?30.6 million Share Placing

RNS Number : 2631T

Oxford Catalysts Group PLC

11 December 2012

 



11^th December 2012

Oxford Catalysts Group PLC

("Oxford Catalysts" or the "Company" or the "Group")

£30.6 million Share Placing

Oxford Catalysts Group (OCG.L), the modular Gas-to-Liquids technology innovator, is pleased to announce the successful conditional placing of shares to raise approximately £30.6 million (before expenses).

Highlights

·     Placing of 24,479,300 new Ordinary Shares, at a price of 125 pence per share, to raise approximately £30.6 million (before expenses)

o  Oversubscribed placing with significant support from existing shareholders, several major new institutional investors and a new strategic investor

o  Placing price represents a 14.5% premium to the 30 day average closing mid-market share price on the date of pricing

o  The new Ordinary Shares are expected to be admitted to trading on AIM on 4 January 2013

·     The Directors intend that the net proceeds of the Placing will be used to consolidate the Group's leading market position and accelerate commercial roll out of its products, and in particular to:

o  Enable the Group to recruit additional resources to support its expanding commercial activities

o  Increase the level and reach of its marketing activities

o  Scale up the Group's supply chain and customer support capabilities

·     The new funds will also strengthen the Group's balance sheet, which the Directors believe will give potential customers added comfort when considering a commitment to the Group's technology

Roy Lipski, CEO of Oxford Catalysts Group said:

"This oversubscribed fund raising, achieved under difficult market conditions, is a huge vote of confidence in Oxford Catalysts' technology and potential. We are delighted by the very significant support received from existing shareholders, several new major institutional investors and a new strategic investor.

"We are the only smaller scale FT provider in the industry to be announcing selection for commercial projects. These new funds will allow us to accelerate forward, consolidating our market lead and driving commercial roll out of our technology."

The Company is also pleased to announce the appointment of Numis Securities Limited as Joint Broker to the Company with immediate effect.

There will be a conference call for analysts at 3.00 p.m. UK time; details of which can be obtained from FTI Consulting (see below).

For further information, please contact:

Oxford Catalysts Roy Lipski, CEO Susan Robertson, CFO	[phone] [phone]
Cenkos Securities (Nomad and Joint Broker) Ken Fleming / Neil McDonald	[phone] [phone]/1
Numis Securities (Joint Broker) Alex Ham / Alastair Stratton	[phone]
FTI Consulting Billy Clegg / Alex Beagley	[phone]

Notes to Editors

Oxford Catalysts enables modular Gas-to-Liquids ("GTL") plants to convert unconventional, remote and problem gas into valuable liquid fuels. Systems based on the Group's technology (marketed under the brand name Velocys) are significantly smaller than those using conventional technology, enabling modular plants that can be deployed cost effectively in remote locations and on smaller fields than is possible with competing systems. Together with world-class partners, Oxford Catalysts provides complete modular GTL solutions that address an untapped market of up to 25 million barrels of fuel a day.

Oxford Catalysts Group PLC is listed on the AIM market of the London Stock Exchange (LSE:OCG). The Group has some 85 employees with facilities near Oxford, UK and Columbus, Ohio, USA.

www.oxfordcatalysts.com

www.velocys.com

EXTRACTS FROM PLACING CIRCULAR

Terms and definitions used in this announcement shall have the meaning given in the Definitions section at the end of this announcement, unless the context requires otherwise.

Introduction

The Board announces that it has raised, subject to certain conditions, approximately £30.6 million (before expenses) by way of a placing of 24,479,300 new Ordinary Shares at a placing price of 125 pence per share.

The Placing is conditional (amongst other things) upon the passing by Shareholders of certain resolutions in order to ensure that the Directors have the necessary authorities and powers to allot the Placing Shares for cash on a non-pre-emptive basis. A General Meeting is therefore being convened for the purpose of considering the Resolutions at 11:00 a.m. on 3 January 2013 at the offices of Mayer Brown International LLP, 201 Bishopsgate, London, EC2M 3AF.

