RNS Number:7273N
Emerald Energy PLC
18 July 2003
Emerald Energy Plc
18 July 2003
For Immediate Release
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES OF
AMERICA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, AUSTRALIA, SOUTH AFRICA OR
JAPAN
Emerald Energy Plc
Emerald Energy Plc (the "Company") announces that it is proposing to raise
approximately #6.8 million (before expenses) and a circular is being sent to
Shareholders today. The document contains details of the following proposals:
- 1 for 1 Rights Issue of 1,462,844,997 New Ordinary Shares at 0.25p per share
underwritten by Waterford Finance and Investment Limited ("Waterford").
- Issue for Cash of 1,253,000,000 New Ordinary Shares at 0.25p per share to
Waterford.
- Capital Reorganisation and Capital Reduction.
- Amendments to the Articles and the Employee Share Scheme.
- Resignation or retirement of the existing Board of Directors and the
appointment of the Proposed Directors.
Graeme Elliot, Chairman of Emerald Energy plc, commented:
"At the current oil price and production levels for Gigante #1A, the Directors
expect the Company for the current financial year to generate an operating cash
surplus which will be applied in the reduction of both creditors and bank
indebtedness. However, the cashflow is insufficient to fund the desired
exploration programme. Therefore the Board views the proposed Issue for Cash and
the Rights Issue as the only structure that would enable the company to raise
the sum of the magnitude required at the significant discount proposed, as a
necessary and positive step which should bring benefit to Emerald by
strengthening the Company's balance sheet and easing the financial pressure it
has suffered in recent months.
The proposed Issue for Cash and the Rights Issue will provide the necessary
funding to finance the future operations of the Group.
Your Board believes that if the Proposals are not successful, the Company will
have insufficient working capital for the next 12 months. Shareholders should be
aware that the Board would need to renegotiate their facilities with their
current bankers and consider the sale of certain assets in order to meet a
potential liability which could crystallise by the end of September 2003, with
payment being required within a further 90 days from then. There is no guarantee
that these discussions will be successful which may result in the board
appointing administrative receivers.
Accordingly, the Directors unanimously recommend you vote in favour of the
resolutions to be proposed at the Extraordinary General Meeting"
Teather & Greenwood Limited, of Beaufort House, 15 St Botolph Street, London
EC3A 7QR has approved the contents of this announcement solely for the purposes
of Section 21 of the Financial Services and Markets Act 2000. This announcement
should be read in conjunction with the full text of the document that was sent
to Shareholders today.
Teather & Greenwood Limited, a company authorised and regulated by the Financial
Services Authority, is acting exclusively for Emerald Energy Plc and no-one else
in connection with the Offer and will not be responsible to anyone other than
Emerald Energy Plc for providing the protections afforded to clients of Teather
& Greenwood Limited nor for giving advice in relation to the Offer or any other
matter referred to herein.
Neither the document sent to Shareholders today nor the Provisional Allotment
Letter have been or will be registered under the United States Securities Act of
1933, as amended, or under the securities laws of any state of the United States
nor the securities laws of any province or territory of Canada, the Republic of
Ireland, Australia, South Africa or Japan, and, accordingly, subject to certain
exceptions, they may not be offered or sold in the United States, Canada, the
Republic of Ireland, Australia, South Africa or Japan or to any national,
citizen or resident thereof.
Enquiries:
Emerald Energy Plc
Iain Alexander 020 8823 9140
Teather & Greenwood Limited
Dugald Carlean 020 7426 9000
Robert Naylor
Extracts from the Chairman's letter the document that has been sent to
Shareholders today
Emerald Energy Plc
Proposed 1 for 1 Rights Issue of 1,462,844,997 New Ordinary Shares at 0.25p
per share
Proposed Issue for Cash of 1,253,000,000 New Ordinary Shares at 0.25p per share
Capital Reorganisation and Capital Reduction
Proposed Amendments to the Articles and the Employee Share Scheme
Introduction
The Company announces it is proposing to raise approximately #6.8 million
(before expenses) by means of an Issue for Cash of 1,253,000,000 Issue for Cash
Shares at 0.25p per share to Waterford and a Rights Issue to Qualifying
Shareholders of 1,462,844,997 Rights Shares at 0.25p per share and, to effect a
Capital Reorganisation and Capital Reduction. The Company also proposes, subject
to shareholder approval, to amend its Articles and the Employee Share Scheme.
Waterford has agreed to subscribe for all the 1,253,000,000 Issue for Cash
Shares representing gross proceeds of #3,132,500 at 0.25p per share and to
underwrite the subscription for all of the 1,462,844,997 Rights Shares at 0.25p
per share representing gross proceeds of #3,657,112 on the terms of the
Underwriting Agreement. The Rights Issue will give Shareholders the opportunity
to participate in the re-financing of the Company. As a consequence of the Issue
for Cash, Waterford will be the beneficial holder of 29.99 per cent. of the
issued New Ordinary Shares (as enlarged by the Issue for Cash and the Rights
Issue). If the underwriting is called upon in full, taking into account the
Issue for Cash, Waterford will own 64.99 per cent. of the New Ordinary Shares
(as enlarged by the Issue for Cash and the Rights Issue). The net proceeds of
the Issue for Cash and Rights Issue will be used to fund the Company's working
capital requirements, repay debt and will enable it to commence its planned
drilling and exploration programme in the near future.
