Star Energy Regulatory News (STAR)

19 Dec 2007 14:47

Petronas International Corp Ltd19 December 2007 FOR IMMEDIATE RELEASE 19 December 2007 Not for release, publication or distribution in or into the United States, Canada, Australia or Japan Recommended Increased Cash Offer by Petronas International Corporation Ltd ("PICL") for Star Energy Group PLC ("Star Energy" or "Company") Summary • The Boards of PICL and Star Energy announce that they have reached agreement on the terms of a Recommended Increased Offer for the entire issued and to be issued share capital of Star Energy not already held by PICL. • The Recommended Increased Offer is made on the following basis: For each Star Energy share 380 pence in cash • The Recommended Increased Offer values the existing issued share capital of Star Energy at approximately £354 million and represents a premium of: o approximately 35 per cent. to the Star Energy Closing Price of 281 pence on 13 November 2007, being the last dealing day prior to the date of PICL's original offer; o approximately 52 per cent. to the Star Energy Closing Price of 250 pence on 12 November 2007; o approximately 58 per cent. to the average Closing Price of 240 pence for each Star Energy Share in the three month period up to and including 13 November 2007. • The Star Energy Directors, who have been so advised by Hoare Govett and Citi, consider the terms of the Recommended Increased Offer to be fair and reasonable. In providing its advice to the directors of Star Energy, Hoare Govett and Citi have taken into account the commercial assessment of the Star Energy Directors. Accordingly, the Star Energy Directors unanimously recommend that Star Energy Shareholders accept the Recommended Increased Offer. • As at the date of this announcement, PICL legally and beneficially owned 36,290,750 Star Energy Shares representing 39.02 per cent. of the issued share capital of Star Energy. PICL has received irrevocable undertakings to accept the Recommended Increased Offer from certain Star Energy Shareholders (including the Star Energy Directors) representing approximately 35.7 per cent. of Star Energy's existing issued share capital. • Commenting on the Recommended Increased Offer, Stephen Gutteridge, Chairman of Star Energy said: "Star Energy has always been grateful for the strong support from shareholders for its strategy of developing a multi-site, gas storage business. That support has enabled the Company to construct Humbly Grove, acquire additional assets, maintain good financial health and assemble a unique portfolio of potential storage opportunities. There are, however, risks in the development of that portfolio and, on balance, we believe that this transaction provides shareholders with fair and reasonable value for the Company at this time. PETRONAS will bring great financial strength and technical ability and I am sure they will make a valuable contribution to the UK and European gas market." • Commenting on the Recommended Increased Offer, Roland Wessel, Chief Executive of Star Energy, said: "Star Energy has enjoyed exceptional support and cooperation with PETRONAS as a major shareholder over the last two years. With nine new gas storage projects on the blocks, we welcome the commitment PETRONAS has made to Star Energy's strategy to build a significant multi-site gas storage business and look forward to the future with enthusiasm." • Commenting on the Transaction, PETRONAS President & CEO Tan Sri Hassan Marican said: "PETRONAS is looking forward to working with Star Energy's management to ensure that Star Energy's key projects are developed in a timely and efficient manner. Delivery and optimisation of Star Energy's core projects will be an important element in ensuring that the long term security of gas supply in the UK is underpinned." ENQUIRIES JP Morgan Cazenove (Financial Adviser and Corporate Broker to PICL) Tel: 020 7588 2828Barry WeirJonathan Wilcox Lambert Energy Advisory Limited (Financial Adviser to PICL) Tel: 020 7491 4473Philip Lambert Hoare Govett (Joint Financial Adviser and Corporate Broker to Star Energy) Tel: 020 7678 8000Andrew FosterStephen Bowler Citi (Joint Financial Adviser and Corporate Broker to Star Energy)Tel: 020 7986 4000Andrew ChapmanMark Todd I. Introduction On 14 November 2007, PICL announced a cash offer of 365 pence per share for thewhole of the issued and to be issued share capital of Star Energy. The Boards of PICL and Star Energy now announce that they have agreed the termsof a Recommended Increased Cash offer for the entire issued and to be issuedshare capital of Star Energy not already held by PICL. The Recommended Increased Offer is made on the following basis: For each Star Energy share 380 pence in cash The Recommended Increased Offer values the entire current issued share capitalof Star Energy at approximately £354 million. The Recommended Increased Offer will initially remain open for acceptances for14 days following the posting of the Recommended Increased Offer Document. It is currently expected that the Recommended Increased Offer Document will beposted on 2 January 2008, in which event the Recommended Increased Offer willinitially remain open for acceptances until 16 January 2008. In all other respects, the Recommended