TIDMKEA
RNS Number : 2932R
Kea Petroleum PLC
26 June 2015
Kea Petroleum plc
("Kea" or the "Company")
Disposal of Assets, Notice of General Meeting, Adoption of
Investing Policy, Share Reorganisation and Closure of Formal Sale
Process
The Company will shortly send a circular to its shareholders
convening a general meeting to approve a number of matters. The
following text has been taken from the circular. A copy of the
circular will be available on the Company's website at
www.keapetroleum.com.
Proposed Disposal of Assets and Related Matters
Shareholders will be aware that trading in our shares on AIM was
suspended on 26 May 2015 pending clarification of our financial
position. This followed our ultimately unsuccessful efforts to
raise GBP3 million of new equity capital to enable us to take
further our drilling activities on our PEP51153 licence area in New
Zealand.
As we stated at the time our efforts have continued to find
alternative ways to secure the survival of the Company for the
benefit of all shareholders and I am writing to you now to bring
you up to date and to explain to you our proposals for the near
future for Kea, including news of proposed asset disposals and a
new investment policy.
The Company has conditionally agreed to sell its 70% interest in
PEP51153, the licence which includes the Puka wells and the Shannon
prospect, to Caliera Fund Limited, a privately owned New Zealand
company, for NZ$500,000 (approximately GBP222,550). That disposal,
if consummated, represents a disposal of substantially the whole of
the Company's assets, and will result in the Company being
classified as an "investing company" under the AIM Rules for
Companies, following an investment policy which must be approved by
shareholders.
In addition we have entered a conditional heads of terms,
subject to contract, to dispose of our interest in PEP381204, the
licence which includes the Mauku prospect.
The net proceeds of the Disposals after costs will be applied in
settlement of the Group's current creditors, and as working
capital, but will not be sufficient to meet the ongoing costs of
keeping the Company alive or delivering on its proposed investment
policy. Accordingly we will be seeking to raise, through
subscriptions by existing substantial shareholders (including
directors and associate parties) and others, up to GBP1 million to
cover ongoing costs of operations pending a new transaction
constituting a reverse take-over which would be put to shareholders
for approval in due course or otherwise implement its investing
policy. To facilitate this fund raising we believe it is necessary
to recognise the reduced value of the Company and the share price
of the Company's shares immediately prior to suspension being below
the current par value by reducing the par value of the ordinary
shares to 0.1p per share from the existing figure of 1.0p per
share.
The Company intends, dependent on the successful conclusion of
the share reorganisation, and providing there is sufficient working
capital from raising of further new funds, to seek to lift the
suspension of it New Ordinary Shares to trading on AIM.
The purpose of this announcement is therefore:
-- to give you more information regarding the Disposals and to seek your approval to them;
-- to explain to you our proposed investing policy and to seek your agreement to it;
-- to give you more details of the proposed share reorganisation;
-- to seek your authority to issue further shares at a price not
less than 0.1p per share to raise up to GBP1 million and to
disapply the statutory pre-emption rights on such an issue.
Sale of Interest in PEP51153
Following an exhaustive marketing exercise conducted on the
Company's behalf in the course of the strategic review announced in
February 2015, Kea's subsidiary Kea Petroleum Limited has entered
into an agreement with Caliera Fund Limited under which Caliera has
agreed to acquire KPL's 70% interest in its joint venture with MEO
New Zealand Pty Limited regarding PEP51153, the licence which
includes the Puka wells and the Shannon prospect. The principal
terms of the JV Disposal are as follows:
-- Caliera will pay NZ$500,000 (approximately GBP222,550) for
KPL's interest in the JV, payable in cash on completion of the
Disposal (less any deposits paid on account as described
below);
-- Caliera will advance NZ$50,000 (approximately GBP22,255)
against the purchase price provided KPL grants to Caliera as
security for the advance a first charge over its assets and an
assignment of its interest in the JV. Provided such security is
granted Caliera will make further advances to ensure KPL can
continue operations prior to completion of the JV Disposal;
-- the JV Disposal is conditional upon:
- the waiver by MEO of its pre-emptive rights to acquire KPL's
interest in the JV and its consent to KPL giving a first charge
over its interest as referred to above;
- the consent of the appropriate Minister of the Crown, to the
transfer of KPL's interest in PEP51153 to Caliera pursuant to
Section 41 of the Crown Minerals Act 1991;
- requisite shareholder approval from Shareholders to the Disposal; and
- clarification to the satisfaction of Caliera, as to the status
under the Crown Minerals Act 1991 of the well drilled by the JV and
known as Puka 3.
-- if Shareholders do not approve the JV Disposal KPL will be
required to refund the deposits paid on account of the purchase
price and pay to Caliera a termination fee of NZ$250,000
(approximately GBP111,275) as full compensation for all costs
(including opportunity costs) incurred by Caliera pending
completion of the Disposal, or failure of a condition;
-- KPL will not hold or continue discussions or negotiations
with any other party in respect of the sale of its interest in the
JV.
