Corporate Update

RNS Number : 5903W

Petroneft Resources PLC

12 December 2019

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN.

PetroNeft Resources plc ("PetroNeft" or the "Company")

US$2.12 million Placing

Corporate Update

Director Appointment

PetroNeft (AIM: PTR), the 50% owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce a conditional placing of 107,755,037 shares at a price of 1.5p.

Highlights:

·    Gross proceeds of US$2.12 million raised at £0.015 per share in a placing with institutional and other investors, a premium of approximately 58%

·    Money raised will primarily be used to fund the 2020 capital investment program

·    Significant commitment from directors, supporting 44% of the placing

·    Petrogrand Loan which was scheduled to expire on 15^th December 2019 has been extended for one year with a potential further year extension to 15^th December 2021 if certain milestones are met.

·    EGM to held in Dublin on 7^th January to approve capital raise.

PLACING

PetroNeft has agreed the terms of a conditional placing of 107,755,037 new Ordinary Shares at £0.015 (€0.0178) per Ordinary Share (the "Placing Shares"). The placing will raise new capital of US$1.6 million and in addition 26,985,227 of the placed shares will be used to settle outstanding salary to senior management and Board Director Fees.

The Placing consists of 107,755,037 Shares at a price of £0.015 each, conditional upon receiving shareholder approval of Resolution 1 at the Extraordinary General Meeting ("EGM") of the Company which will be held on 7 January 2020, on Admission and the terms of the subscription letters entered into with the Placees.  Application for Admission in respect of the Placing Shares will be made to both the London Stock Exchange and Euronext Dublin and, subject to the passing, without amendment, of Resolution 1 at the EGM, it is expected that Admission will become effective and that dealings in the Placing Shares will commence on AIM and Euronext Growth at 8.00 a.m. on  9 January 2020.

Following Admission, the Company's total issued share capital consists of 828,885,530 Ordinary Shares of €0.01 each. The Company does not hold any Ordinary Shares in treasury. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in PetroNeft under the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules.

The Placing Price represents a premium of approximately 58 per cent to the closing price of £0.0095 per Ordinary Share on 11 December 2019, being the latest practicable date on which the Company's shares traded on AIM and Euronext Growth ahead of the announcement of the Placing. Following their issue, the Placing Shares will represent approximately 13 per cent of the Enlarged Issued Share Capital.

An EGM Circular and Notice of EGM will be posted to Shareholders on 13 December 2019 and be made available on www.petroneft.com on the same day. The EGM will be held in at the Clayton Hotel, Ballsbridge, Dublin 4, Ireland at 11.00 AM on Tuesday 7 January 2020.

DIRECTORS' AND MANAGEMENT PARTICIPATION IN THE PLACING

Certain Directors and management of PetroNeft will subscribe for the following Placing Shares:

Directors:	Placing Shares subscribed for	Resulting holding of Ordinary Shares	% of Enlarged Share Capital
Maxim Korobov	32,218,756	240,648,214	29.03
David Sturt	12,463,476	16,511,481	1.99
Tom Hickey	2,977,341	5,203,624	0.63
Senior management:
Pavel Tetyakov	12,444,530	12,444,530	1.50

The participation of Maxim Korobov, David Sturt and Tom Hickey constitutes a related party transaction in accordance with AIM and Euronext Growth Rule 13. Accordingly, David Golder and Anthony Sacca, acting as the independent Directors, consider, having consulted with the Company's Nominated Adviser and Euronext Growth Advisor, that the terms of the participation in the Placing is fair and reasonable insofar as the Company's shareholders are concerned.

PLACING

This placing will involve 107,755,037 new Ordinary Shares at a price of £0.015 per share. The placing of these shares will raise approximately $1.6 million (before expenses). In addition 26,985,227 of these new shares will be issued as settlement of outstanding salaries and fees due to be paid by the Company.  The net proceeds of the Placing will be used to carry out the 2020 capital investment program as well as providing additional financial support for ongoing PetroNeft operational costs.  The funds from this placing will allow management to follow their clearly delineated strategy of increasing the value of the company's assets through low cost but high reward projects, while seeking a buyer for one or both licences over the next 2 years.

CAPITAL INVESTMENT PROGRAM

The Board has stated a clear strategy of seeking to unlock the value of our assets, either through a sale of one or more licences or through further development of the licences through low cost operational and exploration activity. The 2020 capital program is aimed at a combination of reducing ongoing operational costs, increasing production, cash flow and reserves leading in increased asset value

LICENCE 61

Operational costs will be reduced through installation of a mini oil processing unit which will enable produced oil to be refined to fuel to be used in the field. This project has a payback period of less than one year and is expected to reduce operating costs by at least a $1/bbl.

