Shelton Petroleum AB: Shelton Petroleum Makes a Public Offer to the Shareholders of Petrogrand
Shelton Petroleum AB (“Shelton”) today announces an offer to acquire all the outstanding shares in Petrogrand AB (“Petrogrand”), (“the Offer”). Shelton offers 0.30 B shares in Shelton for each share in Petrogrand which is corresponds to a premium of 38.9 % compared to the closing price of yesterday.
Summary
- The Board of Shelton believes that there is an industrial and financial rationale for the Offer. Shelton has a license portfolio with increasing production and significant exploration potential offshore in Ukraine. The transaction gives, via cash held by Petrogrand, financial means to realize the potential in the asset portfolio and to pursue the expansion opportunities that the oil and gas market offers. In addition, it is expected that the liquidity in the Shelton share will increase and the company’s position on the financial market will be strengthened.
- Shelton offers 0.30 B shares in Shelton for each share in Petrogrand. In the event of a full acceptance of the Offer approximately 12,079,769 B shares in Shelton will be issued to the shareholders of Petrogrand, corresponding to a dilution of approximately 49.8 % for the existing shareholders in Shelton.
- The acceptance period for the Offer is expected to be from 28 February 2014 up to and including 21 March 2014.
- An extraordinary shareholders meeting in Shelton on 9 January 2014 resolved to give a mandate to the Board to resolve, among other things, on issue of B shares with provisions regarding payment in kind.
Background and reasons for the Offer
During the past years Shelton has developed its license portfolio step by step with proven oil fields, increasing production and a significant resource potential offshore. Due to successful drillings Shelton reached an important milestone of 1,000 produced barrels of oil per day in the fourth quarter 2013. The increase in production has been achieved under strong profitability. The operating margin in the third quarter 2013 amounted to 32 %.
The board in Shelton believes that there is both an industrial and financial rationale for the Offer. In Russia the latest drilled well produces significantly more oil than previous wells. It has given a new and improved view of the field’s potential, which may be realized in horizontal wells with significantly better well economics. In addition, the company has two adjacent license areas where exploration of the potential only has reached initial stages. In Ukraine the company has interests in the producing Lelyaki field and three offshore licenses with significant potential. Shelton has a strong local network in Russia and Ukraine which gives good access to expansion possibilities.
The investments required to realize the potential in the license portfolio and to pursue new opportunities require investments, can only partly be financed with internally generated cash flows. The Offer to the shareholders of Petrogrand gives Shelton, via cash held by Petrogrand, financial resources to promptly and efficiently implement adopted business plans. The company’s position on the financial market will also be strengthened. By accepting the offer, shareholders of Petrogrand are given an opportunity to be part of a potential appreciation of the share compared to the existing discount and a possibility to benefit from the values that the combined company can create.
With the background outlined above Shelton announces a public offer to the shareholders of Petrogrand.
The Offer
Shelton offers 0.30 B shares in Shelton for each share in Petrogrand.
The offer constitutes a premium of approximately 34.8 % based on the volume weighted average share price for Shelton’s B shares on NASDAQ OMX Main Market and Petrogrand’s shares on NASDAQ OMX First North during the past month up until and including 21 January 2014. Compared to the last closing price for the Petrogrand share, SEK 7.00 per share, on NASDAQ OMX First North on 21 January 2014, i.e. the last day the share was traded prior to the announcement of this Offer, the Offer constitutes a premium of 38.9 %.
Based on the latest closing price paid for the Shelton B share on 21 January 2014 (SEK 32.40 per share), the Offer represents a value of approximately SEK 9.72 for each Petrogrand share. The Offer values Petrogrand to approximately SEK 391.4 million.
The offered consideration will be adjusted if Petrogrand pays dividend or transfers assets before settlement has been made under the Offer and will consequently be reduced with a corresponding amount per share for each such dividend or transfer of asset.
At full acceptance of the Offer approximately 12,079,769 new B shares in Shelton will be issued in the Offer, which is equivalent to a dilution of 49.8 % for the existing shareholders of Shelton.
Shelton’s ownership in Petrogrand
As of the date of the announcement of this Offer Shelton does not own (and does not control in any other way) any shares in Petrogrand or any financial instruments that gives Shelton a financial exposure corresponding to a share holding in Petrogrand.
Financial effects for Shelton
As of September 30, 2013 the main assets of Petrogrand consisted of approximately SEK 330 million in cash (adjusted for a conversion of SEK 30 million and repayment of a convertible loan of SEK 185 million) and 1,500,000 B shares in Shelton.
The financial information below is based on Shelton’s consolidated financial statements as of 31 December 2012 and 30 September 2013 and the period January – September 2013 and on the assumption that Shelton through the Offer acquires all shares in Petrogrand.
