Highlands Natural Resources Regulatory News (HNR)

25 Sep 2006 07:03

Tullow Oil PLC25 September 2006 Not for release, publication or distribution in whole or in part, in, into orfrom Canada or Japan Recommended Proposal for the acquisition of Hardman Resources Limited by Tullow Oil plc by way of scheme of arrangement 25 September 2006 - Tullow Oil plc ("Tullow"), headquartered in London andlisted on the London and Irish Stock Exchanges, is one of the largestindependent oil and gas exploration and production companies in Europe with adiverse portfolio of licences in 17 countries. Tullow is pleased to announce that it has today reached agreement with the Boardof Hardman Resources on the terms of a recommended scheme of arrangement toacquire all of the issued and to be issued ordinary shares in Hardman Resources(the "Scheme"). Highlights • The terms of the Scheme values the entire issued and to be issued share capital of Hardman Resources at A$1.47 billion (approximately £581 million / US$1.1 billion). • The terms include a share alternative, subject to a maximum of 65 million New Tullow Shares being issued. • The Scheme is expected to complete at the latest in early January 2007. • The cash consideration under the offer will be funded by new debt facilities provided by Bank of Scotland Corporate. The Board of Tullow believes that the acquisition of Hardman Resourcessignificantly enhances Tullow's portfolio and delivers further key opportunitiesand strategic positions. In particular, the Acquisition: • increases production by 6,000 boepd and 2P commercial and contingent reserves by 30 per cent.; • delivers a material full cycle business in Mauritania; • establishes operational control in the Albertine basin, Uganda; • doubles Tullow's prospective acreage position; • adds 16 exploration wells to the 2006/07 campaign; and • builds on Tullow's successful acquisition track record. Commenting today, Pat Plunkett, Chairman of Tullow, said: "The acquisition of Hardman Resources is an excellent strategic fit withTullow's production, development and exploration activities. The HardmanResources team has built up a business with exposure to high-impact assets andthis, combined with Tullow's existing portfolio, financial strength andexecution capability, creates an outstanding platform for continued growth. Webelieve that the terms of the transaction are attractive for the shareholders ofboth Tullow and Hardman Resources and we look forward to the successfulcompletion of the Scheme." Presentation, Webcast and Conference Calls Analysts are invited to a presentation in London at the Merrill Lynch FinancialCentre at 2 King Edward Street, London, EC1A 1HQ beginning at 10.00 a.m. (Londontime) today. Those attending should arrive at 9.30 a.m. for a 10.00 a.m. start.For those who are unable to attend in person, the presentation can be viewedlive and subsequently by archive via webcast at: http://www.tullowoil.com.There is also a conference call facility. Access restrictions will apply toanalysts in or from Canada and Japan. A US conference call will be scheduled inthe afternoon and details will be available shortly via the website. Live Event Replay Facility available from 1 pmUK Participants 020 7138 0828 UK Participants 020 7806 1970Irish Participants 01 655 0485 Irish Participants 01 659 8321Other Participants +44 20 7138 0828 Other Participants +44 20 7806 1970 Access Code 3443974# Enquiries: Tullow Oil plc Merrill Lynch Citigate Dewe Rogerson Cosway Australia + 44 (0) 20 8996 1000 +44 (0) 20 7628 1000 +44 (0) 20 7638 9571 +61 (0) 2 9929 8344Aidan Heavey, CEO Simon Mackenzie-Smith Martin Jackson John HurstTom Hickey, CFO Kevin Smith Mark RudderGraham Martin, GC Andrew Osborne Russell Alton +61 (0) 414 566 021 Matthew Stubbs (Sydney) Merrill Lynch is acting as financial adviser and corporate broker to Tullow andis acting for no-one else in connection with the Acquisition and will not beresponsible to anyone other than Tullow for providing the protections affordedto customers of Merrill Lynch or for providing advice in connection with theAcquisition and the listing of the New Tullow Shares or the contents of thisannouncement or any other matter referred to herein. The availability of New Tullow Shares under the Scheme to persons not residentin Australia, the United Kingdom or the United States may be affected by thelaws of the relevant jurisdictions. Such persons should inform themselves aboutand observe any applicable requirements of those jurisdictions. This announcement does not