Transaction and Suspension of Trading

RNS Number : 2576P

Solo Oil Plc

09 October 2019

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OF FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

9 October 2019

Solo Oil plc

("Solo" or "the Company") 

Reverse Takeover Transaction and Suspension of Trading

Acquisition of package of assets from ONE-Dyas, Board and Executive Management Update, securing of Mercuria debt facility, fundraising and associated open offer, proposed change of name, share capital re-organisation and temporary suspension from trading

Solo (AIM: SOLO), a natural resources investing company focused on acquiring a balanced portfolio of production, development and exploration assets, is pleased to announce that its wholly owned subsidiary, Scirocco (Netherlands) Energy B.V., has entered into a binding sale and purchase agreement ("SPA") with ONE-Dyas B.V. ("ONE-Dyas") to acquire a package of non-operated interests in natural gas fields from ONE-Dyas in the Dutch sector of the North Sea (the "Proposed Transaction").

The consideration for the Proposed Transaction comprises an upfront payment of €30.1 million (the "Upfront Consideration"), plus a future deferred payment of €2.0 million upon first production from future development of the hydrocarbons currently designated as 2C resources contained within one of the fields to be acquired. Solo anticipates the Proposed Transaction will be funded through a combination of a new debt facility with Mercuria Energy Group Ltd ("Mercuria"), new equity and existing resources.

The Proposed Transaction is classified as a reverse takeover transaction pursuant to the AIM Rules and accordingly the Company's shares will be temporarily suspended from trading on AIM as of 07:30 a.m. today. Completion of the Proposed Transaction is therefore subject to approval by Solo's shareholders at a general meeting to be convened in due course ("General Meeting") and the raising of below mentioned equity & debt and regulatory, government and partner consents. In order to convene the General Meeting, the Company is required to publish an AIM Admission Document which details, inter alia, the Proposed Transaction. It is intended that the Admission Document will be published by mid Q4 2019.

To underpin this transformational transaction for the Company and reflect on its ongoing strategic evolution towards a European gas, infrastructure and energy player focused on delivering investor returns in the transitional energy economy, Tom Reynolds, an existing Non-Executive Director, will step into the role of Chief Executive Officer (with immediate effect). Aligned to this change, the Company also proposes, subject to shareholder approval being obtained at the General Meeting, to change its name to Scirocco Energy plc ("Scirocco Energy" or "Scirocco") and to undertake a share capital re-organisation.

Key Highlights

·     Diversified portfolio of high quality, high margin producing assets

o  Three core areas with 14 gas fields, producing c.99% gas / 1% condensate

o  High quality operators in ONE-Dyas, Neptune Energy Limited ("Neptune") and TOTAL S.A. ("TOTAL") within a stable fiscal and regulatory environment

o  Mid-life assets, with relatively low abandonment expenditure

o  ONE-Dyas retaining an interest in certain of the assets and remaining as operator, demonstrating commitment to, and quality of, the assets

o  Self-funding balance sheet going forward with follow on development potential funded by re-investment of free cash flow

·     Increased reserves and stable, growing production

Solo's pro-forma net 2P reserves at 1 January 2019 are expected to increase by 3.6mmboe Associated net 2P NPV10 of c.€40 million (pre-tax)

o  Net average production in H1 2019 from the ONE-Dyas Assets was approximately 1,750boepd expected to increase to approximately 2,125boepd in 2020

·     Significant development upside within each core area

o  Incremental 2C resources of 7.5mmboe at 1 January 2019

§ Associated net 2P + 2C NPV10 of c.€99 million (pre-tax)

o  Near field resources and proximity to existing infrastructure

o  Well defined work programme to convert 2C to producing 2P reserves

o  Potential for production increase to over 3,300boepd by 2022

·     Funding of acquisition through a combination of debt and equity

o  Binding commitment for a debt facility of €18 million from Mercuria Energy Group Ltd ("Mercuria") to fund part of the Upfront Consideration 

o  Company intends to raise approximately £20 million in equity ("the Placing") to fund the balance of the Upfront Consideration, posting of decommissioning security and for working capital purposes

o  Peel Hunt LLP ("Peel Hunt") appointed as bookrunner to the Company, alongside Canaccord Genuity Limited, in connection with the Placing

o  Company intends to launch a simultaneous open offer with publication of the Admission Document to allow existing shareholders the opportunity to invest on the same terms as new institutional investors

