Samson Oil & Gas Limited (ASX: SSN) (NYSEMKT: SSN)
announced a 61% increase in the independent estimate of its Proved
Reserve since January 1st, and an extension of its ongoing
shareholders Rights Offering to May 24th in the U.S. and May 31st
in Australia.
Rights Offering
As previously announced, Samson is undertaking an infill
development drilling program in its North Stockyard and Rainbow
Projects, located in the heart of the North Dakota Bakken oil play.
This development program is being undertaken adjacent to existing
production and has been expected to add significant oil production
and reserves to Samson, including the improvement in Proved Reserve
announced today. The recently commenced simultaneous drilling of
four development wells is being financed, in part, by Samson’s
recently completed and ongoing equity offerings.
Following the Company’s recent $3.3 million direct registered
offering of ADS and warrants to U.S. institutional investors,
Samson’s Board of Directors determined to make the same offer as a
registered Rights Offer in order to be fair to all Samson
shareholders. The Rights Offer is being made to holders of ordinary
shares traded on the ASX and to holders of American Depositary
Shares (ADSs) traded on the NYSE MKT.
In light of persistent delays in delivery of the printed
prospectuses to U.S. holders, however, and to permit shareholders
to consider a series of recent positive developments announced by
the Company, including the 61% increase in Proved Reserve detailed
below, Samson has decided to extend the Rights Offer until Friday,
May 24th, in the U.S. and until Friday, May 31st, in Australia,
2013, and to issue this release explaining some of the reasons for
that extension.
Recent positive developments
- A 61% increase in the Proved Reserve
brought about by the addition of the Rainbow Project and an
additional proved location in North Stockyard Field (see
below).
- Acquisition of the Rainbow Project in
North Dakota, which gives operational flexibility, such that the
drilling rig can alternate between the multiple wells pads being
used on both projects. This will allow reserve attribution to occur
in one project whilst the other is being drilled.
- Commencement of the developmental
drilling program in the North Stockyard Field, the results of which
are expected to be reported by the Company in the next 3
months.
Pricing considerations
Because of Samson’s share structure, the Rights Offer is
required to be priced in Australian currency and as underlying
ordinary shares (each ADS traded on the NYSE MKT represents 20
underlying shares). Accordingly, the price set for the Rights Offer
was 2.5 cents Australian per underlying ordinary share. At the time
the U.S. prospectus was filed, the exchange rate was $1.0457 per
Australian dollar, which translated to an Offer Price of $0.52 per
ADS. Since that time, the Australian dollar has weakened, to
$0.9989 per Australian dollar as at the date of this release, which
translates to an Offer price of $0.50 per ADS. The actual pricing
of the ADSs will be determined by the exchange rate shortly after
the close of the Rights Offer in Australia, which is now being
extended to May 31st.
Under the Rights Offer, for every 3 ordinary shares or 3 ADSs
owned on April 8, 2013, shareholders are entitled to receive one
new ordinary share or one ADS and 0.4 of an option for an ordinary
share or a warrant for an ADS, respectively.
The exercise prices for the ordinary share options and the ADS
warrants are set out in the table below.
While Samson cannot advise individual shareholders as to whether
they should exercise their rights to purchase shares and options
(warrants) under the Rights Offer, the Company does consider it
important that all shareholders are informed of the potential
benefits that could accrue from such an exercise. For example,
using the widely accepted Black-Scholes method for valuing
warrants, Samson estimates the May 14th, 2013, value of 0.4 of a
U.S. warrant to be approximately 10 cents and for the Australian
option approximately 0.05 cents. A summary of the referenced
Black-Scholes calculations are attached to this release.
ADS Warrants Ordinary Share Options Exercise
Price US$0.76 A$0.038
Black-Scholes Value per warrant/option
US$0.241 A$0.012 Black-Scholes Value per share purchased (0.4)
US$0.096 A$0.005
Shareholders should be aware, however, that the Black-Scholes
calculation produces a theoretical valuation only and there can be
no guarantee that the options will trade at or above this valuation
or that exercise of the warrants will yield such an amount.
As with Samson’s other securities, the market price of the
warrants will fluctuate in line with market conditions generally as
well as factors specific to Samson and its business.
U.S. shareholders were required to pay a conversion fee of $0.01
per ADS issued by the depository bank. Samson was been able to
reduce this fee by 50% to $0.005 per ADS issued by the depository
bank.
