Proposed Offer for Serica Energy Plc

RNS Number : 5165E

Salamander Energy PLC

29 September 2008

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM AUSTRALIA, JAPAN OR THE UNITED STATES OF AMERICA OR ANY OTHER RESTRICTED JURISDICTION

FOR IMMEDIATE RELEASE

29 September 2008

SALAMANDER ENERGY PLC

PROPOSED OFFER FOR

SERICA ENERGY PLC

Introduction

Salamander announces that on 26 September it made a written proposal to the board of Serica in relation to a proposed combination of the two groups (the 'Proposed Offer').

Salamander believes that the Proposed Offer provides attractive value for Serica Shareholders and that a combination of the two groups would create significant value for both Salamander and Serica Shareholders. However, Serica has informed the board of Salamander that it would not be willing to recommend an offer for Serica on the terms of the Proposed Offer.Salamander is disappointed that the board of Serica has responded in this manner. This announcement enables both Serica's and Salamander's Shareholders to assess the terms of the Proposed Offer on an informed basis.

This summary should be read in conjunction with, and is subject to, the full text of the accompanying announcement and the appendices thereto, which contain further information about the terms and pre-condition to the implementation of the Proposed Offer. Salamander has reserved the right to waive the pre-condition.

This announcement does not constitute an announcement of a firm intention to make an offer under Rule 2.5 of the Takeover Code and, accordingly, there can be no certainty that any offer will ultimately be made, even if the pre-condition to the Proposed Offer is satisfied or waived.

Summary of Proposed Offer

• An all share offer to acquire Serica

• A merger ratio of one New Salamander Share for every three Serica Shares held

• Salamander believes that the Proposed Offer terms fairly reflect the relative valuations of the groups and their respective contributions to the Enlarged Group and offer a significant premium to Serica Shareholders. The combination of Serica and Salamander would provide both sets of shareholders with an investment in an Enlarged Group with strong growth prospects.

• On the basis of full acceptance of the Proposed Offer, including from holders of 'in the money' options under Serica's share option scheme, Serica Shareholders would hold approximately 28 per cent. of Salamander's enlarged issued share capital following completion of the Proposed Combination. 

• Based on a Closing Price per Salamander Share of 210 pence on 26 September 2008, the Proposed Offer values each Serica Share at 70 pence (C$1.3356) and values the entire issued share capital of Serica at approximately £124 million (C$236 million).

• On the basis of the Closing Prices for Serica Shares and Salamander Shares on 26 September 2008, the date on which the Proposed Offer was put to the board of Serica, the Proposed Offer represents a premium of:

• • 23 per cent. to the Closing Price of 57 pence per Serica Share on 26 September 2008; and
    
    

  • 28 per cent. to the volume weighted average price of 54.87 pence per Serica Share for the 20 trading days prior to and including 26 September 2008.

Strategic Rationale and Benefits of the Proposed Combination

Serica Shareholders would receive Salamander Shares, which would provide them with the opportunity to benefit from the enlarged reserves and production and the significant underlying cash flow growth of the Enlarged Group. The Proposed Offer also provides Serica Shareholders with a premium of 28 per cent. to the volume weighted average price of a Serica Share for the 20 trading days prior to and including 26 September 2008, based on the Closing Price of 210 pence per Salamander Share on 26 September 2008. 

The board of Salamander believes that the combination with Serica is an excellent fit, and would consolidate its existing strategic positions. It would create a substantially enlarged, Asia-focused E&P company with proven reserves, increased geographic focus and a strong growing business. The Proposed Combination is in line with Salamander's existing growth strategy and brings clear benefits: 

• An enlarged Asian portfolio with strong growth momentum increasing Salamander's proved and probable reserve base over 17 per cent. to more than 75 MMboe and the expected average production rate by 19 per cent. to close to 19,000 barrels of oil equivalent per day in 2009, from five key assets with operatorship of over 50 per cent. of total production;

• Consolidating interests in the Kambuna gas-condensate field currently under development and exploration licences in Salamander's preferred South East Asian basins:

  • the Enlarged Group would be established as the 100 per cent. equity owner and operator of the Kambuna field, offshore North Sumatra, adding a further 14.5 MMboe¹ of proved and probable reserves. First gas is expected at the end of Q1 2009 with full production anticipated in Q3 2009;

  • it will have the leading exploration position in the Kutei Basin, East Kalimantan, with highly prospective acreage and operating synergies with Bontang PSC;

  • it would complement Salamander's prospective acreage in Vietnam, with an entry into the Nam Con Son Basin providing near-term drilling opportunities;

  • it will provide scope for further organic growth through adding new acreage, as evidenced by the Block 31, Vietnam, due to be signed in Q4 2008 and a new licence application in process in the Northern Kutei Basin;

• Accelerated cash flow growth - Salamander's significant underlying cash flow growth would be enhanced through full Kambuna equity ownership; 

• An enhanced exploration programme with at least 13 exploration wells across 5 different basins in South East Asia during 2009;

• Deploying Salamander's financial and operating strength across the combined asset base to create the opportunity for superior growth;

• Exposure for Serica Shareholders to a more liquid investment; and

• The board of Salamander would explore options for maximising shareholder value from non-core assets including the potential for demerger or sale.

