Placing & Open Offer
July 25 2003 - 12:37PM
UK Regulatory
RNS Number:9940N
Melrose Resources PLC
25 July 2003
FOR IMMEDIATE RELEASE
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES,
CANADA, JAPAN, AUSTRALIA, SOUTH AFRICA OR EIRE.
25 July 2003
MELROSE RESOURCES PLC
Proposed Placing and Open Offer to raise up to #18.9 million sponsored by
Seymour Pierce Limited
Melrose Resources plc, the oil and gas exploration and production company with
interests in Egypt, Bulgaria and the USA, today announces a proposed Placing and
Open Offer.
Highlights:
*Firm placing of 6 million New Ordinary Shares at 100 pence per share,
underwritten by Seymour Pierce.
*Open Offer to existing shareholders of up to 13,256,000 New Ordinary
Shares at 100 pence per share.
*Irrevocable commitments received from the Directors and other
shareholders to take up their entitlements in respect of over 63% of the
Open Offer Shares.
*Net proceeds of the Placing and Open Offer of up to #18.9 million.
*The proceeds of the Placing and Open Offer will be used principally to
fund the Group's ongoing exploration, appraisal and development activities
in Egypt and to reduce indebtedness.
Commenting on the Placing and Open Offer, Robert Adair, Chairman, said:
"The proceeds of the share issue will enable us to follow up on our very
successful exploration drilling programme in Egypt with development of the three
new discoveries later this year and to step up our exploration and appraisal
activities. Our concessions in Egypt are now looking very exciting and offer the
potential to deliver a significant increase in shareholder value. I am also
delighted that, through the Placing, we will introduce some new institutional
shareholders and significantly increase the institutional shareholder base."
This summary should be read alongside the detailed announcement which follows.
For further information please contact:
Melrose Resources plc
Robert Adair, Chairman 0131 225 6678
David Curry, Chief Executive 0131 225 6678
Munro Sutherland, Finance Director 0131 225 6678
Chris Thomas, Corporate Development Director 0207 462 1600
Seymour Pierce Limited
Jonathan Wright 0207 107 8000
Buchanan Communications Limited
Tim Thompson/Sophie Morton 0207 466 5000
Introduction
The Board of Melrose announces that the Company proposes to raise up to #19.26
million (before expenses) by means of a placing ("Placing") and open offer
("Open Offer") of up to 19,256,400 new ordinary shares ("New Ordinary Shares")
at a price of 100p per share ("Issue Price"). The Placing has been underwritten
by Seymour Pierce.
The principal purpose of the Placing and Open Offer is to provide additional
working capital, inter alia, to enable the Company to continue its successful
exploration and development activities in Egypt.
In view of its size, the Placing and Open Offer is conditional upon the approval
of Shareholders which is to be sought at an extraordinary general meeting
("EGM") to be held on 21 August 2003. A prospectus of the Company will be posted
shortly to Shareholders which will provide, inter alia, details of the Placing
and Open Offer, explain why the Board believes it is in the interests of the
Company and recommend that Shareholders vote in favour of the resolutions to be
proposed at the EGM.
Background to and reasons for the Placing and Open Offer
Over the last 18 months, the Company has achieved a number of its key
objectives. In Bulgaria, financing for the Galata Gas Field development has been
secured and development is underway and on schedule for first production in
January 2004. In Egypt, production has now been established on both the Qantara
and El Mansoura concessions and there has been substantial exploration success
on the El Mansoura concession.
The rights issue undertaken in January 2003, which raised #13.6 million net of
expenses, enabled the Company to fulfil its immediate exploration work
commitments in Bulgaria, to reduce corporate borrowings and to continue with its
exploration drilling programme in Egypt. This exploration drilling programme has
resulted in commercial discoveries on all three wells drilled this year on the
El Mansoura concession - the South Mansoura, the Mansouriya and the South Batra
wells. These wells have established two highly prospective exploration plays on
the El Mansoura concession, the shallow Pliocene horizon and the deeper Miocene
Abu Madi channel system. The success of this exploration programme has exceeded
the Directors' expectations and as a result of this success the Directors now
intend to accelerate the exploration, appraisal and development activity on the
Egyptian concessions in 2003 and into 2004.
