Petrel Resources Regulatory News (PET)

1st November 2019

Petrel Resources plc

("Petrel" or "the Company")

Proposals by investor group to increase holding to 51%

A Circular will be dispatched today to Shareholders giving Notice of an Extraordinary General Meeting to be held in Dublin on November 21st at 12 noon at which meeting approval will be sought to issue 64,035,976 new ordinary shares at 1.25 cent a share to the Concert Party being private equity investors and friends and business acquaintances of Mr Roger Edward Tamraz or Mr Michel Fayad.

Should the shareholders approve, the Concert Party will then hold 51% of the issued ordinary shares of Petrel. Mr Fayad will directly hold 7% of Petrel, Mr Tamraz 7% and Mr Mehraik 3.5%.

Mr Fayad, a Director of Petrel is a private equity investor and founder of Boost Incorporated an integrated international oil company. Mr Mehraik, is a private investor and president of Tamoil USA Inc. Mr Tamraz specialises in oil, gas and banking. He founded among other ventures, Tamoil and Oil Capital Ltd (OCL) Inc. and was a leading figure in the development of the SUMED and BTC pipelines.

It is anticipated that a flow of potential investment proposals will be offered to Petrel.

Regulatory approval has been received from The Irish Takeover Panel to proceed with the proposals.

Details of the proposal and on the individuals involved are contained in the Circular, extracts from which are included in Part II to this Announcement and which is available on the Company's website: www.petrelresources.com.

John Teeling, chairman, commented. "I am absolutely delighted that we have the regulatory clearance to proceed with the increase in shareholding of the group headed up by Messrs Tamraz and Fayad to 51% of the issued share capital following the initial subscription by this group in July. This group brings a wealth of oil, gas and financial expertise to Petrel. And we look forward to a potential flow of deals. Mr Fayad and Mr Tamraz will be in attendance at the meeting in Dublin on November 21st. The future looks exciting".

PART II

Approval of Whitewash Resolution under Rule 9 of the Irish Takeover Rules

And

Notice of Extraordinary General Meeting

1. Introduction

On 25 July 2019 the Company entered into a conditional agreement with Mr Roger Edward Tamraz and Mr Michel Fayad whereby they would procure the subscription, through a private placing, for an initial 44,788,913 ordinary shares in the capital of the Company (Placing Shares) (representing a 29.99 per cent. interest after such allotment) at 1.25 cent per ordinary share (Step One). The parties further agreed, subject to the granting of a waiver by the Takeover Panel of any mandatory offer which may arise under the Takeover Rules, that an additional 64,035,976 ordinary shares in the capital of the Company (New Ordinary Shares) (representing 30.01 per cent. interest after such allotment) would be subscribed for at 1.25 cent per share (Step Two). It was agreed by the Board that it is in the best interests of the Shareholders of the Company to carry out the Transaction in two stages in order to secure the investment in the Company, subject to and conditional upon, in respect of Step Two, the conditions referred to in this Circular.

2. The Transaction

The Transaction will result in the allotment of a total of 108,824,889 ordinary shares, which is an increase by more than 100 per cent. of the Company's issued share capital prior to the Transaction. The Transaction, therefore, constitutes a reverse takeover (Reverse Takeover) within the meaning of the Irish Takeover Rules.

Step One was completed and announced on 30 July 2019 whereby the Company raised €559,861 by the issue of the 44,788,913 Placing Shares of to the following subscribers:

Each of the above parties and Netoil has confirmed to the Company, having regard to their business relationships, that they should be regarded as a concert party for the purposes of the Takeover Rules (Concert Party). The individual members of the Concert Party are private equity investors and friends and business acquaintances of Mr Roger Edward Tamraz or Michel Fayad who have collaborated together on a number of private investments in the oil and gas and related sectors over the last ten years.

