TIDMFRI
RNS Number : 8600Q
Frontier Resources International
03 March 2016
For immediate release
3 March 2016
Frontier Resources International Plc
("Frontier" or the "Company")
Proposed disposal of Frontier Oman Resources Limited ("Frontier
Oman") and
Frontier Resources International Inc ("FRII")
Notice of General Meeting
1. Introduction
The Board of Frontier (AIM Ticker: FRI) announces that the
Company has conditionally agreed to dispose of Frontier Oman (which
holds the Group's oil exploration interests in Oman) and its entire
interest in FRII, which provides administrative and technical
support to the Group's oil projects. In accordance with AIM Rule
15, the Oman Disposal and the FRII Disposal are conditional on
Shareholder approval at the General Meeting of the Company, notice
of which will be sent to Shareholders.
The effect of the Oman Disposal should the Resolution be
approved at the General Meeting, would be that on completion the
Company will cease to own, control or conduct all, or substantially
all, of its existing trading business, activities or assets and
would therefore become an AIM Rule 15 cash shell, pursuant to which
it must make an acquisition or acquisitions which constitute a
reverse takeover under AIM Rule 14 (including seeking re-admission
as an Investing Company (as defined under the AIM Rules)) within
six months, failing which the Exchange will suspend trading in the
Ordinary Shares pursuant to AIM Rule 40.
2. Background
The potential farm-out process in respect of the Oman EPSA has
been ongoing for some considerable time, the Company retained the
services of a Dallas-based adviser to assist and provide general
transaction advice and Frontier Oman has had discussions with a
number of parties. But the Board was unable to complete any
transaction or raise sufficient funding and/or provide a bank
guarantee for the Oman EPSA before the Funding Deadline. Frontier
Oman notified the Oman Government that it had not satisfied the
Funding Deadline. No default notification has yet been received
(which unless rectified would otherwise lead to the termination of
the Oman EPSA) notwithstanding that Frontier Oman is in default of
the renewal conditions. Frontier Oman's sole licence interest is
the Oman EPSA.
Frontier Oman has continued discussions with one remaining
potentially interested party, an overseas junior exploration
company, regarding its possible interest in acquiring the Oman EPSA
on the basis of a conditional letter of intent which is subject to
a number of material and substantial conditions including due
diligence, agreement of definitive transaction agreements, the
agreement of the Oman Ministry to waive and extend the Funding
Deadline and approve a change of control of the Oman EPSA pursuant
to which the potential purchaser must provide an acceptable
guarantee of the work programme for the Oman Ministry. Under the
letter of intent, the consideration for Frontier Oman comprises an
exclusivity fee of US$50,000 and a completion payment of
US$450,000. In addition, but subject to completion of a work
programme (comprising 1,000 km of new 2D seismic or an equivalent
programme as agreed with the Oman Ministry and the drilling of two
wells) the purchaser would then assign to the Company a 10 per
cent. working interest in the Oman EPSA, with the Company required
to pay its pro rata share of ongoing working costs, and re-pay
back-costs to the Company of up to US$1.05 million.
However, the Board does not believe that there is any immediate
prospect of any material improvement in market conditions in the
oil sector or investor sentiment. The Board has concluded, given
the material uncertainties and conditions attaching to the
potential disposal described above, and not least the requirement
by the purchaser to fund its work programme in current market
conditions, that there is an unacceptably low likelihood of this
transaction actually proceeding, and the Board is not prepared to
incur the necessary significant expenses and costs given the time
delays involved. There are significant ongoing administrative costs
and obligations that Frontier Oman would still incur, should it
continue in operation while seeking possible agreement from the
Oman Government to an extension of the Funding Deadline and
negotiate and agree definitive terms with the potential farm-out
partner, with no assurance that Oman Government approval would ever
be forthcoming or that any transaction could be subsequently
completed on acceptable terms.