A Circular including a Notice of General Meeting will be posted to Shareholders shortly and, in accordance with the AIM Rules, copies will be available on the Company's website, www.oxfordcatalysts.com, free of charge. The purpose of the Circular is to provide Shareholders with details of, and the reasons for, the Placing and why the Directors believe it to be in the best interests of the Company and its Shareholders and, further, why they recommend that Shareholders vote in favour of the Resolutions. The Directors intend to vote in favour of the Resolutions in respect of their legal and/or beneficial shareholdings amounting, in aggregate, to 3,120,840 Ordinary Shares representing approximately 3.4 per cent. of the Ordinary Shares in issue as at the date of the Circular.

Background to the Placing

Oxford Catalysts designs and develops technology for the smaller scale production of clean synthetic fuels from unconventional, remote and associated gas, as well as carbon containing solids such as biowaste. The Directors believe that market conditions for the production of such fuels are favourable and the Group is enjoying a high level of interest in its technology.

The shale gas boom occurring across the world, and especially in North America, is changing the energy landscape, creating many opportunities for smaller scale Gas-to-Liquids ("GTL") projects. Long term expectations of continued low gas prices (compared to their recent peak in 2005) and relatively high oil prices mean that GTL provides a clearly quantifiable market arbitrage opportunity. In addition, there are numerous opportunities arising from associated or low value stranded gas. The growing political, geological and environmental complexity of oil exploration and production has focused attention on the monetisation of gas reserves and cessation of flaring. As the majority of stranded gas fields and flare gas streams are too small for conventional technology, the opportunity for the Group's technology is now sharply in focus.

After more than 15 years of development, which began at two of the world's leading research organisations (the University of Oxford and the Battelle Memorial Institute), and US$300 million of investment, much of which came from industrial partners, the Directors believe, for the following reasons, that Oxford Catalysts is now ready for commercial roll out:

·     the Group's Fischer-Tropsch ("FT") technology has been demonstrated at increasing scales, firstly at Güssing, Austria, from the summer of 2010 to the fall of 2011, and recently with a demonstration of a commercial scale reactor at a customer site in the Asia Pacific region;

·     its Steam Methane Reforming technology, along with the Group's FT technology, is part of a demonstration of an integrated GTL pilot plant at a Petrobras refinery in Fortaleza, Brazil;

·     in partnership with key engineering, technology and service partners, Oxford Catalysts is now able to provide complete, integrated modular GTL plants, and to support initial and on-going plant operations;

·     through a qualified manufacturing supply chain, the Group is ready to fulfil initial orders for reactors and catalyst, and is putting the foundations in place to be able to scale up production to meet a rapid increase in orders;

·     after making its first reactor sale in December 2010, the Group has begun being selected for multiple reactor facilities, as well as full commercial plants. For example, the Group announced in:

o  May 2012: selection for a 100 bpd facility commissioned by Rosneft;

o  July and November 2012: selection for a full scale commercial waste-biomass to jet fuel project - GreenSky London, a partnership between Solena Fuels Corporation and British Airways;

o  July 2012: selection for a 25-100 bpd California Energy Commission funded Biomass-to-Liquids facility;

o  September 2012: selection for a 1,000 bpd GTL plant for Calumet Specialty Product Partners, L.P.;

o  November 2012: selection as Ventech's preferred supplier of FT technology for North America (further details of the Group's agreements with Ventech are set out below).  

With approximately 85 employees and the world's largest microchannel patent portfolio (over 800 issued patents and filed patent applications, owned or licensed exclusively by the Group), the Directors believe that the Group has the critical mass and positioning to become a technology leader in the emerging market for smaller scale synthetic fuels production.

Recent Corporate Developments

Ventech

On 19 November 2012, Oxford Catalysts announced the subscription for 933,687 new Ordinary Shares at 135 pence per share by VPI, an affiliate of Ventech, raising £1.3 million for the Group. Under the subscription agreement with the Company, VPI is restricted from selling its shares until 17 May 2013, except in certain circumstances such as a sale of the Company, as well as having an option to participate in the Placing. VPI has notified the Company that it does not intend to exercise this option.

Ventech, headquartered near Houston, Texas, is a global leader in the design and construction of modular refineries, and an early pioneer of small scale modular GTL plants. Ventech's manufacturing complex specialises in completely assembled and tested modules that are easily transported by truck, rail, and barge.