I have written to Shareholders today to give details of the Proposals, to
explain why the Directors consider them to be in the best interests of the
Company and to recommend that Shareholders vote in favour of the resolutions to
approve the Proposals at the EGM.
Information on Emerald
Emerald is a United Kingdom based independent oil exploration and production
company with a production interest in Colombia, derived from the Gigante #1A oil
well on the Matambo Block in the Upper Magdalena Valley and exploration in
Colombia, through its Campo Rico and Matambo Association Contract with
Ecopetrol.
Further information on the Emerald Group's exploration and production interests
the document that has been sent to Shareholders today.
Background and reasons for the Issue for Cash and the Rights Issue
The Gigante #1A well has continued to produce throughout the past year and is
now the sole source of production for Emerald since the sale of its North
American assets. The commerciality application for the development of the
Gigante Field was submitted in 2002 and was granted on a sole-risk basis around
the well, with the remainder of the field area retained on exploration terms,
albeit with no obligations. However, since the fire at the well in May 2000, the
production rate has not recovered to the levels required to fund the Company's
planned exploration activities, which has had a significant effect on the
Group's financial position. Efforts have been made to seek farm-out partners for
a second Gigante well, but these were unsuccessful.
As a result of a technical review and the lack of internally generated funds for
capital expenditure, rationalisation of the exploration portfolio has been
undertaken. This has seen modifications to some licences and the termination of
others that were deemed to provide insufficient expected returns to Emerald. In
addition to Matambo, the sole remaining exploration opportunity is the drilling
of the Campo Rico block in the Llanos Basin, Colombia. Technical work on this
block has to date established three drillable prospects - Centauro, Centauro Sur
and Cimarron Sur. The two Centauro prospects probably run into each other to
form a single structure and the first planned well Centauro #2 to be spudded in
December this year, will be up-dip from the Centauro #1 discovery well, drilled
in the 1980's by Ecopetrol. The Company estimates that the Centauro structure
contains some 13 million barrels of reserves in the Mirador reservoir and
despite relatively heavy oil, flow rates of up to 1,200 bopd should be
achievable. The Company's technical assessment estimates that the Cimarron
structure may contain 16 million barrels of recoverable oil.
Current trading and prospects
As stated in the Outlook paragraph of the Chairman's statement in the Company's
preliminary results for the year ended 31 December 2002 as announced on 30 April
2003, "since 31 December 2002, all costs have been substantially reduced and at
an operational level contributions are being made to the repayment of bank debt,
the repayment of creditors and to the payment of overheads in both Bogota and
London." The full text of the Chairman's statement is included in the Annual
Report and Accounts for the year ended 31 December 2002 which are enclosed with
the document sent to Shareholders today.
At the current oil price and production levels for Gigante #1A, the Directors
expect the Company for the current financial year to generate an operating cash
surplus which will be applied in the reduction of both creditors and bank
indebtedness. However, the cashflow is insufficient to fund the desired
exploration programme. Therefore the Board views the proposed Issue for Cash
and the Rights Issue as the only structure that would enable the Company to
raise the sum of the magnitude required at the significant discount proposed, as
a necessary and positive step which should bring benefit to Emerald by
strengthening the Company's balance sheet and easing the financial pressure it
has suffered in recent months.
The proposed Issue for Cash and the Rights Issue will provide the necessary
funding to finance the future operations of the Group.
Your Board believes that if the Proposals are not successful, the Company will
have insufficient working capital for the next 12 months. Shareholders should be
aware that the Board would need to renegotiate their facilities with their
current bankers and consider the sale of certain assets in order to meet a
potential liability which could crystallise by the end of September 2003, with
payment being required within a further 90 days from then. There is no guarantee
that these discussions will be successful which may result in the board
appointing administrative receivers.
Information on Waterford
Waterford is subscribing in full for the Issue for Cash Shares and underwriting
the Rights Issue. Waterford is a privately owned investment vehicle registered
in Guernsey.
The Panel has deemed that Alastair Beardsall, Edward Grace, Fred Ponsonby,
Waterford and persons acting in concert with any of them are acting in concert.
Further information on Waterford is set out in the document sent to Shareholders
today.
Existing Directors
It is proposed that, immediately following the approval of the Proposals by
Shareholders at the EGM, all the current members of the Company's Board of
Directors shall resign with the exception of John Silcock who will retire at the
AGM and will not stand for re-election. The resigning Directors have entered
into conditional agreements with the Company, which contain provisions, inter
alia, for a sum equivalent to three months' salary, or fees, to be paid (instead
of their contracted entitlement of 12 months in the case of the Executive
Directors and 6 months in the case of the Non-Executive Directors) and for all
options granted under the Employee Share Option Scheme granted in favour of the
existing Directors to lapse within six months of their resignation.
Other than the agreements detailed above no agreement, arrangement or
understanding (including any compensation arrangement) exists between Waterford
and the Directors, recent directors, Shareholders or recent Shareholders of
Emerald in connection with the Proposals.
