Nighthawk Energy Regulatory News (HAWK)

2 October 2013

NIGHTHAWK ENERGY PLC

("Nighthawk" or "the Company")

Proposed Capital Reduction

Authority for the purchase of Ordinary Shares by the Company

Notice of General Meeting

Nighthawk, the US focused oil development and production company (AIM: HAWK and OTCQX: NHEGY), announces that it is today posting an explanatory circular (the "Circular") to shareholders containing details of a proposed reduction of the Company's share capital (the "Capital Reduction") and a request for shareholder authority for the purchase by the Company of its own Ordinary Shares, together with formal notice (the "Notice") of the requisite general meeting (the "General Meeting") to be held at 11.00 a.m. on 18 October 2013.

The Circular also contains the Company's unaudited interim results (the "Interim Results") for the six month period ended 30 June 2013 as previously announced on 25 September 2013.

The Circular (containing the Notice and the Interim Results) will shortly be made available on the Company's website at www.nighthawkenergy.com.

Highlights

· In order to support the Company's ability to buy back Ordinary Shares and/or pay dividends in the future (should circumstances in the future make it desirable to do so), the Company is proposing to create distributable reserves by means of the Capital Reduction.

· The Capital Reduction will not affect the number of Ordinary Shares in issue or the rights attaching to them, nor will it involve any distribution or repayment of capital or share premium by the Company or reduce the underlying net assets of the Company.

· In order to facilitate a buy back of its Ordinary Shares at a future date, the board of directors of the Company is also seeking the authority of its shareholders to enable the Company to purchase Ordinary Shares in the market in accordance with the Act (the "Share Buy Back Authority").

· There is no current intention for the Company to buy back its Ordinary Shares pursuant to the Share Buy Back Authority. The directors intend to exercise this right only when, in light of the market conditions prevailing at the time and taking into account all relevant factors, they believe that such purchases are in the best interests of the Company and its shareholders generally.

The Directors consider the Capital Reduction and Share Buy Back Authority to be in the best interests of the Company and its shareholders as a whole and accordingly unanimously recommend shareholders to vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 4,374,637 Ordinary Shares, representing approximately 0.46 per cent. of the existing issued Ordinary Share capital of the Company.

Resolution 1, which will be proposed as a special resolution, is to approve the Capital Reduction.

Resolution 2, which is also proposed as a special resolution, it to authorize the Company to make market purchases of its Ordinary Shares.

Unless otherwise defined, capitalised terms used in this announcement have the meanings given to them in the Circular.

Enquiries:

1. Introduction and summary

The Company announces today details of proposals recommended by the Board to increase the distributable reserves of the Company in order to support the Company's ability to buy back Ordinary Shares and/or pay dividends in the future.

The background to and reasons for the Capital Reduction and seeking authority for a Share Buy Back are set out more fully in paragraph 2 below. In light of the Group's recent and anticipated further operational progress, the Board believes it is an appropriate time to create distributable reserves which would allow the Company to return cash to shareholders, should it be considered desirable to do so in the future.

Accordingly, shareholder approval is being sought to:

a) carry out a reduction of the Company's capital by way of:

i. the cancellation of the amount standing to the credit of the Company's share premium account; and

ii. the capitalisation of the amount standing to the credit of the Company's merger reserve by way of the issue and subsequent cancellation of the Capital Reduction Shares, so as to create distributable reserves; and

b) authorise the Company to make market purchases of Ordinary Shares.

The Capital Reduction and Share Buy Back Authority are conditional upon, amongst other things, the Company obtaining appropriate Shareholder approval at the General Meeting.

The purpose of this announcement and circular being posted today is to provide Shareholders with information about the background to and the reasons for the Capital Reduction and Share Buy Back Authority, to explain why the Board considers the Capital Reduction and Share Buy Back Authority to be in the best interests of the Company and its Shareholders as a whole and why the Board unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out on pages 13 to 15 of the circular being posted today.