constitute an offer to sell or an invitation topurchase or subscribe for any securities. Any response in relation to theproposals referred to in this announcement should be made only on the basis ofthe information contained in the Scheme Document or any document by which suchproposals are effected. Note to US Shareholders in Hardman Resources The Scheme is in respect of the securities of a foreign company. The Scheme issubject to the disclosure requirements of a foreign country that are differentfrom those of the United States. Financial statements included in the document,if any, have been prepared in accordance with foreign accounting standards thatmay not be comparable to the financial statements of United States companies. Itmay be difficult for you to enforce your rights and any claim you may havearising under the federal securities laws, since the issuer is located in aforeign country and some or all of its officers and directors may be residentsof a foreign country. You may not be able to sue a foreign company or its officers or directors in aforeign court for violations of US securities laws. It may be difficult tocompel a foreign company and its affiliates to subject themselves to a UScourt's judgement. You should be aware that the issuer may purchase securitiesotherwise than under the Scheme, such as in open market or privately negotiatedpurchases. This summary should be read in conjunction with the full text of thisannouncement. Recommended Proposal for the acquisition of Hardman Resources Limited by TullowOil plc 1. Introduction The Board of Tullow is pleased to announce that it has today reached agreementwith the Board of Hardman Resources on the terms of a recommended scheme ofarrangement to acquire the entire issued and to be issued share capital ofHardman Resources. The terms of the Scheme value the entire issued and to be issued share capitalof Hardman Resources at A$1.47 billion (approximately £581 million / US$1.1billion). The terms include a share alternative, subject to a maximum of 65million New Tullow Shares being issued. 2. Information on Hardman Resources Hardman Resources is an Australian headquartered oil and gas exploration andproduction company listed on the Australian Stock Exchange and on theAlternative Investment Market of the London Stock Exchange. Hardman Resourceshas projects in six countries including a major presence in the new-foundpetroleum province offshore Mauritania, West Africa, that includes the producingChinguetti oil field. Hardman Resources is also the operator and holds a 50 percent. interest in Block 2, Uganda, where Tullow holds the remaining 50 per cent.and where three successful exploration wells leading to oil discoveries havebeen drilled in 2006. In addition, Hardman Resources has exploration interestsin Tanzania, Suriname, Guyane and the Falkland Islands. For the six monthsended 30 June 2006, Hardman Resources reported profits before tax of A$31.1million and net assets as at that date of A$542.0 million. 3. The Scheme Under the terms of the Scheme, Hardman Resources shareholders will receive: for each Hardman Resources Share A$2.02 To provide Hardman Resources shareholders the opportunity to participate in thefuture of the enlarged group, Hardman Resources shareholders may elect toreceive all or part of the consideration in New Tullow Shares on the followingbasis: for each Hardman Resources Share 0.222890 New Tullow Shares subject to a maximum of, in aggregate, 65 million New Tullow Shares beingissued, representing approximately 10 per cent. of Tullow's issued sharecapital. Elections for New Tullow Shares will be scaled back in the event thatthe aggregate of all elections received would result in more than 65 million NewTullow Shares being issued. Any scaling back will be pro rata to the size ofelections made. The New Tullow Shares to be issued pursuant to the Scheme will be issuedcredited as fully paid and will rank pari passu in all respects with ExistingShares, including the right to receive and retain in full all future dividendsand distributions (if any) declared, made or paid after the date upon which theScheme is approved by the relevant court. Admission of the New Tullow Shares tothe Official List of the UK Listing Authority and to trading on the London StockExchange is expected to take place in January 2007. The New Tullow Shares willnot be listed on ASX. For the Scheme Meeting to be successful, it must be approved by a majority innumber of the Hardman Resources Shareholders who vote at the Scheme Meeting (inperson or by proxy) representing at least 75 per cent. of the total number ofshares voted at the Scheme Meeting (in person or by proxy). 