On the same date, Velocys, Inc., the Group's US subsidiary, entered into a series of agreements with Ventech whereby it became Ventech's preferred supplier of FT technology in North America, and Ventech gained non-exclusive assured access to design, sell and deliver GTL plants incorporating the Group's FT product to customers in North America (subject to certain diligence requirements being met by Ventech).

In addition, as part of the agreement, Ventech committed to placing an order for FT reactors with the Group, by 29 March 2013, and Ventech has indicated that it is confident it will do so. The order will be for FT reactors for the first expected commercial GTL plant, to be delivered around eighteen months after the order is placed. The anticipated revenue to the Group from this order is approximately $8 million over the course of construction. At the time when these reactors are transferred to the ultimate customer, the Group expects to receive additional licence and catalyst revenues in accordance with its normal pricing schedule.

Ventech will fulfil future GTL orders using its 200,000 sq. ft. fabrication facility near Houston, which has been recently expanded to support these expected orders. Furthermore, through VPI, Ventech can draw on US$200 million in available capital to make equity investments in energy projects and expects to co-invest in initial customer GTL plants.

Legal Update

Catacel Corp.

As disclosed in the 2011 Annual Report and Accounts, in April 2010 the Group's US subsidiary, Velocys, filed a lawsuit in the US against Catacel Corp. ("Catacel"), a supplier of catalysts to CompactGTL plc ("CompactGTL"), claiming infringement of several of the Group's microchannel related patents. In response, CompactGTL requested re-examination of eight of the Group's US patents and filed a UK lawsuit which included a threats claim and a request to revoke seven UK patents.

The Directors are pleased to update shareholders that, to date, seven of the eight US patents have completed re-examination, with one still in process. Of the seven completing re-examination, six have completed the process with no amendments and one has completed the process with only one immaterial amendment. CompactGTL has not pursued their UK lawsuit after the initial filing and there has been no initial case management meeting with the court in the intervening two year period. Whilst the outcome of these cases is still uncertain, the Directors are confident of the Group's infringement case against Catacel, as well as the validity of those of its patents which are being challenged.

US Defence Contract Audit Agency

The Company has previously reported that Velocys received notification in 2010 of the results of an audit of contract billings from the US Defence Contract Audit Agency ("USDCAA") which detailed potential non-compliant claims amounting to $1,267,000 and subsequently, in August 2011, Velocys received notification of an investigation being conducted by the United States Department of Justice relating to this matter. After the matter was fully investigated, in December 2011 Velocys was notified by the United States Attorney's Office that it had closed its file on this matter without further action.

Velocys has since received notification that the USDCAA continues to dispute several costs billed by Velocys to one of its subcontractors, but no further update has been received on the status of the USDCAA audit and findings. The Directors believe that they have evidence to support the contract billings made by Velocys. Since this contract relates to the period prior to the acquisition of Velocys by the Company, under the terms and conditions of the sale and purchase agreement for Velocys, there are warranty provisions which would trigger a payment from the former owner of Velocys, the Battelle Memorial Institute, for the entire amount of any claims against Velocys in excess of $250,000.

Current Trading and Strategy

Current Trading

The Group's financial position reflects its continued progress towards commercial roll out. As announced on 21 September 2012, revenues were up in the first half of 2012 while cash outflow also rose during the period. Unaudited turnover for the half year ended 30 June 2012 was approximately £3.6 million and unaudited Group cash (defined as cash, cash equivalents, short term investments and other financial assets) stood at approximately £12.1 million as at 30 June 2012. The Board confirms that the Group is trading in line with market expectations for the current year and is hopeful that commercial scale sales will begin in 2013.

Strategy

During 2013, the Directors intend that the Group will concentrate on seeking to:

·     receive an order to proceed for at least one commercial scale plant;

·     strengthen its business development, marketing, process engineering, manufacturing, supply chain and customer support capabilities;

·     increase the Group's profile within its target market;

·     strengthen relationships with engineering firms and other value chain partners;

·     further scale up its supply chain; and

·     accelerate the growth of its new business pipeline.

Use of Proceeds

The Directors intend that the net Placing Proceeds will be used by the Company to consolidate the Group's position as a market leader and accelerate commercial roll out of its products.