Proposed Directors and Senior Management
Following the EGM it is intended that the following new appointments will be
made to the Board:
Alastair John Beardsall (49) Proposed Executive Director
Alastair Beardsall has been involved in the international oil and gas industry
for 22 years. His career began with 12 years working for Schlumberger Ltd as a
field engineer and location manager for provision of oil field services on
international assignment to the Middle East, Far East, USA and Russia. More
recently Alastair has worked for a number of independent operators, including
Quest Petroleum Ltd (1992-1994), Glencore Ltd (1996-1997), EuroSov Energy plc
(1997-1999) and Sibir Energy plc (1999-2000). His roles have included those of
Chief Engineer, Operations Manager and Technical Director and he has operational
experience in some of the harshest environments in the world. Alastair has oil
and gas industry skills and experience that cover the broad spectrum from
exploration through development to production. He has served as a director of
EuroSov Energy plc (listed on the Official List) and Sibir Energy plc (quoted on
AIM) and is currently a director of First Calgary Petroleums Ltd (dual quotation
on the Toronto Stock Exchange and AIM).
Edward Grace (38) Proposed Executive Director
Edward Grace, MBA, has been a corporate financier with Merrill Lynch and Lehman
Brothers. Most recently, Edward served as Director of Investment Banking with
Lehman Brothers, focusing on raising capital in private and public capital
markets for, and providing mergers and acquisitions advisory to, growth
companies. During his career with Merrill Lynch, Edward spent substantial time
working with corporate and government clients in Central and Eastern Europe,
Russia and the Middle East focusing on the provision of finance and
privatisation of large state owned assets. Prior to investment banking, as a
management consultant with Accenture, formerly Andersen Consulting, Edward was
involved in project work for some of the largest energy companies in the UK.
John Merfyn Roberts (52) Proposed Non-Executive Director
Merfyn Roberts holds an MSc from the University of Oxford in Geochemistry and
began his career as a geologist working in the UK and in North Africa. In 1976
he joined Thomson McLintock & Co. in London and qualified as a Chartered
Accountant in 1980. He joined Charter Consolidated Limited in 1982 as an equity
investment analyst and in 1985 he joined Target Group PLC where he managed the
Gold, Commodity and World Income Unit Trusts. In 1990 he joined Minorco S.A. in
London to set up and manage Minorco's in-house equity fund which, by the time he
left in 1996, specialised in the natural resources sector. Since 1996 he has
been involved with Dragon Securities Limited, a natural resources based equity
fund, as investment director until 2000 and subsequently as investment
consultant. He is also currently the investment director of Cardiff Capital
Limited, a manager of North American, UK and European resource stocks. He is
currently a director of Ocean Resources Capital Holdings plc, Resources
Investment Trust plc and Arc Advisers Limited, and is a past director of Estelar
Resources Limited.
Frederick "Fred" Matthew Thomas Ponsonby (44) Proposed Non-Executive Director
Fred Ponsonby is an oil industry professional who has also pursued a career in
politics. A petroleum engineer by profession, Fred started his oil industry
career with Charterhouse Petroleum plc (1984- 1986) and has most recently worked
for LASMO plc (1989-1992) as a senior petroleum engineer and Phibro Energy
(1994-1998), an oil subsidiary of Salomon Brothers, as the technical manager
with responsibility for international exploration and production projects. Fred
Ponsonby is an active member of the House of Lords and a member of various
European parliamentary institutions. He has held a number of company
directorships and is currently a non-executive director of Acorn Oil and Gas
Limited.
A Chairman of the Board of Directors will be appointed from the Proposed
Directors.
The Proposed Directors have been selected to provide the broad skill set
required to run the Company. The Proposed Directors will reduce the costs of the
current board, which currently consists of 5 directors, including 3 executive
directors. The new board will consist of 2 part time executive directors and 2
non-executive directors. The Articles currently permit fees to be paid to
directors subject to an aggregate cap of #32,000. In order to attract high
calibre individuals to the Company, the Proposed Directors wish to increase this
limit to #100,000. A resolution to effect this amendment will be proposed at the
EGM.
In addition the Proposed Directors have experience of both Official List and AIM
quoted oil and gas exploration and productions companies and experience of
running private equity financed oil and gas companies.
Helen Manning, the existing Financial Manager, will take on the responsibility
for the financial reporting of the Group. The operations in Colombia will
continue to be managed by Dr John Wardle.
Helen Manning FCCA has worked in the oil industry for the last 14 years. She
spent 8 years with Fina, starting in upstream joint ventures and was rotated
into a number of roles in both the upstream and downstream divisions. Helen
moved to Statoil's downstream gas marketing division Alliance Gas as Financial
Accountant followed by role of Finance Manager at Honeywill & Stein an ex BP
chemical distribution company. Helen joined Emerald in November 2000 as Finance
Manager.
