Management Resource Solutions Regulatory News (MRS)

9 Jun 2006 07:01

Melrose Resources PLC09 June 2006 For Immediate Release 9 June 2006 Melrose Resources plc ("Melrose" or "the Company") Proposed Placing and Open Offer of up to 22,691,476 new Ordinary Shares at 330p per share Proposed acquisition of Merlon Petroleum Company Melrose Resources plc (LSE:MRS), the Edinburgh based oil and gas exploration andproduction company, today announces the proposed Placing and Open Offer of up to22,691,476 new Ordinary Shares at 330p per share to raise approximately £75million (before expenses). On 13 April 2006, the Board announced that the Company had entered into aconditional agreement to acquire Merlon Petroleum for a cash consideration of$265 million (adjusted for net working capital less debt) subject to, interalia, shareholder approval ("the Acquisition"). The Placing and Open Offer willgive Melrose a suitable capital structure for its enlarged operations, allowingfor the acceleration of its exploration and development activities. Onsuccessful completion of the Acquisition, Melrose will own a 100% workinginterest in all of the Egyptian concessions and development leases in which itcurrently has an interest. In view of their respective sizes, the Acquisition and the Placing and OpenOffer are each conditional upon the approval of shareholders which is to besought at the EGM. Bell Lawrie is the Sponsor and Joint Broker to the Company. Numis Securities isthe Joint Broker to the Company. For further information please contact: Melrose Resources plc 0184 553 7037Robert Adair , Chairman 0131 221 3360David Curry, Chief Executive 0131 221 3360Munro Sutherland, Finance Director 0207 462 1603Chris Thomas, Corporate Development Director Bell Lawrie 0141 221 7733Liz KennedyKen Fleming Numis Securities 020 7776 1500Chris WilkinsonMichael Rowan Buchanan Communications 0207 466 5000Ben Willey 01943 883990Tim ThompsonEric Burns or visit www.melroseresources.com On 13 April 2006, Melrose Resources plc ("Melrose" or "the Company") announcedthat it had entered into a conditional agreement to acquire Merlon Petroleum fora cash consideration of $265 million (adjusted for net working capital lessdebt) subject to, inter alia, shareholder approval. Further details of theproposed Acquisition were set out in that announcement. When the Company announced the acquisition of Merlon Petroleum on 13 April 2006,it was the Board's intention to finance the Acquisition through a new $320million loan facility with Bank of Scotland. However, the Company is now takingthe opportunity to raise additional equity through a Placing and Open Offer, toprovide a suitable capital structure for its enlarged operations, which wouldallow for the acceleration of its exploration and development activities. The Company announces that it proposes to raise approximately £74.88 million(before expenses) (equivalent to approximately $138.5 million) by the issue ofup to 22,691,476 new Ordinary Shares at a price of 330p per share by way of thePlacing and Open Offer. The Placing is to institutional investors only, subjectto, inter alia, Qualifying Shareholders' rights to take up their entitlementsunder the Open Offer. The Placing and Open Offer is conditional, inter alia,upon the Closing of the Acquisition, the passing of the Resolutions at the EGM,the Placing Agreement having become unconditional in all respects and Admission. The net proceeds of the Placing and Open Offer (approximately £73 million) areexpected to be used by the Company to substantially repay a bridging facility of£75 million which will have been drawn down to finance the Acquisition. In view of their respective sizes, the Acquisition and the Placing and OpenOffer are each conditional upon the approval of shareholders which is to besought at the EGM, details of which are set out below. Background to and reasons for the Acquisition The Acquisition will result in Melrose owning 100% of the working interests inall of the Egyptian concessions and development leases in which it currently hasan interest. In addition, Melrose will take over as the operator of theseinterests. The Acquisition therefore provides the Company with a uniqueopportunity to expand its asset base through the acquisition of assets of whichit already has a detailed working knowledge and which offer obvious synergieswith the Group's existing asset base. Melrose's exposure to the explorationpotential that has already been identified and further exploration targets thatmay be established in the future will be significantly increased as a result ofthe Acquisition. Whilst the principal reason for the Acquisition is to