Agriterra Ld Regulatory News (AGTA)

19 May 2005 07:00

White Nile Limited19 May 2005 White Nile Limited / Epic: WNL / Market: AIM / Sector: Oil & Gas White Nile Limited ("White Nile" or "the Company") 'Acquisition of Oil Concession and Re-Admission to Trading' The Company is pleased to announce that a circular is today, 19 May 2005, beingposted to shareholders setting out full details of a proposed acquisition of aninterest in an oil concession in Southern Sudan and that trading in thecompany's shares on AIM will recommence at 7.00am on Monday 23 May 2005. Full details of the proposed acquisition are set out in the circular, whichincludes the following information: • Part 1; a letter from the Company's Chairman, Phil Edmonds, which summarises the proposed acquisition and related information; • Part 2; an accountant's report from Baker Tilly setting out information on the Company's financial position at 28 February 2005; • Part 3; an independent consultants' report from Exploration Consultants Ltd, a firm of oil consultants / geologists on Block Ba in Southern Sudan; • Part 4; a legal opinion from Maurice Mendelson QC; and • Part 5; statutory and general information. The full text of Part 1 of the circular to shareholders is included within thisannouncement. The Directors of the Company would recommend that shareholdersand other interested parties should refer to the text of the full circular andwhere appropriate take independent advice. The Company proposes, subject to shareholder approval, to acquire an oilconcession in Block Ba in Southern Sudan in consideration for which it willissue 155,000,000 ordinary shares of 0.1p each. An Extraordinary GeneralMeeting is to be held on 16 June 2005 for the purpose of considering and, ifthought fit, passing the following resolution as an ordinary resolution: "That the acquisition by the Company of an interest in a petroleum concessionlocated in an area known as Block Ba in Southern Sudan from Nile PetroleumCorporation Ltd (as more fully described in the letter from the Chairman set outon pages 8 to 17 of the circular to shareholders dated 19 May 2005) inconsideration for which the Company is to allot 155,000,000 ordinary shares of0.1p to Nile Petroleum Corporation Ltd, be and is hereby approved and theDirectors of the Company be authorised to implement the terms thereof." As noted in the Chairman's letter below, irrevocable undertakings to vote infavour of the resolution have been obtained from shareholders who hold over 99%of the issued share capital of the Company. The UK City Code on Takeovers and Mergers ("the City Code") applies to publiccompanies which are resident in the United Kingdom, the Channel Islands or theIsle of Man and therefore applies to the Company. Under Rule 9 of the City Codea party acquiring a holding of 30% or more of a company's voting rights isnormally obliged to make a general offer to all other shareholders to acquirethe shares not held by them. The Takeover Panel has waived the requirement fora general offer to be made and this is the subject of a further detailedregulatory news announcement that is being issued simultaneously with thisannouncement. The London Stock Exchange made the admission of the proposed enlarged sharecapital of the Company the subject of two special conditions which were imposedunder Paragraph 9 of the AIM Rules. The two special conditions were that: 1. The Company obtained Counsel's opinion on the approval process of the licence for the Block Ba concession including the meaning of consensus; and 2. The Company made available for public inspection all signed documents upon which the Company is placing reliance. These conditions have been satisfied and reference is made to the Counsel'sopinion within the letter from the Chairman that forms Part 1 of the circular toshareholders. A list of the documents available for public inspection is setout in Paragraph 12 of Part 5 of the circular to shareholders. The documentswill be available for inspection by the public during normal business hours onany weekday (excluding public holidays) as follows; from the date of thisdocument until 31 July 2005 at Numerica Capital Markets Limited, 66 WigmoreStreet, London, W1U 2HQ and from the date of this document until 27 May 2005 at4th Floor, Clements House, 14 - 18 Gresham Street, London, EC2V 7NN and from 31May 2005 until 31 July 2005 at Millennium Bridge House, 2 Lambeth Hill, London,EC4V 4AJ. LETTER FROM THE CHAIRMAN White Nile Limited7 New StreetSt Peter PortGuernsey GY1 4BZ 19 May 2005 Dear Shareholder White Nile was admitted to trading on AIM on 10 February 2005, having raisedover £9 million from investors prior to admission. The AIM admission documentdated 4 February 2005 described the Company's strategy as being to identify andacquire projects in the natural resources sector with particular emphasis on oilprojects within Africa. The AIM admission document also stated that the Companywas specifically negotiating with the Government of Southern Sudan ("GOSS") forcertain oil concessions and that the Directors were optimistic that thesenegotiations would come to fruition shortly. I am now writing to you withdetails of the Company's proposed acquisition and of the Extraordinary GeneralMeeting called for 16 June 2005 to approve this. 1.1 ACQUISITION On 16 February 2005, the Company announced that agreement had been concludedwith the GOSS and its national oil company, Nile Petroleum Corporation Limited("NPC") whereby the Company would acquire a 60% interest in Block Ba, whichcontains part of the Muglad basin in Southern Sudan. Under the terms of theagreements described in detail in sections 1.1.2 and 1.1.3 below, the Company