4. Background to and reasons for the Acquisition The Board of Tullow believes that the acquisition of Hardman Resourcessignificantly enhances Tullow's portfolio and further delivers key opportunitiesand strategic positions. In particular, the Acquisition: • increases production by 6,000 boepd and 2P commercial and contingent reserves by 30 per cent; • delivers a material full cycle business in Mauritania; • establishes operational control in the Albertine basin, Uganda; • doubles Tullow's prospective acreage position; • adds 16 exploration wells to the 2006/07 campaign; and • builds on Tullow's successful acquisition track record. The Acquisition provides material additions to Tullow's production, developmentand exploration activities through the acquisition of a 19 per cent. interest inthe producing Chinguetti field which is expected to add approximately 6,000boepd to Tullow's hydrocarbon production immediately, as well as materialundeveloped oil and gas discoveries in Mauritania, including the Tiof and Tevetfields and future gas potential. Based on public data, Tullow estimates that theAcquisition adds an additional 105 mmboe of 2P commercial and contingentreserves with significant upside potential. The Acquisition enhances Tullow's exploration portfolio, doubling Tullow'sprospective acreage position and adding 16 incremental exploration wells in fourcountries allowing Tullow to leverage its existing geological expertise in bothproven hydrocarbon provinces and new basins in frontier geographies. In theshort term, the most material activities are likely to be undertaken in Ugandaand Mauritania. Through their joint activities in Uganda, which have to date yielded threesuccessful exploration wells, Hardman Resources and Tullow have formed aneffective working relationship focused on the optimal long term development ofthe Albertine basin. The Acquisition increases Tullow's interest in the highpotential Block 2 to 100 per cent., as well as providing control of theexploration campaign. In Mauritania, where Tullow and Hardman Resources are already co-venturers onBlock 2, the Acquisition will extend Tullow's presence to eight contiguousblocks covering 58,500 sq km. These blocks contain a number of existingdiscoveries and potential developments and three further exploration wells areplanned over the next 12 months. The enlarged Group will have over 110 licences spread across 21 countries, withAfrica accounting for over 45 per cent. of the total. 5. Financing of the Acquisition The maximum cash consideration payable under the Scheme is A$1.47 billion(approximately £581 million / US$1.1 billion). Tullow has arranged new debtfacilities with Bank of Scotland Corporate to provide funding on the basis offull acceptance of the cash consideration by Hardman Resources Shareholders. Theterms of these facilities, including the conditions to drawdown, will bedescribed in the Scheme Document. Tullow's ongoing business is comfortablyfunded from operational cashflows. 6. Scheme Implementation Agreement Tullow and Hardman Resources have entered into the Scheme ImplementationAgreement which contains a number of conditions precedent in relation to theScheme including court approval, Hardman Resources Shareholder approval, ForeignInvestment Review Board approval in Australia and no material adverse change orprescribed occurrences occurring in respect of Hardman Resources. Under the Scheme Implementation Agreement, Hardman Resources has agreed that itwill not participate in discussions with any other party in respect of analternative offer nor solicit, directly or indirectly, any alternative offerfrom any other party, unless to not respond would be in breach of fiduciaryduties owed by any Hardman Resources Director or would otherwise be unlawful.Hardman Resources has also agreed, in certain circumstances, to pay Tullow abreak fee of approximately A$14.7 million. Further details of the Scheme Implementation Agreement are set out in Appendix Ito this announcement. Appendix I Summary details of the Scheme Implementation Agreement Hardman Resources and Tullow have entered into the Scheme ImplementationAgreement dated 25 September 2006 ("SIA") in relation to the Scheme. The SIA sets out the obligations of Hardman Resources and Tullow in relation tothe Scheme. A copy of the SIA will be set out in the Scheme Document that is tobe provided to Hardman Resources