ROSE.L Regulatory News (ROSE)

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THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES OF ROSE PETROLEUM PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

4 November 2019

Rose Petroleum plc

("Rose" or the "Company")

Issue of equity and notice of general meeting

Rose Petroleum plc (AIM: ROSE), a Rocky Mountain-focused oil and gas company, is pleased to announce that the Company has conditionally raised £1.25 million, before expenses, through the proposed issue of new ordinary shares of 0.1 p each in the Company ("Ordinary Shares") at a price of 1.1p per Ordinary Share ("Placing Price") with warrants attached, to a range of new and existing investors and with Turner Pope Investments acting as broker for the Company (the "Placing"). Of the funds raised, approximately £907,000 is conditional, inter alia, on the approval by shareholders of resolutions to provide authority to the Directors to issue and allot further new ordinary shares on a non-pre-emptive basis at a general meeting to be convened by the Company, further details of which are set out below.

Colin Harrington, Chief Executive of Rose said: "This successful fundraising is an important step as we advance our strategy of building a balanced asset portfolio in the U.S. Rocky Mountain region. It enables us to enter the prolific Denver-Julesburg Basin ("DJ Basin") through helping fund the near-term development project on the proposed McCoy lease acquisition announced today, and it allows us to fund ongoing work at our newly restructured Paradox Basin project.

"Since I joined the Rose Board earlier this year, we have taken significant steps to reshape the Company and implement a new strategic and operational focus. I am excited about the Company's prospects, and this optimism is evidenced by the large participation in the placing by Origin Creek Energy, a Company in which Rick Grant, Rose's Chairman, and I are the shareholders.

"I would like to thank the Company's existing shareholders and advisers for their support on this fundraise, and I extend a warm welcome to our new shareholders. The Board looks forward to delivering on the Paradox and McCoy projects and adding additional projects to the portfolio in the short-term."

Background to the Placing

Over recent months the Company has bolstered its operational and governance framework through a restructuring of the Board and management team and the Company has a revised focus on upstream oil and natural gas opportunities in the U.S. Rocky Mountain region.

The Board's stated strategy for the Company is to build a balanced portfolio of assets, exhibiting both free cash flow and long-term development opportunities.

The Company's recently restructured project in the Paradox Basin, Utah, U.S. ("Paradox project") and the Company's proposed acquisition in the 317-acre McCoy lease located in the DJ Basin in Weld County, Colorado, U.S. (the "McCoy project" or "Project"), announced today, sit squarely within the new strategic vision. 

The net proceeds from the Placing are primarily to be used to develop the McCoy and Paradox projects.

McCoy Project

The McCoy project has multiple commercial benefits for the Company:

·; A near-term, low risk development opportunity alongside Captiva Energy Partners, LLC ("CEP"), a U.S. based industry partner with a proven track record of successful horizontal development in the immediate area;

·; An attractive entry cost when compared to similar transactions, with consideration payable in Rose shares at a premium to the Placing Price;

·; A robust, accretive project with strong well economics;

·; Near-term production programme proposed, with drilling anticipated within a year;

·; Optionality to acquire a larger working interest in the McCoy project at Rose's sole discretion; and

·; Ongoing discussions to enlarge the Project and secure a significant funding partner for the project's development.

Subject to finalising the acquisition of a working interest in the McCoy project, the McCoy project will give Rose access to prime acreage within the prolific DJ Basin horizontal play with optionality to increase its working interest position significantly. It also marks the beginning of a partner relationship with CEP. This partnership will provide further deal flow, access to proven competence and a wealth of experience in the Rocky Mountain region. The deal fits well with the stated Rose strategy of targeting low-risk, low-entry cost acquisitions which can deliver near-term production to balance the asset portfolio currently comprised of its longer-term Paradox Basin appraisal asset.

The Company intends to use part of the net proceeds of the Placing in order to part-finance the Company's initial capital expenditure obligations on the McCoy project, which includes its contribution to a proposed 12-well drilling programme in mid-2020, the preparation of a Competent Person's Report and due diligence on the acquisition, as well as to fund ongoing work on the Paradox project and provide the Company with additional working capital.

Further details of the McCoy project are set out in the announcement made by Rose earlier today.

Paradox project

Funds from the Placing will also be used in the development of the Company's Paradox project.

