Leyshon Energy Limited CANCELLATION OF ADMISSION TO TRADING ON AIM (9716B)

TIDMLEN

RNS Number : 9716B

Leyshon Energy Limited

13 January 2015

LEYSHON ENERGY LIMITED

PROPOSED CASH DISTRIBUTION OF APPROXIMATELY US$15.4 MILLION,

CANCELLATION OF ADMISSION TO TRADING ON AIM,

AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION

AND

NOTICE OF GENERAL MEETING

Leyshon Energy Limited (AIM:LEN) (the "Company") announces today the following proposals:

1. the making of a cash distribution to Shareholders of in aggregate approximately US$15.4 million;

2. the cancellation of the Company's Shares to trading on AIM; and

3. the adoption of amended Memorandum and Articles of Association,

(together the "Proposals").

Certain resolutions need to be passed by shareholders in order to implement the Proposals in full. A circular convening a general meeting for the purposes of approving the relevant Proposals (the "Circular") shall be posted to shareholders tomorrow and shall be available on the Company website (www.leyshonenergy.com). Defined terms used in this announcement are as defined in the Circular. Further information concerning the Proposals is set out below.

For further information please contact:

Leyshon Energy Limited

Peter Niu, Company Secretary

Tel: + 86 10 8444 2882

admin@leyshonenergy.com

Cantor Fitzgerald Europe

David Porter/Sarah Wharry (Nominated Adviser)

Richard Redmayne (Corporate broking)

Tel: +44 207 894 7000

Extract of the contents of the Circular

1. Introduction

This circular is being sent to you in connection with the Board's proposals, announced today, which involve the making of a cash distribution to Shareholders of in aggregate approximately US$15.4 million, the cancellation of the Company's Shares to trading on AIM and the adoption of amended Memorandum and Articles of Association (collectively, the "Proposals").

The purpose of this circular is to provide you with details of the Proposals and explain why the Directors consider them to be in the best interests of the Company and its Shareholders as a whole and recommend that you vote in favour of the Resolutions required to implement the Proposals in full.

The General Meeting at which the Resolutions will be considered is scheduled to take place at 3.00 p.m. (London time) on 30 January 2015, notice of which is enclosed at the end of this document.

2. Background to and reason for the Proposals

2.1 Zijinshan Gas Project - Interim Testing Programme

As announced on 10 December 2014, the testing results on the Zijinshan Gas Project have been very mixed and in particular the Company has been unable to establish an economic flow of gas from either of the previously drilled ZJS5 or ZJS7 wells. Furthermore, the Company's discussions to farm out its interests in the ZJS block in order to share the cost and risk of drilling the ZJS8 well have so far proved unsuccessful.

2.2 Acquisition of oil and gas assets in China

As also announced on 10 December 2014, although the Company has been very active in pursuing a number of acquisition and investment opportunities, the recent steep fall in the oil price has made it very difficult for the Company to continue its pursuit of attractive acquisitions; many projects have become marginal or uneconomic, and as a result funding for acquisitions has now become very difficult to obtain.

2.3 Strategic review

As further announced on 10 December 2014, given the current economic environment and operational results, the Company has been cutting costs to preserve cash and, in consultation with its advisors, has been actively considering strategic options to maximize returns to Shareholders in the most cost-efficient and timely manner.

The conclusion of that strategic review is the Proposals.

3. The Proposals

The Board has reached the view that it is no longer in the best interests of Shareholders to pursue the Zijinshan Gas Project on a sole risk basis or seek to complete an acquisition of oil and gas assets in China given the current oil price environment. Rather, the Board considers that the best course of action for the Company and its Shareholders as a whole is for the Company to:

-- discontinue its trading activities and return its remaining surplus cash reserves to Shareholders; and

-- in order to reduce the Company's on-going operational costs further, effect the Cancellation and adopt simplified Memorandum and Articles of Association.

The Directors estimate the on-going costs associated with the Company's admission to AIM, including Directors' and professional advisers' fees, to be approximately GBP500,000 per annum and, should the Cancellation be approved, it is anticipated that such costs shall be substantially reduced.

The Company and its subsidiaries currently have consolidated net assets (unaudited) of approximately US$16.3 million, including approximately US$24.6 million cash on hand and estimated liabilities of approximately US$8.6 million, assessed on a most likely basis. Subject to the cash distribution and Cancellation being effected, the Company will become an unlisted private company with minimal positive net assets on a consolidated Group basis.

It is currently estimated that it will take approximately 6-12 months to discharge or settle the Group's liabilities (which include some environmental liabilities relating to the Zijinshan Gas Project) of approximately US$8.6 million, assessed on a most likely basis. When assessed on a worst case basis, the total liabilities are estimated to be US$9.3 million. The Directors will use this worst case assessment to determine the cash distribution.

During this period, the Company will be maintained as an unlisted private "shell" company (rather than putting the Company into a solvent winding-up procedure) in an effort to procure an orderly process.

Following the discharge or settlement of all of the Group's liabilities, the Company will call a general meeting at which Shareholders will be asked to consider winding-up the Company or any alternative business proposal. If the Company is wound up, the appointed liquidator will, after allowing for all costs and expenses of the winding-up, make a final distribution of any residual cash to Shareholders. Shareholders should note that neither the amount nor the timing for payment of any such final distribution (if any) can be known or assured at this time.