-------------------------------

¹ This 50 per cent. interest in the Kambuna field production is booked by Serica at 14.8 MMboe in Serica's Annual Report and Accounts whereas Salamander has booked its 50 per cent. interest in the production at 14.5 Mmboe.

Commenting today, James Menzies, Chief Executive of Salamander, said:

'A combination with Serica represents an excellent strategic fit, providing outstanding opportunities to accelerate Salamander's production growth and exploration activities while benefiting from available operating synergies. Salamander believes that leveraging the combination of assets with Salamander's financial strength and operational experience will create the opportunity to deliver superior growth for shareholders in the Enlarged Group.  

We believe that the terms of the Proposed Offer are attractive for Serica's Shareholders, providing them with both an appropriate premium to the recent share price and, exposure to a more geographically focused, well financed E&P company with increasing cash flow and strong growth prospects.

We are disappointed that the board of Serica has not indicated a willingness to recommend the Proposed Offer. Salamander continues to seek a recommendation from the board of directors of Serica. A swift conclusion to the process is in the interests of all shareholders.' 

Certain defined terms used in this announcement are set out in Appendix I to the accompanying announcement. The sources of information and bases of calculation of certain financial and other information in this announcement are set out in Appendix II to the accompanying announcement.

Enquiries:

Salamander Energy plc                                020 7404 5959 (on 29 September 2008)

                                                                  020 7960 1580 (thereafter)

James Menzies, Chief Executive

Nick Cooper, Chief Financial Officer

Geoff Callow, Head of Corporate Affairs

Brunswick Group LLP                                 020 7404 5959

Patrick Handley

Nina Coad

Nina Soon

Oriel Securities Limited                               020 7710 7600

Simon Bragg

Natalie Fortescue

David Arch

Investor communications:

Analyst/Investor presentation: 

There will be an investor and analyst presentation at 09:30 GMT on Monday 29 September 2008 at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. 

A copy of the investor and analyst presentation will be available on Salamander's website from 09.30 GMT: www.salamander-energy.com

A recording of the presentation will be available from 13.00 GMT on Monday 29 September 2008, for 72 hours, and can be accessed using the following dial-in details:

International Dial-in: [phone] 

Encore Replay Access Number: 66945905#

An exchange rate of £0.524109015/C$ has been used throughout this announcement.

Oriel Securities Limited is acting for Salamander and no one else in connection with the Proposed Offer and will not be responsible to anyone other than Salamander for providing the protections afforded to clients of Oriel Securities Limited nor for giving advice in relation to the Proposed Offer.

THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR AN INVITATION TO SUBSCRIBE FOR OR PURCHASE, ANY SECURITIES OR THE SOLICITATION OF ANY APPROVAL IN ANY JURISDICTION, NOR SHALL THERE BE ANY SALE, ISSUANCE OR TRANSFER OF THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

The distribution of this announcement in jurisdictions other than the United Kingdom and Canada may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement has been prepared for the purposes of complying with the applicable rules and regulations of the FSA, the London Stock Exchange, the TSXV, the Takeover Code and Canadian securities legislation and will be governed by English law and be subject to the jurisdiction of the courts of England. The information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.

The New Salamander Shares referred to in this announcement have not been, and will not be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States, or of Canada, Australia or Japan and no regulatory clearances in respect of the registration of Salamander Shares have been, or will be, applied for in any such jurisdiction. The Proposed Offer has not been and will not be approved or disapproved by the SEC, nor has the SEC or any US state securities commission passed judgement upon the merits or fairness of the Proposed Offer nor upon the adequacy or accuracy of the information contained in this document. Any representation to the contrary is a criminal offence in the United States. 

New Salamander Shares are not being offered to the public by means of this announcement and this announcement does not constitute a prospectus or prospectus equivalent document.

