Operations Update
January 21 2009 - 2:00AM
UK Regulatory
TIDMPELE
RNS Number : 9754L
Petrolatina Energy PLC
21 January 2009
21 January 2009
PetroLatina Energy Plc
("PetroLatina" or the "Company")
Operations Update re Colon-1 Exploration Well
and
Subscription for a US$4.875 million tranche of up to a proposed
US$9.875 million Convertible Secured Loan Note
PetroLatina (AIM: PELE), an independent oil and gas exploration, development and
production company focused on Latin America, is pleased to provide a further
operational update to that announced on 7 January 2009 in respect of the Col�n-1
exploration well.
The Company's first exploratory well on the La Paloma block is now close to
reaching its target depth of approximately 9,200ft in order to test the La Paz,
Lisama and Umir formations. As previously announced, oil and gas shows were
encountered in this well but the initial wellbore was lost due to unexpected
high pressures encountered in the Cretaceous Umir formation. No wireline logging
or testing was possible, and a sidetrack well has been drilled in order to fully
evaluate the section. The Directors are pleased with the progress of this
sidetrack and the well has again penetrated the Umir formation which remains the
primary reservoir objective. The well is expected to reach the target depth in
the next few days, following which wireline logs will be obtained and, if
warranted, production flow testing will be undertaken. The Directors expect to
be able to release preliminary results from the well on or around 10 February
2009.
As announced on 7 January 2009, the side track operation has resulted in an
increase of approximately US$1.6 million to the original projected costs of US$6
million, and in order to ensure that the Company has adequate funds available
for completion of the well and to progress its ongoing work programme, the
Company is pleased to announce that it has today executed an instrument
constituting secured convertible loan notes 12 per cent. due 2011 in the
aggregate amount of US$9.875 million (the "Notes"). Tribeca Oil and Gas
Financing, Inc. ("TOGF"), a subsidiary of existing shareholder Tribeca Oil &
Gas, Inc. ("TOGI"), has today agreed to subscribe for US$4.875 million in
aggregate of the Notes. TOGF has an option (but is not obliged) to subscribe for
up to a further US$5 million in aggregate of the Notes.
The first tranche of the Notes subscribed for by TOGF, if not repaid or
converted earlier, will mature on 21 January 2011. The Notes will accrue
interest at a rate of 12 per cent. per annum, payable at intervals of six months
from the date of issue, and at the Company's option can be redeemed in whole or
in part prior to maturity, without penalty, on any of the interest payment
dates. Unless converted, the Notes are redeemable immediately prior to any sale
or de-listing of the Company and repayable in the event of any default. At
TOGF's option, the Notes are convertible in whole into new ordinary shares in
the Company ("Ordinary Shares") on any of the interest payment dates, in the
event of early redemption (in respect of the amount specified to be redeemed),
on maturity or on any instance of default, sale or de-listing of the Company.
In the event of conversion, the number of new Ordinary Shares to be issued to
the noteholder will be determined by dividing the principal amount of the
relevant Notes by the initial conversion price per Ordinary Share of 20.9375
pence (the "Initial Conversion Price").
The Company has the option to request that TOGF subscribes in cash at par for
the whole or part of the second tranche of US$5 million Notes (the "Option").
The Option may be exercised by the Company on one occasion only during the
option period, being a period of 6 months from the date of the loan note
instrument. If not repaid earlier, the second tranche Notes will mature in 2011
on their second anniversary. Following exercise of the Option, TOGF is not
obligated to subscribe for the second tranche. If subscribed, the second tranche
of Notes will accrue interest at a rate of 12 per cent. per annum, payable at
intervals of six months from the date of issue, and at the Company's option can
be redeemed in whole or in part prior to maturity, without penalty, on any of
the interest payment dates. Unless converted, the Notes are redeemable
immediately prior to any sale or de-listing of the Company and repayable in the
event of any default. At TOGF's option, the second tranche Notes are convertible
in whole into Ordinary Shares on any of the interest payment dates, in the event
of early redemption (in respect of the amount specified to be redeemed), on
maturity or on any instance of default, sale or de-listing of the Company. In
the event of conversion, the number of new Ordinary Shares to be issued to the
noteholder will be determined by dividing the principal amount of the relevant
Notes by the second tranche conversion price to be calculated as the higher of
(i) the average middle-market closing price of an Ordinary Share over the ten
business days of trading immediately prior to the date of conversion plus a
premium of 25 per cent. thereon, as converted from pounds sterling to US dollars
at the exchange rate prevailing on the business day prior to conversion and (ii)
the then prevailing nominal value of an Ordinary Share.
