Jersey Oil&gas Regulatory News (JOG)

28 July 2015

Trap Oil Group plc

 ("Trapoil" or the "Company")

Proposed Acquisition of Jersey Oil and Gas E&P Limited, Placing to raise approximately £0.82 million (gross), Directorate Appointments and Share Capital Reorganisation

Proposed Amendment to Articles of Association, Increase in Authority to Allot Shares, Disapplication of Pre-emption Rights and Change of Name to "Jersey Oil and Gas plc"

and Notice of General Meeting

Trapoil (AIM: TRAP), the independent oil and gas exploration, appraisal and production company focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce, inter alia, that it has agreed to acquire the entire issued and to be issued share capital of Jersey Oil and Gas E&P Limited ("JOG") and raise approximately £0.82 million (gross), subject, inter alia, to shareholder approval and completion of a capital reorganisation.

Highlights:

· Trapoil to acquire the entire issued and to be issued share capital of JOG for a consideration of £495,000, to be wholly satisfied by the issue of 2,250,000 New Ordinary Shares (the "Acquisition").

· Company has conditionally raised, in aggregate, approximately £0.82 million (before expenses) to provide additional working capital, through the placing of 3,711,228 New Ordinary Shares at a placing price of 22 pence per New Ordinary Share with certain existing and new investors, via WH Ireland.

· Proposed capital reorganisation which includes, inter alia, a one for 100 share consolidation to facilitate the proposals and, conditional on completion of the Acquisition, change in the name of the Company to 'Jersey Oil and Gas plc'.

· Andrew Benitz and Ronald Lansdell (currently founding shareholders and directors of JOG) will be appointed to the Company's Board as Chief Executive Officer and Chief Operating Officer respectively on completion of the proposed Acquisition.

· Refined business strategy:

o To continue to focus on maintaining, developing and exploiting a portfolio of North Sea assets with a greater focus on producing assets in order to seek to unlock the inherent value in the Group's existing tax losses;

o To assess and acquire potential further North Sea oil and/or gas producing assets, some of which have already been identified by Jersey Oil and Gas and are currently undergoing due diligence and/or subject to ongoing commercial negotiations.

· Irrevocable undertakings obtained from the Directors, Mr Peter Gyllenhammar, Mr Paul Curtis and certain other Shareholders in respect of, in aggregate, 73,249,556 Existing Ordinary Shares, representing approximately 32.2 per cent. of the Company's existing issued ordinary share capital, to vote in favour of all of the Resolutions.

Marcus Stanton, Non-Executive Chairman of Trapoil, commented:

"We look forward to welcoming Andrew, Ronald and the rest of the JOG team to the Company. We believe that the proposed acquisition of JOG, refined business strategy and injection of new capital, presents a welcome opportunity to enable the Company to resume a growth strategy going forward and benefit from JOG's experienced management team, in order to maximise shareholder returns in the medium and longer term. These proposals are therefore strongly recommended by the Board."

Andrew Benitz, CEO of JOG, said:

"Following the recent settlement agreement with its major creditors, there is considerable value potential within the Group with respect to its existing tax losses, its current asset portfolio - including the carry to first oil on Magnolia and the high working interest in the Romeo discovery - together with its remaining cash reserves. 

"We believe that the enlarged group will be well placed to take advantage of the evolving consolidation opportunity in the North Sea, as may be demonstrated by the billions of dollars of private equity capital raised to pursue projects in the North Sea in recent months."

Enquiries:

Capitalised terms used but not defined in this announcement have the meanings set out in the appendix to this announcement.

Introduction

The Company has agreed to acquire the entire issued and to be issued share capital of Jersey Oil and Gas for a consideration of £495,000, to be wholly satisfied by the issue of 2,250,000 New Ordinary Shares, subject, inter alia, to the receipt of shareholder authority to allot the Consideration Shares.

In addition, the Company has conditionally raised, in aggregate, approximately £0.82 million (before expenses) through the placing of 3,711,228 New Ordinary Shares at a placing price of 22 pence per New Ordinary Share with certain existing and new investors. The Placing, which has been arranged by WH Ireland pursuant to the terms of the Placing Agreement, is conditional, inter alia, upon Shareholders' approval and Admission.

