LONDON (Alliance News) - Lansdowne Oil & Gas PLC Monday said it will hold a general meeting early next month to allow shareholders to vote on the company's proposals to raise "essential" funds by issuing shares below their nominal value, meaning the company also would have to reorganise its share capital.
Lansdowne needs funds not only to keep the business going but to place itself in a position to be able to settle any liabilities that may arise from the dispute with oilfield services giant Transocean Drilling UK Ltd, which recently won its case against Lansdowne and fellow listed Providence Resources PLC in a court of appeal.
Transocean provided a semi-submersible drilling unit in 2010 to 2011 to be used on the Barryroe field in the Celtic Sea, in which Providence holds an 80% stake and Lansdowne holds the other 20%. Transocean was initially unsuccessful with its claim but then received a favourable ruling in the court of appeal afterwards.
Lansdowne shareholders will vote at a meeting on June 9, specifically as to whether the directors should have the authority to issue up to 350.0 million new shares and on whether the company should be allowed to undertake a share capital reorganisation. Lansdowne currently has only 161.7 million shares in issue.
If shareholders give the directors authority to issue those new shares, then Lansdowne's share capital would be three times its current number, though that would change if the subsequent share capital reorganisation goes ahead as well.
"To delay seeking this authority until such time as the terms of a potential fundraising are agreed would delay completion of such potential fundraising by up to two and a half weeks, given the notice requirements that would be applicable to the related general meeting of shareholders," said Lansdowne.
"The directors do not believe that delaying completion of such a potential fundraising would be in the best interests of the company and the shareholders as a whole. To the extent the directors intend to proceed with a potential fundraising, the company will notify the shareholders of the terms of such potential fundraising prior to its completion," Lansdowne added.
If all 350.0 million shares were approved and then subsequently issued by the company, the total issued share capital would rise from its current 161.7 million shares to 511.7 million shares before the share capital reorganisation.
Importantly, Lansdowne shares have been suspended since April 13 and last traded at 2.12 pence per share - but the new shares, if issued, would be at a heavy discount to that price.
As the shares will be issued at a discount and below the 5.0 pence nominal value, Lansdowne would have to carry out a share capital reorganisation to reduce the nominal value of each share.
If approved, each existing Lansdowne share would be sub-divided and converted into one new share with a nominal value of 0.1 pence and one deferred share of 4.0 pence.
Each new share will carry the same rights as the existing shares, but the company needs to seek approval to amend its articles of association to allow for the creation of the deferred shares.
Importantly, the rights of the deferred shares will be "minimal", rendering them "effectively valueless", Lansdowne said.
Deferred shares will not be entitled to receive dividends or other distributions and will not carry any voting rights. The deferred shares also will not be entitled to any proceeds should the company wind-up and they cannot be transferred without approval from the board.
The deferred shares will not be listed or traded on AIM.
Any other shares to be issued in the future would rank "equally or in priority" to the deferred shares, and the company would be allowed to cancel the deferred shares in the future if shareholders provide further approval.
More importantly, Lansdowne would have the right to purchasing all of the deferred shares for an "aggregate consideration of 1.0 pence", it said.
"The directors consider the passing of the resolutions to be in the best interests of the company and its shareholders as a whole. The board stresses the importance of shareholders voting in favour of the resolutions at the general meeting," said Lansdowne.
All of the directors plan to use their combined stake of 2.06% stake in the company to vote in favour of the proposals next month. More notably, Lansdowne shareholder LC Capital Master Fund Ltd is planning to use its 28.04% stake to also vote in favour of the proposals.
Lansdowne is planning to conduct the fundraising and share capital reorganisation in order to raise funds to cover any liabilities that may arise from a dispute with Transocean Drilling UK after the Court of Appeal ruled in favour of Transocean.
In April, Lansdowne said, through its 20% stake in the Barryroe field in the Celtic Sea, that it would need to raise funds for working capital but to also meet any liabilities that arise from the court ruling.
The company said it is "essential" to raise funds to keep the business going and said it had looked at a range of options. Although it is still holding discussions about those options, which were not detailed, the equity fundraising seems to be the likely method that Lansdowne will use following the news on Monday.
Fellow AIM-listed SeaEnergy PLC holds an 18.67% stake in Lansdowne and released its own statement on Monday morning noting Lansdowne's plans without providing comment or opinion. SeaEnergy shares also are suspended from trading.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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