Neither this announcement nor the Proposed Offer constitutes an offer of securities for the sale in the United States or an offer to acquire or exchange securities in the United States. No offer to acquire or exchange securities for securities has been , or will be made directly or indirectly, in or into or by the use of the mails of, or any means or instrumentality (including, but not limited to, facsimile, eߛmail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, the United States or any area subject to its jurisdiction or any political division thereof, nor is it being made into any other Restricted Jurisdiction and will not be capable of acceptance by any such use, means, instrumentality or otherwise from within the United States or any other Restricted Jurisdiction. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise distributed or sent in, into or from the United States or any other Restricted Jurisdiction. Persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not distribute, mail or send it in, into or from the United States or any other Restricted Jurisdiction.

Forward Looking Statements 

This document includes certain 'forward looking statements' with respect to the business, strategy and plans of Salamander and its expectations relating to the Proposed Combination and its future financial condition and performance. Statements that are not historical facts, including statements about Salamander's or its management's beliefs and expectations, are forward looking statements. Words such as 'believes', 'anticipates', 'estimates', 'expects', 'intends', 'aims', 'potential', 'will', 'would', 'could', 'considered', 'likely', 'estimate' and variations of these words and similar future or conditional expressions are intended to identify forward looking statements but are not the exclusive means of identifying such statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur.

Factors that could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by Salamander or on its behalf include, but are not limited to, general economic conditions in the United Kingdom, the United States or elsewhere; legal proceedings or complaints; changes in competition and pricing environments; or an inability to implement the strategy of the Enlarged Group or achieve the Proposed Combination benefits set out herein.  

Forward looking statements only speak as of the date on which they are made, and the events discussed herein may not occur. Subject to compliance with applicable law and regulation, Salamander undertakes no obligation to update publicly or revise forward looking statements, whether as a result of new information, future events or otherwise.

No statement in this announcement is intended to constitute a profit forecast for any period and no statement should be interpreted to mean that earnings or earnings per share will necessarily match or exceed than those for the relevant preceding financial periods for Salamander or Serica as appropriate.

UK Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of the Takeover Code, if any person is, or becomes, 'interested' (directly or indirectly) in 1 per cent. or more of any class of 'relevant securities' of Salamander or Serica, all 'dealings' in any 'relevant securities' of Salamander or Serica (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 p.m. (London time) on the Business Day in London following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Salamander or Serica, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Takeover Code, all 'dealings' in 'relevant securities' of Salamander or Serica by Salamander or Serica, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the Business Day in London following the date of the relevant transaction.

A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Panel's website at: www.thetakeoverpanel.org.uk.

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Takeover Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM AUSTRALIA, JAPAN OR THE UNITED STATES OF AMERICA OR ANY OTHER RESTRICTED JURISDICTION

FOR IMMEDIATE RELEASE

29 September 2008

SALAMANDER ENERGY PLC

PROPOSED OFFER FOR

SERICA ENERGY PLC

1.           Introduction

Salamander announces that on 26 September it made a written proposal to the board of Serica in relation to a proposed combination of the two groups (the 'Proposed Offer').

Salamander believes that the Proposed Offer provides attractive value for Serica Shareholders and that a combination of the two groups would create significant value for both Salamander and Serica Shareholders. However, Serica has informed the board of Salamander that it would not be willing to recommend an offer for Serica on the terms of the Proposed Offer.Salamander is disappointed that the board of Serica has responded in this manner. This announcement enables both Serica's and Salamander's Shareholders to assess the terms of the Proposed Offer on an informed basis.

2.           Summary of the Proposed Offer

Subject to the satisfaction or waiver of the pre‑condition set out below, and on the terms and conditions to be set out in any formal offer announcement, Salamander is prepared to make an offer for the issued and to be issued ordinary share capital of Serica on the following basis:

                       one New Salamander Share          for every three Serica Shares held

Salamander believes that the Proposed Offer terms fairly reflect the relative valuations of the groups and their respective contributions to the Enlarged Group and offer a significant premium to Serica Shareholders. The combination of Serica and Salamander would provide both sets of shareholders with an investment in an Enlarged Group with strong growth prospects.

On the basis of full acceptance of the Proposed Offer, including from holders of 'in the money' options under Serica's share option scheme, Serica Shareholders would hold approximately 28 per cent. of Salamander's enlarged issued share capital following completion of the Proposed Combination.

Based on a Closing Price per Salamander Share of 210 pence on 26 September 2008, the Proposed Offer values each Serica Share at 70 pence (C$1.3356) and values the entire issued share capital of Serica at approximately £124 million (C$236 million).