2. Background to and reasons for the Capital Reduction and the Share Buy Back

The Company currently has negative distributable reserves, and is therefore prohibited under the Act from making distributions to its Shareholders, including the payment of dividends. It is also prohibited from purchasing its own Ordinary Shares (unless funded by the proceeds of a fresh issue of shares made for the purpose).

The Group has made significant progress since becoming operator of the Smoky Hill and Jolly Ranch Project in January 2012, including the discovery of the Arikaree Creek oil-field. As can be seen in the unaudited interim results for the half year ended 30 June 2013 (released on 25 September 2013 and appended to this document), the Group has made substantial progress in developing Arikaree Creek during 2013, which has led to a significant increase in production, revenues, margins and cash flow. Although the Group made a statutory loss for the period to 30 June 2013 of US$819,691 due to an impairment of a legacy well, profit before tax adjusted for this exceptional impairment was US$658,560 and operating cash-flow was US$4.7 million.

Since 1 July 2013, production, revenues and cash-flow have continued to grow with gross oil production increasing to 1,661 barrels/day in August from 1,029 barrels/day in June. Subject to drilling results, oil prices and other factors that might affect costs or production, the Directors anticipate that further development activity and production growth may lead to profits being recorded in subsequent reporting periods. The low cost nature and rapid payback of the Group's development drilling activities creates the potential for the Group to be highly cash generative after covering on-going investment requirements, costs and debt service and repayment.

It is these business strengths and confidence for the future which have led the Board to recommend that the building blocks to create distributable reserves be put in place. With the creation of distributable reserves, the Board will have the flexibility to distribute future profits to shareholders as share buy backs or dividends, should it be considered desirable to do so in light of circumstances at the time.

As at 31 December 2012, the Company had a profit and loss account deficit of £67,699,724 and the balance standing to the credit of the Company's share premium account was £85,690,797. In addition, a sum of £99,588 was standing to the credit of the Company's merger reserve. The Company is therefore seeking the approval of the Shareholders to cancel its share premium account, and through the issue of the Capital Reduction Shares and their subsequent cancellation, an amount equal to the Company's merger reserve, which will create realised profits of £85,790,385 which will, subject to the discharge of any undertakings required by the Court as explained below, be sufficient to eliminate the accrued deficit. If approved by the Shareholders, the cancellations will require subsequent approval by the Court.

As a result of the Capital Reduction, the future profits of the Company earned after the date on which the Capital Reduction takes effect would then be available for the directors of the Company to use for the purposes of buying back Ordinary Shares and/or paying dividends (should circumstances in the future make it desirable to do so).

Following the implementation of the Capital Reduction, there will be no change in the number of Ordinary Shares in issue.

3. The Capital Reduction

In order to eliminate the deficit of £67,699,724 on the Company's profit and loss account, it is proposed that:

· the amount standing to the credit of the Company's merger reserve in the sum of £99,588 is capitalised by way of a bonus issue of newly created Capital Reduction Shares;

· the newly created Capital Reduction Shares are cancelled; and

· the amount standing to the credit of the Company's share premium account (such amount being, as at 31 December 2012, £85,690,797) is cancelled.

The cancellations, if approved by the Court, will create realised profits sufficient to eliminate the accrued deficit on the Company's profit and loss account.

In seeking this approval, the Company will be required to give such undertakings or other form of creditor protection as the Court may require for the benefit of the Company's creditors at the date on which the Capital Reduction becomes effective. These may include seeking the consent of the Company's creditors to the Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company. The Company currently owes approximately £18.11 million to its main creditors, being a combination of the holders of loan notes issued by the Company and the lenders under two separate loan agreements. As at the date of this document, consent to the Capital Reduction has been obtained from approximately 94.9 per cent. of such creditors by value, representing approximately £17.18 million of the Company's outstanding debt.

It is anticipated that the initial directions hearing in relation to the Capital Reduction will take place on 7 November 2013, with the final hearing taking place on 20 November 2013 and the Capital Reduction becoming effective on that day, following the necessary registration of the Court order at Companies House.

The Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising on the Capital Reduction will, subject to the discharge of any undertakings required by the Court as explained below, support the Company's ability to buy back Ordinary Shares and/or pay dividends, should circumstances in the future make it desirable to do so.

4. Share Buy Back Authority

In order to facilitate a Share Buy Back at a future date, the Board is seeking the authority of Shareholders to enable the Company to purchase Ordinary Shares in the market in accordance with the Act. The terms of this authority are set out in full in Resolution 2 as set out in the Notice of General Meeting being posted to shareholders today.

This authority will be limited to a maximum of 94,443,542 Ordinary Shares (representing approximately 10.0 per cent. of the total issued Ordinary Share capital of the Company as at the date of this document). Ordinary Shares so purchased may be cancelled or held as treasury shares. The authority will expire at the end of the next Annual General Meeting of the Company or 18 months from the passing of Resolution 2, whichever is the earlier. The Directors intend to seek renewal of this authority at subsequent Annual General Meetings of the Company.

The minimum price that can be paid for an ordinary share is 0.25 pence, being the nominal value of an Ordinary Share. The maximum price that can be paid is 5 per cent. over the average of the middle market prices for an Ordinary Share, derived from the Daily Official List of the London Stock Exchange, for the five business days immediately before the day on which the share is contracted to be purchased. The Directors intend to exercise this right only when, in light of the market conditions prevailing at the time and taking into account all relevant factors (for example, the effect on earnings per share), they believe that such purchases are in the best interests of the Company and Shareholders generally. The overall position of the Company will be taken into account before deciding upon this course of action. The decision as to whether any such shares bought back will be cancelled or held in treasury will be made by the directors of the Company on the same basis at the time of the purchase.

5. The Capital Reduction Bonus Issue and the rights of the Capital Reduction Shares

It is proposed to capitalise the sum of £99,588 standing to the credit of the Company's merger reserve by applying that sum in paying up in full new Capital Reduction Shares prior to the Court Hearing (such capitalisation to take effect at the Capital Reduction Record Time), and allotting and issuing such shares by way of a bonus issue to the persons at that point holding Ordinary Shares on the basis of one Capital Reduction Share for every one Ordinary Share held at the Capital Reduction Record Time.

The Capital Reduction Shares will not be admitted to trading on the Main Market of the London Stock Exchange, AIM or any other market. No share certificates will be issued in respect of the Capital Reduction Shares. The Capital Reduction Shares will have extremely limited rights. In particular, the Capital Reduction Shares will carry no rights to participate in the profits of the Company and no rights to participate in the Company's assets, save on a winding-up. The Capital Reduction Shares will be transferable, but no market will exist in them and it is anticipated that the Court will confirm their cancellation at the Court Hearing on the day immediately after they have been issued.

The capitalisation of the merger reserve is needed as an additional step since the Court only has the power to reduce share capital and other statutory reserves, including share premium and capital redemption reserves. Hence, in order to utilise the merger reserve in the Capital Reduction, it is necessary to convert that reserve into share capital (the new Capital Reduction Shares) and thereafter to cancel the Capital Reduction Shares.

6. Takeover Code

Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in a company that is subject to the Takeover Code is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with any persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by such a person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the Company during the 12 months prior to the announcement of the offer.

Under Rule 37 of the Takeover Code, any increase in the percentage holding of a shareholder which results from a company buying-back its own shares will also be treated as an acquisition for the purposes of Rule 9 of the Takeover Code. Where, as a result of such an increase, a shareholder comes to exceed the limits in Rule 9 of the Takeover Code referred to above, the shareholder will not normally incur an obligation to make a general offer unless the shareholder is a director, or the relationship of the shareholder with any one or more of the directors is such that the shareholder is, or is presumed to be, acting in concert with any of the directors. However, an obligation to make a general offer may be imposed if the relevant shareholder (or any relevant member of a group of persons acting in concert) acquires an interest in shares at a time when such shareholder had reason to believe that a buy back of shares by the company would take place.