The JV has been responsible for exploration and development of
PEP51153, including drilling and operating the Puka wells and
preparatory work on the Shannon prospect. Production at Puka was
suspended in January 2015. In the year to 31 May 2015 the directors
estimate that the losses attributable to PEP51153 were NZ$15.6M
(approximately GBP6.9M), on a going concern basis. The value of
KPL's interest in the JV in the books of the Company as at 31 May
2015 is estimated to be GBP10.35M.
Caliera is a private company which was incorporated in New
Zealand in 2013. Caliera is primarily focussed on oil and gas
exploration and production. As noted above, the conditional
agreement to dispose of the Group's interest in PEP51153 is
subject, inter alia, to the approval of the Company's shareholders
and an appropriate resolution to that effect will be tabled at the
forthcoming General Meeting.
Sale of interest in PEP381204
As a result of the marketing of the Company's New Zealand assets
the Company's New Zealand subsidiary Kea Exploration Limited has
entered into a heads of agreement, subject to contract, to assign
its 100% interest in PEP381204, the licence which includes the
Mauku prospect, to New Endeavour Resources (NZ) Limited on the
following terms:
-- a purchase price of US$500,000 (approximately GBP222,550)
payable in cash within 3 months of NZPAM approval to the assignment
of PEP381204;
-- KEL will retain the right to receive a royalty of two and one
half per cent (2.5%) on all petroleum products sold which are
produced on PEP381204;
-- the agreement is currently non-binding and is subject to the
execution of a formal assignment agreement between KEL and NER.
The NER Disposal is conditional upon NZPAM's approval to the
assignment and to PEP381204 remaining compliant, which will require
KEL to make an application for a Change of Conditions to the Permit
Work Programme which is acceptable to NZPAM and to NER. The costs
of the applications to NZPAM will be paid by NER.
The Company is currently in discussions with Methanex regarding
an equitable share of any deal completed on PEP381204 in
recognition of the JV agreement entered into between the Company
and Methanex over the permit.
In the year ended 31 May 2015 the estimated losses attributable
to PEP381204 were NZ$47,500 (approximately GBP21,000). The asset
was fully written down in the Company's balance sheet at that
date.
NER is a private company which was incorporated in New Zealand
in 2010. NER's directors each have in excess of 30 years of
international experience in exploration and development. NER was
awarded PEP57070, an offshore Taranaki Exploration Permit, in 2014
and is continuing to build a portfolio of conventional
opportunities. NER's strategy is to realise reserves in areas where
complex geology hinders formation evaluation.
Investing Policy
On completion of the JV Disposal, the Company will be deemed to
be an 'investing company' for the purposes of the AIM Rules, and
will have one year in which to make an acquisition which will
constitute a 'reverse takeover', or otherwise discharge its
investing policy. For the Company to remain on AIM until such an
acquisition its investing policy must first be approved by
shareholders.
The Board proposes that the Company's Investing Policy should be
to invest in and/or acquire companies and/or projects with
potential for growth. The Directors will focus on making
investments in the industry sectors with which they are most
familiar, which in addition to the resources sector include
technology, life sciences, property, leisure and hospitality. The
overriding criterion, however, will be the potential for creating
value for shareholders. The geographical focus will primarily be in
regions in the world that the Board considers valuable
opportunities exist and potential returns can be achieved.
Where appropriate, the Board may seek to invest in businesses
where it may influence the business at a board level, add their
expertise to the management of the business, and utilise their
industry relationships and access to finance.
The Company's interests in a proposed investment and/or
acquisition may range from a minority position to full ownership
and may comprise one investment or multiple investments. The
proposed investments may be in either quoted or unquoted companies;
be made by direct acquisitions or farm-ins; and may be in
companies, partnerships, earn-in joint ventures, debt or other loan
structures, joint ventures or direct or indirect interests in
assets or projects. The Board may focus on investments where
intrinsic value may be achieved from the restructuring of
investments or merger of complementary businesses.
The Board expects that investments will typically be held for
the medium to long term, although short term disposal of assets
cannot be ruled out if there is an opportunity to generate a
potentially attractive return for Shareholders. The Board will
place no minimum or maximum limit on the length of time that any
investment may be held. The Company may be both an active and a
passive investor depending on the nature of the individual
investment.
There is no limit on the number of projects into which the
Company may invest, and the Company's financial resources may be
invested in a number of propositions or in just one investment,
which may be deemed to be a reverse takeover under the AIM Rules.
The Board intends to mitigate risk by appropriate due diligence and
transaction analysis. Any transaction constituting a reverse
takeover under the AIM Rules will also require Shareholder
approval. The Board considers that as investments are made, and new
promising investment opportunities arise, further funding of the
Company may also be required.