·     Creating a self-funding platform with clear path to increased scale and value

o  The acquired assets immediately deliver cash flow for re-investment

o  Development programme targeting 2C contingent resources is self-funded from free cash flow

o  Provides optionality to extract maximum value from wider portfolio in Tanzania

o  Basis for future organic and inorganic growth

·     Continued corporate evolution

o  Strengthened executive management team with appointment of experienced CEO, CFO and COO, with Alastair Ferguson transitioning to Non-Executive Chairman

o  The broader executive team has the required experience in North Sea M&A, public markets and gas value chain

o  Proposed name change to Scirocco Energy plc to reflect transformational nature of transaction

A presentation for investors will be uploaded on the website and the management team will be hosting a conference call at 9:00 a.m. today. Please contact [e-mail] for the dial-in-details.

Alastair Ferguson, Non-Executive Chairman, commented:

"We are delighted to have agreed this truly transformative transaction with ONE-Dyas to acquire working interest positions in a package of mid-life gas field assets. This SPA is the culmination of 12 months of hard work by the Board in re-determining the Company's strategy.  Our priority has been on ensuring the first deal we bring to shareholders is value accretive and reflects the ambition of the Board to build a new mid-cap company backed by high quality assets and stable cash flow. This is a major step towards the Board's strategic goal of evolving into a European gas, infrastructure and energy player focused on delivering investor returns in the transitional energy economy."

Tom Reynolds, CEO, added:

"I am delighted to step up to the role of CEO at this pivotal juncture in the Company's development and look forward to driving the growth agenda, building on this significant transaction. The acquisition transforms Solo into a leading independent producer in the Netherlands and secures a portfolio of cash-generative, producing assets that sets us on a path to sustainable growth.  We are excited by the low-risk development opportunities within the portfolio and we look forward to pursuing the work programme to prove up the development potential which offers a clear route to growing net production volumes. The acquisition of this asset portfolio provides an enviable platform for growth in line with our stated strategy and in support of our longer term ambitions of producing 20,000 boepd in the next five years."

For further information:

Solo Oil plc Alastair Ferguson, Chairman Tom Reynolds, Chief Executive Officer Douglas Rycroft, Chief Operating Officer	[phone]
Strand Hanson Limited Nominated Adviser James Spinney / Ritchie Balmer / Rory Murphy	[phone]
Gneiss Energy Limited Financial Adviser Paul Weidman Peel Hunt LLP Richard Crichton / James Bavister / John Gilbert Canaccord Genuity Limited Henry Fitzgerald-O'Connor / Adam James Buchanan Financial PR Ben Romney / Chris Judd / Kelsey Traynor /         James Husband	[phone] [phone] [phone] [phone] [e-mail]

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation 596/2014.

ONE-Dyas Transaction

Under the SPA, Solo, through its wholly owned subsidiary, Scirocco (Netherlands) Energy B.V., will acquire non-operated working interest positions in 14 gas fields across three core areas ("ONE-Dyas Assets") from ONE-Dyas for the Upfront Consideration of €30.1 million, plus a future deferred payment of €2.0 million upon first production from future development of the 2C resource contained within one of the ONE-Dyas Assets. Solo anticipates the Proposed Transaction will be funded through a combination of a new debt facility with Mercuria, the Placing and existing resources.

The ONE-Dyas Assets produced approximately 1,750boepd in 1H 2019 and are expected to produce approximately 2,125boepd in 2020. The effective date of the Proposed Transaction is 1 January 2019 (the "Effective Date"). The assets have 3.6mmboe of net 2P reserves (as at 1 January 2019) with an associated 2P NPV10 of c.€40 million (pre-tax) net to Solo. In addition, the acquired assets secure incremental low cost / low risk net contingent 2C resources of 7.5mmboe. The acquisition delivers a net 11.1mmboe of 2P + 2C resources with an associated NPV10 of c.€99 million (pre-tax) as at 1 January 2019 (3.3mmboe of 2P reserves and 10.8mmboe of 2P + 2C resources as at 30 June 2019).