isentitled to 60% of the gross revenues generated in return for bearing 100% ofthe costs of exploration, development and production, subject to being entitledto a minimum annual internal rate of return on capital of 40%. The Directors recognised that the Acquisition was sufficiently large relative tothe size of the Company that it was not appropriate to allow the Company'sshares to continue trading until full information on the Acquisition had beenpublished. Accordingly, on 16 February 2005 the Company requested a suspensionof trading pending such publication. The Acquisition represents a reverse takeover for the purposes of the AIM Rulesand therefore requires the prior approval of shareholders of the Company at theEGM. If the resolution proposed at the EGM is duly passed the Company's existingquotation on AIM will be cancelled and the Company will apply for the EnlargedShare Capital to be admitted to trading on AIM. Under the terms of the Acquisition, the Company is to issue shares that causeNPC to hold 50% of the Enlarged Share Capital though this holding could rise to70% if NPC exercise the option, described in more detail below, to transfer theremaining interest in the Concession. Under Rule 9 of the City Code on Takeoversand Mergers ("the City Code"), NPC would normally be required to make amandatory offer for all of the ordinary shares of the Company. For reasonsdetailed later in this document, the Panel on Takeovers and Mergers ("the Panel") has determined that, in this particular case, no mandatory offer isnecessary. 1.1.1 Background The area known generally as Southern Sudan has been the subject of a long andprotracted civil war which formally ended on 9 January 2005 with the signing ofpeace accords between the National Government of Sudan based in Khartoum and theGOSS, in the form of the Sudanese People's Liberation Movement. Anticipating thepossibility of peace, and recognising the significant potential for oilexploration and extraction in the region, Andrew Groves and I initiated contactswith leading figures in the South with a view to proposing a novel means offunding oil exploration and development projects in their part of the country. Traditionally, the relevant authority in a particular region enters intoexploration and development agreements with oil exploration companies with apotentially lengthy delay between the entering into of the agreement and thefirst receipt of production revenues by the relevant governmental authority. Themodel developed by Andrew Groves and me was designed to enable the GOSS tobenefit from the extensive capital markets in London and elsewhere to raisefunds to enable development of Southern Sudanese oilfields whilst retaining longterm control and influence over them. To this end, Andrew Groves and I proposed that we would create a shell companythat would seek admission to AIM. GOSS would transfer exploration rights to thatcompany in consideration for a substantial shareholding in that company. Theproposed scheme was encapsulated in a draft joint venture agreement and theCompany was established with the intention of implementing the proposed conceptif GOSS decided that it wished to proceed with our proposal. White Nile Limitedwas not a party to the draft joint venture agreement and at that point there wasno contractual binding commitment upon any party. The area of land that was tobe the subject of the arrangements was Block Ba, an area that extends toapproximately 67,000 sq km and is situated in Southern Sudan north of the townof Juba with its centre having the approximate co-ordinates 7degrees north and32degrees east. Further information on the area is set out in the text of theindependent consultant's review below in Part 3 of this document. On 14 February 2005, the GOSS confirmed that it wished to proceed with theCompany and to enter into an agreement with the Company on the commercial termsset out in the draft joint venture agreement under which the Company wouldacquire a 60% interest in Block Ba on the terms detailed in this letter. 1.1.2 The Terms of the Acquisition The Company has now concluded a number of agreements which together set out theterms of the Acquisition described below. These comprise a lock-in agreementdated 17 February 2005, a letter confirming certain information dated 25 March2005, an agreement dated 26 March 2005 (transferring interests in Block Basubject to obtaining shareholders' approval) and the EPLA dated 25 April 2005. The GOSS had, on 12 August 2004, granted to NPC certain concessions, includingthe right to develop and explore Block Ba (the "Concession"). Block Ba extendsto approximately 67,000 sq km and is situated in Southern Sudan north of thetown of Juba with its centre having the approximate co-ordinates 7degrees northand 32degrees east. Further information on the area is set out in the text ofthe independent consultant's review in Part 3 of this document. NPC is to transfer to the Company an interest in the Block Ba Concession.Exploitation of Block Ba is subject to the EPLA, which covers explorationoperations, revenue sharing and responsibility for costs in respect of Block Ba. White Nile has sufficient funds to carry out initial exploration, but it isanticipated that, in order to complete the necessary exploration and then tocommence production, further equity fund raisings will be necessary. In consideration of the transfer of rights in respect of the Concession, NPC isto receive an interest of 50% in the Enlarged Share Capital, through the issueof 155,000,000 ordinary shares of 0.1p each in the Company ("the NPC Shares").Additionally, NPC will have the right, following the issue of the NPC shares, toappoint two