The Company intends to maintain an "Investors" section on the Company's website at (www.leyshonenergy.com) providing information on any significant events or developments in which Shareholders may be interested.

In the event the Resolutions are not passed, the Company will continue to seek a farm-in partner for the Zijinshan Gas Project and review acquisition opportunities.

3.1 The cash distribution

Subject to the passing of the Resolutions, the Directors propose to approve a cash distribution to Shareholders. It is currently estimated that such cash distribution will be approximately US$15.4 million in aggregate, being approximately GBP 4.1 pence per Share. However, although the Directors do not anticipate any significant changes to this estimate, there can be no guarantee that the cash distribution will be such amount as the actual amount of such cash distribution shall be finally determined by the Directors of the Company by reference to the assets and liabilities of the Company at the time of distribution. It is expected that the cash distribution will be finally determined by the Directors shortly after the General Meeting and paid, as soon as practicable, to Shareholders on the company's register of members as at the date of Cancellation.

3.2 The Cancellation

The costs and regulatory requirements associated with maintaining admission to AIM are a significant burden on the Company's financial and management resources which in the opinion of the Board outweigh the benefits gained from admission given the outcome of the strategic review. The costs include fees paid to the Company's nominated adviser, annual fees paid to London Stock Exchange, costs relating to public announcements and certain fees and expenses of professional advisers engaged to provide services relating to the Company's Shares being traded on AIM. Therefore, the Board has agreed that it is in the best interests of the Company and its Shareholders as a whole if the admission of the Shares to trading on AIM is cancelled.

The AIM Rules provide that the Cancellation be conditional upon the approval by not less than 75 per cent of the votes cast, whether in person or by proxy, by the Shareholders in a general meeting.

Pursuant to Rule 41 of the AIM Rules, the Directors have notified the London Stock Exchange of the date of the proposed Cancellation as being 10 February 2015.

Given the Board's recommendation that, subject to requisite Shareholder approval, the admission of the Shares to trading on AIM is cancelled, the Company has served the minimum 3 months' notice required under the Nomad and Broker Agreement to terminate the appointment of Cantor Fitzgerald Europe as its nominated adviser and broker. Cantor Fitzgerald Europe shall cease to act as nominated adviser and broker to the Company upon cessation of the 3 month notice period mentioned above. In the event the Resolution to approve the Cancellation is not passed by Shareholders at the General Meeting, upon Cantor Fitzgerald Europe ceasing to act as the Company's nominated adviser, the Shares shall be suspended from trading on AIM and the Company must seek to appoint a new nominated adviser within one month of such cessation. In the event that the Company is unable to procure the services of another nominated adviser within such period, then admission of the Shares to trading on AIM shall be cancelled.

For information regarding the effect of the Cancellation, please see sections 4 (Effect of Cancellation) and 5 (Matched Bargain Facility) of this letter.

3.3 Amended Memorandum and Articles of Association

As noted above, subject to the cash distribution and Cancellation being effected, the Company will become an unlisted private company with minimal positive net assets on a consolidated Group basis. In recognition of this revised status, the Board is also proposing the adoption of simplified Memorandum and Articles of Association so that following Cancellation, the Directors:

-- will not be required to hold an annual general meeting, however the Company shall continue to hold, when required, other general meetings, in accordance with applicable statutory requirements and the Memorandum and Articles of Association;

-- will over any 15 month period be authorised to issue Shares up to an aggregate nominal amount not exceeding 25 per cent. of the Company's aggregate nominal amount of issued Shares at the beginning of such period free of pre-emption rights. Note that the

Memorandum and Articles of Association currently include such an authority but it is linked to the period between annual general meetings (up to 15 months) which will no longer be relevant given the change explained in the bullet point above; and

   --     will not be required to retire by rotation.

The Memorandum and Articles of Association will also be amended to delete certain provisions included therein which are specific to an AIM-listed company. The proposed amendments to the Memorandum and Articles of Association are expected to reduce the ongoing compliance cost of the Company following Cancellation.

4. Effect of Cancellation

4.1 Effecting Transactions in Shares after Cancellation

The principal effect of the proposed Cancellation is that there would no longer be a formal market mechanism enabling Shareholders to trade their Shares on AIM or any other recognised market or trading exchange. The Board is proposing to establish a matched bargain facility as described below.

4.2 Corporate Governance

Shareholders should also be aware that the Company will no longer be bound by the AIM Rules and that, as a consequence, certain previously prescribed corporate governance procedures may not be adhered to in the future and the Company will no longer be required to announce material events or transactions.

Subject to the Resolutions being passed, Anthony Jan Michael Meggs and Kim Michael Sebastian Howell have each agreed to resign as directors of the Company, such resignations shall take effect after the cash distribution has been finally determined and announced and after Cancellation.

5. Matched Bargain Facility

Following Cancellation, the Company intends to make available to Shareholders an off-market trading facility for the Shares, based on matching bargains, where buyers' and sellers' price expectations match. However, there can be no guarantee of any Shareholders being able to purchase or sell any Shares when desired through the matched bargain facility. It is currently anticipated that this matched bargain facility will be in place shortly after the date of Cancellation. More details of the facility will be made available on the Company's website at that time.