On 14 October 2019, the Company announced that it had negotiated a new agreement with its joint-venture ("JV") partner on the Paradox project, Rockies Standard Oil Corporation. The project continues to offer substantial scale and value and is now, in the Board's view, better positioned for development.

The agreement enables Rose to focus on a potentially highly economic core acreage position of circa 12,920 acres which contains 21 high-priority drilling targets and estimated 2C contingent recoverable resources, net to Rose, of 8.3 million barrels of oil equivalent ("mmboe"). This acreage position alone represents an estimated net present value to Rose of US$59m (at a 10% discount rate) ("NVP10"), a significant premium to the Company's current market capitalisation and demonstrative of the considerable potential of the project.

The agreement also allows Rose to reduce the overall cost of maintaining the project and, most importantly, gives the Company immediate ownership of the maximum potential 12,920 lease acres, with a corresponding nine year lease term on 5,240 of these acres and a two year lease term on the balance.

The Company's revised strategy to focus on the most attractive acreage is a logical step, informed by, amongst other things, the acquisition and analysis of the 3D seismic data covering the project area, the verification work undertaken by Schlumberger in 2018, and the positive feedback received from potential farm-in partners on how Rose can best optimise the project.

Details of the Placing

In total, 113,636,364 Ordinary Shares are proposed to be issued pursuant to the Placing (the "Placing Shares"), at a price of 1.1p per Placing Share, as well as warrants over 60,090,909 new Ordinary Shares as detailed further below. The Placing Shares have been conditionally placed by Turner Pope Investments Limited ("TPI"), as agent and joint broker of the Company, with certain existing shareholders and new institutional and other investors pursuant to a Placing Agreement.

The Company currently has limited authority to issue new Ordinary Shares for cash on a non-pre-emptive basis. Accordingly, the Placing is being conducted in two tranches as set out below. 

1. First placing shares

A total of £343,010.58, representing the issue of 31,182,780 Placing Shares at the Placing Price (the "First Placing Shares"), has been raised within the Company's existing share allotment authorities (the "First Placing").  Application will be made for the First Placing Shares to be admitted to trading on AIM and it is expected that their admission to AIM will take place on or around 8 November 2019 ("First Admission"). The issue of the First Placing Shares is conditional only upon First Admission and the Placing Agreement becoming unconditional in respect of the First Placing Shares and not being terminated in accordance with its terms prior to First Admission. 

2. Second placing shares

The balance of the Placing, being £906,989.42 and representing the issue of 82,453,584 Placing Shares at the Placing Price (the "Second Placing"), is conditional upon, inter alia, the passing of resolutions to be put to shareholders of the Company at a general meeting of the Company to be held on 21 November 2019 (the "GM") to provide authority to the Directors to issue and allot further new ordinary shares on a non-pre-emptive basis, whereby such authority will be utilised by the Directors to enable completion of the Second Placing. A circular containing a notice of the GM will be posted to shareholders shortly.

Conditional on the passing of the resolutions at the GM, application will be made for the Second Placing Shares and the Fee Shares (as defined below) to be admitted to trading on AIM and it is expected that their admission to AIM will take place on or around 22 November 2019 ("Second Admission").

In addition to the passing of the resolutions at the GM, the Second Placing is conditional, inter alia, on Second Admission and the Placing Agreement becoming unconditional in respect of the Second Placing Shares and not being terminated in accordance with its terms prior to Second Admission.

The Placing as a whole would, if the necessary resolutions are approved at the GM, result in the issue of 113,636,364 Ordinary Shares (excluding the Fee Shares), representing, in aggregate, approximately 39.94 per cent. of the Company's issued ordinary share capital as enlarged by the Placing. The First Placing is not conditional on the Second Placing completing.

In addition to the Placing Shares, 1,325,757 Ordinary Shares are being issued in respect of fees due to a professional adviser, conditional on Second Admission ("Fee Shares"). Application will be made for the Fee Shares to be admitted to trading on AIM at Second Admission.

The Placing Shares and the Fee Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of the Company, including the right to receive all dividends or other distributions made, paid or declared in respect of such shares after the date of issue of the Placing Shares and Fee Shares.