representatives of NPC to the Board of White Nile. If the transaction is approved White Nile will become a company controlled, atshareholder level, by the GOSS who will hold 50% of the voting shares. As far asthe Board of Directors is concerned, Phil Edmonds, Andrew Groves and BrianMoritz will continue to be directors and in due course NPC may appoint twoadditional directors. As noted above, at present the names of the directors thatthe GOSS may choose to appoint to White Nile and the extent to which it willseek to exert executive influence over White Nile is not known. White Nile has, subject to shareholder approval of the Acquisition and admissionof the NPC Shares to AIM, also granted NPC the right ("the Option") to transferto White Nile its remaining interests in the gross revenues from Block Ba inconsideration for the issue to NPC of a further 206,666,667 ordinary shares of0.1p each in the Company ("the NPC Option Shares"). The exercise of the Optionby NPC would increase its shareholding in the Company to 361,666,667 out of(assuming that no further shares are issued) 516,666,667 ordinary shares, being70% of the Further Enlarged Share Capital. In the event that the Option isexercised, NPC will be entitled to appoint a further representative to the Boardof Directors of the Company. For the reasons set out in paragraph 1.7 below, the NPC Shares are being issuedto a nominee holder ("the Nominee"). 1.1.3 The EPLA On 25 April 2005, the Company and NPC entered into the EPLA. Under theprovisions of the EPLA the Company has been granted exploration rights inrespect of Block Ba for a period of ten years, divided into an initial period offive years and a second period of five years ("the second period") and then bytwo further periods of three years each, subject to the Company having compliedwith certain minimum exploration obligations set out in the EPLA and subject, inthe case of the two further extensions of three years each, to a commercialdiscovery having been made prior to the end of the second period. The EPLA imposes minimum obligations on the Company as to exploration work thatthe Company must carry out and contains provisions for budgets to be agreed, howdiscoveries are appraised and how commercial discoveries are developed andexploited. The Company will be entitled to exploit commercial discoveries for 25years following the approval between the parties of a development andexploitation plan in relation to the relevant discovery. The EPLA also containsprovisions whereby such periods can be extended for a further period of up to 10years, if commercial production is still possible beyond the initial 25 yearperiod. The rights of exploration and development of crude oil and natural gas resourceswithin Block Ba are exclusive to the Company. All costs of such exploration anddevelopment will be met by the Company. The gross revenues net of selling costsfrom the sale of crude oil and natural gas produced pursuant to the EPLA will besplit 60-40 between the Company and NPC. Unless NPC determines otherwise, theCompany will sell NPC's share of such produce on its behalf and account to NPCfor the sale proceeds. The EPLA specifies that it is the intention of theparties that the Company will attain an annual internal rate of return of aminimum of 40% and that, if such internal rate of return is not achieved by theCompany, the parties will re-negotiate the terms of the EPLA in good faith inorder to ensure that the Company does achieve such internal rate of return. 1.1.4 Business Strategy The Company was established in order to identify and acquire projects in thenatural resources sector with particular emphasis on oil projects within Africa.In addition to the Acquisition, the Company is currently considering projects inEthiopia, Kenya and Somalia. In particular, the Company is currently indiscussions with the Government of Ethiopia concerning a joint study agreement. With respect to the Acquisition the Company's strategy will be: (a) to subcontract the pre-production phase of Block Ba to professional project managers who will oversee the exploration surveys and confirmatory drilling. (b) to use the pre-production period to negotiate contracts for the extraction and distribution of oil from Block Ba, and to put into place funding as required. (c) to engage experienced professional oil industry management staff to handle full commercial production of Block Ba. 1.1.5 The City Code The terms of the Acquisition give rise to certain considerations under the CityCode. Brief details of the Panel, the City Code and the protections they affordare described below. The City Code has not, and does not seek to have, the force of law. It has,however, been acknowledged by both government and other regulatory authoritiesthat those who seek to take advantage of the facilities of the securitiesmarkets in the United Kingdom should conduct themselves in matters relating totakeovers in accordance with high business standards and so according to theCity Code. The City Code is issued and administered by the Panel. The City Code applies toall takeover and merger transactions, however effected, where the offereecompany is, inter alia, a listed or unlisted public company resident in theUnited Kingdom (and to certain categories of private limited companies). It alsoapplies to Channel Island companies resident in the United Kingdom, the ChannelIslands or the Isle of Man. The Panel has determined that the Company is such acompany and that its shareholders are entitled to the protection afforded by theCity Code. Under Rule 9 of the City Code, any person who acquires shares which, when takentogether with shares already held by him or shares