The acquisition signals a transformational move for the Company from an investing company into an operating company with a strong focus on the European gas and energy markets in line with the new strategy. The Board believes that the acquisition of mid-life Dutch assets with low exposure to decommissioning liabilities represents a major step towards establishing Solo as a major independent player in the European gas market and the first step towards the Company's production target of 20,000boepd within five years.  

The transaction aligns Solo with operators with a long history of high-quality performance in the North Sea. The acquisition rationale is supported by strong macro dynamics around gas demand in Europe. The assets provide revenue from a fiscally stable and low risk political operating arena and creates a platform for significant growth from future acquisitions.

Following this transaction, Solo will have a self-funding balance sheet with assets in the Netherlands and Tanzania, providing significant medium-term organic and inorganic growth opportunities to recycle free cashflows to drive value for our shareholders.

Temporary Suspension of Trading

By virtue of its size, and as mentioned above, the Proposed Transaction constitutes a reverse takeover in accordance with Rule 14 of the AIM Rules for Companies. Accordingly, at the request of the Company, the Company's ordinary shares will be suspended from trading on AIM with effect from 07:30 a.m. today and will remain so until either the publication of an AIM Admission Document setting out, inter alia, details of the Proposed Transaction or until confirmation is given that the SPA, and associated discussions, have been terminated.

As part of the AIM Admission Document, a competent persons report in respect of the ONE-Dyas Assets is being prepared by SLR Consulting Limited ("SLR") and an updated competent persons report in respect of Solo's existing Tanzanian assets is being prepared by RPS Energy Consultants Limited.

Board and Executive Management Update

Solo is delighted to announce that Mr Tom Reynolds will step into the role of Chief Executive Officer from his current role as Non-Executive Director. This will further enhance Solo's strong executive team, broadening the range of skills and experience which the Company can utilise as part of its continued future growth path.

Mr Reynolds is a Chartered Engineer and has over 30 years' experience in the energy sector, including senior business roles with BP plc, Total SA and British Nuclear Fuels plc, as well as a number of private equity and publicly-listed, independent oil and gas firms.

Tom's specialism sits within strategic planning, investment management and cross-border M&A in the oil, gas, energy and infrastructure sectors and he has considerable experience in the public markets, including holding board seats on various companies listed in London, Oslo and Toronto. Mr Reynolds grew Oslo listed Bridge Energy ASA in his capacity as CEO through a series of acquisitions before its introduction to trading on AIM, prior to its US$150 million sale to HitecVision-backed Spike Exploration Holding AS in 2013 at a 50% share price premium.

Mr Alastair Ferguson will continue to play a significant role on the Board of the Company as Non-Executive Chairman with his extensive experience of gas commercialisation, E&P operations and governance. Since his appointment as Non-Executive Chairman of Solo in August 2018 (later Executive Chairman) he has led the company through a significant period of portfolio rationalisation and was instrumental in the turnaround of the Company and the development of the new success strategy focused on European gas and the energy transition.  

Funding for the Proposed Transaction

As part of the funding for the Proposed Transaction, Solo has entered into a binding commitment letter for an acquisition financing facility with Mercuria of up to €18 million, subject to documentation being agreed and certain customary conditions precedent being fulfilled.

The Company is also pleased to announce the appointment of Peel Hunt LLP as the Company's Bookrunner, alongside Canaccord Genuity Limited, to coordinate the Placing.

Gneiss Energy Limited is acting as financial adviser to Solo on the Proposed Transaction.

Change of Company Name and Share Capital Reorganisation

To reflect the Company's ongoing strategic evolution towards a European gas, infrastructure and energy player focused on delivering investor returns in the transitional energy economy, as part of the Proposed Transaction the Company intends to change the name of the Company, subject to shareholder approval at the General Meeting, to Scirocco Energy plc.

The Company also intends to undertake, subject to Shareholder approval at the General Meeting, a share capital reorganisation, further details on which will be contained in the AIM Admission Document.

