TIDMEME
RNS Number : 6989P
Empyrean Energy PLC
22 February 2016
Empyrean Energy Plc / Index: AIM / Epic: EME / Sector: Oil &
Gas
22 February 2016
Empyrean Energy PLC ("Empyrean" or the "Company")
EMPYREAN SUCCESSFULLY COMPLETES THE SALE OF THE SUGARLAOF AMI
PROJECT FOR UP TO US$71.5 MILLION
Empyrean Energy PLC, the profitable US onshore oil, gas and
condensate exploration, development and production company with
assets in Texas and California, is pleased to announce that it
reached financial close ("Closing") on 19 February 2016, Houston
time, of the purchase and sale agreement (the "PSA Agreement") with
Carrier Energy Partners II, LLC ("CEP II"), a Delaware corporation,
to dispose of all of its right, title and interest in the Sugarloaf
AMI development (the "Sugarloaf AMI Project" or the "Asset") for a
purchase price of US$61,500,000 (the "Purchase Price") (the
"Transaction"). The Company may also receive, in certain
circumstances as further set out below, contingent payments up to a
maximum of US$10,000,000.
Empyrean had a 3% working interest in the Sugarloaf AMI Project,
which is operated by Marathon Oil Company, a subsidiary of US major
Marathon Oil Corporation (NYSE: MRO) ("Marathon" or the
"Operator"). CEP II is a Houston, Texas based private oil and gas
company focused on the acquisition and exploitation of upstream
assets. Backed with an equity commitment from Riverstone Holdings
LLC, its primary objective is to partner with select operators that
are developing both unconventional and conventional reservoirs in
North America.
The Transaction has an effective date of 1 October 2015 (the
"Effective Date") and all of the conditions to close have now been
met. Following the conclusion of the Transaction, the Company's
portfolio comprises a 58.084% working interest ("WI") in the Eagle
Oil Pool Development Project, located in the San Joaquin Basin in
southern California; a 7.5% WI in two producing wells and lesser
interests in another six producing wells located in the Sugarloaf
Block A operated by ConocoPhillips; and a 10% WI in the Riverbend
Project, located in the Tyler and Jasper counties, onshore
Texas.
At closing, the Purchase Price was adjusted, under the terms of
the PSA Agreement, to reach a settlement that reflected operations
at the Sugarloaf AMI Project up until the Effective Date. These
included adjustments for operating and prepaid expenses paid by the
Company that were incurred on the Asset after the Effective Date
and for revenue received by the Company after the Effective Date
that related to production months prior to the Effective Date.
Following these adjustments, an amount of US$66,315,371.04 (the
"Adjusted Purchase Price") was due to the Company. The Adjusted
Purchase Price was reduced by the deposit of US$6,150,000 already
received by the Company upon signing the PSA Agreement. Empyrean's
settlement amount before the payments made upon Closing, below, was
US$60,165,371.04.
Empyrean has applied the proceeds first to (i) close out the
Company's existing debt facility with Macquarie Bank, (ii) settle
payments due to Marathon Oil Company for both pre-Effective Date
outstanding expenses and also for post-Effective Date outstanding
expenses, the latter having been recovered as part of the Purchase
Price adjustments, (iii) make agreed payments under the terms of
the PSA Agreement to the Withholding Tax Escrow Account and the 10%
Holdback Escrow Account and (iv) settle the US-based advisory and
legal expenses of the Transaction. Further details of these amounts
are set out below.
Empyrean CEO, Tom Kelly, said, "It is with great pleasure that
Empyrean is able to announce the completion of what has been a very
challenging transaction in perhaps the most difficult market
conditions for the global oil and gas sector for decades. The
transaction represents an excellent outcome for our Company and its
shareholders given the backdrop of continued low oil prices and
particularly limited development capital availability. We move
forward debt free and with the potential to unlock further
significant value for shareholders."
Contingent Payments
The Company will be entitled to certain additional payments in
relation to the Transaction in the following circumstances and
calculated in the manner agreed in the PSA Agreement:
o If the average New York Mercantile Exchange strip price of
light sweet crude oil (WTI) for the calendar period of 1 January
2016 until 30 June 2016 or 1 July 2016 until 31 December 2016
exceeds US$55.00 per barrel (the "First Contingency"), then CEP II
shall pay to the Company an additional US$1,000,000 for every whole
dollar in excess of US$55.00 per barrel (collectively, the "First
Contingent Payment"); provided, however, the First Contingent
Payment shall not exceed US$5,000,000;
o If the average New York Mercantile Exchange strip price of
light sweet crude oil (WTI) for the calendar period of 1 January
2017 until 30 June 2017 or 1 July 2017 until 31 December 2017
exceeds US$60.00 per barrel (the "Second Contingency"), then CEP II
shall pay to the Company an additional US$1,000,000 for every whole
dollar in excess of US$60.00 per barrel (collectively, the "Second
Contingent Payment") provided the Second Contingent Payment shall
not exceed US$5,000,000. If there is no First Contingency Payment,
this shall not preclude a Second Contingent Payment if the Second
Contingency is met.
Macquarie Bank Loan Facility and close out of the hedge book
The Company has closed out its existing debt facility with
Macquarie Bank and all related liens and encumbrances have been
released. The total amount outstanding at closing was
US$23,434,531.65. This amount includes the previous amount
outstanding of US$19,670,000 plus further drawdowns, interest, fees
and legal costs. Empyrean was granted an extension on 10 December
2015 to repay US$1million of its loan due 31 December 2015 and
outstanding interest was capitalised at this time. Two significant
drawdowns were made under a bridge finance facility of
US$554,723.58 on 29 January 2016 and a further US$2,482,802.12 on
10 February 2016 to meet new well commitments and avoid penalties
under the terms of the PSA. These cash called payments were made to
Marathon and have been recovered under the terms of the PSA as they
are post Effective Date obligations of CEP II.