In light of the foregoing, and considering recent market prices
for the ADSs and the ordinary shares, Samson believes that the
Rights Offer may hold significant value for its shareholders.
Shareholders should nevertheless read the Prospectus or Prospectus
Supplement before making a decision to understand all the risks and
benefits associated with such an investment. Shareholders may also
wish to seek professional investment advice if and to the extent
they consider it appropriate.
Summary
To summarize, for the reasons noted above, Samson’s Directors
have determined to extend the deadline for subscribing to the
Rights Offer to 5:00 pm Friday, 31st May 2013 (AWST) in Australia
and to 5:00 pm Friday, 24th May 2013 (EDT) in the U.S.
Shareholder enquiries
In the U.S., Samson has engaged Georgeson Inc. to assist
shareholders with the procedures for exercise of their Rights.
Eligible shareholders should call the shareholder hotline
(1-800-223-2064) with any questions, including issues with delays
in the delivery of your printed prospectus, which is also available
online at www.sec.gov.
U.S. shareholders may also call Samson’s Investor Relations
Manager, Erin Cherrington, at 303-298-0369 for assistance.
If U.S. shareholders’ ADSs are held in a U.S. brokerage account,
then it is likely that the shares are held by the broker in “street
name.” In such an event, that broker should be able to assist you
in exercising your Rights.
Event
Date
Australian
market
Date
USA market
Announcement of Offer 22 March 2013 22 March 2013 Record Date to
determine entitlements to New Shares and New Options
(
Rights) 8 April 2013 8 April 2013 Prospectus and
Entitlement and Acceptance Forms dispatched 9 April 2013 9 April
2013 Last day for acceptance and payment (
Closing Date) 31
May 2013 24 May 2013 New Shares and New Options quoted on ASX on
deferred settlement basis 3 June 2013 3 June 2013 Issue of New
Shares / New Options and dispatch of holding statements 10 June
2013 10 June 2013 Trading in New Shares commences 11 June 2013 11
June 2013 Trading in New Options commences 11 June 2013 Not listed
Samson today announced that based on reports from Ryder Scott
Company (RSC), an independent petroleum reserves engineering
consulting firm, its Proved Reserve has increased from 1.05 MMBOE
as at December 31st, 2012, to 1.69 MMBOE as at April 30th, 2013,
representing an increase of 61%.
Proved Reserve
The North Stockyard field spacing order agreed by the North
Dakota Industrial Commission in early January 2013, resulted in an
additional Proved Undeveloped well location being added to the
Proved Reserve attributable to Samson as at April 30th, 2013.
In addition, we asked RSC to estimate the Proved Reserve
associated with the Rainbow Project in North Dakota, which was
acquired by Samson on April 15th, 2012.
In its reserve reports dated April 30th, 2013, RSC estimated
Samson’s reserves as follows:
PDP PUD PROVED MBOE
NPV 10
Million $
MBOE
NPV 10
Million $
MBOE
NPV 10
Million $
Company, Apr 30th 603.7 $ 14.947 528.1 $ 5.133 1,131.6 $ 20.079
Rainbow, Apr 30th 561.2 $ 3.532 561.5 $ 3.532 Total 603.7 $ 14.947
1,089.3 $ 8.665 1,692.8 $ 23.612
This compares to the Proved Reserve position as at December
31st, 2012, which was:
PDP PUD PROVED MBOE
NPV 10
Million $
MBOE
NPV 10
Million $
MBOE
NPV 10
Million $
Company, Dec 31st 652.9 $ 16.834 398.0 $ 4.155 1,050.9 $ 20.989
Comparing the December 31st, 2012, estimate and the current
position is as follows:
PDP MBOE PUD MOBOE PROVED MBOE Change
-8% +174% +61%
This comparison reflects a modest decrease in both the value and
the volume associated with the Proved Developed Producing reserves
due to production, commodity price depreciation and the acreage
trade associated with the Rainbow acquisition, but there has been a
significant increase in the Proved Un-Developed reserves which will
now be subject to the proposed infill development drilling
program.
Probable Reserves
Samson estimated its April 30th, 2013, Probable reserves for the
North Stockyard and Rainbow projects assuming that all of the 30
available locations in both projects were drilled. This represents
11 additional wells in North Stockyard and 14 additional wells in
Rainbow outside of those included in RSC’s estimate of Proved
Reserve.
