Prospex Eng Regulatory News (PXEN)

Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas

25 July 2022

Prospex Energy PLC

('Prospex' or the 'Company')

Successful Fund Raise of £1.87 million

Proceeds to fund portion of costs to first gas production at the Selva Field

Prospex Energy PLC (AIM: PXEN), the AIM-quoted investment company focused on European gas and power projects, is pleased to announce that it has raised £1.87 million via the issue of unsecured Convertible Loan Notes ('the Loan Notes') to existing and new investors ('the Subscribers'), including all of the directors of the Company.

Highlights

· £1.87 million raised via the issue of unsecured Convertible Loan Notes of denomination £1 due end of March 2024

· Net proceeds to provide funds towards the Company's share of development costs (totalling c. £2.3 million, which includes £200,000 of contingency) at the Selva gas discovery on the Podere Gallina Permit, in the Po Valley in Italy as well as working capital

· The Loan Notes are convertible at 4.25p per ordinary share at any time at the election of the investor. Existing share authorities are sufficient to satisfy any potential conversion of the maximum approved amount of £2.3 million plus any accrued interest

· Interest at 12% is payable quarterly compounded monthly, with the first interest payment on 30 September 2022 to be capitalised and added to the loan principal rather than paid in cash

· Loan principal to be paid in three tranches (end of September 2023, end December 2023 and end March 2024)

· This debt/equity hybrid financing allows the Company to fund the initial costs of the development at the Selva field, with the objective of achieving first gas from the field by Q2 2023, subject to further funding being secured for cash calls expected in March 2023 by way of commercial debt, or other financing available at the time

Mark Routh, Prospex's CEO, commented:

"We are extremely pleased to have raised financing at this challenging time in the markets. The proceeds of the Loan Notes will be used to fund the Company's 37% share of the development costs at the Selva gas discovery on the Podere Gallina Permit in Italy and general corporate purposes. We are experiencing significant increases in budgeted costs related to our planned development activity due to many factors including global supply chain complexity, increased costs of energy, materials and staffing all of which put pressure on schedule and costs. The Operator of the Podere Gallina licence in Italy, Po Valley Energy (ASX:PVE) has secured as much as feasible in a tightening market to ensure that the schedule to first gas is not delayed.

"Currently we remain on schedule for first gas from the Selva field in Q2 2023 (subject to the balance of the funding being available), where we predict substantial revenues to be generated from the gas production. The Board examined a number of options to finance our 37% stake of Selva and given the challenging market conditions, this was the best alternative at this time. I would like to take the opportunity to thank our existing shareholders for their continued support and welcome our new Subscribers."

Further Information on the Subscribers and the Loan Note

The Loan Notes pay 12% interest quarterly, compounded monthly, with the first quarterly interest payment on 30 September 2022 capitalised and added to the loan principal. Quarterly cash interest payments will be made thereafter with the first payment on 31 December 2022. Unless converted, the principal is to be repaid in three equal capital repayments scheduled on 30 September 2023, 31 December 2023, and 31 March 2024 which fits conservatively within the expected first production from Selva in Q2 2023.

The Company can elect to pay the interest in Euros by giving 10 business days' notice. The Company can elect, on a change of control of the Company, where a single party has over 50% of the issued share capital of the Company, to convert some or all of the issued Loan Notes, including capitalised interest, into ordinary shares at the lower of the 4.25p conversion price or the prevailing market price. Accrued but unpaid interest may be paid in cash at the time of conversion or added to the loan principal and converted at the election of the Noteholder.

The Company can elect to repay the Loan notes in full or part at any time by giving the noteholders 30 days' notice.

£1.87 million Loan Notes have been issued to 27 individual subscribers, including all four current Directors and one former director of the Company:

Director Amount

Bill Smith £50,000

Richard Mays £36,000 via Sallork Limited (Directors R Mays & E Mays)

Richard Mays £50,000 via the SIPP of R and E Mays

Alasdair Buchanan £50,000

Mark Routh £50,000

James Smith (and partner) £70,000

Related Party Transaction

The participation in the Loan Notes by the Directors, and a former director of the Company within the last 12 months, constitutes a related party transaction under the AIM Rules. Due to the participation by all of the directors in the Loan Notes, there is not a director, or directors, independent of the issue of the Loan Notes to provide the necessary AIM Rule 13 related party transaction opinion. Accordingly, Strand Hanson Limited, the Company's Nominated Adviser, confirms it is satisfied that the terms of the participation by the Directors, and a former director of the Company within the last 12 months, in the Loan Notes is fair and reasonable insofar as the Company's shareholders are concerned.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

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For further information visit www.prospex.energy or contact the following:

Notes

Prospex Energy PLC is an AIM quoted investment company focussed on high impact onshore and shallow offshore European opportunities with short timelines to production. The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low-cost re-evaluation techniques to identify and de-risk prospects.  The Company will rapidly scale up gas production in the short term to generate internal revenues that can then be deployed to develop the asset base and increase production further.

About El Romeral and Tarba

The El Romeral gas and power project in Spain, with gas production wells supplying gas to an 8.1MW power plant near Carmona in Southern Spain is owned and operated by Tarba. It is currently operating at about 30% of its full capacity whilst Tarba waits on permits to drill further infill wells on the concessions to increase production. Prospex owns a 49.9% working interest in the El Romeral project via Tarba. The remaining 50.1% working interest is owned by Warrego Energy Limited (ASX:WGO). Tarba sells electricity generated from the plant on the spot market in Spain. The El Romeral licences comprise three contiguous production concessions.

About Selva:

The Podere Gallina Licence is in the Po Valley region of Italy. The licence contains the currently shut‑in Selva gas-field as well as exciting exploration opportunities. The Podere Maiar-1 well was completed in December 2017 and successfully found a commercial gas accumulation up-dip of the previous wells on the Selva field. The Company now has a 37% working interest in the Podere Gallina licence.

The Podere Gallina Licence holds independently verified 2P gross reserves of 13.4 Bcf (5.0 Bcf net to Prospex at 37% WI), gross Contingent 2C Resources of 14.1 Bcf (5.2 Bcf net) and a further 91.5 Bcf of gross Best Estimate Prospective Resources (33.9 Bcf net).[1]

An independent Competent Person's Report of the Podere Gallina Licence was prepared by CGG Services (UK) Limited in January 2019 on behalf of the joint venture.[1] It attributed a total of 379 MMscm (13.4 Bcf) gross 2P reserves for the Selva redevelopment project.

The CPR also attributed Best Estimate gross prospective (un-risked) gas resources of 1,493 MMscm (52.7 Bcf) on the Podere Gallina Licence in three separate structures.

References:

[1] Source: "Competent Person's Report Podere Gallina Licence, Italy" prepared by CGG Services (UK) Limited in January 2019 https://bit.ly/3nZNfYf].

Glossary:

scm Standard cubic metres

MMscm Million standard cubic metres

Bcf Billion standard cubic feet

MMscfd million standard cubic feet per day

Qualified Person Signoff

In accordance with the AIM notice for Mining and Oil and Gas Companies, the Company discloses that Mark Routh, the CEO and a director of Prospex Energy plc has reviewed the technical information contained herein. Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985. He has over 40 years operating experience in the upstream oil and gas industry. Mark Routh consents to the inclusion of the information in the form and context in which it appears.