TIDMRBD TIDMDELT
RNS Number : 2799T
Reabold Resources PLC
17 July 2020
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION .
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM
INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON
TAKEOVERS AND MERGERS (THE "CODE"). THERE CAN BE NO CERTAINTY THAT
ANY FIRM OFFER WILL BE MADE, NOR AS TO THE TERMS ON WHICH ANY FIRM
OFFER MIGHT BE MADE .
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN .
17 July 2020
Reabold Resources plc
("Reabold" or the "Company")
Statement re Possible Offer for Deltic Energy plc
Reabold (AIM: RBD), the AIM investing company which focuses on
investments in upstream oil and gas projects, provides some further
background to Reabold's Possible Offer and a response to Deltic's
announcement of 16 July 2020.
Further Background to the Possible Offer and Deltic's
Response
Whilst Reabold is optimistic regarding the ultimate prospects of
Deltic's high impact exploration wells in the North Sea in the
medium term, Reabold believes that it is unlikely that there will
be any significant activity or news flow until Shell U.K. Limited
("Shell") commences drilling of Pensacola, which is estimated to be
in H2 2021.
The Possible Offer provides Deltic shareholders with near term
news flow from Reabold's exposure to two fully funded wells at West
Newton, planned for H2 2020 which, being appraisal wells rather
than exploration wells, Reabold believes exhibit a lower risk
profile. In-line with previous guidance, drilling at the West
Newton B-1 well is expected to commence in Q3 2020. The combined
group would have a diverse and highly active portfolio of assets,
including producing assets in California and near-term potential
production from Reabold's assets in Romania.
Reabold is disappointed in Deltic's initial views of the West
Newton project and notes that, given the lack of engagement with
Reabold, the Deltic Board's "detailed understanding" appears to
stem from datasets dating back to 2017, which was prior to the
drilling of the West Newton A-2 well. Reabold is surprised that the
Deltic Board has noted "serious concerns in relation to the
technical viability, materiality and limited potential upside" in
relation to West Newton, particularly given the fact that Deltic
uses West Newton as an example of a potential analogue of Pensacola
in its recent presentation materials and references the significant
discovery at West Newton in its own regulatory announcements when
referring to Pensacola.
Reabold currently has a 39.7 per cent. economic interest in the
West Newton project, via its 59.5 per cent. interest in Rathlin
Energy (UK) Limited ("Rathlin") (the operator of West Newton),
which will increase to a 56 per cent. economic interest on
completion of the acquisition of Humber Oil & Gas Ltd's 16.665
per cent. direct interest. West Newton is potentially the largest
onshore hydrocarbon discovery in the UK since 1973 and, since the
Deltic Board's review of the project in 2017, Rathlin has been
engaged in significant value accretive work which has advanced the
technical understanding of the asset and brought it to the current
stage of development, with an exciting period of drilling over the
next six months with the two planned and fully funded appraisal
wells.
Reabold completed its initial investment into Rathlin in 2018
and, in 2019, Reabold invested, in aggregate, a further GBP17m into
Rathlin. 2019 was a transformational year for the West Newton
project with the West Newton A2 discovery being announced on 17
June 2019. The appraisal well encountered a net 65-metre
hydrocarbon saturated interval within the Kirkham Abbey formation
indicating a substantial hydrocarbon accumulation, including a
significant liquids component. In November 2019, Reabold announced
an update in respect the estimated in-place oil and gas volumes,
indicating a significant upgrade in volumes of estimated
hydrocarbons in place in the Kirkham Abbey formation, consisting of
a significant volume of oil below a gas cap also of potentially
significant size:
Base Case
-- Liquids: 146.4 million barrels ("mmbbl") of oil initially in-place ("OIIP")
-- Gas: 211.5 bcf of gas initially in-place ("GIIP")
Upside Case
-- Liquids: 283 mmbbl OIIP
-- Gas: 265.9 bcf GIIP
Notwithstanding the Deltic Board's initial views of Reabold's
assets, as indicated in its offer letter of 14 July 2020, Reabold
would be pleased to provide access to detailed and up to date
information and spend time with the Deltic Board and its advisers
to explain the significant upside available from its exciting
portfolio of assets, most notably the forthcoming West Newton
appraisal wells, which are fully funded and could be
transformational for the combined group and will also have a
potential read across to Deltic's potentially high impact but early
stage exploration assets. Reabold would also be pleased to discuss
the potential synergies, including potentially utilising the
technical data from West Newton, to optimise the drill programme at
Pensacola.
As noted in its announcement of 15 July 2020, Reabold believes
that the complementary nature of the existing Reabold and Deltic
portfolios, particularly in the emerging Zechstein oil and gas play
underpinned by Reabold's recent West Newton discovery, should
facilitate optimal capital deployment both within the proposed
enlarged group's expanded portfolio and for potential new project
investments, whereby the funds set aside for drilling Selene could
be utilised for new, nearer term projects. The Reabold management
team has a proven track record for new project investment and/or
acquisition and Reabold believes that, rather than being inactive
during a period of general market uncertainty, the current market
conditions provide exciting opportunities, which the combined group
can pursue in-line with Reabold's existing investment policy.
In addition, the combined group would benefit from a further
strengthened and diversified institutional shareholder base, which
Reabold believes will ultimately lead to increased liquidity for
shareholders.