Specifically, the Directors intend to use the net Placing Proceeds to:

·     enable the Group to recruit additional resources to support its expanding commercial activities;

·     increase the level and reach of its marketing activities;

·     scale up the Group's supply chain and customer support capabilities; and

·     strengthen the Group's balance sheet, which the Directors believe will give potential customers added comfort when considering a commitment to the Group's technology.

Details of the Placing

The Company proposes raising approximately £30.6 million, before expenses, by way of a conditional, non-pre-emptive placing of 24,479,300 new Ordinary Shares at the Placing Price. The Placing Shares will be placed by the Joint Brokers as agents for the Company and pursuant to the Placing Agreement, with institutional and other professional investors.

The Placing Shares will represent approximately 21.14 per cent. of the Ordinary Share capital as enlarged by the Placing and will, when issued, rank pari passu in all respects with the other Ordinary Shares then in issue, including all rights to all dividends and other distributions declared, made or paid following Admission.

The Placing Agreement is conditional upon (amongst other things) the passing of the Resolutions at the General Meeting and Admission occurring on or before 4 January 2013 (or such later date as the Joint Brokers and the Company may agree, not being later than 18 January 2013).

Application will be made for the Placing Shares to be admitted to trading on AIM, the Placing Agreement not having been terminated, and it is expected that trading in the Placing Shares will commence at 8:00 a.m. on 4 January 2013.

Definitions

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

"Admission"	admission of the Placing Shares to AIM becoming effective in accordance with Rule 6 of the AIM Rules
"AIM"	the market of that name operated by London Stock Exchange plc
"AIM Rules"	the AIM Rules for Companies, which sets out the rules and responsibilities for companies listed on AIM, as amended from time to time
"Board" or "Directors"	the board of directors of the Company, whose names are listed on page 6 of the Circular
"bpd"	barrels per day
"Cenkos"	Cenkos Securities plc, a public limited company incorporated in England & Wales under registered number 5210733 and having its registered office at 6.7.8 Tokenhouse Yard, London EC2R 7AS
"Circular"	the Circular to Shareholders dated on or around 11 December 2012
"Company" or "Oxford Catalysts"	Oxford Catalysts Group PLC, a public limited company incorporated in England & Wales under registered number 5712187 and having its registered office at 115E Milton Park, Oxford OX14 4RZ
"General Meeting"	the general meeting of the Company to be held at 11.00 a.m. on 3 January 2013, notice of which is set out at the end of the Circular
"GTL"	a refinery process to convert natural gas or other gaseous hydrocarbons into longer chain hydrocarbons such as diesel or jet fuel
"Group"	the Company, its subsidiaries and subsidiary undertakings
"Joint Brokers"	together, Cenkos and Numis
"Notice of General Meeting"	the notice of General Meeting, set out at the end of the Circular
"Ordinary Shares"	ordinary shares of £0.01 each in the capital of the Company
"Numis"	Numis Securities Limited, a private limited company incorporated in England & Wales under registered number 2285918 and having its registered office at 10 Paternoster Square, London EC4M 7LT
"Placing"	the proposed conditional, non-pre-emptive placing by the Joint Brokers of Placing Shares
"Placing Agreement"	the conditional agreement dated on or around 11 December 2012 relating to the Placing, between the Company and the Joint Brokers
"Placing Proceeds"	the proceeds of the issue of the Placing Shares pursuant to the Placing
"Placing Price"	125 pence per Placing Share
"Placing Shares"	24,479,300 new Ordinary Shares, each being a "Placing Share"
"Resolutions"	the resolutions to be proposed at the General Meeting as set out in the Notice of General Meeting
"Shareholders"	the holders of Ordinary Shares from time to time, each individually being a "Shareholder"
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland
"US" or "United States"	the United States of America, its territories and possessions, any state of the United States and the District of Colombia
"US$" or "$"	the lawful currency of the United States
"Velocys"	Velocys, Inc. the Group's wholly owned US subsidiary
"Ventech"	Ventech Engineers LLC
"VPI"	Ventech Project Investments LP
"£"	the lawful currency of the United Kingdom

 

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