21 Oct 2009 15:01
| For immediate release | 21 October 2009 |
Desire Petroleum plc
("Desire" or the "Company")
Placing to raise £42 million
and
Details of proposed open offer
and
Notice of general meeting
Desire Petroleum (AIM:DES), the oil and gas exploration company wholly focused on the North Basin of the Falkland Islands, is pleased to announce that it has conditionally placed 60,000,000 new ordinary shares of 1p each ("Placing Shares") at an issue price of 70p per share, thereby raising £42 million (approximately US$68 million) before expenses (the "Placing").
The Placing Shares, which have been placed predominantly with new institutional investors by Seymour Pierce Limited, will represent approximately 20.7 per cent. of the Company's Enlarged Share Capital.
Background
On 10 September 2009, Desire announced that it had exchanged a letter of intent with Diamond Offshore Drilling (UK) Ltd for the drilling unit the "Ocean Guardian" to undertake a four well minimum drilling campaign in the North
Falkland Basin. Desire also announced that it had secured options to drill up to a further four wells for itself or its partners.
Subsequently, on 2 October 2009, Desire announced that the formal drilling contract for the Ocean Guardian had been signed and disclosed that the contract is for a four well, minimum eighty day campaign, for which the Ocean Guardian could earn maximum total revenue of US$19.6 million with mobilisation and demobilisation fees estimated to be US$16 million.
In addition Desire announced that it had increased the number of option wells from four to six.
With approximately US$40 million of current funds, Desire already has sufficient funds to drill two wells in the planned drilling campaign. This, together with the planned drilling of two further wells by Desire's partners, Arcadia Petroleum Limited ("Arcadia") and Rockhopper Exploration plc ("Rockhopper"), and subject to their approval of the drilling budgets, results in the four well drilling commitment being met.
However, as indicated in the announcements referred to above, it is Desire's intention to drill as many different play types as possible with the Ocean Guardian. Fourteen different play types have been identified in the North
Falkland Basin of which only three have been drilled to date. Prudent exploration dictates that as many of these play types as possible should be drilled to help unlock the potential of the Basin.
This planned approach to the exploration campaign has, in the Directors' opinion, been endorsed by the analysis of the prospective resources of the Company prepared by Senergy (GB) Limited "Senergy".
Senergy has evaluated Desire's top ten prospects, namely Liz, Ann, Alpha, Dawn, Jacinta, Beth, Ninky, Rachel, Helen and Pam, and the key conclusions are as follows:
The mean, net to Desire, unrisked, prospective recoverable resources in those ten prospects is over 3 billion barrels.
The mean, gross, unrisked prospective recoverable resources in those ten prospects is over 4.6 billion barrels.
The mean, gross, unrisked prospect size ranges from 122 million barrels recoverable (Ninky) to 1,631 million barrels recoverable (Alpha).
The full Senergy report has been published by Desire and can be found on the Desire website: www.desireplc.co.uk.
Proposed Open Offer
In addition, in Desire's announcement dated 10 September 2009, the Board stated that it was Desire's intention that Shareholders should have the opportunity to participate in the raising of further funds by the Company.
In keeping with this intention, Desire is intending to invite qualifying Shareholders to participate in an open offer ("Open Offer") which it is anticipated will raise up to approximately a further £20 million at the same issue price, 70p, as the Placing.
The documentation for the Open Offer, which will include an excess application facility, is currently being finalised with Desire's advisers and Desire intends to make the Open Offer as soon as is practicable following completion of the Placing.
Reasons for the Placing and Open Offer and use of proceeds
Under the terms of the contract for the Ocean Guardian, Desire, as operator, is required to exercise any of its options to drill additional wells prior to the spud date of the first well which is expected in February 2010.
In practice, however, since the entire drilling campaign requires detailed planning and commitment to labour, materials and logistics, Desire needs to be in a position to exercise its options to drill additional wells prior to the planned mobilisation of the rig. Following a programme of scheduled shipyard work the Ocean Guardian is expected to mobilise from North Sea waters in late November 2009.
In order to exercise an option, Desire needs to have the funds in place to meet the expected drilling and associated costs. Since it is unlikely that Desire could have completed the Open Offer prior to the date of mobilisation, Desire, in conjunction with its advisers, considered that a placing of new ordinary shares was the most appropriate method of ensuring that Desire would have the financial resources to exercise some options and thereby maximise the use of the rig.
The total estimated net proceeds of the Placing and the Open Offer will enable Desire to drill at least two further wells in the planned drilling campaign and / or to have the flexibility to test any successful wells. Desire has signed heads of agreement, with Rockhopper for the take up of two of the six options available for additional drilling.
Issue of New Shares
A circular will shortly be sent to shareholders in the Company. The issue of new ordinary shares pursuant to the
Placing and the Open Offer is conditional, inter alia, upon the Company obtaining from its Shareholders at a general meeting to be held on 9 November 2009 authority to allot the Placing Shares and the shares to be issued pursuant to the Open Offer
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that such Admission will become effective and that dealings will commence on 10 November 2009.
The circular will be available shortly on the Company's website at: www.desireplc.co.uk
Commenting on the Placing, Stephen Phipps, Chairman of Desire said:
"We are very pleased to be able to report to shareholders that, having secured a suitable rig on excellent terms, we will be able to maximise the use of the rig to both drill and hopefully test a number of plays in the North Falkland Basin. The response from institutional shareholders to the Placing has demonstrated the enormous potential of our assets in the Basin.
We remain very committed to encouraging participation in the overall fundraising efforts by our loyal shareholder base and I look forward to announcing the launch of the proposed open offer soon. "
For further information please contact:
| Desire Petroleum plc | |
| Stephen Phipps, Chairman Ian Duncan, Chief Executive Officer | 020 7436 0423 |
| Seymour Pierce Limited Corporate Finance Jonathan Wright Christopher Wren Corporate Broking Richard Redmayne | 020 7107 8000 |
| Buchanan Communications | 020 7466 5000 |
| Ben Willey Ben Romney |
Seymour Pierce Limited, which is regulated by the Financial Services Authority and is a member of the London Stock Exchange, is acting as nominated adviser and broker exclusively for the Company in connection with the Placing. Its responsibilities as the Company's nominated adviser under the AIM Rules are owed solely to the London Stock Exchange and are not owed to the Company or to any Director or any other person in respect of his decision to acquire ordinary shares in the Company in reliance on any part of this announcement. No representation or warranty, express or implied, is made by Seymour Pierce Limited as to any of the contents of this announcement for which the Directors and the Company are responsible (without limiting the statutory rights of any person to whom this announcement is issued). Seymour Pierce Limited has not authorised the contents of, or any part of, this announcement, and no liability whatsoever is accepted by Seymour Pierce Limited for the accuracy of information or opinions contained in this announcement or for the omission of any material information. Seymour Pierce Limited will not be offering advice and will not otherwise be responsible for providing customer protections to recipients of this announcement in respect of the Placing or any acquisition of shares in the Company.