Increased Offer will be subject to thesame conditions and terms set out in the Original Offer Announcement and theOriginal Offer Document. The Recommended Increased Offer Document and New Form of Acceptance will be sentto Star Energy Shareholders in due course. The Recommended Increased Offer represents a premium of: • approximately 35 per cent. to the Star Energy Closing Price of 281pence on 13 November 2007, being the last dealing day prior to the date ofPICL's original offer; • approximately 52 per cent. to the Star Energy Closing Price of 250pence on 12 November 2007; • approximately 58 per cent. to the average Closing Price of 240 pencefor each Star Energy Share in the three month period up to and including 13November 2007. II. Background to the recommendation of the Star Energy Directors Star Energy has a unique portfolio of strategically important gas storageprojects. In addition to the Company's operational gas storage facility atHumbly Grove, Star Energy has nine additional potential gas storage projects, ofwhich five are onshore in the UK, three are onshore in Western Europe (in theNetherlands, Denmark and Italy) and one is the significant offshore project,Esmond Gordon, in the southern UK North Sea. The combined capacity of StarEnergy's storage projects is believed by the Directors to be up to 300 bcf onceoperational. In addition, Star Energy owns 25 onshore fields with 25 millionbarrels of proven and probable reserves, as at 31 December 2006, net to StarEnergy, producing approximately 4,300 barrels of oil equivalent per day in the11 months to 30 November 2007. The Board of Star Energy remains confident that the Company is well positionedto benefit from the continued strength of the gas storage market and to meet itsstrategic objective of becoming a significant multi-site gas storage company. As a result, the Star Energy Directors believed that the Original Offerundervalued the business and its prospects and it pursued all options tomaximise shareholder value. The Board of Star Energy discussed alternativeoffers for the Company with a significant number of third parties, however,these discussions did not progress beyond the preliminary stage and have nowbeen discontinued. The key reasons for the Board's recommendation are: i. The Recommended Increased Offer represents a verysignificant premium to the average share price at which Star Energy's Shareshave been trading in the three months prior to the announcement of the OriginalOffer; and ii. The Recommended Increased Offer provides Star Energy'sShareholders with an opportunity to realise, more quickly and in cash, the valuewhich Star Energy's strategy could deliver over a longer period of time. Against this background, the Star Energy Directors consider the terms of theRecommended Increased Offer to be fair and reasonable and therefore the Board ofStar Energy is unanimously recommending that Shareholders accept the RecommendedIncreased Offer. III. Current trading Gas Storage On 23 November 2007, Star Energy announced that it had completed the feasibilitystudy for its largest potential gas storage project, the Esmond Gordon projectin the southern North Sea. The feasibility study was undertaken in conjunctionwith EnCore Oil, currently the operator of the Esmond and Gordon fields, andPETRONAS. The results of the feasibility study were positive, concluding that the EsmondGordon fields have suitable geological characteristics to form the basis of agas storage facility with up to 145 bcf of working gas capacity, subject to thesuccessful outcome of the drilling of an appraisal well. The study alsoconfirmed a capital expenditure estimate of £1.15 billion comprising twooffshore platforms (with compression), a 200 km 42" pipeline and a terminal atBacton (with compression and gas processing), excluding cushion gas of £140million. Subsequently, the Company exercised its option to increase itsownership of the project to 50 per cent. and to become operator of the project. The Company will now move to the next stage of drilling an appraisal well on theEsmond field in Q1/Q2 of 2008 at a cost to the Company of approximately £7.5million and to proceed to project sanction. In addition, the Company expects to complete the drilling of an appraisal wellin Bletchingley in Q1 2008. The well will seek to confirm the potential for agas storage project of up to 30 bcf and the presence of contingent gasresources. The Company has submitted preliminary planning applications for its Albury Phase1 project, and expects to submit planning applications for its Gainsboroughproject during H1 2008. The Humbly Grove 10 bcf facility continues to perform in line with expectations.The planning application for the new compressor, which was approved in May 2007,will increase the current capacity to up to 12 bcf. The additional capacity willbe offered to the existing customer, Vitol SA, from April 2008. Oil and Gas Production Total daily production for the Star Energy group has averaged approximately4,300 boepd for the year to date. Production was boosted by a successful welldrilled at Avington, but overall was below management's expectations primarily due to lower incremental oil production from Humbly Grove where output is affected by the operational strategy