In order to implement the Acquisition and the Placing, the Company is proposing to carry out a Capital Reorganisation and seek additional share capital authorities to allot New Ordinary Shares. In addition, the Company is proposing an amendment to the Company's Articles of Association to ensure a sufficient level of permitted borrowings going forward, to afford greater flexibility to the Directors and satisfy the Company's current and anticipated future requirements. Conditional on completion of the Acquisition, it is also proposed that the name of the Company be changed to Jersey Oil & Gas plc and that certain board appointments be effected.

Accordingly, the Company is convening the requisite General Meeting for 11.00 a.m. on 14 August 2015 at the offices of Fieldfisher, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT. This announcement explains the background to and reasons for the proposed Acquisition, the Placing, the Capital Reorganisation and the Proposed Amendment, and explains why the Directors consider the proposed Acquisition, the Placing, the Capital Reorganisation and the Proposed Amendment to be in the best interests of the Company and its Shareholders as a whole and are unanimously recommending that Shareholders vote in favour of all the Resolutions to be proposed at the General Meeting.

Background to and reasons for the Acquisition

Jersey Oil and Gas is a private limited company incorporated in Jersey on 7 March 2014, established by an experienced exploration and production ("E&P") team with a multinational track record of operating assets and managing upstream-focussed oil and gas companies. JOG is currently at an early stage in its development with no pre-existing UKCS licence interests or portfolio of oil and gas assets. For the 16 month period ended 30 June 2015, JOG recorded an unaudited loss before tax of £379,261 and as at 30 June 2015 had unaudited gross assets of £81,239, principally comprising of cash reserves.

Trapoil was incorporated in England & Wales on 24 January 2011 as a public limited company to act as the ultimate holding company for an independent UK oil and gas exploration and appraisal business with a geographic focus on the UKCS. Its ordinary shares were admitted to trading on AIM on 17 March 2011 in conjunction with a fundraising of £60 million (gross) to finance the planned growth of the group's pre-existing carried interest business model and exploration portfolio, and the potential acquisition of additional production and appraisal opportunities in order to establish a more rounded business with a production base.

In July 2011, Trapoil acquired Reach Oil & Gas Limited ("Reach") for a total consideration of approximately £30 million (£20 million satisfied in cash and approximately £10 million in new ordinary shares in Trapoil at a deemed price of 43 pence per share). The Reach group's asset portfolio comprised predominantly carried interests in a total of 14 exploration licences governing 24 Blocks and part Blocks in the UK North Sea covering, in aggregate, an area of approximately 2,000km2. The acquisition of Reach more than doubled the size of Trapoil's then exploration portfolio.

The expanded exploration portfolio and drilling programme was subsequently impacted by a number of significant partner issues and, of the five licences in which Trapoil holds or has held an interest and where drilling activity has taken place, oil discoveries were only made on two of the prospects (Licence P.1666, Block 30/11c ("Romeo") and Licence P.1556, Block 29/1c ("Orchid")), with each exploration well being plugged and abandoned pending any decision to conduct future appraisal drilling. The three remaining exploration wells, on Licence P.1610, Block 13/23a ("Magnolia"), (Licence P.1658, Block 20/5b) ("Scotney") and Licence P.1889, Blocks 12/26b and 12/27 ("Niobe") prospects, were all plugged and abandoned as dry holes.

In March 2012, Trapoil's wholly owned subsidiary, Trap Oil Limited, acquired a 15 per cent. working interest in the Athena Field, operated by Ithaca Energy (UK) Limited, for a total notional cash consideration of approximately £34.5 million. As anticipated, the Athena Field commenced oil production in May 2012 via an FPSO, the BW Athena vessel, but subsequently encountered numerous technical and operational difficulties resulting in lower rates of production than originally envisaged by the operator. Large abandonment provisions were also required towards the end of 2014, with a further instalment expected to be called by the operator by the end of 2015. However, even at the reduced rates of production, the Athena Field remained cash flow positive until the collapse in the Brent oil price in the second half of 2014, with the Company's average monthly net cash outflow being in excess of £0.5 million in the first quarter of 2015 (after taking into account both its share of the field's losses and the Group's general corporate and administrative expenses).

