DES.L Regulatory News (DES)

14 Feb 2005 07:00

Desire Petroleum PLC14 February 2005 Desire Petroleum plc ("Desire" or "the Company") Proposed Placing of 35,555,556 Placing Shares at 45p per share and Open Offerof 20,335,100 Open Offer Shares at 45p per share on the basis of 1 Open Offer Share for every 8 Existing Ordinary Shares •Desire to raise up to £25.15 million via a Placing and Open Offer €3D-seismic survey identifies drilling targets with a potential to discover over one billion barrels of recoverable oil in Tranches C and D in the North Falkland Basin •Preparations for a three-well drilling programme in Tranches C and D underway •Terms agreed with Rockhopper Exploration (Oil) Limited to farm-in to the three-well programme to earn an interest of up to 15% of Tranches C and D by funding up to 30% of the costs of the programme •Qualifying Shareholders entitled to apply for more than their entitlement to shares under the Open Offer Dr Colin Phipps (Chairman) commented: "I am pleased that Desire is now preparing to drill the major objectivesidentified by 3D-seismic survey and I am delighted that we shall be working withDr Pierre Jungles, a most distinguished oilman whom I have known for many years,and his colleagues at Rockhopper." Introduction Your Board indicated in the announcement dated 15 December 2004 that, inaddition to a potential farm-out of Desire's interests in Tranches C and D inthe North Falkland Basin ("Tranches C and D"), a fundraising was also incontemplation. Your Board is now pleased to announce that, following the results of the3D-seismic survey carried out in 2004, the Company is preparing a programme todrill three wells in Tranches C and D to test prospects which the surveyidentified as having the potential to hold over one billion barrels ofrecoverable oil. The Company has also agreed terms with Rockhopper Exploration(Oil) Limited ("Rockhopper"), a company to be chaired by Dr Pierre Jungels, withoil interests in the North Falkland Basin, whereby Rockhopper will earn up to a15 per cent. working interest in Tranches C and D by funding up to 30 per cent.of the costs of a three-well drilling programme. Desire intends to raise furtherfunds towards the remaining costs of the proposed three-well drilling programmeby way of the Placing and the Open Offer. Reasons for the Placing and Open Offer In addition to the farm-out programme, Desire has always had the option ofraising funds sufficient to cover part or all of the costs involved inexploration drilling on Tranches C and D. Since the Company's last fundraisingin January 2004 (to pay for the 804 square kilometres 3D-seismic survey onTranches C and D and its interpretation) the prices of crude oil and natural gashave increased substantially and independent oil exploration companies haveundergone a significant rerating by the market, such that this option is now apractical one. Accordingly, it is your Board's intention to raise up toapproximately £25.15 million before expenses via the Placing and the Open Offerto be conducted on its behalf by the Company's Nominated Adviser and Broker, Seymour Pierce Limited, of which £16 million has been placed with institutionalinvestors at 45p per share. Shareholders will be given an entitlement in the Open Offer, to apply for oneNew Ordinary Share at the issue price of 45p ("Issue Price") per share on thebasis of one New Ordinary Share for every eight Existing Ordinary Sharescurrently held, plus the opportunity to apply for additional shares via anexcess application facility. The Open Offer will be capped at approximately £9.15 million. The principal reasons for the fundraising are as follows: (a) the size of the prospects identified by the interpretation of the 3D-seismicsurvey carried out by RPS Hydrosearch Associates Limited together with theCompany's existing 2D-seismic survey are in excess of two billion barrels ofrecoverable oil and therefore, in the Board's opinion, justify givingShareholders the maximum possible upside exposure to any drilling success; (b) at the Issue Price a fundraising to cover non-farmed-out drilling costs islikely to be less dilutive of Shareholders' interests than is a larger farm-out,even for Shareholders who do not take up their entitlements in the Open Offer; (c) the ability to drill for its own account allows the Company to proceed morerapidly to commission a rig and greatly increases the likelihood of commencing adrilling programme in 2005. With the strengthening of the crude-oil price, therehas been a concomitant increase in exploration drilling activity, leading toincreasing rig rentals and decreasing rig availability. Accordingly, the soonerthe Company can enter the rig market, the better the prospects of an earlydrilling campaign. Furthermore, although the farm-out process is likely to causedelay to the drilling timetable, if a rig has already been secured this shouldbenefit any additional farm-out