As previously announced, the funds raised in the recently
completed subscription are to enable the Company to pursue a new
strategic direction and are not available for funding Frontier
Oman. In the absence, therefore, of any Group funding for Frontier
Oman, or any immediate external funding, there are no available
funds to support Frontier Oman, under the Group's continuing
ownership, to continue trading any further or continue discussions
with the overseas junior exploration company described above or pay
a pro rata share of ongoing working costs in the future as referred
to above. The Board has concluded that it is in the best interests
of the Company and its Shareholders, as soon possible, either to
dispose of the Group's interest in Frontier Oman to a party who
might be willing to fund ongoing farm-out discussions without any
cost to the Company in return for some potential consideration in
the future should those discussions be successful, or to wind-up
Frontier Oman without delay to avoid any further costs.
The Board has taken into account the length of time a winding-up
might take, together with the potential costs involved and that
Frontier Oman's unaudited net current liabilities, excluding
inter-company debts and the annual licence renewal fee, amounted to
GBP24,120 as at 29 February 2016. In addition, US$250,000 is due
from Frontier Oman to the Oman Government in respect of the annual
licence fee for the year ending November 2016. The Board concluded
that an immediate disposal of Frontier Oman, if possible, was the
preferred outcome as it would minimise the costs to the Company, be
achieved in a much shorter timeframe and potentially provide some
future value.
Following an approach by the Board, Mr M (Jack) Keyes, the
former chief executive officer of the Company, agreed that he would
be prepared to purchase Frontier Oman (and fund any ongoing
farm-out discussions) and provide the Company with a deferred
consideration should he ultimately be successful.
3. Proposed disposal of Frontier Oman
The Company has therefore agreed, on 2 March 2016, the sale of
the entire issued share capital of Frontier Oman to Mr M (Jack)
Keyes, the former chief executive officer of the Company,
conditional on the approval by Shareholders.
As part of the Oman Disposal, certain Group liabilities have
been novated to Frontier Oman such that on completion of the sale
of Frontier Oman, the Company will no longer have any liability in
respect of any accrued or ongoing costs associated with Frontier
Oman, including any professional or other advisory fees potentially
payable on a farm-out.
In addition, the Company has novated to Frontier Oman the
contingent debt that it owes to Mr M (Jack) Keyes of GBP272.223.13
(equivalent to approximately US$378,000), which would only be paid
in the event that the Company completed a farm-out of its interests
in one or more of its projects which involved the reimbursement to
the Company of at least GBP435,556 of historic exploration
expenditure.
The consideration for Frontier Oman comprises an initial nominal
cash sum of GBP1 and the rights to a carried interest equivalent to
20 per cent. of:
(i) the net cash (after taking into account any taxes) in excess
of US$500,000 received by Mr M (Jack) Keyes and/or Frontier Oman
(in each case, directly or indirectly) from the sale of Frontier
Oman or the assignment of the Oman EPSA; and
(ii) the net cash (after taking into account working interest
costs and tax) which Mr M (Jack) Keyes and/or Frontier Oman
receives (directly or indirectly) from any sale of any hydrocarbons
produced from the first two wells drilled in respect of the Oman
ESPA.
On completion of the Oman Disposal, the Company will also cancel
the existing share options held by Mr M (Jack) Keyes to subscribe
for 750,000 new Ordinary Shares at an exercise price of 5.5p per
new Ordinary Share on or before 15 October 2020.