In August 2014, Trapoil commenced a significant cost reduction programme, over and above certain cost saving initiatives announced in April 2014 as part of the Group's final results announcement for its financial year ended 31 December 2013, which included two of the Company's founding directors stepping down from the Board, and pursuit of a strategy under which operating costs were to be reduced to a minimum in order to maintain the Company's existing assets whilst seeking to maximise the returns from such assets. Following the reduction in Board members, which took effect on 12 August 2014 with respect to Simon Bragg, the Company's then Chairman (whose role was immediately assumed by Marcus Stanton, an existing Non-Executive Director) and on 31 October 2014 with respect to Mark Groves Gidney and Paul Collins, the Company's Chief Executive Officer and Chief Operating Officer respectively, Trapoil announced, inter alia, the sale of its remaining non-core investment in IGas Energy plc for a total consideration of £1.86 million on 4 November 2014.

On 22 September 2014, in the Company's interim results announcement, it was stated, inter alia, that Total E&P UK Limited ("Total") had agreed to compensate Trapoil should it not elect to drill an exploration well on Licence P.2032, Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b ("Valleys"). No election to drill was subsequently made, however Total is now disputing its obligation to compensate Trapoil for the amount claimed of £1m. If Trapoil was to proceed into potential administration, the Company would have limited resources with which to pursue its claim for compensation, but in the event that the proposed Acquisition and Placing successfully complete, Trapoil currently intends to pursue such claim.

On 11 February 2015, Trapoil reported that despite continued stabilised production rates of approximately 4,800 bopd gross (720 bopd net to Trapoil) following the completion of a workover and certain other intervention works, due to the prevailing depressed oil price of approximately US$58/barrel, the Athena Field was significantly loss making such that the Company was incurring a cash outflow of approximately £380,000 per month after absorption of its share of the field's operating costs. At that time, Trapoil's only other remaining assets comprised its interests in: Niobe, for which a well was planned for the second quarter of 2015; Magnolia, for which seismic evaluation work was ongoing in respect of a possible extension of the adjacent Liberator discovery; Romeo; Licence P.1989, Blocks 14/11, 12 & 16 ("Homer") and Licence P.2170, Blocks 20/5b and 21/1d ("Cortina").

Since embarking on the abovementioned cost minimisation and value maximisation strategy in August 2014, Trapoil's Board has periodically received a number of preliminary approaches from certain third parties expressing potential interest in acquiring the Company. However, none of these approaches resulted in an acceptable offer being tabled. In addition, there was further uncertainty with respect to the outcome of the drilling of an exploration well on the Niobe prospect in which Trapoil holds a 28 per cent. interest.

Drilling operations on the Niobe prospect commenced on 8 June 2015 and, on 25 June 2015, Trapoil announced that no significant hydrocarbons had been encountered and that the well was to be plugged and abandoned. On 25 June 2015, Trapoil also announced that it had reached a settlement agreement with the group's principal creditors, such that, in return for an aggregate payment of £2m by Trapoil to CGG Services (UK) Limited ("CGG") and the Athena Consortium (excluding Trap Oil Limited), all of the Group's contractual liabilities to these parties would be ring fenced and/or expunged (the "Settlement Agreement"). Under the terms of the Settlement Agreement, Trapoil no longer has any outstanding debt due to CGG and all future liabilities (including decommissioning costs) owed to the Athena Consortium will now be met by the Group's partners in the Athena Consortium and repayment will only be sought by way of future revenue generated from the Athena Field and 60 per cent. of any petroleum sales or net disposal proceeds stemming from Trapoil's other existing licence interests, being Magnolia, Romeo, Niobe, Homer and Cortina. Should Trapoil not have repaid the outstanding debt obligation by the time the Athena Field is fully decommissioned the remaining debt will be written off by the Athena Consortium.

Having entered into the abovementioned Settlement Agreement, the Company is now in an improved position with respect to establishing a sustainable footing for its future development and further to discussions with the Sellers, the Board has decided that the Company should enter into the Acquisition Agreement in respect of the proposed Acquisition, further details of which are set out below. On completion of the proposed Acquisition, the enlarged group's business will continue to be focused on maintaining, developing and exploiting a portfolio of North Sea assets, albeit with a greater focus on producing assets in order to seek to unlock the inherent value in the Group's existing tax losses. In addition, the Directors believe that the opportunity presented by the proposed Acquisition provides the following benefits:

· Jersey Oil and Gas has an experienced executive management team that will assist the Company in assessing and acquiring potential further North Sea oil and/or gas producing assets, some of which have already been identified by Jersey Oil and Gas and are currently undergoing due diligence and/or subject to ongoing commercial negotiations.