On the basis of the Closing Prices for Serica Shares and Salamander Shares on 26 September 2008, the date on which the Proposed Offer was put to the board of Serica, the Proposed Offer represents a premium of:

·     23 per cent. to the Closing Price of 57 pence per Serica Share on 26 September 2008; and

·     28 per cent. to the volume weighted average price of 54.87 pence per Serica Share for the 20 trading days prior to and including 26 September 2008.

It is the preference of Salamander to proceed with the transaction on a recommended basis and therefore the Proposed Offer is subject to the pre‑condition of the unanimous recommendation of the board of Serica.

Salamander reserves the right to waive this pre‑condition. In addition, without prejudice to Salamander's right to vary the terms of the Proposed Offer at its discretion (subject to the provisions of the Takeover Code), for the purposes of Rule 2.4(c) of the Takeover Code, Salamander reserves the right, with the consent of the board of Serica, to reduce the number of New Salamander Shares and/or vary the form of the securities comprised in the current terms of the Proposed Offer.

Any offer, if made, would also be subject to the terms and conditions set out in any formal offer announcement, including Salamander Shareholder approval. If a recommendation was forthcoming, it would be Salamander's preference to implement the transaction by way of a scheme of arrangement.

This announcement does not constitute an announcement of a firm intention to make an offer under Rule 2.5 of the Takeover Code and, accordingly, there can be no certainty that any offer will ultimately be made, even if the pre‑condition to the Proposed Offer is satisfied or waived.

3.           Background to and reasons for the Proposed Offer

Serica Shareholders would receive Salamander Shares, which would provide them with the opportunity to benefit from the enhanced reserves and production and the significant underlying cash flow growth of the Enlarged Group. The Proposed Offer also provides Serica Shareholders a premium of 28 per cent. to the volume weighted average price for the 20 trading days prior to and including 26 September 2008, based on a Closing Price of 210 pence per Salamander Share on 26 September 2008.

Salamander and Serica shareholders would be part of an Enlarged Group with proven reserves geographic focus and a strong growing business.

The board of Salamander believes that the combination with Serica is an excellent strategic fit. The Proposed Combination will provide material additions to Salamander’s portfolio in South East Asia, creating a leading independent E&P company in the region with both current production and existing cash flow, as well as significant underlying cash flow growth and an enhanced exploration and appraisal drilling programme. The Enlarged Group would consist of a more diversified portfolio of operated and non-operated assets, providing investors with a balanced exposure to all stages of the exploration and production cycle. With established cash flows from four assets producing a total of 10,000 boepd in 2008, and additional near-term production from the Kambuna field, Salamander believes that the combination of Salamander and Serica would be in a stronger position to absorb the inherent risks of potential timing delays and cost increases associated with developing fields. 

The board of Salamander would explore options for maximising shareholder value from non-core assets including the potential for demerger or sale.

The Enlarged Group would have a single listing on the London Stock Exchange’s main board that would continue to be a FTSE 250 constituent. The enlarged balance sheet would increase Salamander's financial scale, better placing it to fund future exploration, appraisal and development activity.

In particular, the Proposed Combination is in line with Salamander's existing growth strategy and brings clear benefits:

(i)              An enlarged Asian portfolio with strong growth momentum increasing Salamander’s proved and probable reserve base over 17 per cent. to 75 MMboe and the expected average production rate by 19 per cent. to close to 19,000 barrels of oil equivalent per day in 2009, from five key assets with operatorship of over 50 per cent. of total production;

(ii)             Consolidating interests in Kambuna gas-condensate field development and exploration licences in Salamander's preferred South East Asian basins:

•           establishing the Enlarged Group as the 100 per cent. equity owner (as well as the operator) of the Kambuna field development, offshore North Sumatra adding a further 14.5 MMboe of proved and probable reserves;

•           first gas is expected end of Q1 2009 with full production anticipated in Q3 2009;

•           onshore development is ongoing with an additional US$100 million of development capital required over H2 2008 and Q1 2009 to achieve first gas;

•           further upside is expected in the Glagah Kambuna TAC from Kambuna analogue prospects as well as the Glagah light oil discovery;

•           the leading exploration position in the Kutei Basin, East Kalimantan through interests and operatorship of highly prospective acreage in both the Kutai and neighbouring Bontang PSCs providing operating synergies between the licences;

•           complementing Salamander’s prospective acreage in Vietnam, with an entry into the Nam Con Son Basin providing near-term drilling opportunities;

•           it will provide scope for further organic growth through adding new acreage, as evidenced by the Block 31, Vietnam, due to be signed in Q4 2008 and a new licence application in process in the Northern Kutei Basin;