John Wardle worked with Britoil Plc in the North Sea, mainly offshore until the
takeover by BP in 1988. With BP he continued his engineering career until a
secondment to Sedco-Forex Schlumberger in 1990 (Rig Management). In 1991 he
returned to BP as Well Operations Supervisor, including production operations on
the Clyde field and subsequently in the Miller/Brae Complex. In 1993 he was
transferred to Colombia as Drilling Supervisor in the foothill exploration
wells. In 1996 he became Drilling Superintendent of Exploration Group 3, in
charge of the Florena exploration campaign, with annual budget responsibility in
excess of US$40 MM. In 1998 he resigned from BP to follow consultancy interests,
working for several major operators in Columbia. In 2000 he joined Emerald
Energy Colombia as Operations Manager, with responsibility for production and
drilling operations. In July 2001 he was appointed General Manager of Emerald
Energy Colombia.
The Proposed Directors intend to seek the appointment of an additional
independent director to the Board of the Company. The Proposed Directors have
confirmed that in the event of the Proposals being completed in all respects,
the existing employment rights, including pension rights, of the management and
employees of Emerald will be fully safeguarded.
The Proposed Directors believe that the underlying assets of the Company are a
sound basis on which to increase the Group's business both in Colombia and in
other international locations. The Proposed Directors intend to pursue a low
risk strategy with regard to the Company's key assets, the Matambo and Campo
Rico Association Contracts, and to seek additional assets in and outside
Colombia.
In addition the Proposed Directors will consider moving Emerald's listing from
the Official List to an admission on AIM, to reduce the ongoing costs of the
Company's administration and to reduce the costs of future transactions. It is
proposed that this will happen within nine months of Admission. AIM is
understood by the Proposed Directors to have less rigorous regulatory
requirements than the Official List. For example, a company admitted to the
Official List requires shareholder approval for a transaction in which it
acquires or disposes of assets equivalent to 25 per cent. or more of its own
size, while a company quoted on AIM only requires shareholder approval of a
transaction in which it acquires assets equivalent to 100 per cent. or more of
its own size. Should the Proposals not be approved, the Board will reconsider
its intentions, having taken advice from its advisers.
Waiver of the requirements of the City Code
In accordance with Rule 9.1(a) of the City Code, except with the consent of the
Panel, when any person acquires, whether by a series of transactions over a
period of time or not, shares which (taken together with shares held or acquired
by persons acting in concert with him) carry 30 per cent. or more of the voting
rights of a company, that person or persons acting in concert must normally make
a general offer to purchase the balance of the issued share capital of that
class of shares.
Likewise, in accordance with 9.1(b) of the City Code, when any person who,
together with persons acting in concert with him, holds not less than 30 per
cent. but not more than 50 per cent. of the voting rights of a company and such
person, or any persons acting in concert with them, acquires additional shares
which increase his percentage of voting rights, that person or persons acting in
concert must normally make a general offer to purchase the balance of the issued
share capital of that class of shares.
As a consequence of the Issue for Cash, Waterford will be the beneficial holder
of 29.99 per cent. of the issued New Ordinary Shares (as enlarged by both the
Issue for Cash and the Rights Issue). If the underwriting is called upon, the
Waterford Concert Party will become a beneficial holder of 30.00 per cent. or
more of the New Ordinary Shares (as enlarged by both the Issue for Cash and the
Rights Issue). In such event, the Waterford Concert Party would be obliged under
Rule 9 of the Code to make an offer to the existing Shareholders for their New
Ordinary Shares. If the underwriting is called upon in full, the Waterford
Concert Party will own 64.99 per cent. of the issued New Ordinary Shares (as
enlarged by both the Issue for Cash and the Rights Issue) which is more than 50
per cent. of the New Ordinary Shares and will then no longer be subject to Rule
9 of the City Code.
In the event that the Waterford Concert Party comes to hold not less than 30 per
cent. but not more than 50 per cent. of the issued New Ordinary Shares following
the implementation of the Proposals as a result of part but not all the
underwriting of the Rights Issue being called upon, the members of the Waterford
Concert Party will not be able to acquire, for so long as they are acting in
concert, additional new Ordinary Shares without being obliged to extend a
general offer for Emerald under Rule 9.1(a) of the City Code.
In the event that the Waterford Concert Party comes to hold more than 50 per
cent. of the issued New Ordinary Shares following the implementation of the
Proposals, they will thereafter be free to acquire any number of New Ordinary
Shares and thereby increase their percentage of voting rights without incurring
any obligation under Rule 9 of the City Code to make a general offer for the
Company.
The Panel has confirmed that, subject to Resolution One being passed on a poll
by Shareholders at the EGM, the obligations that would otherwise arise, under
Rule 9 of the City Code on Waterford to make a general offer for the entire
issued ordinary share capital of the Company not already owned by Waterford and
by persons acting in concert with Waterford as a result of the implementation of
the Proposals will be waived.
In light of Waterford's interest in the Company pursuant to the Proposals, and
to ensure the Board is free from conflicts of interest, the Company has entered
into the Continuing Relationship Agreement. On the basis of, inter alia, that
agreement, the Directors and Proposed Directors are satisfied the business of
the Company will be carried on independently of Waterford and all transactions
and relationships between the Group and Waterford (and its associates) will be
on arm's length terms and on a normal commercial basis.