· The Directors believe that the enlarged group will be able to structure the abovementioned potential acquisitions in a manner that optimises the utilisation of the Group's existing tax losses arising from Trapoil's previous North Sea activities and thereby enable it to exploit its capital more effectively.

· The Company plans to use the net Placing proceeds to identify, review and evaluate the abovementioned asset acquisition opportunities (both technically and commercially) and, where appropriate, to make conditional offers in respect of the same. Any potential acquisitions that are pursued, will be financed from one or more of the enlarged group's balance sheet, the proceeds from strategic sales of selected parts of the enlarged group's asset portfolio and further equity and debt capital raises as appropriate.

The Directors believe that the addition of the new executive management team from JOG, together with a refined business strategy and injection of new capital, present a timely and attractive opportunity to enable the Company to resume a growth strategy going forward and seek to maximise shareholder returns in the medium and longer term.

Following completion of the proposed Acquisition, Andrew Benitz and Ronald Lansdell (currently founding shareholders and directors of Jersey Oil and Gas) will be appointed to the Board and, together with JOG's technical team, will work closely with the Company's existing Directors to implement the refined business strategy outlined above. Part of that process may include the recruitment of potential additional Board appointees and a review of the Company's office location and tax domicile in order to maximise cost efficiencies and potential tax benefits for the enlarged group going forward.

Proposed Directors and their service agreements and letters of appointment

Jason Andrew Benitz (known as Andrew Benitz) (Proposed Chief Executive Officer)

Mr Benitz is a former CEO and Director of Longreach Oil and Gas Ltd. Mr Benitz joined Longreach in 2009 as Chief Operating Officer. He previously worked at Deutsche Bank within the Oil and Gas Corporate Finance team and within the Equity Capital Markets team. He is also founder and director of Titan Properties SL, a real estate business in Spain. Mr Benitz completed his undergraduate studies at Edinburgh University and the University of Alberta, graduating with a Bachelor of Commerce (Honours).

Subject to and with effect from Admission, Mr Benitz has entered into an amendment to his existing service agreement with JOG, and a letter of appointment as a director of the Company, details of which are summarised below:

· Under his amended service agreement with JOG, Mr Benitz shall receive annual remuneration of £75,000 and be entitled to benefit from the enlarged group's healthcare policy from time to time. His remuneration will increase to £150,000 per annum on the occurrence of the acquisition of the first production asset by any member of the enlarged group (as determined by the board of directors of the Company). His employment shall be terminable on 12 months' notice (falling to 6 months if his salary is increased to £150,000) (the "Notice Period"), save that, if there is a material breach of his agreement (not remedied within a reasonable time), material change in his duties, responsibilities or office, a failure by JOG to continue any material benefit or he is relocated out of Jersey, he may terminate his employment on 30 days' notice, upon which he shall receive a payment equal to his monthly salary for a period of time equal to the Notice Period and a further payment of his aggregate emoluments for a period of time equal to the Notice Period.

· Under his appointment letter with the Company, Mr Benitz shall be appointed as Chief Executive Officer of the Company. No fees are payable in respect of this appointment and it continues until terminated as set out in the amended service agreement.

Ronald John Lansdell (Proposed Chief Operating Officer)

Mr Lansdell was Vice President of Exploration and Director at Longreach Oil and Gas Ltd. Mr Lansdell has held a number of senior technical and commercial roles during a 15 year career at ENI S.p.a./Agip ("ENI/Agip"). These roles included being posted to Nigeria, Kazakhstan and the United Kingdom. Mr Lansdell began his career in 1972 in seismic data acquisition and processing, initially at Digicon Inc. and then CGG in London, before joining Elf in Norway and then BHP Petroleum as Exploration Coordinator Western Australia. He spent nine years with Elf Aquitaine S.A. (in Norway, France and Syria) and then joined Qatar General Petroleum Corporation as Chief Geophysicist in Qatar before joining Eni/Agip. Mr Lansdell graduated in geology from the University of London.

