Acquisition Update

RNS Number : 3288M

Silvermere Energy PLC

15 August 2011

 



15 August 2011

Silvermere Energy plc

("Silvermere" or "the Company")

Acquisition Update

In the admission document published by the Company on 2 August 2011 ("the Admission Document"), the Company stated that, conditional on the grant of shareholder approval at a general meeting which is scheduled to take place on 18 August 2011, it intended to exercise its option to acquire the Mustang Asset and to seek readmission for the Company's shares to trading on AIM.

Definitions used in this announcement are as set out in the Admission Document.

The consideration for the acquisition of the Mustang Asset from Core Petroleum, Inc ("Core") as set out in the Option Agreement was stated as follows:

·    Cancellation of the debt due from Core to Silvermere (which amounts to £2.595 million);

·    Payment of certain of Core's legal fees amounting to £20,000;

·    Payment to the vendors of an over-riding royalty of 4 per cent. of the annual revenues attributable to 100 per cent. of the Mustang Asset;

·    Retention by Core of a 16.65 per cent. working interest in the I-1 Well only with the Company carrying Core's share of the tie-in costs; and

·    The issue at admission of the Company's shares to trading on AIM ("Admission") of the 676,000 shares to the vendors (this will be effected by a payment by the Company to the vendors of £169,000, which they will use to subscribe for the shares).

Thus the total effective consideration payable by Silvermere at Admission is £2.8 million. The amount of on-going royalties payable by Silvermere will depend on production and revenue from the Mustang Asset.

Following to the publication of the Admission Document, Core has informed the Company that it has received an additional cash call under the JOA relating to a cost overrun on the re-entry of the I-1 Well during the six month period ended 30 June 2011 ("the Cash Call"). The cash call amounts to approximately £250,000 which is material in relation to the Company's expected expenditure on the Mustang Asset and the Company's future working capital requirements.

Under the terms of the Option Agreement, Silvermere is responsible for additional costs incurred in relation to the re-entry of the I-1 Well. If the Company exercises its option to acquire the Mustang Asset, the Company will be required to pay Core's proportion of the Cash Call and, therefore, Silvermere will have increased the consideration paid for the Mustang Asset by the corresponding amount.

Following receipt of notification of the Cash Call by the Core Vendors, Silvermere entered into substantive discussions with Core and Dominion and the Directors and the Proposed Directors are confident that an outcome can be reached which will result in the aggregate amount of the consideration payable by Silvermere being maintained in accordance with the Admission Document and the Company's working capital requirement for the foreseeable future (being at least 12 months). Until such discussions are concluded, however, there can be no certainty that such an outcome can be achieved.

As a result, the Chairman of the Directors of Silvermere, Bruce Evers intends to request that the general meeting of the Company to be held on 18 August 2011 is adjourned until 30 August 2011.  The Company will make a further announcement following the general meeting.

Since the Option Agreement expires on 19 August 2011, the Company and the Core Vendors have agreed to extend the option agreement to expire on 9 September 2011.

A further announcement will be made prior to the general meeting.

ENDS

For further information please contact: Silvermere Energy plc Frank Moxon, Proposed Chairman Andy Morrison, Proposed Chief Executive Bruce Evers, Current Executive Chairman	[phone] [phone] [phone]
Merchant Securities Limited (Nominated Adviser and Broker) Lindsay Mair/Virginia Bull Rivington Street Corporate Finance Limited Jon Levinson/Dru Edmonstone Old Park Lane Capital Luca Tenuta	+ 44(0)20 7628 2200  [phone] [phone]
Bishopgate Communications Nick Rome/Shabnam Bashir	[phone]

 

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