At its discretion, the Company is entitled to pay interest accruing on both
tranches of the Notes in the form of either cash or by the issue of new Ordinary
Shares. If interest is paid in the form of shares, the number of new Ordinary
Shares to be issued and allotted (credited as fully paid) to the noteholder will
be determined by dividing the amount of interest payable by the closing
middle-market price of an Ordinary Share on the business day immediately prior
to the relevant interest payment date converted from pounds sterling to US
dollars at the then prevailing exchange rate.
If at any time a takeover offer is made to all ordinary shareholders, the
Company will use its reasonable endeavours to procure a comparable offer to be
extended to the noteholder. If no such offer is extended the noteholder shall be
entitled to exercise their conversion rights or seek repayment of their Notes in
whole or in part at a 5 per cent. premium to their principal amount.
The Initial Conversion Price referred to above is less than the current nominal
value of an Ordinary Share of US$0.50 (approximately 35 pence at the prevailing
pounds sterling to US dollars exchange rate). Accordingly, since English company
law prevents the Company from issuing new shares at a price below the prevailing
nominal value of its Ordinary Shares, the Company has undertaken to implement a
capital reorganisation prior to the first interest payment date in order to
ensure that the nominal value of each Ordinary Share is reduced to an amount
sufficiently below the Initial Conversion Price, which may include (but shall
not be limited to) the sub-division of the existing issued Ordinary Shares into
new ordinary shares of a lower nominal amount and a new class of non-voting
deferred shares of a lower nominal amount. A further announcement in respect of
the Company's proposed capital reorganisation will be made in due course and an
appropriate circular will also be issued to shareholders to provide more details
and convene a general meeting to obtain the requisite shareholder approvals. By
way of security in respect of the Company's obligations under the loan note
instrument, PetroLatina (CA) Limited, a wholly owned subsidiary of the Company,
has granted to TOGF a pledge over its entire shareholding in RL Petroleum
Corporation (a Panamanian Company). This security will be automatically released
by TOGF on the earlier of (i) conversion or redemption of all outstanding Notes
and (ii) the aforementioned proposed capital reorganisation becoming effective.
The Company has agreed to pay TOGF an arrangement fee of US$300,000 in
consideration for the subscription of the Notes. In addition, the Company has
today granted TOGF a warrant over Ordinary Shares exercisable in whole or in
part at an aggregate exercise price of US$300,000 on any number of occasions
throughout the term of the loan note instrument (the "Warrant"). The exercise
price payable by TOGF to the Company in respect of the Warrant will be set off
against the arrangement fee owing by the Company to TOGF pursuant to the Notes.
In the event of exercise, the number of new Ordinary Shares to be issued to the
warrantholder will be determined by dividing the exercise price by the higher of
(i) the middle market closing price of an Ordinary Share on the date of the
Warrant, as converted from pounds sterling to US dollars at the then prevailing
exchange rate, and (ii) the prevailing nominal value of one Ordinary Share at
the time of exercise of the Warrant. The Warrant will lapse on such date as all
of the Notes have either been converted or redeemed or are no longer capable of
issue in accordance with the provisions of the loan note instrument.
