequence of this transaction, drilling of the
much-anticipated HH-2/2z Portland horizontal well will follow very
shortly after completion of the SPA.
This acquisition is in accordance with UKOG's stated business
plan to further consolidate its position in key assets with near
term cash generation potential. The acquisition is fully funded
primarily by current cash reserves and partly by a convertible
loan, which the company has entered into today, but has not yet
drawn down.
It should be noted that the cash consideration will not impact
UKOG's ability to fund the forthcoming Horse Hill 2/2z drilling and
extended testing campaign, as cash funds for its full 85.635% share
were set aside and ringfenced internally in Spring of this year.
The convertible loan detailed below also ensures full funding for
UKOG's increased share of future production facilities costs and
other near-term surface, subsurface and regulatory costs necessary
to bring the field into long-term production.
Transaction details:
The GBP12 million total consideration payable to Tellurian
comprises:
-- An GBP8 million initial payment on SPA Completion (GBP5
million in cash and GBP3 million in UKOG shares).
-- A GBP3 million deferred payment, on or before 31 December 2019, in UKOG shares.
-- A GBP1 million second deferred payment, on or before 31 March 2020, in UKOG shares.
-- The number of consideration shares issued will be calculated
by the payment amount divided by the 10-day volume weighted average
price ("VWAP") prior to the respective payment due date. At its
sole discretion, UKOG can also elect to pay all or part of the
deferred and second deferred payments in cash.
-- Tellurian's dealing in UKOG consideration shares is to be
subject to a 6-month orderly market provision.
Whilst this corporate transaction does not strictly require
formal Oil and Gas Authority ("OGA") consent, OGA has informed the
Company that they have no objections to the acquisition and that
they will provide the customary "comfort letter" to this effect
regarding the change in control of a licensee.
Stephen Sanderson, UKOG's Chief Executive, commented:
"This transformational acquisition, the largest in UKOG's 6 year
history as an oil and gas company, boosts UKOG's net share of its
flagship Horse Hill asset by a significant 69% from a 50.635% to an
85.635% net interest, providing the Company with the lion's share
of future production revenues and reserves, together with absolute
control over the field's future development and progress.
Importantly, the acquisition forms a key part of UKOG's stated
near term strategy to grow the company via organic appraisal
drilling and by targeted acquisitions in key assets with near term
cash flow potential.
The funding of UKOG's increased 85.635% share of the new HH-2/2z
horizontal drilling and testing campaign, scheduled to commence
later this year following transaction completion, will not be
impacted by this acquisition, as existing cash funds were set aside
and ringfenced for this purpose in Spring 2019. The Loan ensures we
also remain fully funded for further capital expenditures necessary
to get the field into long-term production once necessary
regulatory permits are in place this Autumn.
We now look forward to the transaction's completion and the
start of what promises to be an exciting new drilling and testing
campaign at Horse Hill, designed to bring the field into long term
oil production by year-end.
We thank Tellurian and its subsidiary Magellan for their
significant contribution over many years to the success of Horse
Hill and wish them good fortune in developing their global LNG
business."
Acquisition Financing
To fund this acquisition, UKOG will primarily use cash from the
GBP3.5 million placing raised in March 2019, together with funds
from an initial GBP5.5 million loan agreement ("Loan") with
Riverfort Global Opportunities PCC Limited and YA II PN Ltd
("Investors") that UKOG has entered into. The Company will receive
the full GBP5.5 million Loan in cash from the Investors upon draw
down, which is expected to be triggered towards the completion date
of the acquisition.
The portion of the Loan not utilised in the acquisition will be
utilised for the construction of production facilities, and other
surface, subsurface and regulatory activities necessary to bring
Horse Hill into long-term production following the expected grant
of production-related regulatory permissions.
The Loan attracts 0% interest and may, at the sole discretion of
the Investors, be converted into new ordinary shares in the
Company. The conversion price is the lower of either a share price
of 130% of the Company's average VWAP prior to the Loan drawdown
('Fixed Conversion Price'), or 90% of the Company's lowest VWAP
during the five days prior to the conversion date. The Loan is
convertible by the Investors in tranches of not less than
GBP150,000, with a limit of GBP3 million per quarter, unless
otherwise agreed by the Company.
The Loan is subject to customary conditions precedent and events
of default and is repayable 24 months after drawdown. The Company
retains the right to prepay any outstanding amount so long as the 5
day VWAP prior to prepayment is less than the Fixed Conversion
Price and subject to a 10 percent prepayment premium
The Loan includes a provision that, for as long as any portion
of the Loan is outstanding, neither the Investors nor any of their
affiliates shall hold any net short position with respect to the
equity of UKOG.