Pursuant to Step Two it is intended that, subject to and conditional upon the Whitewash Resolution being passed by the Independent Shareholders on a poll, Netoil will subscribe for and be allotted the New Ordinary Shares at a subscription price of 1.25 cent each, representing in aggregate 30.01 per cent. of the Company's Enlarged Share Capital. The aggregate holding by the Concert Party will then be 51 per cent of the Company's Enlarged Share Capital. At the time of the initial agreement in July, this price represented the fair market value of the stock and in the Board's view continues to do so on fundamentals, particularly given the regulatory uncertainty over existing Petrel projects in Ireland, Ghana, and Iraq, together with a reasonable expectation of quality investment-grade deal flow from the new shareholders, as well as enhanced financial credibility and funding capabilities arising from their involvement. The subsequent appreciation of the Petrel share price confirms the Board's view that the proposed increase in the holding of the Concert Party and in particular the direct investment by Netoil as a substantial shareholder in its own right remains in the best interests of Petrel Shareholders. Moreover, Netoil and the principal members of the Concert Party (being the Locked-in Parties) have agreed to be locked in for a period being the earlier of 12 months from the date of Admission or the date of completion of a Substantial Transaction so unlike other shareholders will not be able to trade their shares (including those subscribed in the earlier July Placing) until it is clear what benefit they have brought, as hoped, to the Company.

Netoil is a limited liability Bulgarian incorporated company. It was incorporated on 25 July 2019 under registration number 205764057 with a registered office located at Boulevard Tzarigradsko Shosse 101, et. 7, Sofia 113, Bulgaria. The current shareholders of Netoil are Mr Michel Fayad (50%) and Mr Said Mehraik (50%). Mr Roger Edward Tamraz will become a shareholder of this company (he will then hold 34%, Mr. Michel Fayad will then hold 33% and Mr. Said Mehraik will then hold 33%). The directors of Netoil are Mr. Michel Fayad, Mr. Said Mehraik, Mr. Nikolay Paskalev, Paskalev. As Netoil is a newly incorporated company it has not traded to date and has not published any financial information. It is currently funded by its existing shareholders.

Mr. Michel Fayad is a private equity investor. He has experience in business development, project management and project finance. He started his career as Financial Analyst at the MENA Hedge Fund of the Evolvence Group in Dubai (United Arab Emirates). He is founder and director of Boost Incorporated, an integrated international oil company. 

Mr. Said Mehraik is a private equity investor. He has experience in European oil and gas, hotels, banking and finance groups. He was the former Chief Executive Officer and Chief Financial Officer at Milshare (Financial Holding) and a former Chief Accounting Officer of Oil Capital Ltd. (OCL) Inc. He is the President of Tamoil USA Inc.

Mr. Roger Edward Tamraz is a private equity investor specialising in oil & gas, banking, reorganisations and restructurings. His past holdings and directorships of companies in the oil & gas and related sectors include Intra Investment Company, of which Mr Tamraz was founder and director. Intra Investment Company owned Chantiers Navals de la Ciotat (CNC), the second largest shipyard in France. Mr Tamraz established the First Arabian Corporation, having purchased and combined the Italian assets of Amoco (Standard Oil Company of Indiana). Mr Tamraz founded Tamoil (Tamraz Oil) and Oil Capital Limited (OCL) Inc. (which acquired the exploration and development rights and equity ownership positions in Turkmenistan's Blocks I (offshore) and III (onshore), two of the country's major oil and gas producing properties. In addition, Mr Tamraz has been involved at a senior level with the following very successful projects in the oil & gas sector: the Suez-Mediterranean (SUMED) Pipeline, Ar-Razi (formerly Japanese Saudi Methanol Company), and the Baku-Tbilisi-Ceyhan (BTC) Pipeline. 

3. AIM Rule 13 - Related Party Transaction

As aforementioned, the Directors consider that the subscription price of 1.25 cent remains appropriate for the injection of further funds into the Company. Accordingly, also taking into account:

1. the Relationship Agreement designed to ensure that the Company can actually carry on the Business independently of Roger Tamraz, Michel Fayad, Said Mehraik and Netoil,

2. the Lock-in over the Ordinary Shares in the Company held by the Lock-in Parties (including Placing Shares acquired in the July Placing and the New Ordinary Shares), and

3. the opportunity for Shareholders to approve or otherwise the arrangements,

the Directors, other than Mr Michel Fayad, who is a member of the Concert Party, are independent of the Transaction (Independent Directors), consider having consulted with the Company's Nominated Adviser, that the terms of the Transaction are fair and reasonable in so far as the Shareholders of the Company are concerned.