Where the Company builds a portfolio of related assets it is
possible that there may be cross holdings between such assets. The
Company does not currently intend to fund any investments with debt
or other borrowings but may do so if appropriate. Investments in
early stage assets are expected to be mainly in the form of equity,
with debt potentially being raised later to fund the development of
such assets. Investments in later stage assets are more likely to
include an element of debt to equity gearing. The Board may also
offer New Ordinary Shares by way of consideration as well as cash,
thereby helping to preserve the Company's cash for working capital
and as a reserve against unforeseen contingencies including, for
example, delays in collecting accounts receivable, unexpected
changes in the economic environment and operational problems.
Investments may be made in all types of assets and there will be
no investment restrictions on the type of investment that the
Company might make nor the type of opportunity that may be
considered.
The Company may consider possible opportunities anywhere in the
world.
The Board will conduct initial due diligence appraisals of
potential business or projects and, where they believe further
investigation is warranted, intend to appoint appropriately
qualified persons to assist. The Board believes its expertise will
enable it to determine quickly which opportunities could be viable
and so progress quickly to formal due diligence. The Company will
not have a separate investment manager.
A resolution approving the Company's proposed investing policy
will be proposed at the forthcoming General Meeting.
Funding and share reorganisation
The Directors do not believe it is possible to raise funds for
the Company at or near the current par value of the Company's
ordinary shares of 1p, which would value the company at
approximately GBP1 million. The Directors believe that they need
the flexibility to issue shares at a lower price to secure the
equity finance necessary to maintain the Company's AIM quotation
and discharge its existing liabilities to its creditors and
suppliers. English company law does not allow the issue of shares
at a price less than the par value and accordingly the Board has
concluded that it is necessary to reduce the par value of the
Company's ordinary shares.
Share Capital Reorganisation
As at 24 June 2015, being the latest practicable date prior to
this announcement, the total issued share capital of the Company
was GBP9,393,618.70 divided into 93,936,187 Existing Ordinary
Shares and 93,936,187 Existing Deferred Shares.
It is proposed that to effect the Proposed Reorganisation each
Existing Ordinary Share will be subdivided and converted into one
New Ordinary Share of 0.1p and one New Deferred Share of 0.9
pence.
Ordinary Shares
As a consequence of, and immediately following, the Proposed
Reorganisation becoming effective, each Shareholder's holding of
New Ordinary Shares will be equal to the number of Existing
Ordinary Shares held by them on the Record Date and each
Shareholder's proportionate interest in the Company's issued
ordinary share capital will, and thus the aggregate value of their
holding should, remain unchanged as a result of the proposed
Reorganisation.
The New Ordinary Shares will continue to carry the same rights
as attached to the Existing Ordinary Shares.
The last day of trading on AIM in the Existing Ordinary Shares
is expected to be 13 July 2015.
If approved, following the Proposed Reorganisation becoming
effective, assuming no shares are issued between 24 June 2015
(being the latest practicable date prior to the release of this
announcement) and the date the Proposed Reorganisation becomes
effective (expected to be 8.00 am 14 July 2015), the Company's
issued ordinary share capital will comprise 93,936,187 New Ordinary
Shares.
Share certificates representing the Existing Ordinary Shares
will remain valid in respect of the New Ordinary Shares and new
certificates will not be issued. No adjustment will be made to the
CREST accounts of Shareholders who hold their entitlement to
Existing Ordinary Shares in uncertificated form.
New Deferred Shares
The New Deferred Shares will rank pari passu in all respects
with the Existing Deferred Shares. They will be effectively
valueless as they will not carry any rights to vote or dividend
rights. In addition, holders of Deferred Shares will only be
entitled to a payment on a return of capital or on a winding up of
the Company after each of the holders of Ordinary Shares have
received a payment of GBP10,000,000 on each such share. The
Deferred Shares will not be listed or traded on AIM and will not be
transferable without the prior written consent of the Board. No
share certificates will be issued in respect of the Deferred
Shares, nor will CREST accounts of shareholders be credited in
respect of any entitlement to Deferred Shares.
Authority to issue shares
In order to be able to raise the funds which the Directors
consider Kea needs to be able to continue as a going concern, the
Company will require authority from Shareholders to allow for the
creation and issue of up to 100 million new ordinary shares
following the Proposed Reorganisation.
Authority to allot shares
Under the provisions of the Companies Act 2006, the Directors of
the Company may only allot or grant rights over unissued shares if
authorised to do so by the Company's articles of association or by
its shareholders in a general meeting. Resolution 4, to be proposed
as an ordinary resolution, will provide the Directors with an
authority to allot or grant rights over new ordinary shares with a
nominal value of GBP1,000,000. If given, the authority will expire
on the earlier of 30 November 2015 or the date of the Annual
General Meeting in 2015, unless revoked or varied by the Company
from time to time in a subsequent general meeting.
