LONDON (Alliance News) - Kea Petroleum PLC said its cash resources are almost "totally depleted" as it urged shareholders to approve the restructuring of the company ahead of a general meeting to be held later Friday.
The troubled oil and gas exploration company operating in New Zealand has proposed a share reorganisation, the sale of its assets, a fund-raising, and a new investment policy that will simply target companies or projects with potential for growth.
Kea's shares have been suspended from trading on AIM since May 26 whilst the company clarified its financial position, after it failed to raise GBP3 million of new equity to progress its assets in New Zealand.
Due to its dire financial position, Kea agreed to sell its entire 70% interest in the PEP51153 license to Caliera Fund Ltd for around GBP222,550 after an "exhaustive marketing exercise". That license included the Puka wells and the Shannon prospect, the company's flagship assets.
Kea warned that if shareholders reject the proposed sale to Caliera, it will have to refund the proceeds but also pay an additional GBP111,275 termination fee.
In addition, the company has entered into a conditional heads of terms, subject to contract, to dispose of its interest in the PEP381204 license which includes the Mauku prospect, also for GBP222,550, to New Endeavour Resources (NZ) Ltd. Under that sale, Kea will retain a 2.5% royalty.
Those sales will result in the company being re-classed as an investment company under AIM rules, and the company has proposed a policy to "invest in and/or acquire companies and/or projects with potential for growth," it said.
Kea added it would focus on "the industry sectors with which they are most familiar", including natural resources, technology, life sciences, property, leisure and hospitality.
"The overriding criterion, however, will be the potential for creating value for shareholders. The geographical focus will primarily be in regions in the world that the board considers valuable opportunities exist and potential returns can be achieved," the company added.
If the policy is approved by shareholders, Kea will have one year to implement its investment policy by acquiring a project or company within 12 months under AIM rules.
The proceeds from the sale of its assets will be used to settle outstanding debt with its creditors and for working capital, but "will not be sufficient to meet the ongoing costs of keeping the company alive or delivering its proposed investment policy," it said.
"Accordingly we will be seeking to raise, through subscriptions by existing substantial shareholders, including directors and associate parties, and others, up to GBP1 million to cover ongoing costs of operations pending a new transaction constituting a reverse take-over which would be put to shareholders for approval in due course or otherwise implement its investing policy," said Kea.
In order to facilitate the fundraising, Kea said it is "necessary to recognise the reduced value of the company" and proposes reducing the par value of its shares to 0.1 pence from the existing 1.0 pence. Kea said it did not believe it could raise funds at the current par value, which values the company at around GBP1.0 million, it said.
"The company intends, dependent on the successful conclusion of the share reorganisation, and providing there is sufficient working capital from raising of further new funds, to seek to lift the suspension of it new ordinary shares to trading on AIM," said the company.
As of Tuesday, Kea had 93.9 million shares and a further 93.9 million deferred shares. It is proposed each existing share will be subdivided and converted into one new share of 0.1 pence and one new deferred share of 0.9 pence.
"In order to be able to raise the funds which the directors consider Kea needs to be able to continue as a going concern, the company will require authority from shareholders to allow for the creation and issue of up to 100 million new ordinary shares following the proposed reorganisation," said Kea.
"The company's unallocated cash resources are now almost totally depleted and without additional funds it will not be able to continue," Kea added.
"If shareholders do not approve all of the resolutions to be proposed at the general meeting the directors believe they will have no alternative but to settle the company's creditors from the company's remaining cash resources and commence the liquidation of the company," said Kea
The general meeting will convene in London at 1200 BST.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