Shareholders prior to the Scheme Meeting. Asummary of some of the key terms of the SIA is set out below. Conditions Precedent Implementation of the Scheme is subject to a number of conditions precedentwhich must be satisfied before the Second Court Date, including the following: Regulatory Approvals: Australian Foreign Investment Review Board approval. Shareholder Approval: Hardman Resources Shareholders approving the Scheme at ageneral meeting. The resolution for the Scheme must be passed by a majority innumber of the shareholders present and voting (in person or by proxy), whosevotes represent at least 75 per cent. of the total votes cast at the meeting. Restraints: there being no temporary restraining order, preliminary or permanentinjunction or other order issued by any court of competent jurisdiction or othermaterial legal restraint or prohibition preventing the transaction fromproceeding. Hardman Resources Material Adverse Change: there being no one or more changes,events, occurrences or matters which (whether individually or when aggregatedwith all such changes, events, occurrences or matters of a like kind) has had oris likely to have: • the effect of a diminution in the consolidated net assets of the Hardman Resources Group, taken as a whole (calculated on the basis of AIFRS), of at least A$50,000,000 when compared to the consolidated net assets of the Hardman Resources Group as shown in Hardman Resources' Interim Report as at 30 June 2006; or • the result that Hardman Resources is unable to carry on its business in substantially the same manner as it is currently carried on, in either case, other than as a consequence of: • changes in oil prices or currency exchange rates; or • any revision to the estimated oil reserves of the Chinguetti oil field that is not materially different to that previously announced by Hardman Resources on 23 August 2006; or • write-offs of exploration costs in the ordinary course of business or the incurring of depreciation charges in the ordinary course of business; or • losses covered by insurance which Hardman Resources' insurer has agreed in writing to pay. Hardman Resources Prescribed Occurrence: there being no "Hardman ResourcesPrescribed Occurrence" (which include the events listed in Section 652C of theCorporations Act, certain corporate restructures, material acquisitions,disposals, restraints, financial encumbrances and financial commitments, relatedparty transactions, hedging and insolvency events) by Hardman Resources, and, incertain circumstances, its subsidiaries. Tullow Prescribed Occurrence: there being no "Tullow Prescribed Occurrence"which includes certain capital restructures and insolvency events in respect ofTullow. Court Approval: the Court approving the Scheme. No-Talk, No-Shop and change in recommendation Under the SIA, Hardman Resources has agreed that from the date of the SIA untilits termination or the end date: No Talk: it must ensure that neither it nor any of its subsidiaries, nor any oftheir respective directors, employees, officers or agents (including for theavoidance of doubt any Financial Advisers) directly or indirectly participate inany negotiations or discussions, provide or make available any information(including by way of providing information and access to perform due diligence),or communicate any intention to do any of these things, in respect of or inresponse to any expression of interest, offer or proposal by any person inrelation to any Competing Transaction. No Shop: it must ensure that neither it nor any of its subsidiaries, nor any oftheir respective directors, employees, officers or agents (including for theavoidance of doubt any Financial Advisers) directly or indirectly solicit,encourage (including by way of providing information concerning HardmanResources to any person), initiate or communicate any intention to do any ofthese things, in respect of or in response to any expression of interest, offeror proposal by any person in relation to any Competing Transaction. Fiduciary Carve Out: nothing in the No Shop or No Talk provisions preventsHardman Resources from undertaking an act otherwise prohibited by the No Talkprovision if not undertaking that act would, in the written opinion of a Queen'sCounsel or Senior Counsel, involve a breach of the fiduciary duties owed by anyHardman Resources director or would otherwise be unlawful. Prior to undertakingan act otherwise prohibited by the No Talk provision, that is permitted by thefiduciary carve out Hardman Resources: • must obtain, and