held or acquired by personsacting in concert with him, carry 30% or more of the voting rights of a companywhich is subject to the City Code is normally obliged to make a general offer toall other shareholders to acquire the balance of the shares not held by him andhis concert parties. Rule 9 of the City Code also states that if any person or group of personsacting in concert holds not less than 30%, but not more than 50% of the votingrights of such a company a general offer will normally be required if anyfurther shares are acquired. An offer under Rule 9 must be in cash and at the highest price paid within thepreceding twelve months for any shares in the company by the person required tomake the offer or any person acting in concert with him. Following completion of the Acquisition, NPC, which previously held no OrdinaryShares, will hold 50% of the enlarged issued share capital of the Company. Inthe event that NPC exercises the Option, it is possible that its holding in theCompany will be increased to 70%. The Panel will normally waive the requirement for a general offer to be made ifthe independent shareholders of a company pass an ordinary resolution ("awhitewash resolution") approving such waiver. The Panel also has the power towaive the requirement for a general offer to be made where independentshareholders representing more than 50% of the shares of the company which wouldbe eligible to vote on a whitewash resolution irrevocably undertake to vote infavour of a whitewash resolution, were one to be put to the shareholders.Irrevocable undertakings of this nature have been received from independentshareholders representing more than 50% of the shares of the Company, whichwould be eligible to vote on a whitewash resolution and the Panel hasaccordingly waived the requirement under Rule 9 of the City Code for a generaloffer to be made by NPC to the shareholders of the Company either following theissue by the Company of the NPC Shares or following the issue by the Company ofthe NPC Option Shares. Following the appointment of NPC's two representatives to the Board ofDirectors, the operations of the Company will be carried on from Southern Sudan,the Company's principal place of business will be in Southern Sudan and themajority of Directors will be resident outside the United Kingdom, ChannelIslands and the Isle of Man. Accordingly, the City Code will not apply to theCompany after such appointments on the basis that it will then no longer bemanaged in the United Kingdom, the Channel Islands or the Isle of Man. In thesecircumstances, NPC will be able to acquire further shares without triggering anobligation to make a mandatory offer under Rule 9 of the City Code, irrespectiveof the size of NPC's holding. Upon the appointment by NPC of its tworepresentatives to the Board of Directors an announcement will be made to thiseffect. 1.1.6 Extraordinary General Meeting At the end of this document you will find a notice convening an extraordinarygeneral meeting of the Company which is to be held at 3p.m. on 16 June 2005 at 7New Street, St Peter Port, Guernsey, GY1 4BZ. The resolution to be proposed isfor the approval of the Acquisition. Each of the Directors has entered into an irrevocable undertaking with theCompany to vote in favour of the resolution proposed at the EGM in respect ofthe shares held by them. Other shareholders who, when taken together with theshareholdings of the Directors, hold over 99% of the issued share capital of theCompany have also entered into irrevocable undertakings with the Company to votein favour of the resolution proposed at the EGM. 1.2 INDEPENDENT CONSULTANT'S REVIEW Independent oil consultant ECL has worked alongside CAMEC to appraise Block Ba.White Nile engaged ECL on 18 February 2005 to provide management consultancy andoperational services covering all aspects of oil & gas exploration andproduction in relation to Block Ba, including the preparation of the report setout in Part 3 below. Established in 1969, ECL has become one of the world'sleading oil and gas consultancy companies. A widely-experienced staff ofgeologists, geophysicists and engineers operate from offices inHenley-on-Thames, London and Aberdeen in the UK; Houston, USA; Calgary, Canadaand Perth, Australia. ECL's clients include governments and national oilcompanies, major and independent oil companies and financial institutions. ECLhas particular experience of petroleum exploration and development projects inAfrica. Projects are currently being undertaken in Morocco, Algeria, Libya,Sudan, Nigeria, Cameroon, Gabon, Congo, Angola, Tanzania and Mozambique. Since1995 ECL has acted as technical advisors and consultants to the Government ofEquatorial Guinea, which is now an established oil producing country. The executive summary of the ECL report is as follows: "Block Ba covers an area of approximately 67,000 sq. km, equivalent to some 328UK North Sea blocks or 11 UK North Sea quadrants. This represents over 2/3 ofthe area of the original Block B that was licensed to the French oil companyTotal up to its abandonment of the area in the mid-1980s. Total acquiredaeromagnetic and seismic data in Block B but no drilling has taken place. South Sudan is an established world class petroleum producing area. It containsa large part of a continent-wide Cretaceous rift basin system that has provedpetroliferous in Chad and Niger as well as Sudan. Current production in Sudan isabout 350,000 bopd and this is expected to increase as more oilfield discoveriescome on stream in 2005. Current proven reserves are 1.2 billion bbls andoriginal oil-in-place is estimated at over 10 billion bbls in the explored partof the Muglad Basin. The