Principal terms of the Proposed Transaction

The initial cash consideration is €30.1 million, to be adjusted for working capital movements from the Effective Date. A future deferred payment of €2.0 million is contingent upon the first period of 30 days of continuous production from future development of the 2C resource contained within one of the ONE-Dyas Assets. Completion of the Proposed Transaction is conditional, inter alia, on:

·     Regulatory approval in the Netherlands;

·     the receipt of appropriate consents and transfer relating to the assets to be acquired;

·     the confirmation that no pre-emption rights have been exercised in respect of the Interests, (these three CPs being referred to as the "Consent Conditions")

·     the passing of appropriate resolutions approving the Proposed Transaction in a General Meeting of the Company ("GM Condition");

·     Admission ("Admission Condition").

A deposit of €1 million is due to be paid to ONE-Dyas within one working day of signing of the SPA ("Deposit"). If the Proposed Acquisition does not proceed, the Deposit is repayable to Scirocco (Netherlands) Energy B.V. (the Company's recently incorporated wholly owned subsidiary) unless (a) a defined Buyer Breach (insolvency or breach of fundamental warranties), in which ONE-Dyas retains the entire Deposit or (b) if the GM Condition and the Admission Condition are not satisfied but the Consent Conditions are satisfied, in which case ONE-Dyas retains €500,000 of the Deposit with €500,000 being returned to Scirocco (Netherlands) Energy B.V..

The SPA can be terminated (a) if any of the Conditions Precedent (as defined below) (to the extent not waived) have not been satisfied by the 28 February 2020 (the "Long Stop Date"), (b) if any pre-emption rights over the assets being acquired pursuant to the SPA are exercised before Completion (subject to the acceptance of such exercise by Scirocco (Netherlands) Energy B.V.), (c)  for failure to deliver the completion deliverables on the completion date (subject to the right for the non-defaulting party to delay Completion or proceed to Completion without limiting the right to claim damages) or (d) in the event of Buyer Breach before Completion.

A more detailed summary of the SPA is set out below.

Principal terms of the Mercuria debt package

Mercuria is one of the largest integrated energy and commodity trading companies in the world. Mercuria's activities encompass all key energy products and a wide range of dry bulk commodities, alongside physical elements of the energy business including production, logistics and storage interests.

The acquisition facility with Mercuria will comprise a senior loan of €14 million, which will amortise over a period of four years and will carry an annual interest rate of LIBOR plus 7.0% per annum, and an additional junior loan facility for a further €4 million, which will amortise over a period of five years and will carry an annual interest rate of LIBOR plus 12.0% per annum. Mercuria will also provide gas marketing and gas hedging services to the Company, as part of the Proposed Transaction.

Background to the ONE-Dyas Assets

The net 2P reserves attributable to the ONE-Dyas Assets as at 1 January 2019 are estimated to be 3.6mmboe. These reserves will be a significant addition to Solo's existing net 2P reserves of c.30kboe attributable to its working interest position in the Kiliwani North project, Tanzania.

The working interests of the ONE-Dyas Assets being acquired are laid out in the table below.

Licence / Field	Operator	Proposed Transaction working interest
L08-D	ONE-Dyas	25.00%*
L11c-Gillian	ONE-Dyas	25.00%*
M07-A	ONE-Dyas	15.00%*
M07-B	ONE-Dyas	15.00%*
K09ab-A	Neptune	5.09%
K09ab-B	Neptune	8.63%
K09ab-C	Neptune	9.53%
K09ab-D	Neptune	8.63%
K09c-A	Neptune	10.26%
K09c-C	Neptune	10.26%
K12-L	Neptune	5.18%
K12-G	Neptune	10.32%
L10-M	Neptune	21.43%
K06-D	TOTAL	2.16%

*only a partial divestment is planned by ONE-Dyas in these assets - ONE-Dyas will retain operatorship and a reduced working interest

L08-D & L11c Gillian Fields

L08-D and L11c-Gillian are two producing gas fields, located in blocks L08a, L08b, L11b and operated by ONE-Dyas.

At the end of 2018, ONE-Dyas reported that these fields had produced a total of 636.5million Nm³ of gas for L08-D and 195.0million Nm³ of gas for L11c-Gillian (approximately 24Bscf and 7Bscf, respectively).

