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Highlands Natural Resources Talk Readmission to Trading on the LSE

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Publication of Prospectus, Readmission to Trading on the London Stock Exchange and Placing

© Image copyright tjeerd

Highlands Natural Resources announces that on 28 January 2016 it published a prospectus relating to the acquisition from Diversion Technologies LLC of an interest in 75 per cent. of certain patent and know how rights associated with ‘DT Ultravert’, a well stimulation (fracking) diverter technology, announced on 12 May 2015. The Acquisition was classified as a reverse takeover and resulted in the suspension of the Company’s shares from trading on the Official List pending the publication of the Prospectus.

Accordingly, the Directors have applied for the Ordinary Shares to be admitted to the Official List of the UKLA by way of a Standard Listing and to trading on the Main Market of the London Stock Exchange. Re-Admission is expected to take place and unconditional dealings in the Ordinary Shares are expected to commence on the London Stock Exchange at 8.00 a.m. on 3 February 2016.

In addition, the Company is pleased to announce that it has raised approximately £765,000 (before expenses) pursuant to a placing of 6,375,000 Ordinary Shares at a price of 12 pence per Placing Share. The Placing Price represents a discount of 15.8 per cent. to the closing price of 14.25 pence per Ordinary Share on 25 June 2015 (being the date on which the Ordinary Shares were suspended from trading on the Official List). The size of the Placing discount was determined following discussions with both existing and potential new Shareholders.

Following the issue of the Placing Shares, which represent approximately 29% of the Company’s existing issued ordinary share capital and approximately 22.5% of the issued share capital of the Company as enlarged by the Placing, the Company will have 28,373,500 ordinary shares of 5 pence each in issue. Application has also been made for the Placing Shares to be admitted to the standard listing segment of the Official List of the UK Listing Authority and to trading on the Main Market for listed securities of the London Stock Exchange. Admission is expected to take place on 3 February 2016.

On 25 September 2015, the Company announced that it had signed indicative terms for a licence agreement with Schlumberger Technology Corporation, a 100 per cent. owned subsidiary of Schlumberger Limited, the world’s leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry.

The net proceeds of the Placing will be applied towards both the expenses and any other costs associated with the field trials to be undertaken in accordance with the Indicative Terms.

The Company commissioned an Independent Technology Report on DT Ultravert from RPS Group PLC, the results of which were published on 2 December 2015 and are set out in Part VIII of the Prospectus. The Independent Technology Report highlighted a series of unique advantages which differentiates DT Ultravert from other competitive solutions and confirmed that, if the technology is successful, it has an ability to provide the industry with a revolutionary change in the way certain wells are stimulated.

Furthermore, the Independent Technology Report assessed the economic returns for the investment in the DT Ultravert technology and confirmed that modelling shows a payback of the initial investment within one year and a NPV(10.5%) project value of $58.3MM considering per job revenue of 2% royalty based on fracturing ticket pricing.

Highlights

· Positive activity undertaken towards the commercialisation of DT Ultravert which is focused on reducing production costs for oil and gas companies, thereby potentially transforming the well stimulation (fracking) industry, which is a multi-billion dollar per year business
· Re-fracking using a diverter technology is an emerging trend due to its potential to increase oil and gas production without the expense of drilling new wells
· Particularly considering the current depressed oil price, the development of innovative oilfield technology may represent a highly disruptive force in the market
· Highlands Natural Resources believes that, with DT Ultravert, it may have a market leading solution – an Independent Technology Report concludes that the DT Ultravert technology provides a series of unique advantages which differentiates it from other competitive solutions
· Indicative terms for a licence agreement were signed between Highlands and Schlumberger Technology Corporation, a 100% owned subsidiary of Schlumberger Ltd, on 25 September 2015 providing for a due diligence period for evaluation of DT Ultravert and outlining the terms for a potential 20-year licensing agreement
· Multiple revenue streams identified – up-front licensing fees; on-going royalty fees; the sale of nitrogen or other gasses to licensees and; eventual production acquisitions or investments with exploration and production companies and oil service companies
· Continued progression of strategy to capitalise on the current oil price environment to acquire assets at a low cost

¾ Highlands Natural Resources acquired a 2,149 gross acres (1,972.8 net acres) exploration lease located in the Williston Basin, North Dakota

· Independent Technology Report on DT Ultravert conducted by RPS highlighted the significant potential of the technology to provide the industry with a revolutionary change in the way certain wells are stimulated and estimated a NPV(10.5%) project value of $58.3MM

Robert Price, Chief Executive Officer of HNR, commented:

“We are delighted that shares in Highlands Natural Resources will be readmitted to trading following the acquisition of a 75% interest in Diversion’s patent applications. As the oil price has declined significantly, we believe that there is a clear requirement for the development of transformational new oilfield technologies which dramatically reduce costs for exploration and production companies.

“Considering the results from an Independent Technical Report, published by RPS Group plc, which concludes that the DT Ultravert technology provides a series of unique advantages which differentiates it from other solutions on the market, we believe that DT Ultravert has strong potential to deliver significant savings and to act as a highly disruptive force in the multi-billion dollar per year fracking industry.

“We continue to work closely with Schlumberger as we recognise the potential of the technology, as highlighted by the indicative terms we have signed, and we look forward to demonstrating DT Ultravert’s capabilities through field tests in the coming months.

“We are also committed to our strategy to capitalise on the current oil price environment by acquiring assets at low cost and we delivered on this recently through the acquisition of the exploration lease located in the Williston Basin, North Dakota. We will continue to assess other suitable opportunities in the coming months and look forward to updating the market on this. I thank our shareholders for their patience over recent months, and, with our shares now re-admitted to trading, we look forward to developing opportunities for Highlands Natural Resources.”

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