In addition, the Company is pleased to advise that it chose to
close out its hedge position on 26 January 2016 for an amount of
US$1,582,000. The proceeds of the hedge closeout have been applied
against the amounts owing to Macquarie Bank under the facility and
are reflected in the total amount settled, outlined above.
Payment to Marathon
Empyrean has paid an amount of US$7,492,279.19 as an initial
payment to Marathon for the estimated amount of Joint Interest
Billings outstanding as at 31 January 2016. This amount is split
US$5,366,759.02 in pre-Effective Date costs and US$2,125,528.17 in
post-Effective Date costs. The amount is subject to further
adjustments as Marathon receives third party invoices after
Closing. The post-Effective Date amounts are CEP II's obligation
under the PSA Agreement and are adjusted for and effectively
recovered by Empyrean. The payment of these direct to Marathon has
negated the need for these amounts to have required alternate
financing.
Holdback Escrow of Funds
An amount equal to US$6,150,000 (being 10 per cent. of the
Purchase Price) has been deposited with an escrow agent to secure
the representation, warranty and indemnity obligations of the
Company under the PSA Agreement. Subject to any deductions or
holding back in accordance with the terms of the PSA Agreement,
half of the escrowed funds will be distributed to the Company six
months following Closing and the balance of such funds will be
released to the Company twelve months following Closing.
Withholding Tax Escrow Account
An amount equal to US$10,725,000 (being 15 per cent. of the
anticipated maximum consideration of US$71,500,000) has been
withheld in respect of potential tax liabilities in relation to the
Company's US operations, including the gain made on the disposal of
the Asset. A Tax Withholding Certificate Application, which
provides a detailed estimated assessment of the Company's actual
tax liability, has been lodged by Empyrean and its US taxation
advisors before Closing, in accordance with Treasury Regulation
Section 1.1445-1(c)(2)(i)(B), and the amount included on the
Withholding Certificate Application will, once accepted by the IRS
(who are expected to respond within 90 days), be paid to the IRS to
meet the tax liability and the balance of the amount held in escrow
may be returned to the Company . The current total of potential
estimated tax liability is US$3,500,000. The US$3,500,000 is split
approximately US$2,000,000 for the Purchase Price liability and
US$750,000 for each of the First Contingency Payment and the Second
Contingency Payment, such that if the contingency payments are not
made then the Company may have a reduced tax obligation.
US based advisory
The financial advisor to the Company on the transaction was
Macquarie Capital. The Company's US legal team was Bracewell LLP,
out of Houston and included J.J. McAnelly, Austin Lee, Scott
Thompson and Luke Tanner.
The total costs of the Transaction, including the US based
advisory fees above are estimated to be approximately
US$1,200,000.
Ongoing strategy
It is still the Company's intention that following the settling
of its US taxes and the repayment of all other debts, including any
further costs of the Transaction, and retention of sufficient funds
to meet the Company's strategic goals and ongoing expenses, the
Board will consider the most efficient manner in which to return
surplus funds to Shareholders.
February 22, 2016 03:00 ET (08:00 GMT)
Contacts:
Empyrean Energy plc
Tom Kelly Tel: +618 9481 0389
Cenkos Securities plc (NOMAD)
Neil McDonald nmcdonald@cenkos.com Tel: +44 (0) 131
220 9771
Nick Tulloch ntulloch@cenkos.com Tel: +44 (0) 131
220 9772
Beth McKiernan bmckiernan@cenkos.com Tel: +44 (0) 131
220 9778
St Brides Partners Ltd (Public Relations Adviser)
Hugo de Salis hugo@stbridespartners.co.uk Tel: +44 (0) 20
7236 1177
Elisabeth elisabeth@stbridespartners.co.uk Tel: +44 (0) 20
Cowell 7236 1177
Lottie Brocklehurst lottie@stbridespartners.co.uk Tel: +44 (0) 20
7236 1177
The following definitions apply throughout this announcement,
unless the context otherwise requires:
"AIM" the AIM market operated by the
London Stock Exchange
"AIM Rules" the 'AIM Rules for Companies'
published by the London Stock
Exchange governing the admission
to, and the operation, of AIM
"Board" or "Directors" the board of directors of the
Company
"Business Day" a day (other than a Saturday or
Sunday) on which commercial banks
are open for general business
in London, England
"Cenkos" Cenkos Securities plc, which is
authorised and regulated by the
Financial Conduct Authority
"CEP II" Carrier Energy Partners II, LLC,
a Delaware corporation, with offices
at 77 Sugar Creek Center Boulevard,
Suite 550, Sugar Land, Texas 77478
"CEP II EF, LP" the newly formed subsidiary of
CEP II to serve as the legal entity
for the Transaction
"Company" or "Empyrean" Empyrean Energy plc (incorporated
in England and Wales with registered
number 5387837)
"Effective Date" 1 October 2015
"London Stock Exchange" London Stock Exchange plc
"Ordinary Shares" ordinary shares of 0.2 pence each
in the issued share capital of
the Company
"PSA Agreement" the conditional purchase and sale
agreement entered into by the
Company and CEP II EF, LP
"Purchase Price" US$61,500,000, as adjusted in
accordance with the PSA Agreement
"Transaction" the conditional PSA Agreement
entered into by the Company with
CEP II EF, LP to dispose of all
of its right, title and interest
in the Sugarloaf AMI Project operated
by Marathon
"US$" United States Dollars, the lawful
currency of the United States
of America
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCSEISWEFMSEIE
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