It is intended that all three discoveries will be brought onto production later
this year, adding in excess of 16 MMcfepd net production for Melrose on an
entitlement basis. Of these discoveries, the South Batra is the most
significant, both in terms of size and potential. The South Batra structure has
now been mapped over a much larger area than the initial mapping indicated, with
gross proven plus probable reserves currently estimated at 500 Bcfe. The
Directors expect that the existing well will commence production later this year
at a rate of 30 MMcfpd gross plus 600 bcpd (over 10 MMcfepd net). Production
from this field is expected to increase to 100 MMcfpd gross in 2005 and 150
MMcfpd gross in 2006 with the drilling of further wells. A development well is
being planned for later this year. An extensive 3-D seismic survey will also be
undertaken commencing later this year and continuing into 2004, initially over
the west-central area of the concession, which includes the South Batra
discovery, prior to full field development. If this survey yields good results,
it will be extended to cover the whole of the western half of the El Mansoura
concession.
After further interpretation of the drilling results on the Qantara concession,
the Directors now have a better understanding of the geology of this concession
and a number of prospects and leads have been remapped. An appraisal well, the
Qantara No. 7, is currently being drilled to test whether an extension of the
Qantara field is commercially viable. A further appraisal well, the Qantara No.
8, is also scheduled for later this year.
The Directors expect that production from the Galata Gas Field, the three new
discoveries in Egypt and increased production from the Qantara field will make a
significant contribution to earnings and cashflow from January 2004 and will
enable expenditures for future exploration to be funded out of cashflow.
Use of proceeds
The proceeds of the Placing and Open Offer will be placed on short term deposit
pending being used to finance the Company's operations as set out below:
------------------------- ------------- ------------
Minimum net Maximum net
proceeds of the proceeds of the
Placing and Placing and
Open Open
Offer Offer
# million # million
------------------------- ------------- ------------
Egypt - field appraisal and 7.9 7.9
development
Egypt - exploration 1.6 1.6
USA development 0.5 1.9
Repayment of the loan notes 3.0 3.0
General working capital purposes 1.4 4.5
------------- ------------
14.4 18.9
------------- ------------
The Group's general working capital requirements comprise the Group's ongoing
operating and financing costs and include a contingency for Galata project costs
overruns. After taking into account the repayment of debt detailed above, the
Directors do not expect that any debt repayments, other than in respect of the
Galata project finance, will be due until December 2005 and all operating
cashflow will be available for reinvestment and for distribution to
shareholders.
Current trading and prospects
Production from the Group's interests is currently 3,000 Mcfepd (500 boepd) in
Egypt and 4,200 Mcfepd (750 Boepd) in USA. In 2003, the Group has benefited from
high oil and gas prices, with average prices received of $2.78 per Mcf in Egypt
and $29.68 per bbl and $5.46 per Mcf in the USA. However, earnings in 2003
continue to be affected negatively by the weak US dollar which is the Group's
principal operating currency.
The Directors expect that development of the three new discoveries in Egypt will
add over 16 MMcfepd of net production. Two new wells have been drilled on the
Jalmat Unit in the USA and further wells are planned to be drilled during the
remainder of 2003 with a production target of 900 boepd by the year end.
After the success of the earlier drilling programme, a further three wells are
now scheduled to be drilled in Egypt this year, the first of which, the Qantara
No. 7, is currently being drilled on the Qantara concession. If this is
successful, it will make use of the existing Qantara production facilities which
have spare capacity, and commence production before the end of 2003. A further
well on the Qantara concession and a second well on the South Batra field are
also scheduled for later this year.
The Galata Gas Field development is underway and on schedule for first
production at initial rates of over 40 MMcfpd in January 2004. The platform is
under construction near Varna, in Bulgaria, and is scheduled to be floated out
in September 2003. It is planned that laying of the onshore and offshore
pipeline will commence next month. The drilling rig which will drill the two
production wells is scheduled to be on location in October. The continued
weakness of the US dollar has had an impact on the project costs and the
Directors now expect that the contingencies built into the project budget will
now be fully utilised. Although it is expected that the project's total costs
can still be funded through the project finance facilities and project
cashflows, the Directors have allowed for an additional contingency of $3
million in their assessment of the Company's working capital requirement in
order to cover any further cost overruns.
The Directors expect that production from the Galata Gas Field and from the new
discoveries in Egypt will transform the Group's future earnings and cashflow.
Additionally, the recent successful exploration drilling programme in Egypt has
established two multi-prospect exploration plays on the El Mansoura concession
which offer the potential to significantly increase oil and gas reserves and
production in the future. Based upon current plans and expectations, the
Directors have set an aggregate production target of 40 MMcfepd net to Melrose's
interest from its Egyptian interests by the end of 2005. In the USA, cashflow
from the Group's interests is being re-invested with a view to increasing
production to 3,000 boepd over the next three years.