To increase production, a pipeline will be constructed to link the Sibkrayevskoye field to the Central Processing Unit which will ensure year-round production from the field. Currently the field is produced only when winter roads are in place, which usually enables 200 - 250 bopd to be trucked for approximately three months. Construction of this pipeline will ensure year-round production, and at the same time provide crucial reservoir performance data which will de-risk further development of the field.

To increase reserves, the Company will seek to re-enter the Emtorskaya-300 well drilled in 1971 on the Emtorskaya prospect. This is a significant (106km²) structural closure up dip from the Lineynoye field, where re-interpretation of the well log data has identified potential oil within the Upper Jurassic zones. A successful re-entry and testing of oil from this well would de-risk the whole of the Emtorskaya prospect. The age of the well may cause issues when re-entering, but a successful re-entry will save the significant cost of a new exploration well.

LICENCE 67

Following the successful drilling and testing of the C-4 well on the Cheremshanskoye field in 2018, the Company plans to re-enter this well and also the earlier drilled (2011) C-3 well to bring the Cheremshanskoye field into production through 2020. Initial production data from these two wells will be used to plan forward development of the field. State Reserves of 19.26 mmbbls C1 + C2 (approximate 2P) were approved in early 2019.

In addition to Cheremshanskoye, the plan also includes re-entering two wells (L-2 & L-2a) on the Ledovoye field to test both Jurassic and overlying Cretaceous reservoirs.  Oil was encountered in both wells when initially drilled. On successful re-entry of these wells, they will be tested for three months. Whilst testing is ongoing, the company will expedite approval of state reserves which when granted will enable year-round production. These wells are located right beside an all season road which optimises potential sales routes for the oil.

NON-EXECUTIVE DIRECTOR APPOINTMENT

As part of the Company's desire to improve the strength and diversity of the Board, the Board has voted to bring on Daria Shaftelskaya as a non-executive director on successful passing of the EGM resolutions. Daria, age 41, will be a welcome addition to the board, having a strong finance background in addition to being from the Tomsk region.

Ms. Shaftelskaya will subscribe for 10,000,000 shares in the placing which will take her holding to 88,079,986 Ordinary Shares representing 10.7%of the Enlarged Share Capital.

There are no other matters which are required to be announced pursuant to paragraph (g) of Schedule 2 to the AIM and Euronext Growth Rules

PETROGRAND LOAN FACILITY

The company entered into a $2.0M loan facility with Petrogrand on 16^th January 2018, this facility was increased to $2.5M on 14 February 2019 and was due for repayment in full on 15^th December 2019. The company has successfully negotiated a one year extension to the loan with an additional potential second year extension if 20% of the capital is repaid by 15^th December 2020. If the conditions on the second one year extension are met, then the interest rate will reduce from LIBOR + 9% to LIBOR +6% in December 2020.

The terms of the extension agreement are conditional upon receiving shareholder approval of Resolution 1 at the Extraordinary General Meeting of the Company. 

Due to Petrogrand being an associate (as defined in the AIM and Euronext Growth Rules) of Mr Maxim Korobov, a PetroNeft director, the loan facility is considered to be a related party transaction under the AIM and Euronext Growth Rules. The directors of the Company, other than Maxim Korobov, having consulted the Company's nominated adviser and Euronext Growth advisor, consider the terms of the extension of the loan facility to be fair and reasonable insofar as the Company's shareholders are concerned.

Dave Golder, Chairman of PetroNeft Resources plc commented:

"We are very pleased with the outcome of the Placing, especially as we successfully managed to place at a 58% premium to the prevailing share price; this shows great confidence and support for the company. In addition it is also very encouraging that we have managed to negotiate a loan extension with Petrogrand that enhances our financial flexibility and enables to invest in the ongoing improvement of our resource base and long term asset value."

For further information, contact:

David Sturt, CEO, PetroNeft Resources plc	[phone]
John Frain/Gillian O'Driscoll, Davy (NOMAD, Euronext Growth Advisor and Broker)	[phone]
Joe Heron, Murray Consultants	[phone]

The information contained in this announcement has been reviewed and verified by Mr. David Sturt, Chief Executive Officer and Executive Director of PetroNeft, for the purposes of the Guidance Note for Mining and Oil & Gas Companies issued by the London Stock Exchange in June 2009. Mr. Sturt holds a B.Sc. Degree in Earth Sciences from Kingston University and an MSc. in Exploration Geophysics from The University of Leeds. He is a member of the Petroleum Exploration Society Great Britain and has over 35 years' experience in oil and gas exploration and development.

Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement.

Glossary

bbls	Barrels
bopd	Barrels of oil per day
mmbbls	Million barrels
C1 + C2	Russian State Reserves C1 + C2, equivalent to 2P (Proven and Probable)
2P	Proven and Probable reserves under the Society of Petroleum Engineers Petroleum Reserves Management System

 

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