acquire the additionalinterests in the Nile Delta Concessions, Merlon's US Assets in the Gulf Coastarea of Texas complement, and add some diversity to, the Group's existing USasset base in Texas and New Mexico. Merlon's US assets have additionalexploration potential that the Enlarged Group may seek to exploit, butalternatively the Company may choose to dispose of these assets in the short tomedium term. The Acquisition offers Melrose the opportunity to significantly increase its oiland gas reserve base at a cost that, in the Directors' opinion, represents asmall discount to the underlying value of the proven and probable oil and gasreserves acquired. Financial effects of the Acquisition The Board believes that the Acquisition will enhance the Company's net assetvalue per share and earnings per share in the short to medium term after takinginto account expected synergies (although this statement should not beinterpreted to mean that earnings per share of the Enlarged Group willnecessarily be greater than or equal to that of prior years). Oil and gas reserves of the Enlarged Group On an aggregate basis (as at 31 December 2005), the Enlarged Group hasapproximately 412 Bcfe of proved and probable oil and gas reserves: Egypt Bulgaria USA Total Bcfe Bcfe Bcfe BcfeProved 131.4 47.6 97.5 276.5Probable 125.6 7.6 2.5 135.7 -------- -------- ------- -------Total proved and probable 257.0 55.2 100.0 412.2 -------- -------- ------- ------- Placing and Open Offer As noted above, the Company proposes to raise approximately £75 million(approximately £73 million net of expenses) by the issue of 22,691,476 NewOrdinary Shares pursuant to the Placing and Open Offer. Pursuant to the Placing, the New Ordinary Shares (other than the CommittedShares) are being conditionally placed at the Issue Price with institutionalinvestors, subject to Qualifying Shareholders' rights to take up theirentitlements under the Open Offer. The Placing and Open Offer is conditional,inter alia, upon the Closing of the Acquisition, the passing of the Resolutionsat the EGM, the Placing Agreement having become unconditional in all respectsand Admission. An irrevocable undertaking has been received from Skye (a companyin which R F M Adair, Executive Chairman, has an ultimate beneficial controllinginterest) to take up 11,646,894 New Ordinary Shares under the Open Offer. Subject to the fulfilment of, inter alia, the conditions referred to above,Qualifying Shareholders are being given the opportunity to subscribe under theOpen Offer for New Ordinary Shares pro rata to their existing shareholdings atthe Issue Price on the basis of: 2 New Ordinary Shares for every 7 existing Ordinary Shares held at the close of business on the Record Date and so in proportion to thenumber of existing Ordinary Shares then held. The Issue Price represents adiscount of 12% to the closing middle market price of 375p per Ordinary Share on8 June 2006, the last Business Day prior to the publication of thisannouncement. Each Qualifying Shareholder's entitlement will be rounded down to the nearestwhole number of New Ordinary Shares. Fractions of New Ordinary Shares that wouldotherwise arise will not be allotted. Qualifying Shareholders may apply for anynumber up to their maximum entitlement shown on their Application Form.Qualifying Shareholders with holdings of existing Ordinary Shares in bothcertificated and uncertificated form will be treated as having separate holdingsfor the purpose of calculating their entitlements under the Open Offer. No application in excess of a Qualifying Shareholder's maximum entitlement willbe accepted and any Qualifying Shareholder so applying will be deemed to haveapplied for their maximum entitlement only. Pursuant to and subject to the terms and conditions of the Placing Agreement,Bell Lawrie and Numis have each agreed to place conditionally with certaininstitutional investors, or, to the extent that they fail to do so, themselvessubscribe for the New Ordinary Shares (other than the Committed Shares) at theIssue Price, subject to Qualifying Shareholders' rights to take up theirentitlements under the Open Offer. The Committed Shares are the subject of anirrevocable undertaking from Skye to take up its entitlement under the OpenOffer as described above and accordingly are not being placed or underwritten byBell Lawrie or Numis pursuant to the Placing Agreement. Current trading and prospects Overview Shareholders have most recently been provided with updates on the Company'strading activities in the announcements made to the London Stock Exchange'sRegulatory News Service on 21 April 2006 and 22 May 2006. These announcementsupdated