main productive trend is that of the Muglad Basin wherethe biggest oilfields so far discovered, Unity and Heglig, have proven reservesof 250 and 200 million bbls respectively. It can be demonstrated that the production fairway of the Muglad Basin extendsinto central Block Ba. This fairway has been mapped by geophysical methodsextending south-eastwards from the Heglig-Unity area through Block 5A, where theThar Jath discovery was made by Lundin in 1999 and the Mala discovery made byPetronas in 2003, and through the highly prospective Block 5B. The area of themain part of the Muglad Basin i.e. the most prospective part, in Block Ba couldbe at least 6,000 sq. km (i.e. the area of a UK North Sea quadrant). The easternpart of Block Ba also contains the southerly extension of the Melut Basin whichis also productive in Block 3 to the north. In addition aeromagnetics havedelineated other prospective basinal areas in Block Ba. In the professional opinion of Exploration Consultants Ltd (ECL) Block Ba ishighly prospective and can be expected to have the same level of reserves as theproductive parts of the Muglad Basin to the northwest. Therefore byextrapolation Block Ba can be reasonably estimated to have potentialoil-in-place figures of up to five billion barrels. In global terms Block Ba canbe geologically categorised as low risk/high reward. An outline budget of $30,000,000 has been placed on an initial 3-yearexploration work programme. This includes aeromagnetic and seismic surveysleading up to the drilling of the first exploration well in the first or secondquarter of Year 2. Parts of the exploration areas extend over marshlandsassociated with the Nile which means that specialised swamp crews are required.It is hoped that at least 2 exploration wells can be drilled in the first 3years of exploration." The full text of ECL's report on Block Ba is included at Part 3 of thisdocument. 1.3 SUDAN PEACE ACCORD On 9 January 2005, the Government of the Republic of Sudan on the one hand andthe Sudan People's Liberation Movement/Sudan People's Liberation Army on theother reached a comprehensive Peace Accord. This re-confirmed certain Protocolsand Agreements reached earlier including the Machakos Protocol dated 20 July2002, the Framework Agreement on Wealth Sharing During the Pre-Interim andInterim Period dated 7 January 2004 (the "Agreement on Wealth Sharing") and theProtocol on Power Sharing dated 26 May 2004. On 12 August 2004, the GOSS under the title of the Civil Authority of New Sudanentered into a concession agreement over Block Ba in favour of its own newlycreated national oil company NPC. The Agreement on Wealth Sharing provides for the establishment of a NationalPetroleum Commission which shall be constituted as follows:- (a) The President of the Republic of Sudan and President of the GOSS as Co-chairs and permanent members; (b) Four permanent members representing the National Government; (c) Four permanent members representing the GOSS; and (d) Not more than three Representatives of an oil producing State/Region in which petroleum development is being considered, non-permanent members. As yet the National Petroleum Commission has not been established. The Agreement on Wealth Sharing also provides that the National PetroleumCommission shall approve all oil contracts for the exploration and developmentof oil and that in performing this function the National Petroleum Commissionshall include both its permanent members as mentioned above and thenon-permanent members who are representatives of the region in respect of whichthe contract is being considered for approval. The Agreement on Wealth Sharing states that decisions of the National PetroleumCommission shall be by "consensus". Consensus is not defined and there is someuncertainty whether decisions on the approval of oil contracts are to be made ona unanimous basis or by majority. If unanimous approval of such contracts isrequired representatives of the North of Sudan could have the ability to preventapproval by the National Petroleum Commission of oil contracts relating to areasin the South of Sudan, including Block Ba. The procedure for the National Petroleum Commission to follow in negotiating andapproving oil contracts for the exploration and development of oil in Sudan hasbeen considered by Leading Counsel and a copy of Leading Counsel's opinion isincluded in Part 4 of this document. On the basis of that advice andconfirmations from the GOSS and NPC the Directors are satisfied that in dealingwith any oil contracts in Southern Sudan: (a) the decisions of the National Petroleum Commission are to be taken on a majority voting basis and the concern over decisions having to be made on a unanimous basis outlined above is unjustified ; and (b) the representatives of the GOSS and Southern Sudan will have a majority on the National Petroleum Commission. The Directors are therefore satisfied that should the matter be put to theNational Petroleum Commission the arrangements made by the Company with the GOSSand NPC regarding Block Ba will be approved by the National PetroleumCommission. In any event it is not clear that the National Petroleum Commission will, whenit is formed, have any standing in relation to Block Ba. The Agreement on WealthSharing provides that oil contracts made before 9 January 2005 shall not besubject to renegotiation and therefore the Directors consider that the agreementof 12 August 2004 by which the Concession was granted, and from which the EPLAflows, is not subject to renegotiation. Furthermore, it is not self evident thatthe National Petroleum Commission would have any authority in respect of eventsprior to its having been constituted. There