Capital Reorganisation, capital reduction and proposed consolidation
Capital reorganisation
An Isle of Man company is prevented by company law from issuing shares at a
discount to the nominal value of its shares. Since the proposed Issue Price of
0.25p is below the current nominal value of the Existing Ordinary Shares of 1p,
the Capital Reorganisation needs to be implemented to enable the Proposals to
proceed. Each Existing Ordinary Share of 1p nominal value will be sub-divided
into one New Ordinary Share of 0.1p and one Deferred Share of 0.9p. Each
authorised but unissued Existing Ordinary Share will be sub-divided into ten New
Ordinary Shares. Each New Ordinary Share will have the same rights (including
voting and dividend rights and rights on a return of capital) as each Existing
Ordinary Share. The Capital Reorganisation, which will have no effect upon the
Group's net assets, requires the amendment of the Articles as proposed in
Resolution 2B set out in the Notice of EGM.
The rights attaching to the Deferred Shares, which will not be listed or quoted
on any stock exchange, will be minimal, thereby rendering them effectively
valueless. No certificates will be issued in respect of the Deferred Shares and
subject to the passing of Resolutions 2 and 6 at the EGM, application may be
made to the High Court of Justice in the Isle of Man for the cancellation of the
Deferred Shares.
Capital reduction
The audited profit and loss account of the Company as at 31 December 2002 shows
a deficit of #26.59 million. So long as there is a deficit on the Company's
profit and loss account, the Company is precluded by the IOM Act from paying
dividends or buying back shares. Accordingly, the Company is proposing, in
addition to cancelling the Deferred Shares, to effect a reduction of its share
premium account, which, subject to the passing of Resolution 6 at the EGM and
approval by the High Court of Justice in the Isle of Man, will eliminate the
deficit in the Company's profit and loss account.
If the reduction is sanctioned by the Court, the deficit of #26.59 million will
be eliminated. The implementation of the reduction to the share premium account
will not affect the rights attaching to New Ordinary Shares.
In order to obtain the Court's confirmation, it is necessary for the Company to
ensure that the reduction will not prejudice the interests of its creditors. At
present, it is anticipated that the Company will give an undertaking to the
Court for the protection of creditors.
If Shareholders pass Resolution 6, the Company may arrange for a petition to be
presented to the Court seeking its confirmation of the reduction. Until such
confirmation is obtained, the cancellation of deferred shares will not take
effect.
Share certificates for the New Ordinary Shares will be despatched by 18
September 2003. Share certificates for Existing Ordinary Shares will remain
valid in respect of the equivalent number of New Ordinary Shares shown thereon.
Proposed consolidation
It is the Proposed Directors' intention, subject to Shareholder approval, to
consolidate the New Ordinary Shares within 12 months of the publication of the
document sent to Shareholders today. It is the Proposed Directors current
intention that this consolidation be on the basis of one post consolidation
ordinary share with a nominal value of 20p each for every 200 New Ordinary
Shares held.
The Proposed Directors consider that a consolidation of the New Ordinary Shares
could improve liquidity and may lead to a relative reduction in the bid offer
spread of the Company's shares. In addition, the Proposed Directors believe that
the consolidation will reduce the ongoing administration costs of the Company.
The holders of fewer than 200 New Ordinary Shares would not be entitled to
receive a post consolidation ordinary share. Shareholders with a holding of New
Ordinary Shares in excess of 200 New Ordinary Shares, but which is not exactly
divisible by 200 would have their entitlement rounded down to the nearest whole
number. Fractional entitlements (arising in respect of holding of more or less
than 200 New Ordinary Shares) will be sold in the market or bought back by the
Company (subject to the Company having sufficient distributable reserves) at the
discretion of the Proposed Directors. If the proposed consolidation is to be
effected, the Directors would consider putting a resolution to Shareholders
entitling the Directors to apply any proceeds of #3 or under arising from the
sale of fractional entitlements for the Company's benefit.
Shareholders who are considering subscribing for Rights Shares should be aware
that if they have less than 200 New Ordinary Shares following such subscription,
they will not have any shares in the capital of the Company if the current
proposed consolidation takes effect.
Use of proceeds
The Proposals will result in the Company raising approximately #6.8 million
(#6.1 million net of expenses) from the Issue for Cash and the Rights Issue.
Part of the proceeds will be used to further explore and develop reserves within
the Campo Rico Association Contract Area at an approximate cost of #2.2 million,
to repay debt of approximately #2.5 million with the balance of proceeds being
held on deposit for general working capital purposes.
The Directors are of the opinion that, taking into account the proceeds of the
Proposals and available bank facilities, the Group has sufficient working
capital for its present requirements that is for at least the next 12 months
from the date of the document sent to Shareholders today.
The Board believes that if the Proposals are not successful, the Company will
have insufficient working capital for the next 12 months. Shareholders should be
aware that the Board would need to renegotiate their facilities with their
current bankers and consider the sale of certain assets in order to meet a
potential liability which could crystallise by the end of September 2003, with
payment being required within a further 90 days from then. There is no guarantee
that these discussions will be successful which would result in the board
appointing administrative receivers.
Details of the Issue for Cash and the Rights Issue
Issue for Cash
The Company proposes to raise #3,132,500 gross, by means of a non-pre-emptive
Issue for Cash of 1,253,000,000 Issue for Cash Shares at 0.25p per share to
Waterford.
