TIDMUEN
RNS Number : 3752Q
Urals Energy Public Company Limited
14 October 2013
Press Release 14 October 2013
Urals Energy PCL
("Urals Energy" or the "Company")
Notice of extraordinary general meeting ("EGM")
Possible offer for up to 100 per cent. of the entire issued
share capital of Urals Energy
Posting of Circular to Shareholders
Urals Energy (AIM:UEN), the independent exploration and
production company with operations in Russia, announces that
following the requisition of an EGM, further details of which were
announced on 25 September 2013, it will today post a notice
convening an extraordinary general meeting of the Company's
shareholders for 11.00 a.m. (Cyprus time) on Monday 27 January 2014
at Evagoras Building, Office 34, 3rd floor, 31 Evagorou Avenue,
Nicosia, CY-1066, Cyprus.
The key points in the Circular are:
-- Removal of Ingeborg Srenger from the Board will be an 'Event
of Default' under the Petraco Oil Company debt restructuring
agreement giving Petraco the right to require immediate
repayment of the amounts owing to it
-- Urals Energy would face litigation from Petraco and this
would be extremely detrimental to the Company and its shareholders
-- Potential cash offer received at an indicative price of
12.25 pence per share for 100% of the entire issued share
capital of Urals Energy
-- Potential cash offer is subject to due diligence from a
highly credible purchaser with previous Russian operational
oil experience
-- Uncertainty as to who has ultimate control and ownership
of Fire East Corporation
-- The requisitioners have failed to provide any information
on their future plans for Urals Energy
-- The Board believes that the requisitioners are planning
on using the Company to acquire a high risk asset
-- Existing management have saved Urals Energy from near bankruptcy
-- The resolutions proposed are not in the interests of shareholders
-- The Board of Urals Energy* recommends that shareholders
vote against all the resolutions proposed by the requisitioners
* with the exception of Mr Ranta who has abstained
Copies of the Circular convening the EGM will be posted to
Shareholders today and will be available from Urals Energy's
website in accordance with Rule 20 of the AIM Rules for Companies,
www.uralsenergy.com.
- Ends -
For further information, please contact:
Urals Energy Public Company Limited
Alexei Maximov, Chief Executive Tel: +7 495 795 0300
Officer
Sergey Uzornikov, Chief Financial www.uralsenergy.com
Officer
Allenby Capital Limited
Nominated Adviser and Broker
Nick Naylor Tel: +44 (0) 20 3328
5656
Alex Price www.allenbycapital.com
Media enquiries:
Abchurch
Henry Harrison-Topham / Quincy Allan Tel: +44 (0) 20 7398
7702
quincy.allan@abchurch-group.com www.abchurch-group.com
The following information is extracted from a circular to
Shareholders (the "Circular") expected to be posted today. Copies
of the Circular will be available to download from the Company's
website. Definitions used in the Circular apply in this
announcement unless the context otherwise requires.
Extraordinary General Meeting of Urals Energy Public Company
Limited
("Urals Energy" or the "Company")
The Company has announced today that, following the requisition
of an extraordinary general meeting, further details of which were
announced on 25 September 2013, it will today post a notice
convening an extraordinary general meeting of the Company's
shareholders for 11.00 a.m. (Cyprus time) on Monday 27 January 2014
at Evagoras Building, Office 34, 3rd floor, 31 Evagorou Avenue,
Nicosia, CY-1066, Cyprus (the "EGM").
The purpose of writing to you is to explain the background to
the unanimous decision of the board of Urals Energy (the "Board")
to hold the EGM on 27 January 2014 as well as to give their reasons
why the Board with the exception of Mr Ranta, who has abstained,
recommend that you vote against all of the resolutions proposed by
the requisitioners.
Background to timing of EGM
Petraco Oil Company Ltd ("Petraco")
Shareholders will no doubt recall the debt restructuring
arrangement entered into with Petraco in April 2010, full details
of which were provided in the circular accompanying the notice of
EGM dated 14 April 2010 (the "2010 Circular"). Petraco was, and has
continued to be, enormously supportive of Urals Energy, without
which support the Company would, in all likelihood, have been
placed into insolvency. Key to this support has been the
involvement of Ingeborg Srenger as a non-executive director of the
Company and, in fact, as noted in the 2010 Circular, it is a term
of the debt restructuring agreement (the "Petraco Agreement") that
Petraco have the right to appoint a non-executive director to the
Board.
One of the resolutions proposed by the requisitioners is for the
removal of Ingeborg Srenger as a director of Urals Energy. If
passed, this could have extremely detrimental consequences for the
Company and its shareholders as it would be likely to result in an
'Event of Default' under the debt restructuring terms which would
give Petraco the right to require immediate repayment of the
amounts owing to it from the Company under the Petraco Agreement
and seizure of Arkticneft. Aside from the exposure this would give
the Company to litigation from Petraco, it would be likely to cause
severe damage to Urals Energy's relationship with Petraco going
forward. Petraco have written to Urals Energy in such terms.