is an ongoing process of negotiating and drafting constitutional andlegislative arrangements. It is the case, however, that there is a significantdegree of uncertainty in regard to the arrangements that are the subject of theAgreement on Wealth Sharing and related agreements. Nevertheless, the Directorstake the view that the oil in Block Ba and the contracts over that oil are inthe domain of the GOSS and they have effective authority there. The Agreement on Wealth Sharing covers the Pre-Interim and Interim Periods,which are defined in the Machakos Protocol of 20 July 2002. The Pre-InterimPeriod is a six month period for the implementation of the, then anticipated,Peace Agreement. The Interim Period is a six year period following thePre-Interim Period. The Agreement on Wealth Sharing provides that net oilrevenue derived from oil producing wells in Southern Sudan shall be allocated50% to the "National Government and States in Northern Sudan" and 50% to theGOSS. The definition of net oil revenue has to be agreed between the Governmentof the Republic of Sudan and the Sudan People's Liberation Movement. TheDirectors are of the opinion that these wealth sharing arrangements will nothave any impact upon the Company on the footing that the sharing arrangementsconcern receipts by the GOSS rather than the Company. Total SA, a French company, has issued a press release and Total E&P Sudan andits lawyers have written to the Company and its Nominated Adviser stating thaton 21 December 2004 Total had reached agreement with the Government of Sudan(i.e. the Government of the North of Sudan) to revise the contract entered intoin 1980 under which Total was awarded the right to operate Block B (whichincludes Block Ba). The GOSS has informed the Directors that any contractallegedly entered into by Total with the Government in the North of Sudan on 21December 2004 is ineffective because of the earlier grant on 12 August 2004 bythe GOSS to NPC as mentioned above. Further, the GOSS has advised the Directorsthat the concession agreement of 12 August 2004 between the GOSS and NPC remainsvalid and the GOSS has authorised NPC to enter into the EPLA and has confirmedthat the EPLA is the licensing agreement referred to in the concessionagreement. 1.4 DIRECTORS Philippe Henri Edmonds, aged 54, Chairman and Chief Executive, (MA Cantab) Philippe Edmonds holds an honours degree in land economy from CambridgeUniversity. He played cricket for England and for Middlesex from 1974 to 1987and has been involved in a number of public and private companies, includingSouthern African Resources Plc, Middlesex Holdings Plc and Grosvenor LandHoldings Plc. He is chairman of AIM-listed Central African Mining & ExplorationCompany Plc, Central African Gold Plc and Capricorn Resources Plc and ischairman of Middlesex County Cricket Club. Andrew Stuart Groves, aged 37, Development Director Andrew Groves was born in Harare, Zimbabwe and educated in Zimbabwe and SouthAfrica. He has been involved in a number of private companies in Zambia andZimbabwe and has significant experience in operations management in Southern andCentral Africa, particularly in Zambia and Zimbabwe. He also has a goodknowledge of Namibia and Mozambique. He is a director of AIM-listed SouthernAfrican Resources Plc, Central African Mining & Exploration Company Plc, CentralAfrican Gold Plc and Capricorn Resources Plc. Brian Michael Moritz, aged 68, Non-executive Director Brian Moritz is a chartered accountant and former chairman of the CapitalMarkets Group of Grant Thornton UK LLP, one of the world's top ten accountingfirms. He specialises in advising public companies, mainly in the area offlotation. He is a director of Metal Bulletin Plc, a listed company, and anumber of companies, mainly in the natural resources sector, which are traded onAIM. The Directors are also directors of other companies engaged in the naturalresource sector in Africa. It is the Directors' intention, however, thatwhenever they identify an oil project in Africa, they will offer that project tothe Company before they do so to any other company. Future Directors NPC was incorporated in Yei, Southern Sudan, on 22 July 2004 with company number196. It is wholly owned by the GOSS. The directors of NPC are Bullen Bol, KuolManyang Juuk and Simon Kun Puoch. Sudan is essentially governed by twogovernments: Northern Sudan is governed by the National Islamic Front andSouthern Sudan, where the Concession is located, is governed by the SudanPeople's Liberation Movement who formed the GOSS. Doctor Riek Machar is thePrime Minister of the GOSS and he chairs the leadership council comprising ofaround 7 members who represent different tribal groups. NPC director KuolManyang Juuk is a member of the leadership council. The managing director ofNPC, Bullen Bol, reports to the Minister of Energy, who in turn reports to theleadership council. It is not yet known which representatives of NPC or the GOSSwill be appointed to the board of White Nile, though such appointments aresubject to their meeting the requirements of the London Stock Exchange. Theappointments will be determined by the directors of NPC at the direction of theleadership council. Once the Directors of the Company have that information, theCompany will announce such information as is required by Schedule 2 paragraph(f) of the AIM Rules. 1.5 CORPORATE GOVERNANCE The Directors support the highest standards of corporate governance and intendto observe the requirements of the Combined Code on Corporate Governance to theextent they consider appropriate in light of the Company's size, stage ofdevelopment and resources. The Company intends to set up Remuneration and Audit committees with formallydelegated duties and responsibilities. The Company will abide by Rule 21 of the AIM Rules, including the provisionsregarding Directors' dealings, and will take all reasonable steps to ensurecompliance by Directors and applicable employees. 