4. Admission to Trading

The New Ordinary Shares are being issued pursuant to the existing authorities approved by the Shareholders on 24th July 2019 at the Annual General Meeting.

Admission to trading of the New Ordinary Shares is expected to occur on or before 25 November 2019, assuming the Whitewash Resolution is passed. Following Admission, the Company will have 213,382,135 Ordinary Shares in issue. The Company holds no shares in treasury. Shareholders should use the figure of 213,382,135 as the denominator for the calculations by which they will determine if they are required to notify their interest in or change to their interest in the Company, under the FCA's Disclosure Guidance and Transparency Rules.

5. Future Strategy

Post the Transaction the future strategy of the Company will be the continued oil & gas exploration, development and production in the MENA region, as well as the development of oil & gas pipelines in the Middle East. Netoil shareholders and executives are intimately familiar with oil projects in the region, particularly in Iraq, and Libya, but have lacked an appropriate operating vehicle until Netoil's investment in Petrel. Conversely, Petrel has longstanding operating experience in Iraq and neighbouring countries, but has hitherto lacked substantial backers familiar with the region. Co-operation between the two expands the opportunities available.

Any such transaction will be subject to customary legal, licencing and accounting due diligence and regulatory compliance including compliance with the Irish Takeover Rules and the AIM Rules as appropriate. Subject to the relative size of such transaction, it may constitute a reverse takeover under the AIM Rules requiring shareholder approval and a full re-Admission process.

6. Dispensation from Rule 9 of the Takeover Panel

The Transaction will give rise to certain considerations under the Takeover Rules. Brief details of the Takeover Rules and the protections they afford are described below.

Under Rule 9 of the Takeover Rules, where any person or any persons acting in concert acquire, whether by a series of transactions over a period of time or not, a holding in shares which (taken together with shares already held by that person or by persons acting in concert) carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Rules, that person, or in case of persons acting in concert such one or more persons as the Panel may direct, will be obliged to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights in that company in accordance with Rule 9 of the Takeover Rules unless that obligation has been waived by the Panel.

Under the Takeover Rules, when the issue of new securities in consideration for an acquisition or a cash subscription would otherwise result in an obligation to make a general offer under Rule 9 of the Takeover Rules, the Takeover Panel will normally grant a waiver of that obligation subject to, inter alia, an Independent Shareholders vote on a poll at an extraordinary general meeting approving the proposals which would otherwise give rise to the obligation to make an offer. The relevant resolution in this case is the Whitewash Resolution.

On completion of the Transaction, Petrel will allot and issue the New Ordinary Shares, equal to 30.01 per cent. of the issued share capital of the Company after such allotment and issue. As a result, the Concert Party will hold 51 per cent. of the voting rights in Petrel and would ordinarily be obliged to make a cash offer pursuant to Rule 9 of the Takeover Rules for the remaining issued shares of Petrel. Therefore, Petrel and the Concert Party have sought a Rule 9 Waiver from the Takeover Panel to permit the Concert Party to acquire a 51 per cent shareholding without the need to make a general offer under the Takeover Rules, which the Panel has agreed to waive subject to:

(i) the passing of the Whitewash Resolution by Independent Shareholders at the EGM. Voting on the Whitewash Resolution will be put to a poll, as required by the Takeover Rules; and

(ii) the approval by the Panel of a circular to Shareholders in accordance with the whitewash guidance note of Rule 9 in the Takeover Rules. This Circular has been so approved in this respect only.

The Whitewash Resolution is subject to the approval of a simple majority of the Independent Shareholders on a poll and each Independent Shareholder will be entitled to one vote for each Existing Ordinary Share held. None of the members of the Concert Party will vote on the Whitewash Resolution.