Rights Issue
The Company proposes to raise #3,657,112 gross, by means of the Rights Issue on
the following basis:
1 Rights Share for each Existing Ordinary Share held on the Record Date at 0.25p
per share
Provisional Allotment Letters will be sent to Qualifying Shareholders in respect
of their entitlement to Rights Shares subject to Shareholder approval of the
Proposals at the EGM. The Provisional Allotment Letters will show the number of
Rights Shares provisionally allotted to Qualifying Shareholders and contain
instructions regarding acceptance and payment, renunciation, splitting and
registration in respect of the Rights Shares.
Further information on the Rights Issue and the terms and conditions on which it
is being made, including the procedure for application and payment, is set out
in the document sent to Shareholders today.
The Rights Issue has been fully underwritten by Waterford. The underwriting
cannot be terminated once the Nil Paid Rights have started trading.
The latest time and date for acceptance and payment under the Rights Issue is
expected to be 9.30am on 8 September 2003.
When considering whether or not to subscribe for Rights Shares, each Shareholder
should consider the risk factors set out in the document sent to Shareholders
today.
General
Both the Issue for Cash and the Rights Issue, which is underwritten by
Waterford, are inter-conditional and are also conditional, inter-alia, upon:
1. the Issue for Cash and Underwriting Agreement not having been terminated in
accordance with its terms prior to Admission and otherwise becoming
unconditional in all respects;
2. Admission becoming effective on or before 8.00am on 18 August 2003 or such
later time and/or date as the Company, Waterford and Teather & Greenwood may
agree; and
3. the passing of resolutions 1-5 at the EGM.
The New Ordinary Shares issued pursuant to the Rights Issue and Issue for Cash
will when fully paid rank pari passu with the issued New Ordinary Shares created
by the Capital Reduction, including voting rights, and the right to receive all
dividends and distribution declared after the Record Date.
The Issue Price represents a discount of approximately 64 per cent. to the
closing mid market price on 14 July 2003, being the latest practicable dealing
day prior to the publication of the document sent to Shareholders today, and a
premium to nominal value of 0.15 pence.
It is expected that Admission will take place on 8.00am on 18 August 2003 (or
such later time and/or date as the Company, Waterford and Teather & Greenwood
may agree). If Admission has not so occurred, monies remitted with Provisional
Allotment Letters will be returned to Shareholders without interest at the
Shareholder's risk as soon thereafter as is practicable.
Share Options
The Employee Share Scheme currently only permits options to be granted to
employees of the Group and directors of the Group who are required to devote in
excess of 25 hours per week to the business of the Group. The Proposed Directors
wish to have the flexibility to attract high calibre individuals to work for the
Company and to have the flexibility in remunerating them in either cash or
options, in order to reduce the operating costs of the Group. It is therefore
proposed that the Rules of the Employee Share Scheme are changed to enable
options to be granted to consultants to the Group and to any director of any
company in the Group regardless of the number of hours he is required to devote
to the business of the Group. A resolution to effect this is to be put to
Shareholders at the EGM as resolution 8.
Financial information
Financial information on the Company, for the five financial periods ended 31
December 2002 is set out in the document sent to Shareholders today. The
auditors report on the financial statements for the year ended 31 December 2002
drew attention to a fundamental uncertainty relating to going concern.
"In forming our opinion we have considered the adequacy of the disclosures made
in Note 1 of the Financial Statements concerning their preparation on a going
concern basis. The validity of this basis depends on the successful outcome of
negotiations to finance the Group and sufficient funds being raised. The
Financial Statements do not include any adjustments that would result from a
failure to secure funds through the financing negotiations."
Your Board believes that if the Proposals are not successful, the Company will
have insufficient working capital for the next 12 months. Shareholders should be
aware that the Board would need to renegotiate their facilities with their
current bankers and consider the sale of certain assets in order to meet a
potential liability which could crystallise by the end of September 2003, with
payment being required within a further 90 days from then. There is no guarantee
that these discussions will be successful which would result in the board
appointing administrative receivers.
Extraordinary General Meeting
Set out at the end of the document sent to Shareholders today is a notice
convening the Extraordinary General Meeting to be held at 12:15pm on 15 August
2003 at which the following resolutions will be proposed:
1. To approve the waiver.
2. To:
- sub-divide the current issued ordinary share capital of the Company into
one New Ordinary Share and one Deferred Share;
- sub-divide each unissued Existing Ordinary Share into ten New Ordinary
Shares; and
- adopt new Articles setting out the rights attaching to the Deferred Shares
3. To authorise the Directors to allot the Issue for Cash Shares;
4. To authorise the Directors to allot the Rights Shares;
5. To authorise the Directors to allot a further 2,000,000,000 New Ordinary
Shares;
6. To cancel the Deferred Shares, reduce the Company's share premium account and
amend the Articles;
7. To amend the Articles to increase the amount the Company can pay in
directors' fees from #32,000 to #100,000; and
8. To amend the terms of the Employee Share Scheme.
Recommendation
The Directors, who have been advised by Teather & Greenwood, consider the
Proposals to be in the best interests of the Company and Shareholders as a
whole. In providing advice to the Company, Teather & Greenwood, has taken into
account the Directors' commercial assessments. Accordingly, the Directors
unanimously recommend you vote in favour of the resolutions to be proposed at
the Extraordinary General Meeting, as they intend to do in respect of their own
beneficial shareholdings amounting in aggregate to 32,930,146 New Ordinary
Shares, representing 2.25 per cent. of the Company's existing issued ordinary
share capital.