As Mr M (Jack) Keyes was a director of the Company within the
last 12 months, the Oman Disposal is a related party transaction
for the purposes of Rule 13 of the AIM Rules. The Directors, having
consulted with the Company's nominated adviser, consider that the
Oman Disposal is fair and reasonable insofar as Shareholders are
concerned. The Directors have taken into account the following:
(i) on completion of the sale of Frontier Oman, the Company will
no longer have any potential liability in respect of the Keyes Debt
of GBP272,223.13 nor will it have any ongoing requirement to
provide any future funding to Frontier Oman;
(ii) in the absence of any Group funding for Frontier Oman or
any external funding by way of a farm out, there are no available
funds to support Frontier Oman under the Group's continuing
ownership to continue trading any further. If the Oman Disposal
were not to proceed, the Board would intend to wind-up Frontier
Oman as soon as possible. As previously notified the recent
subscription was secured to support the future development of the
Group in a new sector and the funds raised from the subscription
would not be used to support the Group's existing oil exploration
projects, including Frontier Oman;
(MORE TO FOLLOW) Dow Jones Newswires
March 03, 2016 02:01 ET (07:01 GMT)
(iii) the Oman Disposal minimises the costs to the Company, can
be achieved in a much shorter timeframe than a winding-up and
potentially provide some future value should Mr M (Jack) Keyes be
able to secure Oman Government approval as described above and
secure funding from a third party. Frontier's carried interest
reflects, inter alia, the risk that the Oman Disposal is not
conditional on Oman Government consent to the change of control of
Frontier Oman, which Mr M (Jack) Keyes will need to subsequently
procure;
(iv) the Board does not believe that there is any immediate
prospect of a material improvement in market conditions in the oil
sector or investor sentiment. While the potential farm-out process
in respect of the Oman EPSA has been ongoing for some considerable
time, and the Company retained the services of a Dallas-based
adviser to assist and provide general transaction advice on this
process, the Board had been unable to complete any farm-out nor
does it believe there is any certainty it would be able to do so
within an acceptable timeframe, notwithstanding that the Company
has in any event resolved not to commit further funds to Frontier
Oman;
(v) while the Oman Government has not yet issued a default
notification, the Board does not believe that Frontier Oman under
the continuing ownership of the Group would be able to comply in
the relevant period with the terms of any such default notice and
that the Oman EPSA would therefore in all probability terminate;
and
(vi) the Oman Disposal enables the Company to make a clean break
from its activities in Oman and enables the Board to focus on new
projects. On completion of the Oman Disposal, the Company will have
no further liabilities either to Mr M (Jack) Keyes or to Frontier
Oman.
4. Disposal of FRII
Given the proposed disposal of the Group's activities in Oman,
and the proposed cessation of activities in Zambia and Namibia as
described further below, the Company has also, on 2 March 2016,
agreed the sale of 100 per cent of the issued share capital of
FRII, to Mr M (Jack) Keyes for a nominal cash sum of GBP1. FRII has
historically provided administrative and technical support for the
Group's oil exploration projects and has no licence interests. On
completion of the FRII Disposal, all inter-company balances owed by
Group companies to FRII will be novated to the Company and the
remaining net balance owed by FRII to the Company amounting to
US$1,718,584 will be waived in full. The net balance owed by FRII
of $1,718,584, has already been impaired in full in the Company
financial statements
As Mr M (Jack) Keyes was a director of the Company within the
last 12 months, the FRII Disposal is also a related party
transaction for the purposes of Rule 13 of the AIM Rules. The
Directors, having consulted with the Company's nominated adviser,
consider that the FRII Disposal is fair and reasonable insofar as
Shareholders are concerned. The Directors have taken into account
that FRII is a Group cost centre with no revenues or assets and
therefore the inter-company balances reflect the historic funding
of ongoing administrative and other day-to-day operational costs
incurred by FRII on behalf of the Group. Furthermore, the Company
no longer requires any technical support, as it will no longer have
any activities in Oman and as described further below intends to
cease activities in Zambia and Namibia as soon as possible.
5. Effect of the disposals on the Company
In accordance with AIM Rule 15, the effect of the Oman Disposal
(together with the FRII Disposal would be that on completion, the
Company will cease to own, control or conduct all, or substantially
all, of its existing trading business, activities or assets and
would therefore become an AIM Rule 15 cash shell, pursuant to which
it must make an acquisition or acquisitions which constitutes a
reverse takeover under AIM Rule 14 within six months, failing which
the Exchange will suspend trading in the Company's shares pursuant
to AIM Rule 40. If the Company fails to make an acquisition or
acquisitions that constitute a reverse takeover under AIM Rule 14
(including seeking re-admission as an Investing Company (as defined
under the AIM Rules)) within a further six months, then the
Company's Ordinary Shares will be cancelled from trading on
AIM.
The Oman Share Sale Agreement and the FRII Share Sale Agreement
are each conditional on the approval by Shareholders.