provide Tullow with a copy of, the written Queen's Counsel or Senior Counsel's legal opinion; and • must not, and ensure that none of its Representatives undertake any such prohibited act until the end of the next Business Day after the provision of the written Queen's Counsel's or Senior Counsel's legal opinion. Notification of Approaches: During the No-Shop Period, Hardman Resources mustnotify Tullow immediately if it, or any of its Representatives becomes aware ofany: • negotiations or discussions; • approach or attempt to initiate any negotiations or discussions; or • intention to make such an approach or attempt to initiate any negotiations or discussions, in respect of any expression of interest, offer or proposal of a kind referredto in the paragraphs above and prior to doing a prohibited act (which act isonly permitted to be undertaken pursuant to the fiduciary carve out mechanismset out above) Hardman Resources must immediately provide in writing to Tullowthe identity of the relevant person or persons and details of such expression ofinterest, offer or proposal (including copies of, and updates in relation to,any expressions of interest, offer or proposals). Change of Recommendation Hardman Resources must notify Tullow three Business Days prior to announcing anychange in recommendation and must consult with Tullow in good faith for thosethree days to consider if the recommendation in place at that time can bereinstated Reimbursement Fee: Hardman Resources has agreed to pay a reimbursement fee toTullow, equal to A$14,711,694 if: • the Hardman Resources Board withdraws or modifies its recommendation that Hardman Resources Shareholders vote in favour of the Scheme or makes a public statement indicating that it no longer supports the Transaction or that it supports some other transaction, unless there has been a Tullow Prescribed Occurrence prior to that change, withdrawal or modification and Hardman Resources has commenced the process of terminating the SIA on the basis of the Tullow Prescribed Occurrence; or • a Competing Transaction (as defined below) is announced by a third party and that third party gains a relevant interest in at least 50 per cent. of Hardman Resources shares or acquires, acquires control or merges with Hardman Resources within 12 months of the announcement of the Competing Transaction; or • Hardman Resources is in breach of its obligations under the No Shop and No Talk provisions; or • the SIA is terminated by Tullow as a result of a Hardman Resources Prescribed Occurrence occurring prior to the Second Court Date, or pursuant to a material breach of the SIA or a breach of representation or warranty (subject to the materiality set out below), Hardman Resources must pay the Reimbursement Fee within three Business Daysafter receiving a written demand from Tullow pay to Tullow, without set-off orwithholding. The demand may only be made after the occurrence of an event thattriggers the fee referred to above. A Competing Transaction means a transaction or arrangement pursuant to which athird party will, if the transaction or arrangement is entered into orcompleted: • acquire (whether directly or indirectly) or become the holder of, or otherwise acquire, have a right to acquire or have an economic interest in all or a substantial part of the business of the Hardman Resources Group; • acquire a relevant interest in, become the holder of, or otherwise acquire, have a right to acquire or have an economic interest in 5 per cent. or more of Hardman Resources' voting shares; • acquire control (as determined in accordance with section 50AA of the Corporations Act) of Hardman Resources; • otherwise acquire or merge with Hardman Resources; or • enter into any agreement, arrangement or understanding requiring Hardman Resources to abandon, or otherwise fail to proceed with, the transaction, whether by way of takeover offer, scheme of arrangement, shareholder approvedacquisition, capital reduction or buy back, sale or purchase of shares orassets, joint venture, dual-listed company structure (or other synthetic merger)or other transaction or arrangement. Prior to the Hardman Resources Board modifying or changing its recommendation inaccordance with the terms of the SIA, Hardman Resources must appoint an escrowagent to hold the Reimbursement Fee in escrow in trust for Tullow oncommercially reasonable terms and pay an amount equal to the Reimbursement Feeinto the escrow account. Termination The SIA may be terminated at any time prior to the Second Count