The L08-D and L11c-Gillian fields are both tilted fault block structures which have the mid Permian, Rotliegend Group, Slochteren Formation ("ROSL") as the reservoir. This reservoir is divided into an Upper Slochteren Member ("ROSLU") and a Lower Slochteren Member ("ROSLL"), with the ROSLU further sub-divided for reservoir management purposes. The ROSLU is the more important of these two reservoir intervals which are separated by shales of the Silverpit Formation, Ameland Member. These clastic reservoirs were deposited under continental, desert and semi-desert conditions in depositional environments including alluvial fan, aeolian dunes, fluvial and sabkha deposits. The reservoir intervals have variable Net/Gross ratios (average range of 45-80%) and average zonal porosities in the range 10-13%.

The contiguous L08-D, L11c-Gillian and L11-B fields have all been developed from the L11b-A production platform, which was installed by previous operator Chevron. L11-B ceased production in 2009. ONE-Dyas assumed operatorship of the L11b-A platform in 2016.

L08-D was discovered by the L08-16X well in 2004, lying to the north-west of the platform and has been in production since 2009 via three production wells: A06, A08 (2013) and A09 (2015).

L11c-Gillian lies to the south-east of the platform and was discovered in 2015 by the deviated well L11-14, which was renamed A07Z and tied in for production. A second production well, A10 (also known as Gillian-2) was drilled in August 2018. A07Z was hydraulically stimulated in 2017 resulting in a significant productivity improvement. A similar hydraulic stimulation was applied to the new A10 well and would be planned for any future development wells in the area.

Processing facilities on the L11b-A platform include separation, compression and dehydration, with gas export via the NGT pipeline system to Uithuizen.

The approved work programme for these assets includes a side-track of the A06 well (A06X) into an L08-D fault block just to the north-west of the A06 and A09 wells. Also proposed in the 2019 programme are A09 production enhancement activities intended to close a gap in production performance with the A06 and A08 wells.

L08-D - New Satellite Developments

Two satellite developments are considered for the L08-D area, these being L08-D South and L08-D North. The rationale behind these satellite developments is that the majority of L08-D South currently remains un-drained and the L08-D North area is not connected to the current L08-D development.

Phase 1 of the L08-D further development (L08-D South) would consist of an unmanned satellite platform located on the south-eastern corner of the field with three long-reach wells drilled from the platform. These wells would be designed to allow lateral side-tracks to be drilled later to increase the number of production locations to up to six. Similarly, to L11c- Gillian, these wells are likely to be stimulated.

Subject to the results of Phase 1, Phase 2 would re-use the same development concept in the L08-D North area to the north east.

Production from L08-D South and North would flow to the L11b-A platform, bypassing compression, and would be exported via the NGT pipeline to Uithuizen.

SLR has considered the Chance of Development for these new developments and has assigned a risk factor of 75% for L08-D South and 50% for L08-D North.

M07-A & M07-B Fields

The M07-A and M07-B producing gas fields are located in Block M07 and are operated by ONE-Dyas.

At the end of 2018, ONE-Dyas reported that this field had produced a total of 716.7million Nm³ of gas from M07-A and 622.8million Nm³ of gas from M07-B (approximately 27Bscf and 23Bscf respectively).

For the M07-A Field, the reservoir is the Lower Triassic, Volpriehausen Formation, whilst for the M07-B Field the reservoir is the Upper Jurassic, Scruff Formation (specifically, the Schill Grund and Spiculite members).

The Triassic Volpriehausen Formation was deposited under semi-arid to arid conditions and comprises a clastic reservoir of fluvial, aeolian, lacustrine and lagoonal deposits. Average petrophysical properties for the Volpriehausen reservoir are 55-100% Net/Gross and 15-20% porosity, although quality is variable due to depositional facies variations and diagenetic overprints.

The M07-A Field (Triassic reservoir) and M07-B Field (Jurassic reservoir) have both been developed by drilling from the M07-A minimum facilities mono-tower platform. ONE-Dyas assumed operatorship of the licence in 2011. The platform can accommodate a maximum of three wells and all slots are currently in use.

A commercial agreement has been reached with NAM for L09-FF compression capacity to be made available to the M07 Fields from 3Q 2019. A compression test was carried out in May 2018 demonstrating increased production rate without back-out of the NAM production.

ONE-Dyas has identified the following further potential development opportunities:

·     The M07-10 well was drilled to appraise the eastern flank of M07-B in 2016 but found tight reservoir. This well could be stimulated in an attempt to establish commercial production from the area via satellite tie-back.