information included in the Company's annual report for the year ended31 December 2005 which was posted to shareholders on 4 May 2006. The Group is currently benefiting to some degree from the high oil price, bothdirectly through its impact on the value of the Group's oil production, and alsoindirectly through its impact on gas prices, particularly in Bulgaria. The Directors believe that the drilling programmes that are currently scheduledfor 2006 and 2007 in Egypt and Bulgaria offer opportunities to significantlyenhance the Enlarged Group's net asset value and potential future cashflowsthrough the discovery and development of additional oil and gas reserves. Egypt drilling update A second well has been drilled in each of the West Khilala (late Miocene AbuMadi) and West Dikirnis (late Miocene Qawasim) field discoveries to furtherappraise them. The Company announced on 22 May 2006 the results of these recentappraisal wells, both of which were very encouraging with thicker and betterquality reservoir sections being encountered than in the original discoverywells. On the basis of the initial evaluation of the well data, the Directorsbelieve that GIIP for the West Khilala field should exceed 500 Bcf. Plans arebeing advanced for initial production from the field in late 2006 at rates whichit is estimated by the Directors will exceed 60 MMcfpd. The West Dikirnis No.2well has recently been tested at a rate of 2,200 bopd through a 24/64ths chokeat a flowing tubing pressure of 1,960 pounds per square inch. The test resulthas confirmed that the West Dikirnis field now comprises a gas cap overlying anoil leg which has a thickness of 72 ft in the No.2 well. Most likely oil inplace has been initially estimated by the Directors to be 45 MMbbl andpreliminary analysis by Melrose of the reservoir and petrophysical data suggesta recovery factor in excess of 50% should be achievable from this field. Plansare being drawn up by the operating group for early oil production from thefield through a new 10-inch pipeline to the existing South Batra facilities at arate which the Directors currently estimate will be approximately 10,000 bopdand 10 MMcfpd by the second half of 2007. Further appraisal of the field willcontinue in parallel with work on the full field development plan. Bulgaria drilling programme and acquisition of additional exploration concession Production from the Galata gas field continues to be in line with the Directors'expectations at 40 - 50 MMcfpd. The gas price for production from the Galata gasfield has increased by over 25% this year to $3.53/Mcf (for sales in the 2ndquarter 2006) compared to the average realised price in 2005 of $2.81/Mcf. A semi-submersible drilling rig has been contracted for a drilling programme ofup to five wells. The Directors expect this drilling programme will target someof the deeper water prospects that have been mapped on Block Kaliakra 99, BlockRezovska and Block Bourgas Deep Sea. The prospects that have been mapped rangein size from 200 Bcf to over 1 Tcf. On 4 May 2006 the Group acquired a 100%interest in the exploration concession Bourgas Deep Sea. Several largestructures have already been identified from the 2-D seismic data on this blockand one prospect with GIIP potential in excess of 500 Bcf has been identifiedand is ready to be drilled with a semi-submersible rig. This drilling programmeis scheduled to commence towards the end of 2006. Proposed changes to the Board Chris Thomas, the Corporate Development Director and Company Secretary, intendsto resign from these positions with effect from 31 July 2006 in order to devotemore time to his other business interests. Chris is also Executive Chairman ofRenova Energy plc, a bio-fuel production and distribution company which was soldby the Company to management in 2002 and floated on AIM in June 2005. ChrisThomas will continue to be engaged by the Company in a consulting capacity for aminimum period of six months to assist in the ongoing execution of the Company'sstrategy in the US and in the integration of Merlon following the Acquisition.Chris Thomas was a founding director of Melrose and the Board would like tothank him for his contribution to the Company over the last nine years and wishhim every success in the future with Renova Energy plc. Extraordinary General Meeting The Acquisition and the Placing and Open Offer are conditional, inter alia, uponthe passing of the Resolutions to be proposed at the EGM to be held at theoffices of Tods Murray LLP, Edinburgh Quay, 133 Fountainbridge, Edinburgh EH3 9AG, at 10:00 am on 26 June 2006. Shareholders will be asked to consider and,if thought fit, pass resolutions