6. Namibia and Zambia projects update
Namibia
As reported previously, the Namibian Ministry had granted
Frontier Namibia a two-year extension to the Namibia Licence until
20 January 2016. The Board has resolved to cease the Group's
activities in Namibia. Accordingly, the Namibian Ministry has been
informed, and the Board will now take the necessary steps to
wind-up as soon as possible, Frontier Namibia, the holder of the
expired Namibia Licence.
Zambia
As previously reported, the Zambian Ministry informed Frontier
Zambia that the Zambia Licence had been renewed for a further three
years with the condition that Frontier Zambia conduct an
environmental project brief on or before 14 March 2016 and pay any
outstanding statutory fees due with immediate effect. The Board has
also resolved to cease the Group's activities in Zambia and
informed the Zambian Ministry. The Board will now take the
necessary steps to wind-up Frontier Zambia, the holder of the
Zambia Licence, as soon as possible.
7. Strategy
As described above, following completion of the Oman Disposal
and the FRII Disposal, the Company will become an AIM Rule 15 cash
shell, pursuant to which it must make an acquisition or
acquisitions which constitute a reverse takeover under AIM Rule 14
(including seeking re-admission as an Investing Company (as defined
under the AIM Rules)) within six months, failing which the Exchange
will suspend trading in the Company's Ordinary Shares pursuant to
AIM Rule 40.
The Board's strategy is to identify a suitable acquisition or
acquisitions in a new sector, which will satisfy the requirements
of AIM Rule 15.
8. General Meeting
Notice convening the General Meeting will be posted to
Shareholders as soon possible. The General Meeting will be held at
the Company's Registered Office at 11 Staple Inn, London WC1V 7QH
at 10.00 a.m. on 22 March 2016.
Enquiries:
Frontier Resources
International Plc Tel: +44 (0) 7785
Adam Reynolds, Chairman 908158
Beaumont Cornish (Nomad)
Michael Cornish Tel: +44 (0)20 7628
Emily Staples 3396
Beaufort Securities
Limited (Broker) Tel: +44 (0)20 7382
Jon Belliss 8300
A copy of this announcement is available from the Company's
website www.friplc.com
DEFINITIONS
The following definitions apply throughout this announcement
unless the context otherwise requires:
"AIM" AIM, a market operated by the
London Stock Exchange
"AIM Rules" the AIM Rules for Companies issued
by the London Stock Exchange
from time to time
"Company" Frontier Resources International
Plc, a company registered in
England and Wales with registered
number 06573154
"Directors" or the directors of the Company
"Board" at the date of this announcement
"Disposals" together the FRII Disposal and
the Oman Disposal
"FRII" Frontier Resources International
Inc., a company incorporated
under the law of the State of
Texas with company charter number
01106351
"FRII Disposal" the proposed sale of the Company's
entire interest in FRII pursuant
to the FRII Share Sale Agreement
"FRII Share Sale the conditional share sale agreement
Agreement" dated 2 March 2016
"Frontier Namibia" Frontier Resources Namibia Limited,
a company registered in England
and Wales with registered number
07725539 and holder of the Namibia
Licence
"Frontier Oman" Frontier Resources Oman Limited,
a company registered in England
and Wales with registered number
07626414 and holder of the Oman
EPSA
"Frontier Zambia" Frontier Resources Zambia Limited,
a company registered in England
and Wales with registered number
07837491 which is conditionally
the holder of the Zambia Licence
"General Meeting" the general meeting of the Company
to be held on 22 March 2016 at
10.00 a.m. (or any adjournment
thereof)
"Group" the Company and its subsidiary
undertakings, from time to time
"Keyes Debt" GBP272,223.13 owed to Mr M (Jack)
Keyes by the Company which would
only be paid in the event that
the Company completes a farm-out
of its interests in one or more
of its projects which involves
the reimbursement to the Company
of at least GBP435,556 of historic
exploration expenditure
"London Stock Exchange" London Stock Exchange plc
or "Exchange"
(MORE TO FOLLOW) Dow Jones Newswires
March 03, 2016 02:01 ET (07:01 GMT)
Frontier Res. (LSE:FRI)
Historical Stock Chart
From May 2024 to May 2024
Frontier Res. (LSE:FRI)
Historical Stock Chart
From May 2023 to May 2024