partners. Accordingly, the Company commissioned a survey of world-wide rig availabilitywhich has identified a number of suitable units available for drilling in theNorth Falkland Basin towards the end of 2005. A rig contract tender document isbeing prepared with a view to being sent to the owners of all of these units andpreparations for a three-well drilling programme are already underway. Whilst itis your Board's intention to continue its discussions with other potentialfarm-in partners, the current fundraising will give the Company greaterflexibility in negotiating both the size and terms of any farm-out participationin addition to Rockhopper's. Should there be an additional farm-out, theCompany, as a result of the current fundraising, will then be in a position,either to fund additional drilling on Tranches C and D, or to drill on its ownaccount in Tranches I and L in the North Falkland Basin, in which the Companystill holds a 100 per cent. interest. Principal terms of the Placing and the Open Offer The Company proposes to issue up to 35,555,556 Placing Shares and 20,335,100Open Offer Shares at the Issue Price which, assuming the Open Offer is fullysubscribed, will raise in aggregate approximately £25.15 million for the Company(before expenses). Seymour Pierce has fully underwritten the Placing. QualifyingShareholders are invited to apply for Open Offer Shares at the Issue Price onthe basis of: 1 Open Offer Share for every 8 Existing Ordinary Shares registered in their name on the Record Date (10 February 2005) and so on inproportion for any other number of Existing Ordinary Shares so registered.Qualifying Shareholders may apply for their pro rata entitlement, less thantheir pro rata entitlement, or their pro rata entitlement together with anyfurther number of Open Offer Shares. Where appropriate, the entitlement ofQualifying Shareholders will be rounded down to the nearest whole number of OpenOffer Shares and any fractional entitlements will be aggregated and sold, ifrequired, for the benefit of the Company to satisfy excess applications. ThePlacing Shares and the Open Offer Shares will, when issued and fully paid, rankpari passu in all respects with the Existing Ordinary Shares of the Company andwill, once allotted, rank in full for all dividends and other distributionsdeclared, made or paid on the share capital of the Company in respect of theperiod after such allotment. Directors' and Certain Shareholders' Intentions Phipps and Company Limited, a corporate Shareholder in which Stephen LawreyPhipps is a shareholder and director has undertaken to subscribe for 555,556New Ordinary Shares which, at the Issue Price, represents a cash subscriptionof approximately £250,000; Walter Ian Logan Forrest intends to subscribe for 11,112 New Ordinary Shareswhich, at the Issue Price, represents a cash subscription of approximately£5,000; The spouse of Dr Ian Gordon Duncan intends to subscribe for 11,112 New OrdinaryShares which, at the Issue Price, represents a cash subscription ofapproximately £5,000. Extraordinary General Meeting The Placing and the Open Offer are conditional, inter alia, on the approval ofShareholders which is to be sought at an EGM convened for 10.00 a.m. on 10 March2005. At this meeting the following resolutions will be proposed: 1. to increase the authorised share capital of the Company from £2,500,000 to £4,000,000 by the creation of 150,000,000 New Ordinary Shares; 2. to authorise the Directors to allot, inter alia, Ordinary Shares pursuant to section 80 of the Act, sufficient to satisfy applications under the Placing and the Open Offer and otherwise up to an aggregate nominal value of £730,000; and 3. to disapply the statutory pre-emption rights set out in section 89 of the Act to enable the New Ordinary Shares to be allotted, and to authorise the Directors to allot certain further Ordinary Shares and other issues of Ordinary Shares for cash pursuant to section 95 of the Act up to a nominal value of £218,000. EXPECTED TIMETABLE OF PRINCIPAL EVENTS Record Date for the Open Offer 10 February 2005 Prospectus published 14 February 2005 Latest time and date for splitting Application Forms tosatisfy bona fide market claims under the Open Offer 3.00 p.m. 4 March 2005 Latest time and date for receipt of Form of Proxy 10.00 a.m. 8 March 2005 Latest time and date for receipt of completed Application Forms and payment in full under theOpen Offer 3.00 p.m. on 8 March 2005 EGM 10.00 a.m. on 10 March 2005 Admission effective and dealings commence in the NewOrdinary Shares on AIM and (where applicable) CRESTstock accounts expected to be credited 8.00 a.m. on 11 March 2005 Despatch of definitive share certificates forNew Ordinary Shares no later than 18 March 2005 Contacts: Colin Phipps, Chairman: 020 7409 2138Ewan Leggat, Seymour Pierce Limited: 020 7107 8000 This information is provided by RNS The company news service from the London Stock Exchange