Subject to and with effect from Admission, Mr Lansdell has entered into an amendment to his existing service agreement with JOG and a letter of appointment as a director of the Company, details of which are summarised below:

· Under his amended service agreement with JOG, Mr Lansdell shall receive annual remuneration of £75,000 and be entitled to benefit from the enlarged group's healthcare policy from time to time. His remuneration will increase to £150,000 per annum on the occurrence of the acquisition of the first production asset by any member of the enlarged group (as determined by the board of directors of the Company). His employment shall be terminable on 12 months' notice (falling to 6 months if his salary is increased to £150,000) (the "Notice Period"), save that, if there is a material breach of his agreement (not remedied within a reasonable time), material change in his duties, responsibilities or office, a failure by JOG to continue any material benefit or he is relocated out of Jersey, he may terminate his employment on 30 days' notice, on which he shall receive a payment equal to his monthly salary for a period of time equal to the Notice Period and a further payment of his aggregate emoluments for a period of time equal to the Notice Period.

· Under his appointment letter with the Company, Mr Lansdell shall be appointed as Chief Operating Officer of the Company. No fees are payable in respect of this appointment and it continues until terminated as set out in the amended service agreement.

Current trading and future prospects

Further to the Company's announcement of 25 June 2015, its contractual liabilities to its principal creditors have been ring fenced and/or expunged. Accordingly, the Directors believe that the business now represents a more attractive and robust investment proposition, for potential funding providers and vendors of North Sea assets, as an AIM quoted company with sizable pre-existing tax losses and a number of promising licence interests. The Directors, in conjunction with the Company's advisers, have for some time been assessing opportunities to secure additional funding and executive management to drive the Company forwards and believe that the proposed Acquisition and Placing affords the best means for maximising shareholder value.

The Group's general and administrative cost-base is currently approximately £1.3m per annum and, in accordance with the terms of the Settlement Agreement, all future revenues generated from the Group's interest in the Athena Field is to be passed over to the Athena Consortium. It is therefore critical that prompt action is taken to secure the injection of new working capital, as the Company's net unrestricted cash reserves currently amount to only approximately £0.4 million.

The Directors believe that the net proceeds of the Placing will be sufficient to meet the Company's near term working capital requirements.

In the event that Resolutions 1, 3 and 4 are not passed and the proposed Acquisition and Placing are not completed, Trapoil will have only limited remaining cash reserves and will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available, the Directors believe that it is highly likely that the Company would be forced to enter into administration within the next two to three months.

Details of the Placing

The Company has conditionally placed the Placing Shares to raise, in aggregate, approximately £0.82 million (gross) (the "Placing Proceeds") conditional upon, inter alia, the passing of Resolutions 1, 3 and 4 at the General Meeting and Admission occurring on or before 17 August 2015 (or such later date as WH Ireland may agree, not being later than 30 September 2015). The Placing Price represents a discount of approximately 32.3 per cent. to the closing middle market price of 32.5 pence (as adjusted for the Capital Reorganisation) per New Ordinary Share on 27 July 2015, being the last business day prior to the announcement of the Placing. Following their Admission, the Placing Shares will represent, in aggregate, approximately 44.5 per cent. of the Company's Enlarged Share Capital. The Placing Shares will be fully paid and will rank pari passu in all respects with the Consideration Shares and the other New Ordinary Shares.

The Placing Shares have been conditionally placed by WH Ireland, as agent of the Company, with certain existing and new investors pursuant to the Placing Agreement. Under the terms of the Placing Agreement, WH Ireland will, conditional on Admission, receive certain fees and commission from the Company, together with warrants to acquire up to 70,454 New Ordinary Shares at 22 pence per share for the 18 month period to 27 January 2017 and the Company will give customary warranties and undertakings to WH Ireland in relation, inter alia, to its business and the performance of its duties. In addition, the Company has agreed to indemnify WH Ireland in relation to certain liabilities that it may incur in undertaking the Placing. WH Ireland has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event that there has been, inter alia, a material breach of any of the warranties. The Placing is not being underwritten. The enlarged group will also pay certain commissions via WH Ireland, and may directly pay a contingent success fee to RFC Ambrian in accordance with its role as sub-broker for the Placing.

The Company has also agreed to allot and issue the Fee Shares to a consultant in payment of part of his fees for advising the Company in connection with the transaction which will be allotted and issued pursuant to the general authorities being sought under Resolutions 3 and 4 at the General Meeting.