Assuming the Whitewash Resolution is passed, as noted above, upon Admission the Concert Party will control the voting rights of Placing Shares and New Ordinary Shares representing 51 per cent. of the Enlarged Share Capital. Accordingly, following Admission and for so long as the Concert Party holds more than 50 per cent. of the Company's voting share capital (for the purposes of the Takeover Rules), the Concert Party might then be permitted by the Panel to increase their holding in the Company without incurring an obligation under Rule 9 to make a general offer for the Company.

If approved, the Transaction will result in an increase by more than 100 per cent. of the Company's existing issued share capital that confers voting rights and therefore the transaction is classified by the Takeover Panel as a "reverse takeover transaction". Pursuant to Rule 3.2 of the Takeover Rules, the Board is therefore required to obtain competent independent advice that the entering into the reverse takeover transaction is in the interests of its Shareholders.

Your attention is drawn to paragraph 16 of this Part 1 which provides a recommendation from the Directors in relation to the Waiver/Whitewash Resolution and the reverse takeover transaction.

8. The Concert Party

The Concert Party includes each of Mr Roger Edward Tamraz, Mr Michel Fayad, Mr Said Mehraik, Netoil Inc Ltd, being also subject to Lock-in Deed and Relationship Agreement, Mr Marc, Jean - Louis, d'Hombres, Mr George Mgaloblichvil, Mr Antoine Baaklini, Mr Nikolay Paskalev Paskalev and Mrs Dolly Khouny.

Further details on each member of the Concert Party are set out in Part 3 of this Circular.

9. Summary of The Relationship Agreement

On the implementation of Step Two of the Transaction, Mr Roger Tamraz, Mr Michel Fayad, Mr Said Mehraik and Netoil (Significant Shareholders) will together be interested in 101,372,514 Ordinary Shares representing 47.51 per cent. of the Enlarged Share Capital. Pursuant to an agreement dated 30 October 2019 made between (1) the Company, (2) Mr Roger Tamraz, (3) Mr Michel Fayad (4) Mr Said Mehraik, (5) Netoil Inc Ltd and (6) Beaumont Cornish Limited (Relationship Agreement) the parties, agreed procedures to manage the relationship between them to ensure, inter alia, that:

(a) the Company will at all times be capable of carrying on the Business independently of Mr Roger Tamraz, Mr Michel Fayad, Mr Said Mehraik and Netoil; and

(b) all transactions and arrangements between the Company and Mr Roger Tamraz, Mr Michel Fayad, Mr Said Mehraik and/or Netoil will be at arm's length and on normal commercial terms.

The Relationship Agreement provides that for so long as any Significant Shareholders individually or collectively are interested in voting rights representing more than 30 per cent of the rights to vote at a general meeting of the Company attaching to shares, they shall, be entitled to nominate two directors for appointment to the Board.

All director appointments are subject to the satisfactory completion of the Nomad's due diligence and overall agreement that the enlarged board structure post appointment(s) is appropriate for a company admitted to trading on AIM.

The provisions of the Relationship Agreement will remain in force for so long as: -

1. the Placing Shares and New Ordinary Shares are admitted to trading on AIM; and

2. each of Mr Roger Tamraz, Mr Michel Fayad, Mr Said Mehraik and Netoil individually or together are interested in voting rights representing 30% or more of the rights to vote at a general meeting of the Company.

10. Summary of Lock-in Deed

On the implementation of Step Two of the Transaction, Mr Roger Tamraz, Mr Michel Fayad, Mr Said Mehraik and Netoil (Lock-in Parties) will be the owner of 47.51 per cent. of the Enlarged Share Capital. Pursuant to an agreement dated 30 October 2019 made between (1) the Company, (2) Mr Roger Tamraz, (3) Mr Michel Fayad, (4) Mr Said Mehraik, (5) Netoil and (6) Beaumont Cornish (Lock-in Deed), the Lock-in Parties, agreed to enter into certain restrictions with regard to the disposal of the Ordinary Shares in the Company held by them (including Placing Shares acquired in the July Placing and the New Ordinary Shares) to ensure, inter alia, that each of Mr Roger Tamraz, Mr Michel Fayad, Mr Said Mehraik and Netoil will not effect any disposal of the Ordinary Shares held by them during the lock-in period being the earlier of 12 months from the date of Admission or the date of completion of a Substantial Transaction.