·     Alternatively, the A01X platform well slot could be reused for further appraisal of the area and potentially add production.

K09/L10-M/K-12-G Cluster

The K09/L10-M/K12-G Cluster is located in the K09ab and K09c licences, the K12-G Unit and the L10-M Unit.

This area contains five producing fields and four currently non-producing fields (planned for potential future production). The K12-L Field has reached its Cessation of Production point and is scheduled for abandonment. All fields are operated by Neptune, except for K06-D Field which is operated by TOTAL. The individual fields are a series of unitised and non-unitised assets.

The gas fields of the K09/L12-M/K12-G Cluster all share the same clastic reservoir interval, that being the mid Permian, Rotliegend Group, Slochteren Formation ("ROSL"). This reservoir is divided into an Upper Slochteren Member ("ROSLU") and a Lower Slochteren Member ("ROSLL"). The ROSLU is the volumetrically more important of these two reservoir intervals which are separated by shales of the Silverpit Formation, Ameland Member. These clastic reservoirs were deposited under continental, desert and semi-desert conditions in depositional environments including alluvial fan, aeolian dunes, fluvial and sabkha deposits. The reservoir intervals generally have high Net/Gross ratios (with an average range of 60-90%) and average zonal porosities are in the range of 10-14%.

Tom Reynolds, Chief Executive Officer, career summary

Tom started his career in 1991 in a variety of commercial, marketing and technical roles with British Nuclear Fuels. In 1997, he joined Total SA, holding a number of commercial roles, including portfolio management and acquisition and divestment processes. From 2000 he was BP plc's commercial manager for the Foinaven and Schiehallion fields. He originated and negotiated the commercial framework for the new West of Shetlands Pipeline System, including third party field tariff arrangements.

He joined 3i plc as an investment manager in early 2003, making a pre‐IPO investment in Pearl Energy and a private placement in CH4 Energy Limited to support the acquisition of the Markham Field. From 2004 until 2008, Mr Reynolds served as CIO of Energy Development Partners, structuring, marketing and successfully closing EDP's first equity fund of US$350 million as a novel approach to development project finance on both the United Kingdom Continental Shelf ("UKCS") and Dutch sector of the North Sea.

In 2008, Tom led the UK team of Silverstone Energy Limited, delivering production and reserve growth within the North Sea and, subsequently, in 2010, managed its merger with Oslo‐listed Bridge Energy AS and a further doubling of production through the acquisition of a series of high margin assets. Following a successful secondary listing on AIM, he grew the enlarged business through acquisitions and successfully delivered its sale in 2013 to Spike Exploration Holding AS, a private company backed by HitecVision. The group was sold for approximately US$150 million, a c.50% premium over its pre-approach share price. In 2014, he joined Iona Energy Inc., a distressed UKCS player, replacing the management team and leading turnaround activities, including the financial restructuring on its US$350 million high yield bond.

More recently, Mr Reynolds has been involved in providing strategic, valuation, investment and corporate finance advice to a broader range of energy companies including serving as a mentor to early stage companies within The Oil & Gas Technology Centre (www.theOGTC.com) sponsored start‐up programme.

Mr Reynolds is a Chartered Member of the Institution of Chemical Engineers and holds a first class honours degree in Chemical and Process Engineering from the University of Strathclyde.

Qualified Person's Statement

Rosemary Johnson-Sabine, Solo's principal technical adviser, who has over 25 years of relevant experience in the oil industry, has approved the technical information contained in this announcement. Mrs Johnson-Sabine is a geophysicist by background having of international experience with major, mid-size and small oil and gas companies. She has worked in business development, exploration and development stages of the industry with a documented history of exploration success winning UK Explorer of the year award from Wood Mackenzie and decorated for services to the energy industry in the UK with an OBE. Rosemary holds a Bachelor of Science in Geology and Geophysics from the University of London, and is a member and ex-President of industry associations PESGB and EAGE and also a member of SEG.

