TIDMHNL
RNS Number : 9969B
Hague and London Oil PLC
10 April 2017
10 April 2017
HAGUE AND LONDON OIL PLC
(the "Company" or "HALO")
PROPOSED REVERSE TAKEOVER
PROPOSED ACQUISITION OF TULLOW 101 NETHERLANDS B.V.
Conditional agreement to acquire producing assets in the Dutch
North Sea
Hague and London Oil PLC is pleased to announce that it has
agreed the conditional acquisition of significant non-operated
natural gas production assets in the Dutch North Sea from Tullow
Netherlands Holding Coöperatief B.A. based on an enterprise value
of EUR4,752,675, the net effect of which is that the Seller shall
receive an estimated amount of EUR9,752,429 on Completion and
contingent payments of up to EUR20,000,000 payable between 1
January 2019 and 1 January 2021.
HALO is to acquire the assets through the purchase by its wholly
owned subsidiary, Hague and London Oil B.V. ("HALO B.V."), of the
entire issued share capital of Tullow 101 Netherlands B.V. ("Tullow
101") (the "Acquisition").
Highlights
-- HALO B.V. will acquire Tullow 101 and its two subsidiaries, Tullow Exploration & Production B.V. and Tullow
Exploration & Production Netherlands B.V. (the "Target Group").
-- The Acquisition comprises interests in a suite of offshore exploration and production licences on the Dutch
Continental Shelf ("DCS") within the Northern Area and Joint Development Area ("JDA") in the western part of the
DCS (the Licences), which collectively generated total net production of 2,900 boepd in 2016.
-- The Directors believe that the Acquisition represents a transformational step in the implementation of HALO's
strategic repositioning towards lower risk, production opportunities in established hydrocarbon provinces with
ample access to, and equity ownership of, infrastructure.
-- The Licences benefit from stable field production and the Directors see potential for significant upside in
proved undeveloped and probable reserves, and contingent resources.
-- HALO is currently engaged in discussions with potential finance providers to agree the terms of funding for the
completion payment pursuant to the terms of the Acquisition, whilst minimising dilution to Shareholders. The
Company will announce further details of its financing arrangements at the appropriate time and once any binding
agreement is entered into and details of such arrangements shall be included in the Admission Document.
Andrew Cochran, Chairman and Interim Chief Executive of Hague
and London Oil plc, commented:
"Since the combination with Wessex Exploration in 2014, we have
been on a slow but steady, measured, path to transform the Company
into a lower-risk, successful E&P player. The prolonged market
downturn has hit our sector very hard and has certainly impacted
our efforts to diversify and grow the portfolio sooner. We have
therefore been focused, disciplined and persistent in our
implementation of the announced strategy, and today's proposed
acquisition is the culmination of the Company's dedication to
deliver within the stated objectives and a cost-effective manner.
These are high-quality, cash generative assets with significant
upside potential, in a mature basin with existing infrastructure
and commercialisation routes - which have been the critical factors
in our screening process and are also likely to be key in agreeing
the funding of the Acquisition. We are looking forward to
integrating this portfolio into HALO to continue on the future
growth trajectory. This will fully complete the corporate
transition to what we had longed planned for the Company"
Reverse takeover, General Meeting and Admission
Given the scale of the Acquisition when compared to the existing
Group, the Acquisition constitutes a reverse takeover under Rule 14
of the AIM Rules and requires the Company to issue a new admission
document and is conditional, inter alia, on the approval of the
Acquisition by Shareholders. The Company is in the process of
preparing an admission document relating to the Acquisition and
readmission to trading on AIM of the Enlarged Group (the "Admission
Document") and is aiming to publish the Admission Document by 1
August 2017. A Competent Person's Report ("CPR") on the material
assets and liabilities of the Enlarged Group is in the course of
being finalised, and will be included in the Admission Document as
required by the AIM Rules. The Admission Document and a notice of
the General Meeting, at which the approval of HALO's shareholders
to the Acquisition will be sought, will be sent to shareholders in
due course following the finalisation of the CPR and binding
financing agreements. The Admission Document will also be made
available on the Company's website (http://www.haloil.co.uk/ ).
Stifel Nicolaus Europe Limited is acting as nominated advisor to
the Company in connection with the Acquisition.
Restoration of trading on AIM following publication of Admission
Document
Trading in the Company's Ordinary Shares on AIM has been
temporarily suspended since 4 April 2017. On publication of the
Admission Document, the Ordinary Shares will be re-admitted to
trading on AIM.
Capitalised terms used but not defined in the body of this
Announcement shall have the meanings ascribed to them in the
"Definitions" section at the end of this Announcement, unless the
context otherwise requires.