Application will be made for the Placing Shares and the Fee Shares to be admitted to trading on AIM and it is currently expected that admission to trading and dealings in the Placing Shares and Fee Shares will become effective at 8.00 a.m. on 17 August 2015.

Acquisition Agreement

On 27 July 2015, the Company conditionally agreed to acquire the entire issued and to be issued share capital of Jersey Oil and Gas in consideration for the issue of the Consideration Shares, conditional on, inter alia: (i) the passing at the General Meeting of the Resolutions; (ii) the Placing Agreement having become unconditional (save for any condition relating to Admission or the Acquisition Agreement); and (iii) Admission. Under the terms of the Acquisition Agreement, Messrs Benitz and Lansdell (together the "Seller Warrantors"), the two largest shareholders of Jersey Oil and Gas, have provided certain warranties to the Company in respect of Jersey Oil and Gas. Such warranties are subject to certain financial caps and other limitations. In addition, the Company and its Directors (together the "Buyer Warrantors") have provided certain warranties to the selling shareholders of Jersey Oil and Gas in respect of the Company. Such warranties are also subject to certain financial caps and other limitations. Both the Seller Warrantors and the Buyer Warrantors have given undertakings and covenants to each other in respect of the conduct of Jersey Oil and Gas and the Company, respectively, during the period from the date of the Acquisition Agreement until satisfaction of the conditions thereunder. If the conditions under the Acquisition Agreement are not satisfied by 30 September 2015, or there is a material breach of certain warranties, undertakings or covenants given under the Acquisition Agreement, it will terminate without liability to either party.

In addition, each of the Seller Warrantors has undertaken not to dispose of any interest they, and their connected persons, respectively hold in any shares of the Company during the period of 12 months commencing on Admission, including the Consideration Shares that they each shall receive under the Acquisition Agreement, and any shares they each may subsequently acquire during such 12 month period, except in certain restricted circumstances.

Application will be made for the Consideration Shares to be admitted to trading on AIM and it is currently expected that admission to trading and dealings in the Consideration Shares will become effective at 8.00 a.m. on 17 August 2015.

Share Capital Reorganisation

Terms of the Capital Reorganisation 

Under English company law, a company is not allowed to issue shares at a price per share which is lower than the nominal value of its shares. The Placing Price is the equivalent of 0.22 pence per Existing Ordinary Share, which is below the current nominal value of the Existing Ordinary Shares.

Accordingly, subject to Shareholder approval, the Directors propose to reorganise the Company's share capital as explained below with a view to reducing the number of ordinary shares in issue by a factor of 100 whilst maintaining the same low nominal value. 

The terms of the proposed Capital Reorganisation are such that on the Record Time every 100 Existing Ordinary Shares of 1 pence each will be consolidated and subdivided into one New Ordinary Share of 1 pence and one Deferred Share of 99 pence. 

Save as explained below with regards to fractional entitlements, following the Capital Reorganisation each Shareholder will hold such number of New Ordinary Shares as is equal to 1/100th of the number of Existing Ordinary Shares that he or she held immediately beforehand, but the nominal value of the New Ordinary Shares will remain as 1 pence. 

The New Ordinary Shares resulting from the Capital Reorganisation will have exactly the same rights as those currently accruing to the Existing Ordinary Shares under the Company's Articles of Association, including those relating to voting and entitlement to dividends. 

The Deferred Shares created pursuant to the Capital Reorganisation will have no voting rights or rights to receive a dividend, will have only a very limited right to any distribution on a return of capital and are non-transferable. They will not be listed on AIM. Accordingly, the Deferred Shares will be practically worthless. The full rights attaching to the Deferred Shares are set out in Resolution 1 in the notice of General Meeting, which, if passed, will amend the Company's Articles of Association to set out the rights of the Deferred Shares.

Resolution 1 contained in the notice of General Meeting at the end of the circular convening the General Meeting (the "Circular"), which will be posted to Shareholders today, will, if passed by Shareholders, effect the proposed Capital Reorganisation as detailed above. The passing of Resolution 1 effects the consolidation and redesignation of the Existing Ordinary Shares into New Ordinary Shares and Deferred Shares and effects the amendments to the Company's Articles of Association to set out the rights of the Deferred Shares. If approved, the Capital Reorganisation will take place at 5.00 p.m. on 14 August 2015 and Admission and dealings in the New Ordinary Shares will become effective at 8.00 a.m. on 17 August 2015. 