In situations where the directors of a company are aware that a buy back of shares by that company would otherwise give rise to an obligation for a shareholder (or group of shareholders acting in concert) to make a general offer, the board of directors should ensure that an appropriate resolution to approve the waiver of this obligation is put to the company's independent shareholders prior to implementation of the relevant buy back of shares as a pre-condition to its implementation.

7. Taxation

The following comments are intended as a general guide only and relate only to certain UK tax consequences of receiving the Capital Reduction Shares under the Capital Reduction Bonus Issue. The comments are based on current legislation and HM Revenue & Customs practice, both of which are subject to change, possibly with retrospective effect. These comments deal only with Shareholders who are resident and, if they are individuals, ordinarily resident for taxation purposes in the UK, who are the absolute beneficial owners of Ordinary Shares and who hold them as an investment and not on trading account. They do not deal with the position of certain classes of Shareholders, such as dealers in securities, insurance companies, collective investment schemes or persons regarded as having obtained their Ordinary Shares by reason of employment.

Capital Reduction Bonus Issue and Capital Reduction

The Capital Reduction Bonus Issue should be treated as a "reorganisation" for the purposes of UK taxation of chargeable gains ("CGT"), so that a Shareholder should not be treated as making a disposal or part disposal of his Ordinary Shares for CGT purposes upon receipt of the Capital Reduction Shares. Instead, the Capital Reduction Shares will be treated as the same asset, acquired at the same time, as his Ordinary Shares. On the basis that the Capital Reduction Shares will be treated as being paid up for "new consideration" received by the Company, the issue of the Capital Reduction Shares should not give rise to any liability to United Kingdom income tax (or corporation tax) in a Shareholder's hands.

Due to the fact the Capital Reduction Shares:

· have no voting rights or rights to income;

· have no market; and

· at the time issued, it is anticipated that the Capital Reduction Shares will be cancelled for no payment on the day immediately following their issue,

the market value of the Capital Reduction Shares is likely to be nil for the duration of their existence. The CGT base cost of the Capital Reduction Shares and Ordinary Shares should be calculated by apportioning the base costs of the Ordinary Shares between the Capital Reduction Shares and the Ordinary Shares based on their respective market values. Consequently the issue of the Capital Reduction Shares should not impact the base cost of the Ordinary Shares, and there should be no tax charge (nor any allowable loss) on the cancellation of the Capital Reduction Shares.

Stamp Duty and Stamp Duty Reserve Tax ("SDRT")

No stamp duty or SDRT will be payable on the issue of the Capital Reduction Shares. This section is not intended to be, and should not be construed to be, legal or taxation advice to any particular Shareholder. Any Shareholder who has any doubt about his own taxation position, whether regarding CGT or otherwise, or who is subject to taxation in any jurisdiction other than the UK should consult his professional taxation adviser immediately.

8. The General Meeting

Set out on pages 13 to 15 of the circular being posted to Shareholders today is a notice convening the General Meeting to be held on 18 October 2013 at the offices of FTI Consulting, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB at 11.00 a.m., at which the Resolutions will be proposed.

Resolution 1, which will be proposed as a special resolution, is to approve the Capital Reduction.

Resolution 2, which will be proposed as a special resolution, is to authorise a Share Buy Back.

9. Action to be taken

A Form of Proxy for use at the General Meeting is appended to the circular being posted to Shareholders today. The Form of Proxy should be completed and signed in accordance with the instructions thereon and returned, using the reply paid envelope provided, to the Company's registrars, Capita Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible, but in any event so as to be received by no later than 11.00 a.m. on 16 October 2013. The completion and return of a Form of Proxy will not preclude Shareholders from attending the General Meeting and voting in person should they so wish.

10. Recommendation

The Directors consider the Capital Reduction and Share Buy Back Authority to be in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 4,374,637 Ordinary Shares, representing approximately 0.46 per cent. of the existing issued Ordinary Share capital of the Company.