Accordingly, Reabold strongly believes in the merits of the
Possible Offer and will seek to engage with certain Deltic
shareholders, including those with which it has already had initial
conversations regarding the strategic merits of the Possible Offer.
Reabold hopes that, should Deltic shareholders be supportive of the
Possible Offer, they are not denied the opportunity to decide on
its merits .
Implied valuation of the Possible Offer
In arriving at its valuation, Reabold has taken into
consideration, inter alia, the following:
-- Whilst Reabold is a larger company with a more diverse asset
base, the Possible Offer is more akin to a merger of equals, with
clear synergies on both sides, therefore Reabold does not believe
that a significant premium for control is appropriate, with Deltic
shareholders remaining as investors in the combined group.
-- In its announcement on 16 July 2020, Deltic refers to the
Possible Offer not reflecting Deltic's existing cash balance, which
was reported to be GBP13.2m as at 31 March 2020. However, Deltic
has been and will continue to burn through cash due to its
corporate G&A costs (which Reabold believes could be
consolidated and reduced as part of a combined group) through to
completion of the Possible Offer, if made and successfully
completed.
In addition, Reabold is mindful that, if Deltic's two planned
exploration wells are drilled, assuming Deltic's FY2019 annual
corporate cash costs are at a similar level going forward, Deltic
shareholders would be left with a diminished cash base at the end
of 2022. Reabold believes that this, combined with the uncertainty
and delayed nature of the Shell drilling campaign is clearly
reflected in the prevailing market price of Deltic's shares prior
to Reabold's Possible Offer announcement and that, given the
corporate expenditure for an investing company with limited short
term activities, which is burning through the cash on Deltic's
balance sheet, a valuation of lower than the reported 31 March 2020
cash position is justified.
However, Reabold would note that, as set out in its announcement
of 15 July 2020, it has not been offered the opportunity to
undertake market standard confirmatory due diligence and would
encourage the Deltic Board to engage with Reabold in this regard
.
This announcement does not amount to a firm intention by Reabold
to make an offer under Rule 2.7 of the Code and, even if the
pre-conditions noted in Reabold's announcement of 15 July 2020 are
satisfied, there can be no certainty that an offer for Deltic will
ultimately be made, nor as to the terms on which any such offer
would be made.
Unless defined in this announcement, defined terms used in this
announcement have the same meaning as set out in the announcement
made pursuant to Rule 2.4 of the Code, issued by the Company on 15
July 2020.
A further announcement will be made in due course as and when
appropriate.
For further information please contact:
Reabold Resources plc c/o Strand Hanson
Stephen Williams +44 (0)20 7409 3494
Sachin Oza
Strand Hanson Limited (Nominated and Financial
Adviser)
James Spinney
Rory Murphy
James Dance
Jack Botros +44 (0)20 7409 3494
Whitman Howard Limited (Broker)
Hugh Rich +44 (0) 20 7886
Nick Lovering 2733
Strand Hanson Limited which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority is acting
exclusively for Reabold Resources plc and no-one else in connection
with the possible transaction described in this announcement and
accordingly will not be responsible to anyone other than Reabold
Resources plc for providing the protections afforded to clients of
Strand Hanson Limited nor for providing advice in relation to the
matters described in this announcement.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 pm (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 pm (London time) on the 10th business day following the
announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a
Dealing Disclosure if the person deals in any relevant securities
of the offeree company or of any securities exchange offeror. A
Dealing Disclosure must contain details of the dealing concerned
and of the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule
8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies
must be made by no later than 3.30 pm (London time) on the business
day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Publication on website
In accordance with Rule 26.1 of the Code, a copy of this
announcement will be made available (subject to certain
restrictions relating to persons resident in restricted
jurisdictions) on Reabold's website at www.reabold.com by no later
than 12 noon (London time) on 20 July 2020.
For the avoidance of doubt, the content of the website referred
to above is not incorporated into and does not form part of this
announcement.
Forward looking statements
This announcement (including information incorporated by
reference in this announcement), oral statements made regarding the
Possible Offer and other information published by Reabold contain
statements which are, or may be deemed to be, "forward looking
statements" concerning Reabold and Deltic. Generally, the words
"will", "may", "should", "continue", "believes", "expects",
"intends", "anticipates" or similar expressions identify
forward-looking statements. Forward-looking statements are
prospective in nature and are not based on historical facts, but
rather on current expectations and projections of the management of
Reabold about future events and are therefore subject to risks and
uncertainties which could cause actual results to differ materially
from the future results expressed or implied by the forward-looking
statements. The forward-looking statements contained in this
announcement include statements relating to the expected effects of
the Possible Offer on Reabold and Deltic and other statements other
than historical facts.
Although Reabold believes that the expectations reflected in
such forward-looking statements are reasonable, Reabold can give no
assurance that such expectations will prove to be correct. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by such forward-looking statements. Reabold,
its associates, directors, officers and advisers provide no
representation, assurance or guarantee that the occurrence of the
events expressed or implied in any forward-looking statements in
this announcement will actually occur. You are cautioned not to
place undue reliance on these forward-looking statements. Other
than in accordance with its legal or regulatory obligations,
Reabold is under no obligation, and Reabold expressly disclaims any
intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
No profit forecasts
No statement in this announcement is intended as a profit
forecast or profit estimate and no statement in this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
OFDKZGMNLVRGGZM
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