for the gasstorage facility. Additional oil production wells were also drilled at Stockbridge, Cold Hanworth and Welton during the year. Outturn Strong cash flows from the Company's production business (aided by high oilprices) enabled the Company to continue its development towards being asignificant multi-site gas storage business. The Company also benefited from asignificant one-off gain from the disposal of the Singleton oilfield, althoughthe impact of this was partially offset by the lower than anticipated oilproduction levels. With the UK now more connected to the continental European market, the expansioninto Western Europe will provide cross-border gas storage opportunities. Thefundamentals for gas storage continue to strengthen and with it, the potentialvalue of the Company's multiple storage projects. IV. Recommendation The Star Energy Directors, who have been so advised by Hoare Govett and Citi,consider the terms of the Recommended Increased Offer to be fair and reasonable. In providing its advice to the directors of Star Energy, Hoare Govett and Citihave taken into account the commercial assessment of the Star Energy Directors.The Star Energy Directors consider that the Recommended Increased Offer is inthe best interests of Star Energy Shareholders. Accordingly, the Star EnergyDirectors unanimously recommend that Star Energy Shareholders accept theRecommended Increased Offer. V. Interests in Star Energy Shares As at the date of this announcement, PICL legally and beneficially owned36,290,750 Star Energy Shares representing 39.02 per cent of the issued sharecapital of Star Energy. PICL has received irrevocable undertakings to accept, or procure the acceptanceof, the Recommended Increased Offer from the following: (a) Star Energy Directors in respect of an aggregate 1,682,997 Star Energy Shares, (b) Lansdowne Partners Limited in respect of 9,231,776 Star Energy Shares, (c) Credit Suisse Securities (Europe) Ltd in respect of 8,197,947 Star Energy Shares, (d) Cheyne Capital Management Ltd in respect of 5,419,933 Star Energy Shares, (e) Tudor BVI Global Portfolio L.P. in respect of 4,654,576 Star Energy Shares, (f) Artemis Investment Management Ltd in respect of 3,988,362 Star Energy Shares, representing in aggregate 33,175,591 Star Energy Shares or 35.7 per cent. of theissued share capital of Star Energy. In accordance with the terms of these irrevocable undertakings, acceptances ofthe Recommended Increased Offer are to be submitted within 7 days of the postingof the Recommended Increased Offer Document and may only be withdrawn if theRecommended Increased Offer lapses or is withdrawn. These irrevocable undertakings have been obtained with the agreement of theBoard of Star Energy. VI. Financing of the Recommended Increased Offer The cash consideration payable by PICL under the terms of the RecommendedIncreased Offer will be funded from existing cash resources. JP Morgan Cazenove, financial adviser to PICL, is satisfied that sufficientresources are available to PICL to satisfy the cash consideration payable toStar Energy Shareholders in the event of full acceptance of the RecommendedIncreased Offer. ENQUIRIES JP Morgan Cazenove (Financial Adviser and Corporate Broker to PICL) Tel: 020 7588 2828Barry WeirJonathan Wilcox Lambert Energy Advisory Limited (Financial Adviser to PICL)Tel: 020 7491 4473Philip Lambert Hoare Govett (Joint Financial Adviser and Corporate Broker to Star Energy) Tel: 020 7678 8000Andrew FosterStephen Bowler Citi (Joint Financial Adviser and Corporate Broker to Star Energy)Tel: 020 7986 4000Andrew ChapmanMark Todd This announcement does not constitute an offer to sell, or an invitation topurchase, any securities or the solicitation of any vote or approval in anyjurisdiction. The Recommended Increased Offer will be made solely by the RevisedOffer Document and the Form of Acceptance, which will contain the full terms ofthe Recommended Increased Offer (including details of how it may be accepted)and which will be posted to Star Energy Shareholders in due course. The availability of the Recommended Increased Offer to Star Energy Shareholderswho are not resident in the United Kingdom may be affected by the laws of therelevant jurisdictions in which they are located or of which they are citizens.Such persons should inform themselves of, and observe, any applicable legal orregulatory requirements of those jurisdictions. Further details in relation tooverseas shareholders will be contained in the Revised Offer Document. The Recommended Increased Offer is not intended to be made, directly orindirectly, in, into or from Australia, Canada, Japan or the United States andthe Recommended Increased Offer will not be capable of acceptance from or withinAustralia, Canada, Japan or the United States. Accordingly, copies of thisannouncement are not being, and must not be, directly or indirectly, mailed orotherwise forwarded, distributed or sent in, into or from Australia, Canada,Japan or the United States and persons receiving this announcement (includingcustodians, nominees and trustees) must not mail or otherwise distribute or sendit in, into or from such jurisdictions as doing so may invalidate any purportedacceptance of the Recommended Increased Offer. JP Morgan Cazenove