A copy of the Company's Articles of Association, showing the intended amendments to be made pursuant to Resolutions 1 and 2 will be made available for inspection at the General Meeting. 

Fractional Entitlements 

Under the Company's Articles of Association, if as a result of the Capital Reorganisation any Shareholders would become entitled to fractions of a New Ordinary Share, the Directors are entitled, on behalf of such Shareholders, to sell the shares representing the fractions for the best price reasonably obtainable and distribute the net proceeds of sale in due proportion amongst those Shareholders, provided that any amount otherwise due to a Shareholder which is less than £5 may be retained for the benefit of the Company. Given the Company's current share price it is not expected that any such amounts would be distributed to Shareholders. Shareholders who hold fewer than 100 Existing Ordinary Shares at the Record Time will not receive any New Ordinary Shares or Deferred Shares. 

To facilitate the Capital Reorganisation, following the General Meeting but prior to the Record Time the Company Secretary will subscribe for such number of Existing Ordinary Shares (being fewer than 100 Existing Ordinary Shares) as is necessary to ensure that the Company's issued ordinary share capital is divisible by exactly 100. 

For purely illustrative purposes, examples of the effect of the Capital Reorganisation are set out below:

Share Certificates and CREST Entitlements

Shareholders who hold their Existing Ordinary Shares in certificated form will receive a new share certificate representing their New Ordinary Shares following the Capital Reorganisation. If Shareholders hold their Existing Ordinary Shares in uncertificated form, the shares held in their CREST account will be updated accordingly. Shareholders will not be issued with a share certificate in respect of the Deferred Shares. 

Background to and reasons for the Proposed Amendment

Resolution 2 contained in the notice of General Meeting at the end of the Circular sets out a proposed amendment to the Articles of Association with respect to the Company's level of permitted borrowings going forward, to afford the Board greater flexibility and enable the Company potentially to secure debt funding of a sufficient and more appropriate quantum to satisfy the Group's current and anticipated future requirements. In the event that Shareholders do not approve Resolution 2, the Directors believe that their ability potentially to secure meaningful debt funding going forward would be unduly restricted by the prevailing borrowing limit set out in the Articles of Association. In such circumstances, the Directors would be obliged to seek alternative sources of funding which may not be obtainable on similar commercial terms or at all.

Disapplication of pre-emption rights and share capital authorities

The Directors are seeking authority to allot New Ordinary Shares in relation to the Acquisition and the Placing and up to a further 2,780,670 New Ordinary Shares (representing approximately 33.33 per cent. of the Enlarged Share Capital following completion of the Acquisition and the Placing), together with an authority to disapply pre-emption rights in respect of the Placing and up to a further 1,668,402 New Ordinary Shares (representing approximately 20 per cent. of the Enlarged Share Capital following completion of the Acquisition and the Placing), subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems relating to such an allotment.

These renewed authorities will enable the Directors to carry out the Company's objectives going forward and will ensure that the Company is in a position to pursue and take advantage of growth opportunities as and when they arise. In particular, the proposed authorities are intended to provide the Directors with the flexibility to issue New Ordinary Shares, and rights to subscribe for New Ordinary Shares, as consideration to vendors of potentially attractive assets and/or to fund the cash consideration element of such potential acquisitions. The proposed authorities will also enable the Directors to: (a) raise additional working capital to, inter alia, fund potential future work programmes without having to incur the time delay and cost of convening a further general meeting; and (b) up to an amount of 10 per cent. of the fully diluted share capital from time to time, to satisfy allotments under any share incentive arrangements that may be established for the benefit of the enlarged group's employees and directors from time to time. Any options or similar awards to be granted under any such share incentive arrangements will be at the discretion of the Board's Remuneration Committee. 

Change of Company Name

To reflect the proposed changes to the Company, its management and refined business strategy as a result of the Acquisition, it is proposed that, conditional on, and with effect on and from, completion of the Acquisition, the Company will change its name to Jersey Oil and Gas plc.