EXPECTED TIMETABLE
2003
Latest time and date for receipt of Forms of Proxy 12.15pm On 13 August
Record Date for entitlement to Rights Issue close of business on 13 August
Annual General Meeting 12.00 noon on 15 August
Extraordinary General Meeting 12.15 pm on 15 August
For the purposes of paragraph 6 of the Fourth Schedule 1c of the 7.00am 15 August
IOM Act the subscription list will open at
Despatch of Provisional Allotment Letters (to qualifying Non-Crest 15 August
Shareholders only)
Dealings in Issue for Cash Shares, fully paid and in Nil Paid 8.00am 18 August
Rights, commence on the LSE
Nil Paid Rights and Fully Paid Rights enabled in CREST as soon as 8.00am on 18 August
practicable after
Recommended latest time for requesting withdrawal of Nil Paid 4.30pm on 27 August
Rights from CREST (i.e. if your Nil Paid Rights are in CREST and
you wish to convert them into certificated form)
Latest time for depositing renounced Provisional Allotment 3.00pm on 3 September
Letters, Nil Paid, into CREST or for dematerialising Nil Paid
Rights or Fully Paid Rights into a CREST, stock account
Latest time and date for splitting Provisional Allotment 3.00 pm on 4 September
Latest time and date for receipt of Provisional Allotment Letter 9.30am on 8 September
and payment under the Rights Issue 10.30am
Dealings in Rights Shares commence, fully paid, on LSE 8.00am on 9 September
CREST member accounts credited for New Ordinary Shares 9 September
Despatch of definitive share certificates for Rights Shares 18 September
DEFINITIONS
The following definitions apply throughout this announcement:
"Act" the Companies Act 1985 (as amended)
"Admission" the admission of the Rights Shares, nil paid and the Issue for Cash
Shares, fully paid to the Official List and to trading on the London Stock
Exchange becoming effective in accordance with the Listing Rules and the
admission and disclosure standards published by the London Stock Exchange
respectively
"AGM" the annual general meeting of the Company convened for 12.00pm on 15
August 2003, or any adjournment thereof, notice which is set out in the
Annual Results accompanying the document sent to Shareholders today
"AIM" the Alternative Investment Market of the London Stock Exchange
"Articles" the articles of association of the Company
"Business Day" a day (other than a Saturday or Sunday) on which banks are generally open
in London for the transaction of normal business
"Capital Reorganisation" the proposed sub-division of each issued Existing Ordinary Share into one
New Ordinary Share and one Deferred Share and the sub-division of each
authorised but unissued Existing Ordinary Share into ten New Ordinary
Shares, details of which are set out in the document sent to Shareholders
today
"certificated" or "in A share or other security not in uncertificated form (i.e. not in CREST)
certificated form"
"Capital Reduction" the proposed cancellation of the Deferred Shares and reduction of the
Company's share premium account
"City Code" The City Code on Takeovers and Mergers
"Company", "Emerald" or "Emerald Emerald Energy Plc
Energy"
"Continuing Relationship " the continuing relationship agreement between Waterford, Emerald Energy
Agreement" and the Proposed Directors dated 18 July 2003, material details of which
are set out in the document sent to Shareholders today
"CREST" the relevant system (as defined in the Regulations) in respect of which
CRESTCo Limited is the Operator (as defined in the Regulations) to
facilitate the transfer of title to shares in uncertificated form
"CRESTCo" CRESTCo Limited, the operator of CREST
"CREST Courier and Sorting " the CREST Courier and Sorting Service established by CRESTCo to
Service" or, "CCSS" facilitate, inter alia, the deposit and withdrawal of
securities
"CREST Glossary" means the CREST Glossary of Terms issued on 24 June 2002
"CREST Manual" the rules governing the operation of CREST consisting of the CREST
Reference Manual, the CREST International Manual, the CREST Central
Counterpart Service Manual, the CREST Rules, the CCSS Operations Manual,
the Daily Timetable, the CREST Application Procedures and the CREST
Glossary of Terms (as updated on the 24 June 2002)
"CREST member" a person who has been admitted to CRESTCo as a member (as defined in the
CREST Manual)
"CREST participant" a person who is, in relation to CREST, a participant (as defined in the
CREST Manual)
"CREST participant ID" the identification code or numbers used in CREST to identity a particular
CREST member or other CREST participant
"CREST sponsor" a CREST participant which operates as a Sponsor (as defined in the CREST
Manual)
"CREST sponsored member" a CREST member which employs the services of a CREST sponsor
"Deferred Share" deferred shares of 0.9 pence each in the capital of the Company to be
created by the Capital Reorganisation
"Directors" or "Board" the current directors of Emerald as set out on page 3 of this in the
document sent to Shareholders today
"Ecopetrol" Empresa Colombiana de Petroleos, the Colombian state oil Company
"EGM" the extraordinary general meeting of the Company convened for 12.15pm on
15 August 2003 (or any adjournment thereof), notice of which is set out at
the end of this in the document sent to Shareholders today