Enquiries:
Hague and London Oil Stifel Nicolaus Europe
PLC Limited
6 Charlotte Street, 150 Cheapside
Bath, London
BA1 2NE EC2V 6ET
Attention: Attention:
Andrew Cochran Callum Stewart
Executive Chairman Managing Director
andrew.cochran@haloil.co.uk callum.stewart@stifel.com
Natalia Erikssen +44(0) 20 7710 7600
IR/PR enquiries
natalia.erikssen@haloil.co.uk
+44 (0)20 7520 9268
INTRODUCTION
The Company announced on 11 May 2016 its intention to pursue a
dual strategy going forward consisting of (1) a focus on lower risk
assets with well-understood geology, near-term commercial
potential, access to infrastructure and with locations in
established hydrocarbon and stable political jurisdictions (2)
higher risk assets being spun out into a partly owned subsidiary of
HALO, Vermeer Exploration B.V.
The rationale for HALO'S revised strategy was a significant
reduction in the appetite of equity markets for high-risk
exploration, affecting industry valuations, in conjunction with the
availability of lower-risk assets and an expanded access to
capital. HALO was conscious that its existing portfolio and
opportunities arising in the market fell in two distinct and
seemingly opposed risk profiles. Given the state of the industry,
opportunities available and capital markets, HALO adapted by
refocusing the business and has concentrated its efforts on
pursuing the acquisition of producing, lower-risk or near-term
development assets primarily in Europe. The Directors believe that
the Acquisition fits perfectly in this stated objective and
represents a transformative step in implementing the previously
disclosed strategy for the Group.
PRINCIPAL TERMS AND CONDITIONS OF THE ACQUISITION
Pursuant to the Acquisition Agreement, HALO B.V. has agreed to
acquire all the issued shares in the capital of Tullow 101 with
effect from 00.00.01 on 1 January 2017 conditionally upon passing
of the Resolution at the General Meeting and re-admission of the
Company's Ordinary Shares to trading on AIM. The purchase price
payable at Completion is based on an enterprise value of
EUR4,752,675 subject to working capital adjustment and adjustment
for intra-group indebtedness, the net effect of which is that the
Seller shall receive an estimated amount of EUR9,752,429 on
Completion.
Contingent payments of up to a maximum of EUR20,000,000 may also
be payable between 1 January 2019 and 1 January 2021.
HALO has agreed to guarantee all of HALO B.V.'s obligations
under the Acquisition Agreement.
Following Completion, Tullow 101's name will be changed to
assimilate it within the Group.
SUMMARY FINANCIAL INFORMATION ON TULLOW 101 AND THE
SUBSIDIARIES
Tullow 101
Tullow 101 was incorporated to undertake the exploration,
development and production of oil and gas in the Netherlands.
Tullow 101 is primarily a holding company and does not employ
personnel and does not perform research and development
activities.
Tullow 101 recorded a loss of EUR240,310,000 for the year ended
31 December 2015. As at 31 December 2015, the company had a net
liability position of EUR47,771,000. Further financial information
on Tullow 101 will be included in the Admission Document.
Tullow Exploration & Production Netherlands B.V.
("TEPN")
Tullow Exploration and Production Netherlands B.V.'s activities
during financial year 2015 recorded a loss of EUR230,200,000.
Tullow Exploration & Production B.V.
Tullow Exploration and Production B.V. recorded a loss of
EUR53,240,000 for financial year 2015.
INFORMATION ON THE TARGET GROUP'S ASSETS
The proposed acquisition comprises TEPN's interests in 12
licences in the Northern Area and a suite of interests in the JDA
in the western part of the DCS. The acreage spreads over 2,878 sq
km across 12 licences which generated total net production of 2,900
boepd in 2016. An independent CPR which will externally assess and
describe the proved & probable reserves and contingent &
prospective resources within the Licences is underway and will be
published as part of the Admission Document.
Tullow Oil Group reported total revenues of $31.5 million from
its Dutch assets in 2016.
There is significant planned and sanctioned capital expenditures
("Capex") for the Acquisition assets, which is in excess of total
consideration in both 2017 and 2018. Capex would likely be funded
by the operating cashflow generated out of production from the
Licences within the current business plans.
The operating expenditures ("Opex") in 2016 averaged to be
approximately EUR25/boe in 2016 with respect to the Licences and
these are anticipated to be ca. EUR21/boe in 2017. There are
currently no pending abandonment expenditures ("Abex") associated
with the assets, however Abex obligations and potential financial
guaranties are expected to be incurred in the future within the
normal course, and ongoing of operations of the Assets.
Gas trades in line with the Title Transfer Facility ("TTF").