Therefore, in order to remove the possibility of an 'Event of
Default' occurring under the Petraco Agreement or of litigation
between the Company and Petraco, itself a shareholder in Urals
Energy, the Board considers that it is in the interests of
shareholders as a whole for the EGM to take place after all sums
have been repaid to Petraco which, as previously announced, is
anticipated to take place prior to the end of 2013.
Possible offer for up to 100 per cent. of the entire issued
share capital of Urals Energy
The Board has received a non-binding letter of intent from a
third party, whom the Board and the Company's advisers consider to
be highly credible, setting out the third party's intention to make
an offer for up to 100 per cent. of the entire issued share capital
of the Company (the "Potential Offer"). The Potential Offer, which
is subject to the results of a due diligence process currently
underway, is envisaged to be an all cash offer and with an
indicative price of 12.25 pence per share, a significant premium to
the Company's current share price. I must stress that, at this
stage, whilst the Board view the possible purchaser as highly
credible, with both the necessary means to effect the Potential
Offer and previous Russian operational oil experience, no binding
offer has yet been forthcoming and there can be no guarantee that a
formal offer will in fact be made. Further, should a formal offer
be made, there can be no guarantee that the price per share will be
as indicated.
The Board unanimously consider that it is in the interests of
all shareholders to allow the third party time to complete the due
diligence required. The Board have been informed by the third party
that, should the resolutions proposed by the requisitioners be
passed by shareholders, no offer would be forthcoming.
To date, the Company has received no indication from the
requisitioners, who hold in excess of 30 per cent. of the issued
share capital of the Company, that they intend to make an offer for
the entire issued share capital of the Company. As an AIM listed
Cypriot company, the Company is not subject to any takeover
code
If a formal offer is received, the Board will consider such
offer on its merits and make a recommendation to shareholders as to
whether to accept.
Summary
In view of the above, namely the risk of an 'Event of Default'
resulting in potential litigation from Petraco and the possibility
of an offer for up to 100 per cent. of the entire issued share
capital of the Company, the Board unanimously considers that it is
in the best interests of shareholders to hold the EGM no sooner
than early 2014. The Company has received advice from its Cypriot
lawyers that convening the EGM for 27 January 2014 is in accordance
with Cypriot law.
Recommendation to vote against all resolutions proposed by the
requisitioners
The Board, with the exception of Mr Ranta who has abstained,
recommends that shareholders vote against all the resolutions
proposed by the requisitioners at the EGM for the following
reasons:
It is far from clear who is behind Fire East Corporation
As announced on 4 October 2013, pursuant to Urals Energy's
articles of association the Board has asked Fire East Corporation
("Fire East") to identify any persons who have an interest in the
shares Fire East holds in the Company. The Board has subsequently
received a response from Fire East stating that that Mr Oleg Makhno
is the 100 per cent. beneficial owner of Fire East. The Board is
currently considering this response further but understands that
Fire East and Mr Barsky are both acting at the behest of Mr D
Bosov, owner of the Alltech Group, Pechora LNG and Pacific Oil
Company amongst others.
The Board* advises that shareholders vote against the
resolutions proposed by the requisitioners given the risk that
control of the Company may be passed to unknown individuals which
could be to the detriment of shareholders.
The requisitioners have failed to give any information on their
future plans for Urals Energy
Neither Alpcot Capital Management Ltd nor Fire East have given
any public indication of what their future plans are for Urals
Energy, despite proposing a complete change of executive management
of the Company and a change of board control. The Board is
concerned that, in addition to leaving shareholders with very
little information regarding the future of the Company, many of the
senior technical and operational staff that are pivotal to Urals
Energy's continued operations may choose to seek more certain
employment elsewhere in the absence of certainty over their
futures.
The Board* therefore advises that shareholders vote against the
resolutions in order to avoid potentially irreparable damage being
done to the Company's operations.
The Board has reason to believe that the requisitioners are
planning on using the Company to acquire a high risk asset and
dilute existing shareholders
In 2010 Mr Bosov approached Urals Energy with a proposal that
the Company acquire the Prizalivnyj licence on Sakhalyn Island
(which is owned by Pacific Oil Company), some 200 kms north of the
Company's own licence at Petrosakh. This was rejected by the
Company at that time on the basis of the perceived geological
risks, high costs and location in relation to evacuation of
hydrocarbons, if any. Subsequently in May 2013, Mr Barsky, on
behalf of Mr Bosov, again approached Urals Energy seeking to
combine the acquisition of the Prizalivniy licence together with a
merger with Matra Petroleum plc, a company of which he is CEO. At
the time Matra Petroleum plc was in the process of selling its
principal asset, an exploration licence and expected to receive a
minimum of US$25 million for this. At the meeting in June 2013, the
Board accepted an independent professional's recommendation to
reject Mr Barsky's proposal, principally on the grounds that the
geological risks of the Prizalivnyj licence were unduly high,
further seismic is likely to be required and the costs of drilling
a first well could be in the region of US$10 to US$15 million. In
addition, although it might seem that there would be synergistic
benefits with Urals Energy's licence and refinery at Petrosakh, in
reality the lack of logistics would be both difficult and expensive
to overcome.