As stated in the interim results announcement of 30 September 2008, the Company
requires additional financing to be able to complete its entire planned work
programme and the Directors have been evaluating how best to fund the necessary
capital and operating expenditure. Whilst preliminary discussions with a number
of potential third party finance providers have been positive, negotiating
suitable debt facilities has proved difficult in light of the recent turmoil in
global financial markets and the reticence of banks to commit to new lending in
the current uncertain macro-economic environment. Accordingly, the Directors
believe that the issue of the Notes is the most efficient and cost effective
means of securing the Company's near term funding requirements in order to avoid
any delay or reduction in the ongoing drilling programme whilst continuing to
seek appropriate longer term debt facilities and evaluate alternative funding
options. The net proceeds from the issue of the Notes will be used to fund
certain capital expenditure commitments in respect of the Company's ongoing work
programme in Colombia and for general working capital purposes. The Company
expects to have remaining cash resources of approximately US$2 million following
completion of Colon-1, as outlined above, and prior to exercise of the Option,
and although the Directors are satisfied that the working capital available to
the Company will be sufficient for its present requirements, it is currently
expected that the Company will require additional funding in order to complete
its entire work programme. Further announcements regarding such financing will
be made as and when appropriate.
TOGI is a significant shareholder in the Company and currently holds 15,360,999
Ordinary Shares, representing approximately 35 per cent. of the Company's issued
share capital and existing warrants over a further 1,875,260 Ordinary Shares
which are automatically exercisable if, and to the extent that, any exercise of
the Company's other existing outstanding 3,482,625 warrants occurs. Accordingly,
the issue of the Notes as set out above is considered to be a related party
transaction under the AIM Rules for Companies. The independent directors of the
Company (being John May and Menno Wiebe) consider, having consulted with Strand
Partners Limited, that the terms of the issue of the Notes are fair and
reasonable insofar as the Company's shareholders are concerned.
Juan Carlos Rodriguez, CEO of PetroLatina, commented:
"PetroLatina is delighted that Tribeca has continued to support the business,
particularly in light of the current global economic uncertainty. These funds
will enable us to complete the Col�n-1 exploration well and continue to invest
in our work programme to grow the Company.
"We look forward to announcing initial test results from Col�n-1 in the coming
weeks; we believe the prospect has possible recoverable reserves of up to 19.8
million barrels of oil."
Enquiries:
+-----------------------------------------------------------------------------+
| PetroLatina Energy Plc |
+-----------------------------------------------------------------------------+
+------------------------------------------------------+-----------------------+
| Juan Carlos Rodriguez, Chief Executive Officer / | Tel: +57 1627 8435 / |
| Sebastien Garnier, Chief Financial Officer | + 44 7525 009616 |
+------------------------------------------------------+-----------------------+
| Pawan Sharma, Executive Vice President - Corporate | Tel: +44 (0)207 956 |
| Affairs | 2821 |
+------------------------------------------------------+-----------------------+
| |
+------------------------------------------------------------------------------+
| Strand Partners Limited |
+------------------------------------------------------------------------------+
| Simon Raggett / Matthew Chandler | Tel: +44 (0)20 7409 |
| | 3494 |
+------------------------------------------------------+-----------------------+
| |
+------------------------------------------------------------------------------+
| Financial Dynamics |
+------------------------------------------------------------------------------+
| Ben Brewerton / Susan Quigley | Tel: +44 (0)20 7831 |
| | 3113 |
+------------------------------------------------------+-----------------------+
Additional Information on PetroLatina Energy Plc:
PetroLatina Energy Plc (AIM: PELE), formerly known as Taghmen Energy Plc, was
founded in 2004. The Company is presently focused on Colombia after the sale of
its assets in Guatemala in which it retains a 20% interest in the first three
wells and a 20% working interest in future wells. In Colombia, the Company
currently holds 40% and 20% interests in the Los Angeles and Santa Luc�a fields
on the Tisquirama licence respectively, and a 100% interest in the Do�a Mar�a
field. In November 2007 the Company secured the extension of the Tisquirama
licence for the economic life of the fields. In April 2006 the Group acquired an
interest in two exploration blocks with an 85% interest in Midas and an 80%
interest in La Paloma. PetroLatina also owns the R�o Zulia-Ayacucho pipeline in
the prolific Catatumbo basin which transports crude oil. Present
exploration/exploitation activities in this area should increase the volume of
crude oil transported resulting in an increased cash flow. Further information
is available on the Company's website (www.petrolatinaenergy.com).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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