1.6 DIVIDEND POLICY It is the intention of the Directors to achieve capital growth. As outlined inthe strategy section (1.1.4 above) the Directors intend to carry out explorationand development of oil concessions in Southern Sudan. This is unlikely togenerate revenues and profits in the next two to three years and therefore theCompany is unlikely to declare dividends in the foreseeable future. 1.7 LOCK-IN ARRANGEMENTS Each of the Directors has agreed with Hichens, Harrison & Co plc, Numerica andthe Company that they will not (except in the limited circumstances permitted bythe AIM Rules including in the event of an intervening court order, the death ofa Director, or in respect of the acceptance of a take-over offer of the Companywhich is open to all shareholders) dispose of any Ordinary Shares in which theyor any connected person are interested until the date which falls 12 monthsafter the date of Admission. NPC has agreed with the Company that it will not dispose of any Ordinary Sharesfor a period of 12 months starting from the date of Admission. In order tosecure this obligation, the NPC Shares have been issued to the Nominee wherethey will be held until the expiry of the lock-in period. 1.8 WORKING CAPITAL Having regard to the proposed exploration programme and the cash resourcesavailable to the Company, which presently stand at approximately £9 million, inthe opinion of the Directors, having made due and careful enquiry, the workingcapital available to the Company is sufficient for its present requirements,that is for at least 12 months from the date of Admission. It is anticipated that a fundraising exercise will need to be undertaken by theCompany to raise money to finance the development and production of theConcession. 1.9 CREST CREST is a paperless settlement procedure enabling securities to be evidencedotherwise than by a certificate and transferred otherwise than by a writteninstrument. The Ordinary Shares have been admitted to CREST. Accordingly,settlement of transactions in the Ordinary Shares may take place within theCREST system if the relevant shareholders so wish. CREST is a voluntary system and holders of Ordinary Shares who wish to receiveand retain share certificates will be able to do so. 1.10 DIRECTORS, EMPLOYEES AND CONSULTANTS SHARE OPTION SCHEME On the Commencement Date the Company adopted the Share Option Scheme, for whichno application for approval was made to the Inland Revenue. The principalfeatures of the Share Option Scheme, which is administered by the Board, are setout in section 5 of Part 5. The scheme is open to Directors of, employees of andconsultants to the Company or any of its subsidiaries from time to time who arenot bound to retire within the period of two years after the date on which theBoard invites such persons to apply for the grant of options. 1.11 REASONS FOR THE ADMISSION The Company will make an application for the Enlarged Share Capital to beadmitted to trading on AIM. It is a requirement of NPC that receiveconsideration for the Acquisition in the form of securities which are tradeableon an open market. NPC wish to have access through its shareholding in theCompany to the capital markets of the developed economies to enable developmentof Southern Sudanese oilfields for the benefit of the people of Southern Sudan.Admission is also expected to raise the public profile of the Company. 1.12 RISK FACTORS The risk factors which should be taken into account in assessing the Company'sactivities and investment in the Company include, but are not necessarilylimited to, those set out below. Shareholders should carefully consider thefollowing factors, among others, affecting the proposed activities of theCompany following the conclusion of the Acquisition. The exploration anddevelopment of natural resources is a speculative activity that involves a highdegree of financial risk. Government and legal risk Changes in government, monetary policies, taxation and other laws can have asignificant impact on the Company's assets, operations and ultimately thefinancial performance of the Company and its securities. Sudan is emerging froma long period of civil war, and economic sanctions imposed by the United Statescurrently remain in place. There can be no guarantee that the process of law,including the enforceability of contracts with the GOSS and NPC, and thegranting of legal title in Southern Sudan will operate as it does in the UnitedStates or the European Union. The GOSS is a fledgling government that has been formed by people who have beenfighting a long civil war, and they do not have the degree of legal orcommercial infrastructure or sophistication of governments that have beenestablished for longer periods. It was therefore not possible to negotiate thedegree of detail and precision in the arrangements that would have been normalin a transaction of this nature, had it been concluded with a more establishedgovernment. The Peace Accord signed on 9 January 2005 refers to the creation of a NationalPetroleum Commission on which there will be representatives of the Government ofthe Republic of Sudan in Khartoum and the newly autonomous GOSS. As yet thecommission has not been established and therefore it is not possible to predicthow the commission will operate and the effects of this on concessions andlicensing agreements. It is possible that the ability of the GOSS to validlyagree concessions or