Faroe Petroleum Plc Regulatory News (FPM)

13 Apr 2006 07:01

Faroe Petroleum PLC13 April 2006 Faroe Petroleum plc Placing of 18,382,353 new Ordinary Shares at 136 pence per share to raise £25.0 million Faroe Petroleum has conditionally raised £25.0 million (approximately £23.5million after expenses) through a placing with institutional and other investorsof 18,382,353 new Ordinary Shares in the Company at 136 pence per OrdinaryShare. The placing is subject to shareholder approval at an extraordinarygeneral meeting to be held on 8 May 2006. Highlights • Placing of 18,382,353 Ordinary Shares at 136 pence per share, raising £25.0m before expenses • Company fully funded in advance of planned drilling programme forecast to cover eight wells over the next 18 to 24 months, the first two of which will be in 2006: - North Sea: North Halibut well currently scheduled to commence drilling in mid May - Faroes: Brugdan well on Licence 006 currently scheduled to commence drilling in July • Net placing funds will also support the Company's expansion into Norway, as well as the continuing work to mature the licence interests in the existing portfolio and in acquiring and applying for new E&P opportunities Williams de Broe, Nominated Adviser and Joint Broker to the Company, and PanmureGordon, now appointed as Joint Broker to the Company, have together conditionally placed 18,382,353 new Ordinary Shares with existing shareholdersand other financial institutions. The Placing Price represents a discount ofapproximately 4.9 per cent. to the closing middle market price of 143 pence pershare on 12 April 2006, the last business day prior to this announcement. Graham Stewart, Chief Executive of Faroe Petroleum said, "We are delighted withthe outcome of this placing and the significant levels of interest shown by theinvestment community, demonstrating the market's confidence in the Company andits strategy. Following the EGM, Faroe Petroleum will be well positioned toundertake the next stage in its business strategy, which includes the drillingprogramme, the continued maturing of the Company's licence portfolio, andexpansion into Norway, where the Company has recently become pre-qualified." Enquiries:Graham Stewart, Chief Executive +44 (0)1224 652 810Faroe Petroleum plc Frank Moxon / Nick Morgan +44 (0)20 7588 7511Williams de Broe Plc Tim Linacre / Katherine Roe +44 (0)20 7459 3600Panmure Gordon Billy Clegg / Edward Westropp +44 (0)20 7831 3113Financial Dynamics Introduction The Company has conditionally raised approximately £25.0 million before expenses(approximately £23.5 million net of expenses) through a placing withinstitutional and other investors of 18,382,353 new Ordinary Shares in theCompany at 136 pence per Ordinary Share. Development of the business to date The Directors announced on 27 February 2006 the preliminary results for the yearended 31 December 2005 which stated that the Company's portfolio of licences nowtotals fifteen: five in the Faroes and ten in the UK, a significant increasefrom the two licenses held by the Company at float in June 2003. The Companyretains varying degrees of ownership, cost exposure and management controlacross each of the existing licences in the portfolio. While developing eachlicence interest, management constantly reviews and considers the levels ofownership versus cost exposure in relation to each of the licences in order toachieve the optimum position to increase the value of the business toShareholders. An uplift in the underlying value of the portfolio as it has grownand matured has been reflected in the Company's share price. In addition to the Company's exposure to the Atlantic Margin and the North Sea,Faroe Petroleum recently became pre-qualified as a licence holder in Norway,which allows the Company to apply for and be considered for award of off shoreoil and gas exploration licences in future licence rounds from the Norwegiangovernment. Pre-qualification was partly helped by the recent hiring of a highlyexperienced team of oil and gas professionals based in Norway, who havesignificant experience working in the Norwegian oil and gas sector, many of themwith the major oil companies who operate in that region. The Directors believethat the Norwegian oil and gas market is significantly under developed incomparison with the UK North Sea and holds great potential for Faroe Petroleumto create significant additional shareholder value. Current business strategy Further to the increase in the value of the portfolio since float, the Companyhas focused considerable resources in maturing each licence interest with theultimate aim of reaching a drilling decision, in conjunction with partners asappropriate. While the business has performed well in creating value through thecareful management of its licence interests, the Directors believe that theopportunity for a significant step change in value will only be created througha successful drilling campaign. Faroe Petroleum is planning a drilling campaign across the Company's portfoliowhich allows for eight wells, with two wells confirmed for drilling in 2006, thefirst of which is currently timetabled to begin drilling in the middle of May.Financial commitments are anticipated to be made on the remaining wells over thenext 12 months. Each of these wells has differing risk and reward profiles,however the Directors are of the opinion that the drilling campaign, whenconsidered in the context of the portfolio, has a good chance of deliveringsuccessful results, with the potential for a significant increase in the valueof the business. This drilling campaign represents a very important stage in the creation ofvalue for Shareholders from the current portfolio. It is therefore of criticalimportance that the Company is in a position to commit to the cost of the wellsin the planned drilling campaign and to seek to retain material participatinginterests. In parallel with this work programme, the Directors will not only becontinuing to mature the other licence interests currently under ownershiptowards a drilling decision, but also pursue new opportunities, especially inNorway, to acquire promising oil and gas properties in order to enhance furtherthe value of the business portfolio. Reasons for the Placing The Company currently requires capital for the following three activities:• drilling of existing licence interests;• work programmes on other existing licence interests; and• expansion into Norway. The Directors believe that the costs of the above activities and the ability tocommit to the costs of the proposed drilling campaign in the near future requirethe Company to be appropriately funded now. The Company's current business planwill be part funded through a combination of its current cash reserves and theraising of further equity capital from farm-out agreements. The Directors