PROVED PROBABLE PROVED AND PROBABLE
MBOE
NPV 10
Million $
MBOE NPV 10
Million $
MBOE NPV 10
Million $
April 30th, 2013 1,692.8 $ 23.612 3,278.0 $ 28.547 5,270.9 $ 52.159
Notes to Reserves Estimates
MBOE is one thousand barrels of oil equivalentPDP is Proved
Developed ProducingPUD is Proved Un-DevelopedNPV 10 is Net Present
Value at 10% discount rate
The reserves quoted in this release were estimated based on the
definitions and disclosures guidelines contained in the Society of
Petroleum Engineers, World Petroleum Council, American Association
of Petroleum Geologists and Society of Petroleum Evaluation
Engineers Petroleum Resources Management Systems.
Pricing
These estimates have used the SEC pricing model which is based
on the average prices during the 12-month period prior to the
ending date of the report. These prices are $81 per bbl. for oil
and $5.77/mcf for gas.
About Samson Oil & Gas Limited
Samson’s Ordinary Shares are traded on the Australian Securities
Exchange under the symbol "SSN". Samson's American Depository
Shares (ADSs) are traded on the New York Stock Exchange MKT under
the symbol "SSN". Each ADS represents 20 fully paid Ordinary Shares
of Samson. Samson has a total of 2,813 million Ordinary Shares
issued and outstanding, which would be the equivalent of 141
million ADSs. Accordingly, based on the NYSE MKT closing price of
US$0.49 per ADS on May 14th, 2013, the Company has a current market
capitalization of approximately US$68.9 million. Correspondingly,
based on the ASX closing price of A$0.024 on May 14th, 2013, the
Company has a current market capitalization of A$67 million.
SAMSON OIL & GAS LIMITEDTERRY BARRManaging
Director
Statements made in this press release that are not historical
facts may be forward-looking statements, including, but not limited
to, statements using words like “may”, “believe”, “expect”,
“anticipate”, “should” or “will.”
Actual results may differ materially from those projected in any
forward-looking statement. There are a number of important factors
that could cause actual results to differ materially from those
anticipated or estimated by any forward-looking information,
including uncertainties inherent in estimating the methods, timing
and results of exploration activities.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy any of Samson’s securities, nor
shall there be any offer or sale of such securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful without registration or qualification under the securities
laws of the jurisdiction. While Samson has filed a registration
statement with the U.S. Securities and Exchange Commission relating
to a proposed Rights Offering to its shareholders, that offering
will be made only by means of a prospectus. The U.S. prospectus and
prospectus supplement for the Rights Offering are available at
www.sec.gov/edgar/searchedgar/webusers.htm. The Australian
prospectus is available at www.asx.com.au. A copy of the U.S.
prospectus and prospectus supplement may be obtained from the
information agent Georgeson Inc. at 800-213-0473.
A description of the risks and uncertainties that are generally
attendant to Samson and its industry, as well as other factors that
could affect Samson’s financial results, are included in the
prospectus and prospectus supplement for the Rights Offering as
well as the Company's report to the U.S. Securities and Exchange
Commission on Form 10-K, which are available at
www.sec.gov/edgar/searchedgar/webusers.htm.
BLACK-SCHOLES CALCULATIONOF VALUE FOR
WARRANTSTO BE ISSUED TO ADS HOLDERS
The table below represents Samson’s internal valuation for
the Warrants that are to be issued with the ADRs through this
Rights Offer. The following explains the assumptions that were used
in determining the value of these warrants.
- Stock Price – The quoted stock
price on May 14th, 2013.
- Exercise Price – The stated
exercise price per the terms of the Rights Offer.
- Term – The stated life of the
Warrant per the terms of the Rights Offer.
- Volatility – To measure the
volatility, we used the historical closing stock price over a
frequency (4 years) equal to the option's expected term.
- Annual Rate of Quarterly Dividend
– None
- Discount Rate – The average of
the 5-year Treasury Yield (0.65) and 3-year Treasury (0.30).
Black-Scholes Pricing Model Input
Variables Shares (A$) ADSs (US$) Stock Price
$ 0.024 $ 0.49 Exercise
Price
$ 0.038 $ 0.76
Term (in years)
4.00 4.00 Volatility
80.90 % 80.90 % Annual
Rate of Quarterly Dividends
0 0
Discount Rate - Bond Equivalent Yield
0.475
% 0.475 % Call Option
Value $ 0.012 $ 0.241
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