The Board believes that, subject to completion of the Placing and Open Offer,
the financial and trading prospects of the Company for the current financial
year to 31 December 2003 are encouraging.
The Placing and Open Offer
The Company is proposing to raise up to #19.26 million gross (approximately
#18.86 million net of expenses) by the issue of 19,256,400 New Ordinary Shares
at the Issue Price pursuant to the Placing and Open Offer. Seymour Pierce has
conditionally placed firm 6,000,000 Placing Shares with institutional and other
investors at the Issue Price pursuant to the Placing. Seymour Pierce has
underwritten the Placing. None of the Placing Shares will be the subject of
clawback. Of the Open Offer Shares, over 63% currently are subject to
irrevocable undertakings received from certain Shareholders to take up some of
their entitlements under the Open Offer.
Seymour Pierce, acting as agent for the Company, has invited Qualifying
Shareholders to apply to subscribe under the Open Offer for Open Offer Shares at
the Issue Price, free of all expenses, payable in full on application, on the
basis of:
3 Open Offer Shares for every 10 Existing Shares
held at the close of business on the 22 July 2003 ("Record Date") and so in
proportion to the number of Existing Shares then held. The Open Offer has not
been underwritten. The Issue Price represents a discount of 9.1% to the current
middle market price of 110p per Ordinary Share.
The Placing and Open Offer is conditional, inter alia, upon:
(i) the passing of the resolutions to be proposed at the EGM;
(ii) a placing agreement between Seymour Pierce and the Company
("Placing Agreement") having become unconditional in all respects and
not having been terminated in accordance with its terms; and
(iii) admission of the New Ordinary Shares to the Official List and to
trading on the London Stock Exchange's market for listed securities
("Admission") becoming effective not later than 8 a.m. on 22 August 2003
(or such time and/or date as the Company may decide being no later than
8 a.m. on 31 August 2003).
If the conditions of the Placing Agreement are not fulfilled on or before the
relevant time and date in the Placing Agreement, Placing monies will be returned
to placees without interest as soon as practicable thereafter.
None of the New Ordinary Shares have been marketed or will be made available in
whole or in part to the public in conjunction with the application for Admission
other than pursuant to the Placing and Open Offer. The New Ordinary Shares will
rank pari passu with the Existing Shares in all respects, including with regard
to dividends and interest.
Application will be made to the UK Listing Authority and to the London Stock
Exchange for the New Ordinary Shares to be admitted to the Official List and to
be admitted to trading on the London Stock Exchange's market for listed
securities. It is expected that Admission will become effective and that
dealings in such shares will commence on 22 August 2003.
Extraordinary General Meeting
The Placing and Open Offer is conditional, inter alia, upon the passing of the
resolutions to be proposed at the extraordinary general meeting to be held at 66
Queen Street, Edinburgh, EH2 4NE, at 10 a.m. on 21 August 2003. Shareholders
will be asked to consider, and if thought fit, pass the following resolutions
which will be proposed to:
a. increase the authorised share capital of the Company from
#6,000,000 divided into 60,000,000 ordinary shares of 10p each to
#10,000,000 divided into 100,000,000 ordinary shares of 10p each;
b. *authorise and empower the directors of the Company under section 80 of the
Act to issue and allot (i) up to 19,256,400 new Ordinary Shares pursuant to
the Placing and Open Offer and (ii) new Ordinary Shares up to an aggregate
nominal amount of #2,100,000 as they think fit; and
c. *authorise and empower the directors of the Company under section 89 of the
Act to issue relevant securities for the purposes of such section (i) up to
an aggregate nominal amount of #1,925,640 for the purposes of the Placing
and Open Offer (ii) pursuant to a rights issue, open offer or other
pre-emptive issue and (iii) otherwise on a non pre-emptive basis up to a
maximum nominal amount of #635,000.
Expected timetable of principal events
Record Date for the Open Offer Close of
business on 22
July 2003
Latest time and date for splitting Application Forms 3 p.m on 15
(to statisfy bona fide market claims only) August 2003
Latest time and date for receipt of Forms of Proxy for 10 a.m. on 19
use at the Extraordinary General Meeting August 2003
Latest time and date for receipt of Application Forms 3 p.m. on 19
and payment in full under the Open Offer August 2003
Extraordinary General Meeting 10 a.m. on 21
August 2003
Expected date of Admission and expected date of 22 August 2003
commencement of dealings in the New Ordinary Shares
CREST member accounts to be credited 22 August 2003
Definitive share certificates in respect of New 29 August 2003
Ordinary Shares to be held in certificated form
dispatched by
This information is provided by RNS
The company news service from the London Stock Exchange
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