Date in certaincircumstances: by either party if: • the other party is in breach of any material provision of the SIA other than in respect of a breach of either a representation or warranty; • the other party is in material breach of a representation or warranty and the loss that flows from the breach is greater than A$30 million, in the case of a breach by Hardman Resources and A$120 million the case of a breach by Tullow; • a court or government agency has taken any action permanently restraining or otherwise prohibiting the Scheme from proceeding or has refused to do any thing necessary to permit the Scheme to proceed (and the action or refusal has become final and cannot be appealed); or • a condition precedent is not satisfied and Hardman Resources and Tullow cannot reach agreement to proceed by way of alternative means, by Tullow if: • the Hardman Resources Board changes, withdraws or modifies its recommendation that Hardman Resources Shareholders vote in favour of the Scheme or makes a public statement indicating that it no longer supports the transaction; • Hardman Resources' Shareholders have not approved the Scheme at the Scheme Meeting by 31 January 2007; or • Hardman Resources is in breach of its obligations under the No-Shop and No-Talk provisions; and by Hardman Resources if: • following 21 days' notice to Tullow, the Hardman Resources Board has changed, withdrawn or modified its recommendation in accordance with the terms of the SIA and by the end of the 21 days' notice period the recommendation has not been reinstated and the Reimbursement Fee has been paid to Tullow. Appendix II Definitions and glossary of terms Definitions The following definitions apply throughout this document, unless the contextotherwise requires: "Acquisition" the acquisition of Hardman Resources by Tullow to be effected by the Scheme; "Australian Stock Exchange" or "ASX" Australian Stock Exchange Limited; "Board" or "Directors" the directors of the named company; "Enlarged Group" the Tullow Group as enlarged by Hardman Resources; "Existing Shares" Tullow Shares in issue at the date of this document; "Hardman Resources" Hardman Resources Limited; "Hardman Resources Shareholders" holders of Hardman Resources Shares; "Hardman Resources Shares" ordinary shares in the capital of Hardman Resources; "Irish Stock Exchange" The Irish Stock Exchange Limited; "London Stock Exchange" London Stock Exchange plc; "Merrill Lynch" Merrill Lynch International; "New Tullow Shares" Tullow Shares to be allotted pursuant to the Scheme"Official Lists" the official list of the UK Listing Authority and the official list of the Irish Stock Exchange; "Scheme" the scheme of arrangement of Hardman Resources which, if approved, will result in Tullow acquiring the Hardman Resources Shares; "Scheme Document" the document containing details of the Scheme sent by Hardman Resources to Hardman Resources Shareholders; "Scheme Implementation Agreement" the scheme implementation agreement entered into between Tullow and Hardman Resources; "Scheme Meeting" the meeting of Hardman Resources Shareholders to be convened to approve the Scheme; "Tullow" or "Company" Tullow Oil plc; "Tullow Group" or "Group" Tullow and its subsidiaries; "Tullow Shares" ordinary shares of 10 pence each in the capital of the Company; "UK Listing Authority" the Financial Services Authority acting in its capacity as theor "UKLA" competent authority for the purposes of Part VI of the Financial Services and Markets Act including where the context so permits, any committee, employee, officer or servant to whom any function of the UK Listing Authority may for the time being be delegated; "United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland; and"United States" or "US" the United States of America, its territories and possessions. In this document all references to "A$" are to the lawful currency of Australiaand all references to "£", "pence" and "sterling" are to the lawful currency ofthe United Kingdom. Unless otherwise stated in this document, an exchange rate of £1 = A$2.5315 hasbeen used, being the exchange rate at 4.30pm in London on 22 September 2006 andan exchange rate of £1 = US$1.9004 has been used, being the close of business inNew York on 22 September 2006 (the last business day before this announcement).Source: Bloomberg Glossary of Terms "boepd" barrels of oil equivalent produced per day; and"mmboe" million barrels of oil equivalent. This information is provided by RNS The company news service from the London Stock Exchange