(iii)            Accelerated cash flow growth

•           long life base plate production assets with significant growth driving underlying cash flow which will be enhanced through full Kambuna equity ownership;

•           Salamander estimates a CAGR of 65 per cent. in production from 2008-2010;

•           achieved on the basis of increasing diversity in the production base, 37 per cent./63 per cent. gas oil split in 2009, and varied economic regimes encompassing both tax and royalty regimes as well as PSCs;

•           further growth from current appraisals in East Kalimantan, North East Thailand and Gulf of Thailand which is expected to lead to additional near-term production;

(iv)            Enhanced exploration programme

•           adding further exploration wells to Salamander’s current drilling programme with at least 13 exploration wells across 5 different basins in South East Asia during 2009;

•           the financial capacity of the Enlarged Group will enable more aggressive exploitation of the enhanced portfolio;

•           the 2009 drilling programme would target over 300 MMboe of net unrisked prospective resources;

(v)             Financial strength

•           Salamander's current balance sheet is well capitalised to fund the enlarged portfolio with a net cash position and additional debt capacity from current Salamander facilities;

•           substantial cash flow from current production (Salamander had US$23.8 million operating cash flow in H1 2008);

•           ability to further leverage the Kambuna asset, including through potential expansion of the existing RBL facility;

•           deploying Salamander's financial and operational strength across the combined asset base to create the opportunity for superior growth; and

(vi)            Exposure for Serica Shareholders to a more liquid investment in Salamander Shares.

4.           Information relating to Salamander

Salamander is an independent upstream oil and gas exploration and development company focused on Asia, with existing assets in Indonesia, Vietnam, Thailand, Lao PDR and the Philippines.

Salamander is a member of the London Stock Exchange FTSE 250 and its shares are admitted to the Official List and trade on the London Stock Exchange's market for listed securities.

In March 2008, Salamander acquired GFI Oil & Gas Corporation, a TSXV listed company with assets primarily in South East Asia, for an aggregate consideration of £106 million satisfied by a mix of cash and shares. In July 2008, it announced the acquisition of interests in the Glagah‑Kambuna TAC and the Kutai PSC from Serica for, in aggregate, US$52.75 million. Salamander also became operator of the Glagah‑Kambuna TAC in August 2008. In August 2008, Salamander closed a placing and open offer which raised net proceeds of £93 million.

Salamander's 2P reserves at 30 June 2008 were approximately 60 MMboe and pro-forma 2P reserves at 30 June 2008, including the acquired interest in the Glagah‑Kambuna TAC, were 64 MMboe. Production for the first half of 2008 was 8,200 boepd comprising 44 per cent. liquids and 56 per cent. gas.

Salamander has in excess of 120 MMboe of contingent resources and over one billion barrels of oil of prospective resources within its portfolio.

5.           Information relating to Serica

Serica is an international oil and gas exploration and production company with activities focused on Western Europe and South East Asia. Serica has operations in the UK North Sea, Ireland, Spain, Indonesia and Vietnam. Serica has built a portfolio of exploration, appraisal and development projects.

Serica is a publicly traded company listed on the AIM market of the London Stock Exchange and on the TSX Venture Exchange in Toronto, Canada, with offices in London, Singapore and Jakarta. 

In South East Asia, Serica holds PSCs in Indonesia and Vietnam. Serica has a 50 per cent. interest in Kambuna Glagah TAC, a 45 per cent. interest in the Biliton PSC, a 33.3 per cent. interest in block 06/94 in Vietnam and, on completion of its sale agreement with Salamander, a 54.6 per cent. interest in the Kutai PSC.

In July 2008, Serica announced the sale of interests in the Glagah Kambuna TAC and Kutai PSC to Salamander as described above. In June 2008, Serica announced the sale of its 20 per cent. interest in its Norwegian offshore licences PL406 and PL407. In September 2008, Serica announced reaching a farm-out agreement with RWE DEA AG in respect of a 50 per cent. working interest in its exploration licence in the Slyne Basin off the west coast of Ireland. In the same month, Serica entered into a farm-out agreement with Hansa Hydrocarbons Limited ('Hansa') in respect of a 35 per cent. working interest in two North Sea Blocks - the Blocks 48/16b (which contains the Chablis prospect scheduled to drill in mid-October 2008) and Block 48/17d.

In Western Europe, Serica holds offshore exploration, appraisal and development licences in the UK, Norway and Ireland and exploration permits for onshore Spain. It holds a 50 per cent. interest in four licences in the United Kingdom, a 100 per cent. interest in a further two licences in the United Kingdom, a 65 per cent. working interest in the two blocks into which Hansa has farmed-in, a 50 per cent. working interest in three licences in Ireland, and 75 per cent. of four licences in Spain.