and Lambert Energy Advisory Limited, who are each authorisedand regulated in the United Kingdom by the Financial Services Authority, areacting exclusively for PICL and no-one else in relation to the RecommendedIncreased Offer and will not be responsible to anyone other than PICL forproviding the protections afforded to clients of JP Morgan Cazenove and LambertEnergy Advisory Limited or for providing advice in relation to the RecommendedIncreased Offer or in relation to the contents of this announcement or anytransaction or arrangement referred to herein. Each of the PICL directors accept responsibility for the information containedin this announcement other than the information for which the Star Energydirectors accept responsibility. Subject as aforesaid, to the best of theknowledge and belief of PICL (who has taken all reasonable care to ensure thatsuch is the case), the information contained in this announcement for which heis responsible is in accordance with the facts and does not omit anything likelyto affect the import of such information. Hoare Govett and Citi, who are each authorised and regulated in the UnitedKingdom by the Financial Services Authority, are acting exclusively for StarEnergy and no-one else in relation to the Recommended Increased Offer and willnot be responsible to anyone other than Star Energy for providing theprotections afforded to clients of Hoare Govett and Citi or for providing advicein relation to the Recommended Increased Offer or in relation to the contents ofthis announcement or any transaction or arrangement referred to herein. Each of the Star Energy Directors accepts responsibility for the informationcontained in this announcement relating to Star Energy, the Star Energy groupand themselves and their immediate families, their related trusts and controlledcompanies To the best of the knowledge and belief the directors of Star Energy(who has taken all reasonable care to ensure that such is the case), theinformation contained in this announcement for which they are responsible is inaccordance with the facts and does not omit anything likely to affect the importof such information. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of "relevant securities" of Star Energy, all "dealings" in any "relevant securities"of that company (including by means of an option in respect of, or a derivativereferenced to, any such "relevant securities") must be publicly disclosed by nolater than 3.30 pm (London time) on the business day following the date of therelevant transaction. This requirement will continue until the date on which theRecommended Increased Offer becomes, or is declared, unconditional as toacceptances, lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of Star Energy, they will be deemed to be a single person for thepurpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Star Energy by PICL, or by any of its respective "associates",must be disclosed by no later than 12.00 noon (London time) on the business dayfollowing the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Takeover Panel's website. If you are in any doubt as to whether or notyou are required to disclose a "dealing" under Rule 8, you should consult theTakeover Panel. APPENDIX I - BASES AND SOURCES i. The value placed by the Recommended Increased Offer onthe existing issued share capital of Star Energy is based on 93,040,810 StarEnergy Shares in issue on 18 December 2007, being the last dealing day prior tothe date of this announcement. ii. Information concerning the Original Offer has beenextracted from the Original Offer Document. APPENDIX II - DEFINITIONS The definitions set out in the Original Offer Document apply other than as setout below, unless the context requires otherwise. The following additionaldefinitions apply throughout this announcement unless the context requiresotherwise: "bcf" billion standard cubic feet of gas;"Citi" Citigroup Global Markets Limited;"EnCore Oil" EnCore Oil plc;"Hoare Govett" Hoare Govett Limited;"New Form of Acceptance" the new form of acceptance and authority relating to the Recommended Increased Offer which will accompany the Recommended Increased Offer Document;"Original Offer" the original cash offer of 365 pence per Star Energy Share made by PICL by means of the Original Offer Document;"Original Offer Announcement" the announcement dated 14 November 2007 by PICL of the Original Offer;"Original Offer Document" the document posted to Star Energy Shareholders on 6 December 2007 making the Original Offer;"Recommended Increased Offer" the increased recommended offer to be made by PICL to acquire all of the issued and to be issued Star Energy Shares not already held by PICL on the terms and subject to the conditions to be set out in the Recommended Increased Offer Document, and the New Form of Acceptance, including, where the context requires, any subsequent revision, variation, extension or renewal of such offer;"Recommended Increased Offer Document" the revised offer document to be issued by PICL to Star Energy Shareholders in respect of the Recommended Increased Offer; and"Recommended Increased Offer Price" 380 pence per Star Energy Share. This information is provided by RNS The company news service from the London Stock Exchange