LONDON (Alliance News) - Savannah Petroleum PLC late Tuesday said it plans to terminate a proposed reverse takeover after deciding to launch a placing with new and existing investors to raise USD40.0 million to fund work on the Agadem Rift Basin in South East Niger.
Savannah requested for the company's shares to be suspended in January this year after entering talks with another party that, if completed, would have led to a transaction classed as a reverse takeover.
However, Savannah now plans to terminate those talks once it has completed a USD40.0 million placing, providing the funds needed to develop its existing assets in the second half of 2016 and allowing the company's shares to resume trading on AIM.
Importantly, AIM rules would see Savannah's shares cancelled from AIM following a six-month suspension, meaning the company has to complete the deal or terminate talks by July 12 to prevent the listing being cancelled.
Savannah said it is "highly likely" that talks with the other party would still be terminated even if the placing, which requires shareholder approval, is not completed.
All of the shares issued under the proposed placing will be priced at 38.0 pence each through an accelerated bookbuild. Before being suspended, Savannah shares last traded at 24.0 pence per share - 39% lower than the placing price.
Savannah already held the authority to issue 18.9 million of the new shares, which have been issued and raised GBP7.2 million - or USD9.3 million of the total USD40.0 million target. Those shares represent 9.0% of the enlarged issued share capital following that first placing.
A further 60.3 million new shares have then been conditionally placed at the same price, raising GBP22.9 million - or the other USD29.7 million needed.
Those shares will only be issued if shareholders grant approval at a general meeting on July 22, and would represent 22% of the company's enlarged issued share capital following that second placing.
Importantly, certain unnamed directors of Savannah have been given the authority to purchase a combined total of 726,000 shares on the same terms as the placing within one day of the placing being completed.
Overall, Savannah is proposing to issue 79.8 million new shares in the company
Savannah plans to use the proceeds to recommence ground operations in Niger during the second half of 2016, starting with the acquisition of 3D seismic data over the R3 area. The other areas are R1, R2 and R4, which all lie close to one another.
Once drilling targets have been identified, Savannah will conduct a drilling programme in the first quarter of 2017.
The company also plans to keep looking for a partner to join the project, and said it is already in talks.
"The company is currently in discussions with a number of large and well capitalised counterparties, who have indicated their capabilities to meet Savannah's financial and technical objectives in the current industrial environment, with a view to potentially announcing a transaction prior to the commencement of drilling activity," said Savannah.
Savannah has already found 118 exploration leads and prospects over its acreage, compared to only 51 in May 2015, and some lie over proven plays and are thought to be of a low risk nature. The 10 targets that are over proven plays are thought to contain around 494.0 million barrels of unrisked mean recoverable resources.
An update has also been conducted on the wider resource estimate. The current gross best estimate risked recoverable prospective resources stands at 2.18 billion barrels of oil compared to the previous estimate of 1.19 billion barrels.
The main driver was the upgraded volumes to come from the R3 and R4 areas and additional resources from the Sokor formation across all four areas.
Savannah has received notification from the Ministry of Energy and Petroleum in Niger that the proposed amendments to be made to the existing production sharing contracts will be put forward to the Council of Ministers to be considered for approval.
Savannah said the changes, if approved, will see the minimum work commitments that need to be completed by the company change.
The government has advised a new Petroleum Code is anticipated to be adopted prior to the end of 2016, and the current expectation is that the new code would allow production sharing contracts to be renewed for two year periods, compared to the current one year period.
The government also intends to lift the cost recovery ceiling to 80% from the current 70%.
Savannah has also entered into an agreement with the government that would allow the company to have a right to become an equity holder in any potential oil export infrastructure that is built in the country.
"In the event the Agadem Region Infrastructure Agreement is signed, Savannah would intend to establish an externally funded vehicle for the purposes of financing its share of any costs," said Savannah.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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