ASSETS TO BE ACQUIRED
Area Licence Unitised Interest Licence Interest Operator
--------------- ------------- ------------------ ----------------- -----------------
Northern Area E10 30.00% ENGIE
--------------- ------------- ------------------ ----------------- -----------------
E11 30.00% ENGIE
--------------- ------------- ------------------ ----------------- -----------------
E14 30.00% ENGIE
--------------- ------------- ------------------ ----------------- -----------------
E15c 20.00% ENGIE
--------------- ------------- ------------------ ----------------- -----------------
E18b 30.00% Now relinquished
--------------- ------------- ------------------ ----------------- -----------------
E15a 4.147% 4.69% Wintershall
----------------------------- ------------------ ----------------- -----------------
E15b 18.357% 21.12% Wintershall
----------------------------- ------------------ ----------------- -----------------
E18a 18.357% 17.60% Wintershall
4.147%
--------------- ------------- ------------------ ----------------- -----------------
E18a Ballot 10.384% Wintershall
--------------- ------------- ------------------ ----------------- -----------------
F13a 4.147% 4.69% Wintershall
----------------------------- ------------------ ----------------- -----------------
JDA J9 9.95% NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA K8 9.95% 22.50% NAM
0.597%
--------------- ------------- ------------------ ----------------- -----------------
JDA K11 9.95% 18.00% NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA K7 9.95% 0% NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA K14a 9.95% 0%(3) NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA K15 9.95% 0%(3) NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA L13 9.95% 22.50% NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA K18 Golf 2.189% 0% NAM
--------------- ------------- ------------------ ----------------- -----------------
JDA K15 6.809%, 0% NAM
3.809%
----------------------------- ------------------ ----------------- -----------------
THE ENLARGED GROUP AND THE EFFECTS OF THE ACQUISITION ON
HALO
The Acquisition of the Target Group will substantially increase
the size and scale of the Group's operations. The Directors believe
the Target Group will become significantly earnings-enhancing by
2018 (assuming no significant change in commodity prices and no
material unbudgeted capital expenditure requirements).
The Company's strategy is to focus on lower-risk assets with
well-understood geology, near-term commercial potential, access to
(or ownership of) infrastructure situated in established
hydrocarbon basins and stable fiscal jurisdictions, with higher
risk assets spun out into Vermeer Exploration B.V. Following
Admission, the Group will continue to implement this stated
strategy.
The Directors believe the change in scale which will result from
the Acquisition will allow the company to pursue larger
opportunities in the future as well as cash flow to pursue
lower-risk organic opportunities. The Group continues to screen
suitable opportunities as they arise focusing on those which meet
the strategic objectives and are deemed to be value-accretive.
FINANCING ARRANGEMENTS RELATING TO THE ACQUISITION
HALO is in the course of discussions with potential finance
providers to agree terms on which funding may be provided for the
purchase price payable pursuant to the terms of the Acquisition,
whilst minimising dilution to Shareholders.
The Company currently expects the Enlarged Group to be in a
position to meet the costs of any contingent payment which may
become payable under the Acquisition Agreement in the period
between 1 January 2019 and 1 January 2021, without recourse to any
additional third party financing.
The Company will announce further details of its financing
arrangements at the appropriate time and once any binding agreement
is entered into and details of such arrangements will be included
in the Admission Document.
ADMISSION TO AIM
The Company's Ordinary Shares have been temporarily suspended
from trading on AIM since 4 April 2017. The Company is in the
course of preparing the Admission Document and the temporary
suspension of trading will be lifted and trading will resume on
publication of the Admission Document.
If Shareholders approve the Acquisition at the General Meeting,
to be convened in due course, the Company's existing quotation on
AIM will be cancelled and the Enlarged Group will then be admitted
to trading. The Admission Document will include an expected
timetable of principal events.
GENERAL MEETING
A notice convening a general meeting of the Company will be set
out in the Admission Document. At the General Meeting the
Shareholders will be asked to approve, by ordinary resolution, the
Acquisition. To be passed, the Resolution requires a majority of
the votes cast at the General Meeting, in person or by proxy.
DEFINITIONS
"Acquisition Agreement" the conditional sale and
purchase agreement dated
[7] April 2017 made between
(1) the Seller; (2) HALO
B.V. and (3) the Company
relating to the Acquisition;
"AIM" the market of that name
operated by the London Stock
Exchange;
"AIM Rules" the AIM Rules for Companies
published by the London
Stock Exchange, as amended
from time to time;
"Board" the board of directors of
the Company from time to
time;
"Completion" completion of the Acquisition
in accordance with the terms
of the Acquisition Agreement;
"Directors" the directors of the Company;
"Enlarged Group" the Company and its subsidiaries
following completion of
the Acquisition;
"General Meeting" the general meeting of the
Company to be held for the
purpose of, inter alia,
considering and, if thought
fit, passing the Resolution,
and any adjournments thereof;
"Group" the Company and its subsidiaries;
"London Stock Exchange" London Stock Exchange plc;
"Ordinary Shares" ordinary shares of GBP0.04
each in the capital of the
Company;
"Resolution" the resolution to approve
the Acquisition to be proposed
at the General Meeting;
"Seller" Tullow Netherlands Holding
Coöperatief B.A., a
cooperative incorporated
under the laws of the Netherlands;
"Shareholders" holders of Ordinary Shares
in the Company from time
to time;
"Subsidiaries" Tullow Exploration & Production
B.V. and Tullow Exploration
& Production Netherlands
B.V. (and each a "Subsidiary");
and
"Tullow Oil Group" the group of companies the
ultimate parent company
of which is Tullow Oil plc,
a public limited company
incorporated in England
and Wales with company number
03919249.
ACQILMTTMBAMTMR
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