Serica's 2P reserves at 30 June 2008 were approximately 14.8 MMboe. Serica incurred a loss of US$7.6 million for the six month period ended 30 June 2008. Serica's net cash flow from operations for the six month period ended 30 June 2008 was negative US$2.9 million.

6.           Employees

Salamander attaches great importance to the skills and experience of the existing management and employees of Serica. In the event that an offer is made, Salamander intends that the existing employment rights, including pension rights, of all Serica Group employees will be fully safeguarded.

7.           Salamander General Meeting

In view of its size, in order to implement an offer, if made, it would be necessary for the Salamander Shareholders to approve the transaction and to authorise an increase in the share capital of Salamander and the issue and allotment of the New Salamander Shares under any such offer and to give effect to it. A general meeting of Salamander would be convened for these purposes. 

Terms used in this announcement have the meanings given to them in Appendix I to this announcement. Appendix II to this announcement contains further details of the bases of calculation and sources of information contained in this announcement.

Information in this announcement relating to Serica has been compiled from published sources.

An exchange rate of £0.524109015/C$ has been used throughout this announcement.

Enquiries:

Salamander Energy plc                020 7404 5959 (on 29 September 2008)

                                                  020 7960 1580 (thereafter)

James Menzies, Chief Executive

Nick Cooper, Chief Financial Officer

Geoff Callow, Head of Corporate Affairs

Brunswick Group LLP                020 7404 5959

Patrick Handley

Nina Coad

Nina Soon

Oriel Securities Limited            020 7710 7600

Simon Bragg

Natalie Fortescue

David Arch

Investor communications:

Analyst/Investor presentation: 

There will be an investor and analyst presentation at 09:30 GMT on Monday 29 September 2008 at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED. 

A copy of the investor and analyst presentation will be available on Salamander's website from 09.30 GMT: www.salamander-energy.com

A recording of the presentation will be available from 13.00 GMT on Monday 29 September 2008, for 72 hours, and can be accessed using the following dial-in details:

International Dial-in: [phone] 

Encore Replay Access Number: 66945905#

Oriel Securities Limited is acting for Salamander and no one else in connection with the Proposed Offer and will not be responsible to anyone other than Salamander for providing the protections afforded to clients of Oriel Securities Limited nor for giving advice in relation to the Proposed Offer.

THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR AN INVITATION TO SUBSCRIBE FOR OR PURCHASE, ANY SECURITIES OR THE SOLICITATION OF ANY APPROVAL IN ANY JURISDICTION, NOR SHALL THERE BE ANY SALE, ISSUANCE OR TRANSFER OF THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

The distribution of this announcement in jurisdictions other than the United Kingdom and Canada may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement has been prepared for the purposes of complying with the applicable rules and regulations of the FSA, the London Stock Exchange, the TSXV, the Takeover Code and Canadian securities legislation and will be governed by English law and be subject to the jurisdiction of the courts of England. The information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.

The New Salamander Shares referred to in this announcement have not been, and will not be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States, or of Canada, Australia or Japan and no regulatory clearances in respect of the registration of Salamander Shares have been, or will be, applied for in any such jurisdiction. The Proposed Offer has not been and will not be approved or disapproved by the SEC, nor has the SEC or any US state securities commission passed judgement upon the merits or fairness of the Proposed Offer nor upon the adequacy or accuracy of the information contained in this document. Any representation to the contrary is a criminal offence in the United States. 

New Salamander Shares are not being offered to the public by means of this announcement and this announcement does not constitute a prospectus or prospectus equivalent document.

Neither this announcement nor the Proposed Offer constitutes an offer of securities for the sale in the United States or an offer to acquire or exchange securities in the United States. No offer to acquire or exchange securities for securities has been, or will be made directly or indirectly, in or into or by the use of the mails of, or any means or instrumentality (including, but not limited to, facsimile, eߛmail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, the United States or any area subject to its jurisdiction or any political division thereof, nor is it being made into any other Restricted Jurisdiction and will not be capable of acceptance by any such use, means, instrumentality or otherwise from within the United States or any other Restricted Jurisdiction. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise distributed or sent in, into or from the United States or any other Restricted Jurisdiction. Persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not distribute, mail or send it in, into or from the United States or any other Restricted Jurisdiction.