areproposing to fund the remaining cash requirement of the business plan throughthe Placing. Details of the Placing Subject to the passing of the Resolutions at the EGM, the Company is proposingto raise approximately £25.0 million before expenses (approximately £23.5million net of expenses) by the issue of the Placing Shares pursuant to thePlacing. The Placing Shares will represent approximately 24.9 per cent. of theenlarged issued share capital of the Company. Williams de Broe, in conjunctionwith Panmure Gordon, has conditionally placed the Placing Shares withinstitutional and other investors at the Placing Price. The Placing Shares will, when allotted and fully paid, rank pari passu in allrespects with the existing Ordinary Shares. Admission is expected to take place and dealings in the Placing Shares tocommence on AIM on 10 May 2006. Share certificates in respect of Placing Sharesto be held in certificated form are expected to be despatched by no later than17 May 2006. Placing Shares to be held in uncertificated form are expected to bedelivered in CREST by no later than 10 May 2006. The Placing has only been made to persons falling within article 19 and article49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order2001 and are also qualified investors for the purposes of section 86 of FSMA andno other person may now participate in the Placing or rely on any communicationrelating to it. The offer of the Placing Shares has not been made to the publicfor the purposes of the Prospectus Rules. Current trading and prospects On 27 February 2006, the Company reported its preliminary results for the yearended 31 December 2005. Subsequent to this announcement the Company announced on27 March 2006 that the Norwegian Ministry of Petroleum and Energy had informedFaroe Petroleum that it had pre-qualified as a licence holder on the NorwegianContinental Shelf. Faroe Petroleum is actively pursuing plans to participate inthe upcoming 2006 APA Round, announced by the Norwegian Energy Minister on 21February 2006, with applications to be submitted by 29 September 2006. The Company is advanced in its plans to submit applications in the UK 24thLicencing Round later this year. The first two wells of the Company's planned drilling programme are committed tobe drilled in 2006:• North Sea: North Halibut well, currently scheduled to commence drilling in mid May; and• Faroes: Brugdan well on Licence 006, currently scheduled to commence drilling in July. The Directors are constantly reviewing potential acquisition opportunitiesincluding the possible acquisition of minority interests in small near-termproduction assets. Further information will be released when available. Extraordinary General Meeting A notice convening the Extraordinary General Meeting to be held on 8 May 2006 at11.00 a.m. at the offices of Financial Dynamics, 26 Southampton Buildings,London WC2A 1PB, has been dispatched to Shareholders today. At this meetingspecial resolutions will be proposed, inter alia, to: a) increase the authorised share capital of the Company from £10,000,000 to £12,000,000 by the creation of an additional 20,000,000 Ordinary Shares; b) authorise the Directors, pursuant to Section 80 of the Act, to allot up to 47,559,498 new Ordinary Shares, representing approximately 86 per cent. of the current issued share capital of the Company and, following the implementation of the Placing, leaving remaining section 80 authority to allot up to 29,177,145 new Ordinary Shares, representing approximately 40 per cent. of the then issued share capital of the Company; and c) disapply statutory pre-emption rights, inter alia, in relation to: (i) the Placing; and (ii) the allotment of equity securities for cash up to an aggregate nominal amount of £368,390 (representing approximately 5 per cent. of the issued share capital of the Company following the implementation of the Placing). The proposed increase in the authorised share capital of the Company to120,000,000 Ordinary Shares contained in (a) above is necessary to allow for theissue of the Placing Shares and to leave further headroom for any subsequentissues. The allotment authority contained in (b) above is required for the issueof the Placing Shares and any further issues prior to the Annual General Meetingto be held in 2006. The allotment authority contained in (b) as reduced toapproximately 40 per cent. following the implementation of the Placing,represents the following: • 4,642,399 Ordinary Shares in connection with various employee share options and other option arrangements; and• 24,534,746 Ordinary Shares equivalent to approximately one third of the issued share capital of the Company following the Placing. The allotment authorities contained in (b) and (c) above will expire at theCompany's forthcoming 2006 Annual General Meeting and such authorities as willbe required on an ongoing basis will be proposed at such time. The Board believes that the Placing is in the best interests of the Company andShareholders as a whole and intends to vote in favour of the resolutions to beproposed at the EGM, in the respect of their own beneficial holdings, whichamount in aggregate to 311,461 Ordinary Shares (representing approximately 0.56per cent. of the current issued share capital of the Company). Definitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Act" the Companies Act 1985 (as amended)"Admission" the admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules"AIM" the AIM Market of the London Stock Exchange"AIM Rules" the AIM rules published by the London Stock Exchange"Board" or the directors of the Company"Directors""Company" or "Faroe Faroe Petroleum plcPetroleum""CREST" the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which CRESTCo Limited is the operator"Extraordinary the extraordinary general meeting of the Company convenedGeneral Meeting" or for 11.00 a.m. on 8 May 2006"EGM""FSMA" Financial Services and Market Act 2000"Group" the Company and its subsidiaries"London Stock London Stock Exchange plcExchange""Ordinary Shares" ordinary shares of 10p each in the capital of the Company"Panmure Gordon" Panmure Gordon Broking (Limited)"Placing" the placing of the Placing Shares"Placing Price" 136 pence per Placing Share"Placing Shares" the 18,382,353 new Ordinary Shares to be issued pursuant to the Placing"Prospectus Rules" the rules made for the purposes of Part VI of FSMA in relation to, among other things, offers of securities to the public, as revised from time to time"Resolutions" the resolutions set out in the notice of EGM"Shareholder(s)" holder(s) of Ordinary Shares"UK" the United Kingdom of Great Britain and Northern Ireland"Williams de Broe" Williams de Broe Plc, the Company's nominated adviser and joint broker This information is provided by RNS The company news service from the London Stock Exchange