Zoltav Resources: Completes Bortovoy License Acquisition
On 16 December 2013 Zoltav, the CIS-focused oil and gas company, announced that it had entered into a conditional agreement with Bandbear Limited (“Bandbear”) to acquire the entire issued share capital of Royal Atlantic Energy (Cyprus) Limited (“Royal Atlantic Energy”) for a total consideration of US$180 million (the “Acquisition”). The consideration agreed included (1) the issue of 26,562,500 new Ordinary Shares to Bandbear at an effective price of US$1.60 (100 pence) per share (equivalent to US$42.5 million); (2) the payment of US$77.5 million in cash; and (3) the assumption of a new debt facility, draw down in an amount of approximately US$60 million. The Company and Bandbear agreed as a term of the Acquisition that Diall Alliance, Royal Atlantic Energy’s wholly owned operating subsidiary, should be allowed to refinance those intercompany loans due from it to Bandbear from the proceeds of the new debt facility. Accordingly, on 4 April 2014, Diall Alliance put in place the Sberbank Facility from which US$59.84 million has been drawn down to date all of which has been used to reduce the outstanding intercompany loans. Zoltav will assume this facility on completion of the Acquisition. On 22 May 2014 the Company and Bandbear agreed to vary the terms of the Acquisition such that in addition to assuming the Sberbank Facility, Bandbear will be issued the Consideration Shares (equivalent to US$61.22 million) and paid US$58.94 million in cash giving a total consideration of US$180 million).
The Company is pleased to announce that, having now published an AIM admission document (“Admission Document”), it is seeking Shareholder approval to proceed with the Acquisition, a Subscription to raise US$65.95 million in cash (the “Subscription”) and re-admission of the Enlarged Group to trading on AIM.
Highlights
· Acquisition delivers 100% ownership of the Bortovoy Licence in the Saratov Oblast of the Russian Federation – 3,215 square kilometre area containing a number of productive gas fields, a processing plant and significant exploration prospectivity
· Bortovoy Licence contains Proven and Probable Reserves of 137.4 million barrels of oil equivalent (mmboe) and produced 2.8 mmboe in 2013
· Considerable upside potential from additional prospects within the Bortovoy Licence area and scope for increased production through the construction of additional facilities
· Conditional agreement with ARA Capital, the Company’s largest shareholder, Crediton Invest and Matteson Overseas to subscribe for US$45.615 million, US$10.166 million and US$10.166 million respectively of new Ordinary Shares at US$1.60 (100 pence) per share to fund the payment of the cash consideration of the Acquisition (US$58.94 million) and the balance to provide working capital
· The Company’s ordinary shares will be restored to trading on AIM today at 8:00 a.m.
Royal Atlantic Energy
Diall Alliance holds the Bortovoy Licence, a 3,215 km2 licence containing a number of gas fields in the West and East of the Bortovoy Licence area and a gas processing plant located in the West of the Bortovoy Licence area. The Bortovoy Licence, located in the Saratov Oblast of the Russian Federation, has proven plus probable reserves of 21.2 billion cubic metres (approximately 0.75 trillion cubic feet) of gas and 3.9 million barrels of oil and condensate (a total of 137.4 mmboe (based on a gas conversion factor of 1,000 cubic metres = 158.8 barrels)) and in 2013 produced 392.6 million cubic metres (approximately 13.9 billion cubic feet) of gas and 0.3 million barrels of condensate and oil (a total of 2.8 million barrels of oil equivalent). Zoltav believes there is considerable upside potential from a number of prospects within the Bortovoy Licence area and scope for increased production through the construction of additional facilities. The Bortovoy Licence came into effect upon its registration by the Ministry for Natural Resources of the Russian Federation on 13 January 2000, and is valid until 12 January 2025 (inclusive).
The near term strategy in respect of the Bortovoy Licence is to utilise the cash flows from existing operations to fund the further development of the Karpenskoye field and the tie in of the Zhdanovskoye field to the Western Plant. This includes the drilling of Well 100 on the Karpenskoye field which is expected to spud this month and the hook-up of the Zhdanovskoye field which is expected to be operational by the end of 2014 ensuring that the Western Plant is operating at full capacity of approximately 1.4 million cubic metres per day (49.4 million cubic feet per day) by 2015. In addition the Directors intend to undertake further capex on the Western Plant to improve its performance and reduce operating costs. It is currently planned to drill a further well on the Zhdanovskoye field in mid-2015, although this will be finally determined after studying the Zhdanovskoye well performance.
It is the Director’s intention to develop an exploration plan during the course of 2014 which will allow a feasibility study to be undertaken during the course of 2015 with a view to building a second gas plant in the East of the Bortovoy Licence.
Consideration
The total consideration of US$180 million is to be satisfied through the issue of 38,263,095 new Ordinary Shares at an effective price of US$1.60 (100 pence) per share (equivalent to US$61.22 million); the payment of US$58.94 million in cash and the assumption of US$59.84 million of bank debt.
Subscription
In order to satisfy the cash consideration payable to Bandbear, the Company has entered into Subscription Agreements with ARA Capital, Crediton Invest and Matteson overseas pursuant to which these parties have agreed to subscribe in aggregate for $65,946,418 of Ordinary Shares at a price of US$1.60 (100 pence) per share.
The Subscription is conditional upon completion of the Acquisition.
Annual General Meeting
An Admission Document giving details of the Proposals and incorporating a notice convening the Annual General Meeting will be posted to Shareholders today and will be available on the Company’s website www.zoltav.com with effect from 7:00 a.m. today.
Consequently, the Company’s ordinary shares will be restored to trading on AIM today at 8:00 a.m.
The Annual General Meeting will be held at Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey at 10.30 a.m. on 17 June 2014.
The Proposals are conditional, inter alia, on the passing of the Resolutions and on Admission. It is expected that Admission will become effective and dealings in the Enlarged Share Capital will commence on AIM on 18 June 2014.
Symon Drake-Brockman, Executive Chairman, said:
“The Acquisition of Royal Atlantic Energy will deliver Zoltav’s first producing hydrocarbon assets. The Bortovoy Licence is attractive not only because of its existing gas output and favourable location but also because of the significant upside that the construction of additional processing facilities would create and the opportunities to exploit numerous undeveloped fields within the Licence.
“We welcome the financial support for the Acquisition of ARA Capital, the Company’s largest shareholder, and that of two new investors through participation in the Subscription as we continue to pursue the Company’s ambition of building a sizeable CIS-focused upstream business.”