Forward Looking Statements 

This document includes certain 'forward looking statements' with respect to the business, strategy and plans of Salamander and its expectations relating to the Proposed Combination and its future financial condition and performance. Statements that are not historical facts, including statements about Salamander's or its management's beliefs and expectations, are forward looking statements. Words such as 'believes', 'anticipates', 'estimates', 'expects', 'intends', 'aims', 'potential', 'will', 'would', 'could', 'considered', 'likely', 'estimate' and variations of these words and similar future or conditional expressions are intended to identify forward looking statements but are not the exclusive means of identifying such statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur.

Factors that could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by Salamander or on its behalf include, but are not limited to, general economic conditions in the United Kingdom, the United States or elsewhere; legal proceedings or complaints; changes in competition and pricing environments; or an inability to implement the strategy of the Enlarged Group or achieve the Proposed Combination benefits set out herein.  

Forward looking statements only speak as of the date on which they are made, and the events discussed herein may not occur. Subject to compliance with applicable law and regulation, Salamander undertakes no obligation to update publicly or revise forward looking statements, whether as a result of new information, future events or otherwise.

No statement in this announcement is intended to constitute a profit forecast for any period and no statement should be interpreted to mean that earnings or earnings per share will necessarily match or exceed than those for the relevant preceding financial periods for Salamander or Serica as appropriate.

UK Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of the Takeover Code, if any person is, or becomes, 'interested' (directly or indirectly) in 1 per cent. or more of any class of 'relevant securities' of Salamander or Serica, all 'dealings' in any 'relevant securities' of Salamander or Serica (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 p.m. (London time) on the Business Day in London following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Salamander or Serica, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Takeover Code, all 'dealings' in 'relevant securities' of Salamander or Serica by Salamander or Serica, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the Business Day in London following the date of the relevant transaction.

A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Panel's website at: www.thetakeoverpanel.org.uk.

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Takeover Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.

APPENDIX I

DEFINITIONS

The following definitions apply throughout this announcement unless the context otherwise requires:

'2006 Act'	the Companies Act 2006, as amended from time to time
'AIM'	the Alternative Investment Market operated by the London Stock Exchange
'Australia'	the Commonwealth of Australia and its dependent territories
'board of Serica'	the board of directors of Serica
'boepd'	barrels of oil (using a conversion factor of 6 bscf of gas to one barrel of oil) per day
'bscf'	billion standard cubic feet
'Business Day'	a day (other than a Saturday or a Sunday or public holiday) on which banks are open for business in London or Toronto
'CAGR'	compound annual growth rate
'Canada'	Canada, its provinces and territories and all areas subject to its jurisdiction or any political sub-division thereof
'C$'	the lawful currency of Canada (and reference to Canadian 'cents' shall be construed accordingly)
'Closing Price'	the closing middle market price of a relevant share as derived from the daily official list of the London Stock Exchange
'E&P'	exploration and production
'Enlarged Group'	with effect from any offer becoming or being declared unconditional in all respects, the combined Salamander Group and Serica Group
'FSA'	Financial Services Authority
'Japan'	Japan, its cities, prefectures, territories and possessions
'London Stock Exchange'	the London Stock Exchange plc or its successor
'MMboe'	million barrels of oil equivalent
'New Salamander Share(s)'	the new Salamander Shares proposed to be issued credited as fully paid pursuant to the Proposed Offer
'Official List'	the Official List of the FSA
'Panel'	the Panel on Takeovers and Mergers
'£'	UK pounds sterling (and reference to 'pence' shall be construed accordingly)
'Proposed Combination' or 'Proposed Offer'	the proposed combination of Salamander with Serica
'PSC'	production sharing contract
'Restricted Jurisdiction'	any jurisdiction in which an offer of New Salamander Shares would constitute a violation of relevant laws or require registration of the New Salamander Shares
'RBL facility'	the reserve base lending facility dated 13 June 2008 between Salamander Energy (S.E. Asia) Limited, Salamander Energy (E&P) Limited, certain subsidiaries of Salamander Energy (S.E. Asia) Limited, BNP Paribas, ING Bank N.V. and Natixis
'Salamander'	Salamander Energy plc
'Salamander General Meeting'	the general meeting of Salamander Shareholders which would be convened in connection with the Proposed Combination, if implemented
'Salamander Group'	Salamander and its subsidiary undertakings and where the context permits, each of them
'Salamander Shareholders'	holders of Salamander Shares
'Salamander Share(s)'	ordinary shares of 10p each in the capital of Salamander
'SEC'	US Securities and Exchanges Commission
'Serica'	Serica Energy plc
'Serica Group'	Serica and its subsidiary undertakings and where the context permits, each of them
'Serica's Annual Report and Accounts'	the annual report and audited accounts of Serica for the year ended 31 December 2007
'Serica Shareholders'	holders of Serica Shares
'Serica Share(s)'	the ordinary shares of US$ 0.10 each in the capital of Serica
'Serica's Interim Results'	the interim results of Serica for the six months ended 30 June 2008 and published on 5 August 2008
'TAC'	technical assistance contract
'Takeover Code'	the City Code on Takeovers and Mergers
'trading days'	days of the year when AIM is open for trading
'TSXV' or 'TSX Venture Exchange'	TSX Venture Exchange operated by the TSX Group in Canada
'UK' or 'United Kingdom'	the United Kingdom of Great Britain and Northern Ireland
'United States' or 'US'	the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia
'US $'	the lawful currency of the United States
'US Securities Act'	the US Securities Act of 1933, as amended and the rules and regulations promulgated thereunder
'volume weighted average price'	the average share price at which shares trade during a day with the weighting in the average of each trade being the proportion that the volume of shares in that trade bears to the total volume of shares traded that day
For the purposes of this announcement 'subsidiary undertaking' shall be construed in accordance with the 2006 Act.