"Emerald Argentina" Emerald Energy (Argentina) Limited, a subsidiary of the Company
"Emerald Group" or "Group" Emerald and its subsidiaries or associates
"Employee Share Scheme" the Emerald Energy Plc Discretionary Share Option Scheme
"Ex-entitlement Date" the date on which the Existing Ordinary Shares were marked by the London
Stock Exchange as ex their entitlement to participate in the Rights Issue
"Existing Ordinary Shares" existing ordinary shares of 1 pence each in the capital of the Company
"Form of Proxy" the form of proxy accompanying the document sent to Shareholders today for
use at the EGM
"Fully Paid Rights" rights to acquire New Ordinary Shares fully paid
"IOM Act" the Isle of Man Companies Acts 1931 to 1993
"Issue for Cash" the issue for cash of 1,253,000,000 New Ordinary Shares to Waterford as
described in the document sent to Shareholders today
"Issue for Cash Shares" 1,253,000,000 New Ordinary Shares which are the subject of the Issue for
Cash
"Issue for Cash & Underwriting " the conditional issue for cash and underwriting agreement dated 18 July
Agreement" 2003 between (1) the Company, (2) the Directors and the Proposed
Directors, (3) Waterford and (4) Teather & Greenwood details of which are
set out in the document sent to Shareholders today
"Issue Price" 0.25 pence per Issue for Cash Share or Rights Share as the case may be
"Listing Rules" the Listing Rules of the UK Listing Authority made under section 74 of the
Financial Services and Markets Act 2000
"London Stock Exchange" or "LSE" London Stock Exchange plc
"New Ordinary Shares" the new ordinary shares of 0.1 pence each in the capital of the Company to
be created by the Capital Reorganisation
"Nirihuau Agreement" an agreement dated 15 October 1997 between the Secretariat of Energy of
the Argentinean Government (1) and Emerald Argentina (2) relating to the
grant of exploration rights to the Group in the Nirihuau block Argentinia
"Nil Paid Rights" rights to acquire New Ordinary Shares nil paid
"Notice of EGM" the notice of the EGM set out at the end of the document sent to
Shareholders today
"Official List" the official list of the UKLA
"Option holders" holders of options under the Employee Share Scheme
"Panel" the Panel on Takeovers and Mergers
"Proposals" the Waiver, the Capital Reorganisation, the Capital Reduction, the Issue
for Cash, the Rights Issue and the proposed amendments to the Articles and
the Employee Share Scheme
"Proposed Directors" Merfyn Roberts, Frederick Ponsonby, Alastair Beardsall, Edward Grace
"Provisional Allotment Letter" the renounceable provisional allotment letter to Qualifying shareholders
in connection with the Rights Issue
"Qualifying Shareholders" Shareholders on the register at the Record Date, other than certain
overseas Shareholders as described in the document sent to Shareholders
today
"Qualifying CREST Shareholders" Qualifying Shareholders whose Shares are in uncertificated form
"Qualifying non CREST Qualifying Shareholders whose Shares are in certificated form "
Shareholders"
"Receiving Agent" Capita IRG Plc, Corporate Actions, The Registry, P.O. BOX 166, 34
Beckenham Road, Beckenham, Kent, BR3 4TU
"Record Date" the close of business on 13 August 2003
"Registrars" the registrars of the Company, Capita IRG Plc, The Registry, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU
"Regulations" Uncertificated Securities Regulations 2001 (SI 2001 No 2001/3755) as
amended
"Resolutions" the resolutions to be proposed at the EGM and set out in the Notice of EGM
"Rights Issue" the offer by way of rights to Qualifying Shareholders of the New Ordinary
Shares on the basis of 1 Rights Share for each Existing Ordinary Share
held by Qualifying Shareholders at the Issue Price
"Rights Shares" 1,462,844,997 New Ordinary Shares which are the subject of the Rights
Issue
"Shareholders" holders of Existing Ordinary Shares
"Teather & Greenwood" Teather & Greenwood Limited
"UKLA" or "UK Listing the Financial Services Authority in its capacity as the competent
authority for the purposes of Part VI of the Financial Services and
"Authority" Markets Act 2000
"Uncertificated" or "in Ordinary Shares recorded on the relevant register of Ordinary "Shares as
Uncertificated Form" being held in uncertificated form and title to which, by virtue of the
Regulations, may be transferred by means of CREST
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
"United States" or "US" the United States of America, its states, territories and possessions
(including the District of Columbia)
"Waiver" the agreement of the Panel to waive any obligation on Waterford to make a
mandatory cash offer to Shareholders for the issued New Ordinary Shares
not already owned by Waterford upon completion of the Issue for Cash and
Rights Issue which would otherwise arise under Rule 9 of the City Code as
a result of the Proposals
"Waterford Concert Party" Waterford Finance & Investment Limited, Alastair Beardsall, Edward Grace,
Frederick Ponsonby and persons acting in concert with them
"Waterford" Waterford Finance & Investment Limited
This information is provided by RNS
The company news service from the London Stock Exchange
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