Glossary

boepd - barrels of oil equivalent per day

Bscf - billion standard cubic feet 

mmboe - million barrels of oil equivalent

kboe - thousand barrels of oil equivalent

kboepd - thousand barrels of oil equivalent per day

Nm³ - normal cubic meter

Summary of the SPA

A sale and purchase agreement has been entered into on 8 October 2019 by Scirocco (Netherlands) Energy B.V., a wholly owned subsidiary of the Company as buyer, the Company as Guarantor to certain of Scirocco (Netherlands) Energy B.V.'s obligations, and One-Dyas B.V as seller, in respect of the Interests ("Acquisition Agreement").

The Acquisition Agreement is conditional upon (a) the written approvals of the Minister of Economic Affairs and Climate Policy of the Netherlands (Minister van Economische Zaken en Klimaat) ("Minister"), (b) the unconditional approval by EBN B.V., a company designated by the Minister for the purpose of state participation under sections 81 up to and including 97b of the Dutch Mining Act 2003 (Mijnbouwwet) of Scirocco (Netherlands) Energy B.V. becoming a party to the Agreements of Co-operation (as far as applicable); (c) no pre-emption right in respect of the Interests to be acquired having been exercised, or any such pre-emption right having been waived by the party capable of exercising such right, (d) the receipt of all other necessary cooperation and/or consents required under the agreements related to the Interest to be acquired, (e) the approval of the acquisition at the general meeting of the Company ("GM Condition") and (f) Admission taking place ("Admission Condition").  The conditions must be satisfied by the Long Stop Date, or such other date as agreed in writing by Scirocco (Netherlands) Energy B.V. and ONE-Dyas or the Acquisition Agreement terminates, together the "Conditions Precedent".  All Conditions Precedent can be waived by Scirocco (Netherlands) Energy B.V. and ONE-Dyas agreeing to such waiver. Conditions Precedent (a), (b) and (c) above are referred to as the "Consent Conditions".

The consideration for the Interests is €30,100,000 ("Initial Consideration") which is to be adjusted by a working capital adjustment.

In addition to the Initial Consideration, deferred consideration of €2,000,000 will become payable on the day after the first period during which L08-D South produces for a period of 30 consecutive days. This is a contingent payment which is wholly dependant on such production.

A deposit of €1,000,000 ("Deposit") is payable within one working day of signing of the Acquisition Agreement. On completion of the Acquisition Agreement, the Initial Consideration payable will be reduced by the amount of the Deposit. If the Acquisition Agreement terminates, the Deposit is repayable to Scirocco (Netherlands) Energy B.V. unless (a) there has been an insolvency event relating to Scirocco (Netherlands) Energy B.V. after execution of the Acquisition Agreement or a material breach of warranties granted by Scirocco (Netherlands) Energy B.V. relating to title and capacity as well as anti-bribery and anti-money laundering ("Buyer Breach") or (b) if the Acquisition Agreement fails to complete solely as a result of the GM Condition and the Admission Condition not being satisfied (providing that the Consent Conditions have been satisfied) in which case ONE-Dyas retains €500,000 of the Deposit with €500,000 being returned to Scirocco (Netherlands) Energy B.V..

The Acquisition Agreement can be terminated if (a) any of the Conditions Precedent (to the extent not waived) have not been satisfied by the Long Stop Date, (b) if any pre-emption right is exercised before Completion (subject to Scirocco (Netherlands) Energy B.V.'s acceptance of such exercise, in which case the Acquisition Agreement will proceed to Completion with the pre-empted Interest excluded from the Acquisition Agreement, and a corresponding reduction in Consideration), (c) failure to deliver the Completion Deliverables on the completion date (subject to the right for the non-defaulting party to delay Completion or proceed to Completion without limiting the right to claim damages) and (d) in the event of Buyer Breach before Completion.

ONE-Dyas has granted customary warranties and indemnities to Scirocco (Netherlands) Energy B.V. including warranties relating to the Interests and covering title, capacity to sell, confirmation that the Licences are in full force and effect, confirmation of no encumbrances and no disputes.

Scirocco (Netherlands) Energy B.V. has granted customary warranties to ONE-Dyas in respect of title, capacity, solvency and anti-bribery and anti-money laundering.

The Acquisition Agreement is governed by the laws of the Netherlands with the jurisdiction for any disputes being the competent court on Amsterdam, the Netherlands.

 

END

 

 

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