FOGL.L Regulatory News (FOGL)

29 Nov 2006 10:23

Falkland Oil and Gas Limited29 November 2006 This announcement is not for release, publication or distribution in or into theUnited States Falkland Oil and Gas Limited Falkland Oil and Gas Limited announces reaching agreement on the terms of an £8million convertible loan note issue The Board of Directors of Falkland Oil and Gas (FOGL, the Company) is pleased toannounce that the Company has agreed terms with RAB Special Situations (Master)Fund Limited ("RAB SSMF") for RAB SSMF to invest £8 million by way ofconvertible loan notes ("Notes") in the Company ("Transaction"). The issue of these Notes, which is dependant principally on the entry intodefinitive documentation, will provide the Company with additional cashresources for the funding of ongoing exploration in its licences located to theSouth and East of the Falklands. In particular it will be used to fund the costsof the Controlled Source Electro Magnetic Survey ("CSEM") to be conducted by OHMLimited and a seabed coring programme. The OHM vessel, the CS Teneo is due tocommence the CSEM survey in January 2007. In addition, The Wavefield BergenSurveyor is already en route to the Falkland Islands and is expected to commencethe 2D seismic infill programme in Mid December 2006. Proposed terms of the Notes The Notes are for a term of 5 years and bear interest at 6 per cent per annum,they carry the right to be converted at any time at the discretion of RAB SSMFin whole or in part into ordinary shares of 0.002 pence each in the Company ("Shares") at a price of 80 pence per Share (subject to adjustment). Interest canbe paid in cash or securities at the option of the Company and the securitiesconvert into Shares in the Company on the same basis as the Notes Fullconversion would lead to the issue of 10,000,000 Shares of the Company. TheNotes are not redeemable/repayable by the Company until the expiry of the term.On issue of the Notes RAB SSMF will receive 6,000,000 warrants, exercisable inwhole or in part over a 6 year term, to acquire one Company Share per warrant ata price of 100 pence per Share (subject to adjustment) ("Warrants"). It is intended that RAB SSMF will subscribe £2 million on completion of thefinal documentation, £2 million on 23 February 2007, £2 million on 30 April 2007and £2 million on 24 September 2007. The conversion price for the Notes will, in the event that the Company issuesShares or securities convertible into Shares at a price lower than 80 pence perShare, be adjusted to the lower of 80 pence and a 10 per cent. premium to theprice at which such Shares are issued. The exercise price for the Warrants will,in the event that the Company issues Shares or securities convertible intoShares at a price lower than 100 pence per Share, be adjusted to the lower of100 pence and a 30 per cent. premium to the price at which such Shares areissued. RAB SSMF As at the date of this announcement, the Company has been informed by RAB SSMFthat it has an interest in 28,322,778 Shares, representing 30 per cent. of thecurrent issued share capital. As the Company is incorporated in the Falkland Islands, the City Code onTakeovers and Mergers (the "Code") does not apply to the Company. Despite thefact that the Code does not apply, as set out in the Company's AIM AdmissionDocument, the Articles of Association of the Company contain provisions which(in summary) entitle the Company's board (the "Board") at its discretion interalia to suspend the voting rights of a shareholder if it (and those acting inconcert with it) would be required to make an offer to acquire all of the sharesof other shareholders of the Company under Rule 9 of the Code, if the Codeapplied to the Company (a "Mandatory Offer"), and has failed to do so within 21days of when such obligation would have arisen (the "Suspension Right"). In the event that RAB SSMF converts the Notes and exercises the Warrants, anadditional 16,000,000 Shares will fall to be issued to RAB SSMF. AdditionalShares will also fall to be issued in the event that the conversion price of theNotes or exercise price of the Warrants is altered (as set out above) or thatthe interest due under the Notes is settled in securities into which the Notesconvert on the same basis of the agreement. The Board, after due consideration of what it considers to be in the bestinterests of the Company and its shareholders, has agreed not to invoke theSuspension Right (if applicable) in respect of all new Shares now held or to beacquired by RAB SSMF pursuant to the Transaction. This waiver does not apply toany issue of such Shares to, or their acquisition, by any other persons. The Transaction is a related party transaction for the purpose of AIM rule 13,as RAB SSMF is a related party within the meaning of the AIM rules. TheDirectors of the Company consider, having consulted with the Company's nominatedadviser KBC Peel Hunt, that the terms of the Transaction are fair and reasonableinsofar as the shareholders are concerned. Tim Bushell, Chief Executive of FOGL commented : "I am delighted that we have been able to agree on this financing, which willprovide FOGL with funding for the Company's fast track exploration plans in ourlicences. We are embarking on a very exciting programme over the next fewmonths which will enable us to select the best prospects for drilling. TRACS International ("TRACS") has also recently completed an independent reviewof what they believe are our top 10 prospects. In their opinion these 10prospects have an un-risked prospective resource potential of 10 billion barrelsand net (to FOGL) risked prospective resources of 863 million barrels. TRACScommented that 'the planned 2006-2007 work programme (CSEM & 2D seismic) is alogical strategy and shows efficient use of resources'. I am also pleased to report that our work programme is progressing well, withCSEM, infill 2D Seismic and seabed cores all being acquired over the comingAustral summer. The results of these surveys will allow us to focus on the bestprospects for drilling. I also, remain confident that we can achieve ourobjectives of securing suitable partners and contracting a rig to commenceexploration drilling in 2008." The un-risked prospective resource potential and net risked prospectiveresources referred to above have been reviewed independently in a recentcompetent persons report ("CPR") prepared by TRACS. This CPR has been preparedin accordance with the guidance in AIM notice 16 (AIM Rules - Guidance forMining and Oil & Gas Companies) issued in March 2006. This resource update isprepared in accordance with the definitions used by The Society of PetroleumEngineers. The numbers quoted are those of TRACS. Enquiries: FOGL 020 7563 1260Tim Bushell, Chief Executive KBC Peel Hunt 020 7418 8900Jonathan Marren College Hill 020 7457 2020Nick Elwes / Paddy Blewer Notes to editors: The full TRACS report will be published on the FOGL website:www.fogl.com TRACS International: www.tracs.com This information is provided by RNS The company news service from the London Stock Exchange