Last checked at 1 May 2015 07:00
1 May 2015
Baron Oil plc
("Baron" or "the Company")
Convertible Loan Facility Agreed with InfraStrata
The Board of Baron Oil plc, the independent oil and gas exploration and production company, is pleased to announce that it has signed a Convertible Loan Agreement ("Agreement") with InfraStrata plc ("InfraStrata") with respect to the Islandmagee gas storage project in Northern Ireland. The loan will specifically provide bridge financing for the imminent drilling of the Islandmagee gas storage project salt appraisal well. (Background information on this important project is summarised at the end of this announcement).
Under the terms of the Agreement, Baron will provide a secured loan of €1.8 million to InfraStrata with an option to convert the loan balance into an equity participation of 15% in Islandmagee Storage Limited ("IMSL"), a subsidiary of InfraStrata. The loan has an 8% interest coupon and is repayable by 1 May 2016. Baron has an option to extend the loan until 31 December 2016.
The loan will be used as working capital to bridge the receipt of the agreed European Commission grant, 70% of which or approximately €1.75 million, will be received on completion of the 2015 work programme. The work programme includes drilling a well to obtain salt cores and completing the subsequent testing and engineering design work. The salt appraisal well Islandmagee#1 is expected to commence drilling in May 2015.
IMSL is the owner of the proposed 500 million cubic metre natural gas storage project located next to Northern Ireland's largest power station, the Ballylumford gas fired power station on the shore of Larne Lough.
In addition, Baron and InfraStrata have commenced discussions on a possible participation by Baron in the forthcoming Woodburn Forest-1 well in Petroleum Licence PL1/10 in Northern Ireland.
Commenting on the Agreement, Bill Colvin, CEO of Baron Oil, said:
"This unique and exciting opportunity has become available to Baron as we are in the fortunate position of having cash available for investment on our balance sheet. A successful salt appraisal well will greatly assist the shareholders of IMSL to realise value for their 8 years of hard work on this strategically important asset for the country's energy security. If the appraisal well does not subsequently lead to a successful realisation of value of the Islandmagee project, the shareholders of Baron will recover all their invested capital from the EU grant plus an 8% interest payment."
For further information on the Company visit: www.baronoilplc.com or contact:
Baron Oil plc Bill Colvin, Chairman and Chief Executive
| +44 (0)7780 684 108 |
Cantor Fitzgerald Europe (Nomad and Broker) Sarah Wharry, Corporate Finance Richard Redmayne, Corporate Broking | +44 (0)20 7894 7000 |
Background on the Islandmagee Storage Project
The Islandmagee gas storage project commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility Regulator. In October 2013, the gas storage project was granted a 'Project of Common Interest' ("PCI") status by the European Commission. PCI status means recognition by the European authorities that the Islandmagee gas storage project brings benefits not only to the Member State in which it is located, but to a much wider area. It confirms the importance of the project at a European level. PCI status also means that the project must be given priority and quick passage by relevant Member States in the permitting process, and cooperation in its development. Importantly, projects of common interest can apply for significant financial support from the European Commission - this may be in the form of direct grant, such as that secured for the salt core well, or other forms of financial backing from institutions such as the European Investment Bank. The next investment step in the project is the drilling of the data gathering well (Islandmagee-1) to approximately 1,670 metres depth to obtain cores of the salt sequence and subsequently undertake further engineering design work. Drilling engineers Acona UK were appointed in May 2014. The well planning and design have been completed. RPS Consulting Engineers in Belfast have undertaken the environmental support work. Following the drilling of the data gathering well and further engineering design work all key technical risks will have been addressed and the project will be deemed "construction ready" enabling a Final Investment Decision to be taken after that point.
For further information on the Islandmagee gas storage project visit: http://www.islandmageestorage.com/
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