It is a matter of public record that in April 2013, attempts by
East Siberian Resources Ltd, a company owned by Mr Bosov, to farm
out a controlling interest in the Prizalivnyj licence were
unsuccessful. It is also well known that Mr Barsky believes Russian
assets to be overvalued and this has led to the recently announced
new strategy of Matra Petroleum plc to seek investment
opportunities in the United States.
Steve Buscher and I, as the representatives of the Board, met Mr
Barsky in Moscow at his request on 25 September 2013, the day on
which the EGM was requisitioned. In this meeting Mr Barsky was
clear that his motivation was to take control of the Company,
without making an offer for the entire share capital and then to
have the Company acquire the Prizalivnyj licence for new shares in
the Company, resulting in significant dilution for current
shareholders.
In the Board's* view the result of this exercise could be
extremely damaging to existing shareholders. The risks and costs
associated with the licence would be significant for a small
company with a relatively limited cash flow, even if we believed
the area to be sufficiently prospective. The subsequent protection
of the interests of minority shareholders in the Company would also
not be assured. As a result, the Board* recommend that shareholders
vote against all the resolutions.
Existing management have saved Urals Energy from near
bankruptcy
Urals Energy's transformational recovery from near bankruptcy a
few years ago has been dramatic. Production at both of its assets
is solid and the recent results of the Passive Seismic Spectroscopy
and a separate Micro-Seismic surveys give the Board considerable
grounds for optimism and show the possibility of significantly
increasing production at Arkticneft from the current horizons with
limited capital and operational expenditure. At the same time,
measures to halt natural decline at Petrosakh including the
completion of successful workovers have stabilised production and
new well drilling and existing well optimisation programmes are in
place and being implemented on both fields.
As announced on 27 September 2013, the Company's gross profit
for the first six months of 2013 improved by 60 per cent. to US$4.9
million (H1-2012: US$3.0 million). As a result the Company achieved
a net profit of US$1.0 million for the same period (H1-2012: US$0.6
million loss). Indeed, for the first time since 2006, the Company
achieved positive net working capital on 30 June 2013 of US$0.7
million (2012: US$1.0 million negative working capital).
Looking to the future, the drilling of Well #53 on the Petrosakh
Field will be completed during October 2013 and, following the
annual planned tanker shipment for export from Arkticneft in late
October 2013, the Board anticipates being substantially debt free
by the end of 2013 resulting in the expected release of the charge
over the Company's Arkticneft assets by Petraco. Drilling of a new
well #112 is expected to start shortly after Well #53 commences
production.
The Board believe that Mr Barsky is well aware of the
significant progress being made by Urals Energy and this attempt to
obtain control of the Company without paying shareholders a premium
is entirely opportunistic.
By voting against the resolutions proposed by the
requisitioners, shareholders will retain the current management and
stability for the Company, thereby allowing the current strategy,
which is already bringing tangible results, to be fulfilled. Any
vote in favour of the requisitioners risks undermining this
progress and stability.
The resolutions proposed are not in the interests of
shareholders
As noted above, to date the requisitioners have made no
indication to the Board that they are prepared to make a bid for
the entire issued share capital of the Company. It is also clear
from statements made by Mr Barsky that his motivation is precisely
the opposite, namely to take control of the Company without having
to make an offer for all of its shares.
The Board* therefore advise shareholders to vote against the
resolutions proposed at the EGM since to do otherwise potentially
risks the interests of minority shareholders being sidelined in
favour of the requisitioners.
Further action to be taken
The Board* advises shareholders to vote against all resolutions
proposed at the EGM.
On 11 October 2013 the Board received a letter from Fire East
claiming to have written confirmation from other shareholders
representing in excess of 8.5 per cent. of the issued share capital
of the Company in favour of the resolutions proposed at the EGM.
The Board is currently investigating the veracity of this as yet
unsubstantiated claim but, in the meantime, the Board* advises
shareholders not to commit to a course of action without having
received all available information.
Further announcements in relation to the Potential Offer will be
made at the appropriate time. In the event that the Potential Offer
does not proceed, the Board will write to shareholders before the
end of 2013 to update them on the Company's progress and set out in
more detail the Board's arguments for shareholders voting against
all of the resolutions proposed at the EGM. The Board* urges
shareholders to take no action until they have received this
further letter.
Yours sincerely,
Andrew Shrager
Chairman
Urals Energy Public Company Limited
* with the exception of Mr Ranta who has abstained
This information is provided by RNS
The company news service from the London Stock Exchange
END
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