Disapplication of pre-emption rights
Resolution 5 grants the Directors authority to allot equity
securities for cash, without the need first to offer such shares to
existing shareholders. The proposed limit on the nominal value of
the equity securities that may be allotted for cash is
GBP1,000,000. Resolution 5 is to be proposed as a special
resolution. This means that for the resolution to be passed, at
least three quarters of the votes cast must be in favour of the
resolution.
Conclusion of Formal Sale Process
In connection to the proposed disposals of PEP51153 and
PEP381204, the Board has decided to terminate the Formal Sale
Process as defined in the Takeover Code. Therefore the Company is
no longer in an "offer period" under the Takeover Code.
Recommendation
The Company's unallocated cash resources are now almost totally
depleted and without additional funds it will not be able to
continue. The Directors believe that the prospects of receiving new
investment will be enhanced by the Disposals and by the adoption of
the Investment Policy but will need additional funds to enable the
discharge of that policy. If Shareholders do not approve all of the
resolutions to be proposed at the General Meeting the Directors
believe they will have no alternative but to settle the Company's
creditors from the Company's remaining cash resources and commence
the liquidation of the Company.
Accordingly the Directors unanimously recommend that
shareholders vote in favour of all the resolutions to be proposed
at the General Meeting, as they and those persons connected with
them intend to do in relation to their Ordinary Shares
(representing 15.66 % of Kea's existing ordinary share
capital).
General Meeting
A General Meeting of the Company will be held at the Company's
offices at 1(st) Floor, 5-8 The Sanctuary, London SW1P 3JS on 13
July 2015 at 12 noon.
Expected timetable of principal events
2015
Posting of the Notice of GM and form 26 June
of proxy
Latest time and date for receipt of 12 noon on
forms of proxy 9 July
General Meeting of the Company 12 noon on
13 July
Record date 5pm on 13
July
Share reorganisation becomes effective 14 July
Definitions
"AIM Rules" the AIM Rules for Companies published
by London Stock Exchange PLC;
"AIM" the market of that name operated
by London Stock Exchange PLC;
the "Board" or the directors of the Company;
the "Directors"
"Caliera" Caliera Fund Limited, a New Zealand
company, the proposed purchaser
of KPL's interest in the JV;
"Company" or "Kea" Kea Petroleum PLC;
"Deferred Shares" the Existing Deferred Shares
and the New Deferred Shares;
"Disposal" the JV Disposal and the NER Disposal;
"Existing Deferred the issued deferred shares of
Shares" 9p each in the capital of the
Company;
"Existing Ordinary the issued ordinary shares of
Shares" 1p each in the capital of the
Company;
"General Meeting" the general meeting of Shareholders
convened for 13 July 2015;
"Group" Kea and its subsidiaries;
the "Investing the Company's proposed investing
Policy" policy described in this announcement;
"JV" the joint venture between KPL
and MEO regarding PEP51153;
"JV Disposal" the proposed disposal of KPL's
interest in the JV to Caliera
as described in this announcement;
"KEL" Kea Exploration Limited, a wholly
owned subsidiary of the Company
incorporated in New Zealand;
"KPL" Kea Petroleum Limited, a wholly
owned subsidiary of the Company
incorporated in New Zealand;
"MEO" MEO New Zealand Pty Limited,
KPL's joint venture partner in
the JV;
"NER" New Endeavour Resources Pty Limited,
a New Zealand company, the proposed
purchaser of PEP381204;
"NER Disposal" the proposed disposal of KPL's
interest in petroleum exploration
permit PEP381204 to NER as described
in this announcement;
"New Deferred Shares" the deferred shares of 0.9p each
arising on the Proposed Reorganisation;
"New Ordinary Shares" the ordinary shares of 0.1p each
arising on the Proposed Reorganisation;
"NZPAM" New Zealand Petroleum and Minerals,
part of the New Zealand Ministry
of Business Innovation and Employment;
"Proposed Reorganisation" the proposed reorganisation of
the Company's share capital described
in this announcement;
"Record Date" the record date for the Proposed
Reorganisation, being 13 July
2015;
"Shareholders" holders of the Existing Ordinary
Shares;
"Takeover Code" the City Code on Takeovers and
Mergers;
For further information please contact:
Kea Petroleum plc Tel: +44 (0)20 7340
David Lees, Executive Director 9970
WH Ireland Limited (NOMAD) Tel: +44 (0)20 7220
James Joyce 1666
James Bavister
Buchanan Tel: +44 (0)20 7466
Mark Court 5000
Sophie Cowles
This information is provided by RNS
The company news service from the London Stock Exchange
END
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