All times referred to are London time unless otherwise stated.

APPENDIX II

SOURCES OF INFORMATION AND BASES OF CALCULATION

 

(a)        The value attributed to the existing issued ordinary share capital of Serica is based upon 176,518,311 Serica Shares being in issue, as announced by Serica on 15 August 2008.

(b)        The market value of Salamander Shares is based on the Closing Price of a Salamander Share of 210 pence on 26 September 2008, sourced from Global Topic, being the last Business Day prior to the publication of this announcement.

(c)        The value of Serica Shares is based on the Closing Price of a Serica Share of 57 pence on 26 September 2008, sourced from Global Topic, being the last Business Day prior to the publication of this announcement.

(d)        The volume weighted average price per Serica Share for the 20 trading days prior to and including 26 September 2008 has been sourced from Thomson Datastream.

(e)        The reference to Serica Shareholders holding approximately 28 per cent of Salamander's enlarged share capital following completion of the Proposed Combination, assuming full acceptance of the Proposed Offer including from holders of 'in the money' options under Serica's share option scheme, is based upon (i) 176,518,311 Serica Shares in issue sourced as in (a) above; (ii) 875,000 Serica Shares being issued upon the exercise of 'in the money' options based on information in Serica's Annual Report and Accounts and the exchange ratio comprised in the terms of the Proposed Offer; and (iii) 152,781,255 Salamander Shares being in issue as at 26 September 2008.

(f)        Share price information used throughout this announcement has, unless otherwise stated, been sourced from the London Stock Exchange Daily Official List closing prices at the relevant dates. 

(g)        An exchange rate of £0.524109015/C$ has been used throughout this announcement.

(h)        Unless otherwise stated, financial and other information concerning Salamander and Serica has been extracted or derived from interim statements, preliminary results, the annual report and accounts of each company for the relevant periods, or in respect of statements relating to Serica sourced from their website: http://www.serica-enrgy.com

(i)         In arriving at: (i) the expected increase in Salamander's proved and probable reserve; (ii) the exposure to at least 13 exploration wells in South East Asia during 2009; (iii) the expected increase in average boepd production rate in 2009, the sources of information Salamander has used include:

·     Salamander's HI 2008 pro forma accounts

·     Serica's Annual Report and Accounts

·     Serica's Interim Results

·     Statements issued by Salamander in connection with its acquisition of Kambuna

·     Statements from Serica in connection with its Kambuna asset

·     Serica's presentations to analysts

·     Serica's website

·     Salamander management estimates

(j)         The reference to a 37 per cent./63 per cent. gas oil split in relation to the production base for 2009 is based on Salamander management estimates.

(k)        The reference to the Proposed Combination giving Serica Shareholders exposure to a more liquid investment in Salamander Shares is based on information on the respective trading volumes of each of Serica and Salamander for the period 25 September 2007 to 25 September 2008 sourced from Thomson Datastream.

(l)         The references to the contingent resources and prospective resources within Salamander's portfolio are based on information in the prospectus published by Salamander dated 16 July 2008 as adjusted for Salamander management estimates of the impact of subsequent drilling.

(m)       The estimated CAGR of 65 per cent in production from 2008-2010 is based on Salamander management estimates.

(n)        Unless otherwise stated, information relating to prospective production volumes for the Enlarged Group are based on publicly available information as indicated in (i) above and Salamander management estimates.

(o)        Values stated throughout this announcement have been rounded to the nearest whole number and are given to the stated number of decimal places.

 

END

 

 

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