LONDON (Alliance News) - PetroNeft Resources PLC Wednesday said it has proceeded to take a loan from its partner in Russia to allow a work programme to be carried out despite the ongoing battle with its largest shareholder.
PetroNeft said earlier this week that its partner on Licence 61 in Russia, Oil India Ltd, was willing to provide USD35.0 million of funding over a two-year period by way of a shareholder loan to the 50:50 joint venture company that operates the licence.
Importantly, PetroNeft had said the loan would be reliant on PetroNeft shareholders voting against resolutions that will be tabled at an extraordinary general meeting by its largest shareholder, Natlata Partners Ltd, which holds a 29.47% stake in the company.
That meeting will not be held until next month, and shareholders will vote on whether or not to remove four existing board members and on whether to appoint three new board members that have been nominated by Natlata.
PetroNeft confirmed Wednesday that the loan is contingent on "the current management team remaining in place," as it tries to gain support from shareholders.
"Should there be a change in management subsequent to the drawdown of the new loan this would constitute an event of default, requiring immediate repayment of amounts advanced and further requiring PetroNeft to provide its 50% share of funding," said PetroNeft.
PetroNeft said only the first tranche of the USD35.0 million loan has been executed, totalling USD10.0 million, which will be used for the work to be carried out on the licence this year. That is being provided by an unsecured loan to WorldAce Investments Ltd, the joint venture company.
The work to be carried out this year includes the drilling of one vertical well and up to three horizontal wells, as well as a delineation well and optimisation studies.
Natlata will not be pleased that PetroNeft has taken the loan prior to the meeting next month, as shareholders will now have to either reject the proposals to change the board or vote in favour of them and accept the company will have to repay the loan and source a substantial amount of funds that it currently does not have.
When PetroNeft originally said it was organising the loan from Oil India, Natlata described it as a "poison pill", highlighting Oil India provided a similar USD45.0 million loan in 2014 which led to " no material increase in production".
PetroNeft shares were down 2.9% to 2.02 pence per share on Wednesday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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