11. Wider Intentions of the Concert Party

The current Chairperson of the Company, Mr John Teeling, will remain as an executive director. The members of the Concert Party have confirmed to the Company that it is not proposing to seek a change in the general nature of the Company's business.

The members of the Concert Party have also confirmed that they do not intend to make any changes regarding the locations of the Company's places of business or the continued employment of its employees and management nor does the Concert Party intend that there should be any redeployment of the fixed assets of the Company. Post the Transaction the future strategy of the Company will be the continued oil & gas exploration, development and production in the MENA region, as well as the development of oil & gas pipelines in the Middle East. 

The Concert Party intends that the Company should remain quoted on AIM and may only vote their shareholding in favour of a cancellation from admission to trading on AIM if the Independent Directors recommend such cancellation.

12. Extraordinary General Meeting and the Whitewash Resolution

A notice convening the Extraordinary General Meeting is set out in the Appendix to this Circular, at which the Whitewash Resolution, will be proposed.

The EGM will take place at 21 November 2019.

The Whitewash Resolution is being proposed as an ordinary resolution and requires a simple majority of the votes cast to be cast in favour on a poll in order for it to be passed.

13. Effect of not approving the Whitewash Resolution

Should Shareholders not vote in favour of the Whitewash Resolution set out in the Appendix to this Circular, the Board would not be able to proceed with Step Two of the Transaction and would have to seek alternative sources of capital in the near term. There is no guarantee that the Board would be successful in raising this capital on terms acceptable to Shareholders or at all.

If you are in any doubt about the contents of this document or as to the action you should take, you are recommended immediately to seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant, or other independent financial adviser authorised pursuant to the Financial Services and Markets Act 2000 ("FSMA"), or, in the case of Shareholders in a territory outside Ireland and the United Kingdom, from another appropriately authorised independent financial adviser.

14. Action to be taken in respect of the Extraordinary General Meeting

For Existing Shareholders who hold their shares in certificated form, you will find enclosed with this document a Form of Proxy for use by such Shareholders at the Extraordinary General Meeting. Whether or not you wish to attend the Extraordinary General Meeting, you are requested to complete and sign the Form of Proxy and return it to the Company's Registrars, Computershare, 3100 Lake Drive, Citywest Business Campus, Dublin 24, Ireland so as to arrive no later than 48 hours before the time appointed for the Extraordinary General Meeting. The return of the Form of Proxy will not prevent you from attending the Extraordinary General Meeting and voting in person should you wish to do so.

Alternatively, for those who hold Existing Ordinary Shares in CREST, an Existing Shareholder may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Computershare. In each case the proxyappointment must be received by no later than 12.00 p.m. on 19 November 2019. The completion and return of either an electronic proxy appointment notification or a CREST Proxy Instruction (as the case may be) will not prevent a Shareholder from attending and voting in person at the Extraordinary General Meeting or any adjournment thereof, should such Existing Shareholder wish to do so.

15. Additional Information

Your attention is drawn to Part 3 of this document which contains certain additional information in respect of Petrel. Shareholders are advised to read the whole of this document and not rely solely on the summary information set out in this letter.

16. Recommendation

The Independent Directors consider that the Transaction is in the best interest of the Company and its Shareholders as a whole.

The Independent Directors, having been so advised by Beaumont Cornish, consider the Waiver and the entry into the reverse takeover transaction, as defined by the Takeover Rules, to be in the best interests of the Shareholders and the Company as a whole. In providing advice to the Independent Directors, Beaumont Cornish has taken into account the commercial assessments of the Independent Directors.

The Independent Directors unanimously recommend that all Independent Shareholders vote in favour of the Whitewash Resolution to be proposed at the Extraordinary General Meeting, as they intend to do in respect of their beneficial holdings which amount to, in aggregate, 11,415,769 existing ordinary shares (including the Company's Secretary's shares), representing 7.64 per cent. of the Company's issued share capital as at the date of the Circular.

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

For further information please visit http://www.petrelresources.com/ or contact:

END

Enquiries:

APPENDIX

DEFINITIONS

In this Announcement the following expressions have the following meanings.