to: (a) approve the Acquisition; and (b) approve the terms of the Placing and Open Offer, increase the authorized share capital and authorize and empower the directors of the Company under section 80 of the Act to issue and allot (i) the New Ordinary Shares at the Issue Price pursuant to the Placing and Open Offer and (ii) new Ordinary Shares up to an aggregate nominal value of £756,700 as they think fit (in additional to all existing authorities that are in place at the date of the EGM). Further Information A Circular and a Prospectus setting out, inter alia, further details of theAcquisition and of the Issue (and the risk factors relating thereto) and, (inthe case of the Circular) containing the notice of an EGM together with a recommendation from the Board to vote in favour of the Resolutions to beproposed at the EGM, are expected to be despatched to Shareholders shortly. TheCircular and Prospectus will also be accompanied (in the case of all Qualifying Shareholders except Overseas Shareholders) by a personalised Application Form(which may not be split or transferred except to satisfy bona fide marketclams) The Open Offer will be made to Overseas Shareholders by publishing anotice in the London Gazette on or about 13 June 2006, further details of whichare set out in the Prospectus and (in the case of all Shareholders) a Form ofProxy for use at the EGM. The latest time and date for receipt of completedApplication Forms and payment in full under the Open Offer is 3.00 pm on 6 July2006. The latest time and date for splitting of Application Forms is 3.00 pmon 4 July 2006. The EGM is being convened for 10:00 am on 26 June 2006. Application will be made to the UK Listing Authority and to the London StockExchange for the New Ordinary Shares to be admitted to the Official List and totrading on the London Stock Exchange's market for Listed Securities. It isexpected that Admission will become effective and that dealings will commenceat 8.00 am on 12 July 2006. It is expected that CREST member accounts will becredited that day and that certificates in respect of New Ordinary Shares willbe issued by no later than 19 July 2006. The Company hereby gives notice that copies of the Circular and the Prospectusare being submitted to the UKLA for approval and will shortly be available forinspection at the UKLA's Document Viewing Facility which is situated at: Financial Services Authority, 25 The North Colonnade, Canary Wharf, London EH145HS. Telephone: 0207 066 1000. Expected Timetable Of Principal Events 2006 Record Date for entitlement under the Open Offer close of business on 6 June Annual General Meeting 15 June Latest time and date for receipt of Forms of Proxy for use at the Extraordinary General Meeting 10:00 am on 24 June Extraordinary General Meeting 10:00 am on 26 June Expected date of Closing of the Acquisition 29 June Latest time and date for splitting Application Forms (to satisfy bona fide market claims only) 3:00 pm on 4 July Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer 3:00 pm on 6 July Expected date of Admission and expected date of issue of and commencement of dealings in the New Ordinary Shares 12 July CREST accounts expected to be credited for New Ordinary Shares 12 July Expected date for dispatch of share certificates for New Ordinary Shares by 19 July DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise: "Acquisition" the proposed acquisition of Merlon by Melrose pursuant to the Acquisition Agreements "Acquisition the Merger Agreement, the Escrow Agreement and the Skye VotingAgreements" Agreement "Admission" the admission of the New Ordinary Shares to the Official List and to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission Standards "Admission the Admission and Disclosure Standards published by the LondonStandards" Stock Exchange "Application the application form relating to the Open Offer being sent toForm" Qualifying Shareholders (other than Overseas Shareholders) with the Prospectus and the Circular "Bank of The Governor and Company of the Bank of Scotland, a subsidiaryScotland" of HBOS plc "Bell Lawrie" Bell Lawrie (a division of Brewin Dolphin Securities Limited, which is regulated by the Financial Services Authority) "Business Day" a day other than a Saturday or Sunday on which banks are open for commercial business in the City of London "certificated" a share or other security which is not in uncertificated formor in"certificatedform" "Circular" the circular dated 9 June 2006 being sent to Shareholders in connection with the Acquisition and the Placing and Open Offer "Closing" closing of the Acquisition, which is expected to take place on 