Use of proceeds

The Company intends to use the net proceeds from the Placing for the enlarged group's general working capital purposes.

General Meeting

Set out at the end of the Circular, which will be posted to Shareholders today, is a formal notice convening a General Meeting to be held at the offices of Fieldfisher, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT on 14 August 2015 at 11.00 a.m. to consider, and if thought fit, pass the following Resolutions:

Resolution 1: a special resolution to authorise and effect the Capital Reorganisation and amend the Company's Articles of Association;

Resolution 2: a special resolution relating to a proposed further amendment to the Company's Articles of Association to ensure a sufficient level of permitted borrowings going forward to afford greater flexibility to the Directors and satisfy the Company's current and anticipated future requirements;

Resolution 3: an ordinary resolution to grant the Directors general authorities to allot New Ordinary Shares, including for the Acquisition, the Placing and in relation to employees' and directors' share incentive arrangements to be adopted and implemented at the discretion of the remuneration committee of the board of Directors; and

Resolution 4: a special resolution to grant the Directors power to allot equity securities for cash as if statutory pre-emption rights did not apply, including for the Placing and in relation to employees' and directors' share incentive arrangements to be adopted and implemented at the discretion of the remuneration committee of the board of Directors.

For the ordinary resolution to be passed, more than half of the votes cast must be in favour of the resolution.

For the special resolutions to be passed, at least three-quarters of the votes cast must be in favour of the relevant resolution.

Completion of the Acquisition and the Placing is conditional upon the passing of Resolutions 1, 3 and 4. If any of these Resolutions are not passed then the Acquisition and the Placing will not complete. Trapoil will only have limited remaining cash reserves and will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available, the Directors believe that it is highly likely that the Company would be forced to enter into administration within the next two to three months.

Related Party Transaction

The Union Discount Company of London Limited ("UDCL") and Peter Gyllenhammar AB ("PGAB"), existing shareholders in the Company, are 100 per cent. owned by Mr Peter Gyllenhammar and together are interested, in aggregate, in 51,102,026 Existing Ordinary Shares representing approximately 22.5 per cent. of the Company's existing issued share capital. Accordingly, UDCL and PGAB are deemed to be related parties of the Company for the purposes of the AIM Rules for Companies. PGAB has subscribed for 1,136,364 Placing Shares pursuant to the Placing, such that following completion of the Placing UDCL and PGAB will be interested, in aggregate, in 1,647,383 New Ordinary Shares representing approximately 19.75 per cent. of the Enlarged Share Capital. The Directors consider, having consulted with the Company's nominated adviser, Strand Hanson, that the participation of PGAB in the Placing is fair and reasonable insofar as Shareholders are concerned.

Irrevocable undertakings

The Company has received irrevocable undertakings from each of the Directors, Mr Peter Gyllenhammar (in respect of the shares held by UDCL and PGAB), Mr Paul Curtis and certain other Shareholders in respect of, in aggregate, 73,249,556 Existing Ordinary Shares, representing approximately 32.2 per cent. of the Company's existing issued ordinary share capital, to vote in favour of all of the Resolutions and not dispose of any such Existing Ordinary Shares prior to the General Meeting.

Recommendation

The Directors consider that the Acquisition, the Placing, the Capital Reorganisation and the Proposed Amendment are in the best interests of the Company and its Shareholders as a whole and, accordingly, unanimously recommend that Shareholders vote in favour of all of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken so to do or procure to be done in respect of their own beneficial and other connected interests, amounting in aggregate to 3,681,414 Existing Ordinary Shares representing approximately 1.62 per cent. of the Company's existing issued ordinary share capital.

In the event that Resolutions 1, 3 and 4 are not passed and the proposed Acquisition and Placing are not completed, Trapoil will have only limited remaining cash reserves and will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available, the Directors believe that it is highly likely that the Company would be forced to enter into administration within the next two to three months.

Notes:

1. References to times and dates in this announcement are to times and dates in London (unless otherwise stated).

2. The timing of the events set out in the above timetable and in the remainder of this announcement is indicative only. If any of the above times and/or dates should change, the revised times and/or dates will be notified via an announcement through a Regulatory Information Service.

3. Temporary documents of title will not be issued

**ENDS**

APPENDIX

Table of Definitions

Capitalised terms used but not defined in the body of this announcement have the meanings set out below.