licences may be subject to challenge. It is also possiblethat conflicting claims may arise from parties purporting to have been grantedconcessions to Block Ba by the Government of the Republic of Sudan in Khartoum. As indicated in paragraph 1.3 above within Sudan there is an ongoing process ofnegotiating and drafting constitutional and legislative arrangements. There is asignificant degree of uncertainty in regard to the arrangements that are thesubject of the Agreement on Wealth Sharing and related agreements and there istherefore a risk that this process could adversely affect the Company. Also asindicated in paragraph 1.3 above, Total SA has indicated that it believes thatit has claims over Block Ba. There may be other parties who will also seek tomake claims over Block Ba. There is a risk that Total SA or other parties maytake legal proceedings against the GOSS, NPC or the Company to enforce suchclaims. Exploration risks Oil and gas exploration by its nature contains elements of significant risk.Commercial and successful operations are therefore dependent upon theacquisition of and the discovery of economically recoverable hydrocarbons,access to competent operational management and title risk. Adverse weatherconditions over a prolonged period can also adversely affect explorationactivities. Commodity price risk The price for oil and gas will depend on available markets at acceptable pricesand transmission and distribution costs. Any substantial decline in the price ofoil or an increase in transmission or distribution costs could have a materialadverse effect on the Company. Environmental risks The Company's projects are subject to laws and regulations regardingenvironmental matters and the discharge of hazardous waste and materials. Thepotential for liability is a risk. Costs may be incurred in environmentalrehabilitation, damage control and losses. Operational and technical risks A range of factors may affect the current and future operations of the Company,including exploration, appraisal and possible production activities, includingstart-up risks, geological conditions, limitations on activities due to seasonaland exceptional weather patterns, alterations to joint venture programmes andbudgets, unanticipated operational and technical difficulties encountered inseismic survey, drilling and production activities, mechanical failure ofoperating plant and equipment, adverse weather conditions, industrial andenvironmental accidents, industrial disputes, unavailability of drillingequipment, unexpected shortages or increases in the costs of consumables, spareparts, plant and equipment, prevention of access by reason of political unrest,outbreak of hostilities, inability to obtain consents or approvals, contractingrisk from third parties providing essential services, potential problems inlocating and securing the services in a timely and cost effective fashion ofappropriately skilled employees, consultants or contractors. Insurance Insurance of all risks associated with oil and gas exploration and production isnot always available and, where available, the cost can be high. The Companywill endeavour to put in place insurance considered appropriate for theCompany's needs. The Company will not be insured against all possible losses,either because of the unavailability of cover or because the Directors believethe premiums are excessive relative to the benefits that would accrue. TheDirectors will continue to review the insurance cover in place to ensure that itis appropriate. Funding The Company is dependent on obtaining future equity capital or debt fundingsufficient to continue its exploration and contemplated development, productionand sales and to provide sufficient future working capital. The Company'sability to raise such funding will vary according to a number of factorsincluding: the success or otherwise of exploration and the future development ofany hydrocarbons discovered; stock market conditions; oil and gas prices; andaccess to pipeline or other facilities required to transport any producedhydrocarbons to point of sale. Access to Infrastructure The Company will require access to processing and transmission facilitiesincluding pipelines in order to commercially exploit any hydrocarbonsdiscovered. Third party access to such infrastructure may depend on the level ofuncontracted capacity available from time to time. Access to processing plant islikely to depend on the successful negotiation of commercial arrangements withthe owner of such plant. 1.13 RECOMMENDATION The Directors consider the Acquisition to be fair and reasonable and in the bestinterests of the Company's shareholders and recommend the Company's shareholdersto vote in favour of the resolution to be considered at the EGM, as they haveirrevocably undertaken to do in respect of their holdings of Ordinary Shares. Yours truly, PHIL EDMONDSChairman Copies of the circular will be available to the public during normal businesshours on any weekday (excluding public holidays) as follows; from the date ofthis document until 27 May 2005 at 4th Floor, Clements House, 14 - 18 GreshamStreet, London, EC2V 7NN and from 31 May 2005 until 31 July 2005 at MillenniumBridge House, 2 Lambeth Hill, London, EC4V 4AJ. Enquiries concerning this announcement should be directed to: Phil EdmondsWhite Nile Limited, 18 Upper Brook Street , London, W1K 7PUTel: 0845 108 6060 Hugo de SalisSt Brides Media & Finance Ltd, 46 Bedford Row, London, WC1R 4LRTel: 020 7242 4477 Paul Gray or Jeff WardNumerica Capital Markets Limited, 66 Wigmore Street, London, W1U 2HQTel: 020 7467 4000 This information is provided by RNS The company news service from the London Stock Exchange