29June2006 "Committed 11,646,894 New Ordinary Shares in respect of which anShares" irrevocable undertaking to take up its entitlement under the Open Offer has been received from Skye "CREST" the relevant paperless settlement procedure operated by CRESTCo enabling securities to be evidenced otherwise than by written instrument "Directors" or the directors of Melrose"Board" "EGM" or the extraordinary general meeting of the Company to be held on"Extraordinary 26 June 2006, or any adjournment thereofGeneral Meeting" "Enlarged Group" the Company and its subsidiaries following Closing "Escrow Agent" Amegy Bank N.A., a bank with an office in Houston, Texas "Escrow the escrow agreement between Merlon, Melrose, representativesAgreement" of Merlon's shareholders and the Escrow Agent dated 12 April 2006 relating to the Acquisition, further details of which are set out in Part II of the Prospectus "FSA" the Financial Services Authority "FSMA" the Financial Services and Markets Act 2000 (as amended) "Form of Proxy" the document entitled "Melrose Resources plc Form of Proxy" sent to Shareholders with the Circular "Group" Melrose and its subsidiaries "Issue" the Placing and Open Offer "Issue Price" 330p per New Ordinary Share "Listing Rules" the listing rules of the UK Listing Authority governing, inter alia, admission of securities to the Official List "London Stock the London Stock Exchange plcExchange" "Melrose" or Melrose Resources plc"Company" "Merlon" or Merlon Petroleum Company, a Texas corporation"MerlonPetroleum" "Merlon Group" Merlon and its subsidiary undertakings "Merlon's US the interests of Merlon in the North Raywood and Rankin fieldsAssets" in Texas, USA "Merger the conditional agreement and plan of merger between Merlon,Agreement" the Company and MRP Acquisition Sub, Inc. (a subsidiary of the Company) and J Kishpaugh and P Leidel (as shareholder representative) dated 12 April 2006 relating to the Acquisition, further details of which are set out in Part II of the Prospectus "New Ordinary up to 22,691,476 new Ordinary Shares to be issued by theShares" Company pursuant to the Placing and Open Offer "Nile Delta the El Mansoura, South East El Mansoura and Qantara explorationConcessions" concessions in the Nile Delta "Notice of EGM" the notice of the EGM set out at the end of the Circular "Numis" Numis Securities Limited "Official List" the Official List of the UK Listing Authority "Open Offer" the conditional invitation by Bell Lawrie, acting as agent for the Company, to Qualifying Shareholders to subscribe for New Ordinary Shares on the terms and subject to the conditions set out or referred to in Part IV of the Prospectus and in the Application Form "Ordinary ordinary shares of 10 pence each in the capital of the CompanyShares" "Overseas any Qualifying Shareholders who do not have a registeredShareholders" address within the UK and who have not supplied to the Company an address within the UK for the service of notices "Placing" the conditional placing of the New Ordinary Shares at the Issue Price pursuant to the Placing Agreement and subject to the rights of Qualifying Shareholders to apply for such shares pursuant to the Open Offer "Placing the conditional agreement dated 9 June 2006 between (1) BrewinAgreement" Dolphin Securities Limited (trading as Bell Lawrie), (2) Numis and (3) the Company relating, inter alia, to the Placing and Open Offer, further details of which are set out in paragraph 12 of Part VI of the Prospectus "Prospectus" the prospectus dated 9 June 2006 issued in connection with the Acquisition and the Placing and Open Offer "Qualifying holders of Ordinary Shares on the register of members of theShareholders" Company at the Record Date "Record Date" close of business on 6 June 2006 "Resolutions" the resolutions to be proposed at the EGM set out in the Notice of EGM "Shareholders" holders of Ordinary Shares "Skye" Skye Investments Limited, a company registered in England under no. 3340923 "UK" or "United United Kingdom of Great Britain and Northern IrelandKingdom" "UK Listing the FSA, acting in its capacity as the competent authority forAuthority" the purposes of Part VI of FSMA "uncertificated" recorded on the register of the share or security concerned asor in being held in uncertificated form in CREST, and title to which,"uncertificated by virtue of the CREST Regulations, may be transferred by meansform" of CREST "US", "USA" or the United States of America, its territories and possessions"United States" and any state of the United States and District of Columbia "$" US dollars This information is provided by RNS The company news service from the London Stock Exchange