This Loan agreement also provides for further funding on the
same terms of between GBP3.6 million and GBP4.5 million dependent
on the operational performance of the Horse Hill asset.
Qualified Person's Statement
Matt Cartwright, UKOG's Commercial Director, who has over 35
years of relevant experience in the global oil industry, has
approved the information contained in this announcement. Mr
Cartwright is a Chartered Engineer and member of the Society of
Petroleum Engineers.
For further information, please contact:
UK Oil & Gas PLC
Stephen Sanderson / Kiran Morzaria Tel: 01483 900582
WH Ireland Ltd (Nominated Adviser and Broker)
James Joyce / James Sinclair-Ford Tel: 020 7220 1666
Cenkos Securities PLC (Joint Broker)
Joe Nally / Neil McDonald Tel: 0207 397 8919
Novum Securities (Joint Broker)
John Bellis Tel: 020 7399 9400
Public Relations
Brian Alexander Tel: 01483 900582
Glossary
extended well a well test, as per the permission granted by the
test or production Oil and Gas Authority, with an aggregate flow period
test duration over each zone of greater than 96 hours;
the objective being to establish whether a discovery
is commercially viable and the optimal methods
of future production and recovery
flow test a flow test or well test involves testing a well
by flowing hydrocarbons to surface, typically through
a test separator; key measured parameters are oil
and gas flow rates, downhole pressure and surface
pressure. The overall objective is to identify
the well's capacity to produce hydrocarbons at
a commercial flow rate
-------------------------------------------------------
horizontal a well that during drilling is steered so as to
well follow and remain within a particular geological
stratum or reservoir unit having a trajectory that
runs approximately parallel to the top and or base
of the target horizon
-------------------------------------------------------
oil field an accumulation, pool or group of pools of oil
in the subsurface that produces oil to surface
-------------------------------------------------------
UKOG Licence Interests
The Company has interests in the following UK licences:
Asset Licence UKOG Licence Operator Area Status
Interest Holder (km(2)
)
Field currently
Avington UKOG (GB) IGas Energy temporarily
(1) PEDL070 5% Limited Plc 18.3 shut in
--------------------- ---------- ------------------- ------------------- -------- --------------------
BB-1/1z oil
Broadford discovery, Loxley-1
Bridge/Loxley/Godley gas appraisal
Bridge well planning
(2, 3, UKOG (234) UKOG (234) application
8) PEDL234 100% Ltd (4) Ltd (4) 300.0 submitted
--------------------- ---------- ------------------- ------------------- -------- --------------------
Finalising new
site selection
to drill Portland
and Kimmeridge
A24 (3) PEDL143 67.5% UKOG UKOG (7) 91.8 prospects
--------------------- ---------- ------------------- ------------------- -------- --------------------
Horndean UKOG (GB) IGas Energy Field in stable
(1) PL211 10% Limited Plc 27.3 production
--------------------- ---------- ------------------- ------------------- -------- --------------------
Production tests
ongoing, two
Horse Horse further appraisal
Horse Hill Hill Developments Hill Developments wells scheduled
(5) PEDL137 85.635% Ltd Ltd 99.3 for 2019
--------------------- ---------- ------------------- ------------------- -------- --------------------
Horse Horse
Horse Hill Hill Developments Hill Developments
(5) PEDL246 85.635% Ltd Ltd 43.6 As above
--------------------- ---------- ------------------- ------------------- -------- --------------------
Preparing planning
submission for
Arreton-3 oil
appraisal well
Isle of and Arreton
Wight (Onshore) South exploration
(2, 3) PEDL331 95% UKOG UKOG 200.0 well
--------------------- ---------- ------------------- ------------------- -------- --------------------
Markwells UKOG (GB) UKOG (GB)
Wood PEDL126 100% Limited Limited 11.2 MW-1 P&A
--------------------- ---------- ------------------- ------------------- -------- --------------------
Notes:
1. Oil field currently in stable production.
2. Oil discovery pending development and/or appraisal
drilling.
3. Exploration asset with drillable prospects and leads.
4. Contains the Broadford Bridge-1/1z Kimmeridge oil discovery,
the eastern extension of the Godley Bridge Portland gas discovery
plus further undrilled Kimmeridge exploration prospects.
5. Oil field with three productive and commercially viable
zones, EWT ongoing, further drilling campaign scheduled,
development underway subject to grant of planning consent expected
in Q3 2019.
6. UKOG has a direct 77.9% interest in HHDL, which has a 65%
interest in PEDL137 and PEDL246.
7. OGA consent received for the transfer of operatorship from
Europa to UKOG
8. Gas discovery pending appraisal drilling and development with
underlying Kimmeridge potential
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014
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END
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