Director subscriptions

Origin Creek Energy LLC ("OCE") has subscribed for 43,636,364 Placing Shares in the Second Placing, equivalent to £480,000 at the Placing Price. The shareholders and directors of OCE are Rick Grant, the Chairman of Rose, and Colin Harrington, the CEO of Rose. Colin Harrington is indirectly the controlling shareholder of OCE. Upon First Admission, OCE's interest in Ordinary Shares will remain unchanged at 25,000,000 Ordinary Shares but will represent 12.37% of the then issued share capital. Upon Second Admission, OCE will have an interest in 68,636,364 Ordinary Shares, equivalent to 24.00% of the Company's then issued share capital. In accordance with the terms of the Placing, OCE will also be issued with 24,318,182 Warrants on Second Admission.

Chris Eadie (Finance Director of Rose) has also subscribed for 909,091 Placing Shares in the Second Placing, equivalent to £10,000 at the Placing Price. In accordance with the terms of the Placing, Chris Eadie will also be issued with 454,545 Warrants on Second Admission.

OCE's and Chris Eadie's aggregated participation in the Placing is a related party transaction pursuant to rule 13 of the AIM Rules for Companies. Accordingly, the directors of Rose (excluding Rick Grant, Colin Harrington and Chris Eadie) consider, having consulted with the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Warrants

In addition to the Placing Shares, the Company is proposing to issue to subscribers in the Placing 56,818,182 warrants to subscribe for a total of 56,818,182 new Ordinary Shares (the "Warrants"), representing one Warrant for every two Placing Shares. The Warrants will be exercisable at a price of 2p per Ordinary Share, an 82% premium to the Placing Price, for a period of two years from issue.

The Company is also proposing to issue TPI with 3,272,727 warrants to subscribe for 3,272,727 new Ordinary Shares ("Broker Warrants") as part of TPI's fees for undertaking the Placing. The Broker Warrants will be exercisable at a price of 1.32p per Ordinary share, a 20% premium to the Placing price, for a period of three years from issue.

The issue of the Warrants and Broker Warrants are conditional on the passing of the resolutions to be put to shareholders of the Company at the GM to provide authority to the Directors to issue and allot further new ordinary shares on a non-pre-emptive basis. The Warrants and the Broker Warrants will not be admitted to trading on AIM or any other stock exchange.

Placing Agreement

Under the terms of a Placing Agreement between the Company and TPI, TPI will receive commission from the Company conditional on First Admission and Second Admission and the Company will give customary warranties and undertakings to TPI in relation, inter alia, to its business and the performance of its duties. In addition, the Company has agreed to indemnify TPI in relation to certain liabilities that they may incur in undertaking the Placing. TPI has the right to terminate the Placing Agreement in certain circumstances prior to First Admission and Second 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.

Total voting rights

Following First Admission, the Company's total issued share capital will consist of 202,096,720 Ordinary Shares, with one voting right per share. The Company does not hold any shares in treasury. Therefore, the total number of Ordinary Shares and voting rights in the Company will be 202,096,720 from First Admission. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company pursuant to the FCA's Disclosure Guidance and Transparency Rules.

Following Second Admission, the Company's total issued share capital will consist of 285,876,061 Ordinary Shares, with one voting right per share. The Company does not hold any shares in treasury. Therefore, the total number of Ordinary Shares and voting rights in the Company will be 285,876,061 from Second Admission. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company pursuant to the FCA's Disclosure Guidance and Transparency Rules.

 Notice of General Meeting

The Company will publish a Circular to convene the GM to propose resolutions to enable completion of the Placing.

The general meeting will be held at 12 noon on 21 November 2019 at the offices of Allenby Capital Limited, 5 St. Helen's Place, London EC3A 6AB. The circular containing the notice of general meeting will be published and sent to shareholders tomorrow and will be available shortly thereafter on the Company's website, www.rosepetroleum.com.

MAR

The Market Abuse Regulation (MAR) became effective from 3 July 2016. Market soundings, as defined in MAR, were taken in respect of the Placing with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

Contacts:

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, investors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; Placing Shares offer no guaranteed income and no capital protection; and an investment in Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, only investors who have met the criteria of professional clients and eligible counterparties have been procured. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to Placing Shares.

Notification and public disclosure of transactions by persons discharging managerial responsibilities and persons closely associated with them