FINN(COM) DAILY RECORD FOR 24 DECEMBER 2003
Compiled by J. Brock (FINN)
Desire Petroleum PLC
24 December 2003
Desire Petroleum Plc
('Desire Petroleum' or 'the Company')
Proposed Placing of 35,313,100 new ordinary shares of 1p each in Company
('Placing Shares') and Open Offer of up to 37,500,184 new ordinary shares of 1p
each in the Company ('Open Offer Shares') on the basis of 1 Open Offer Share for
every 3 existing ordinary shares of 1p each in the Company ('Existing Ordinary
Shares')
Introduction
Your Board indicated in the announcement of Desire Petroleum 's interim results
on 23 September 2003 that the Company intended to raise further funds and that
shareholders of the Company ('Shareholders') would be given the opportunity to
participate in any fundraising. Your Board is therefore pleased to announce that
the Company proposes to raise up to approximately £7.28 million (before
expenses) by way of a placing ('the Placing') of 35,313,100 Placing Shares at a
price of 10p per share ('the Issue Price') and an open offer of up to 37,500,184
Open Offer Shares at the Issue Price ('the Open Offer'). The Placing has been
fully underwritten by Seymour Pierce.
Qualifying Shareholders are invited to subscribe for Open Offer Shares under the
Open Offer on the basis of:
1 Open Offer Share for every 3 Existing Ordinary Shares
held at 22 December 2003 ('Record Date'). Qualifying Shareholders may apply for
their pro rata entitlement, less than their pro rata entitlement, or their pro
rata entitlement together with any further number of Open Offer Shares. The Open
Offer is conditional, inter alia, on the passing of resolutions to be proposed
at the Extraordinary General Meeting of the Company to be held on 21 January
2004, on the placing agreement entered into between the Company, the Directors
of the Company and Seymour Pierce Limited becoming unconditional and on
admission of the Placing Shares and Open Offer Shares (together, 'New Ordinary
Shares') to trading on the AIM market ('Admission').
The principal purpose of the Placing and Open Offer is to provide funds for the
Company to enable it to negotiate and to enter into a seismic survey agreement
with Fugro Geoteam A/S ('Fugro') to engage Fugro formally to carry out a 3D
seismic survey over certain areas within Tranches C and D (areas situated in the
North Falkland Basin of the Falkland Islands ('North Falkland Basin').
Background Information
Desire Petroleum (named after HMS Desire which discovered the Falkland Islands
in 1592) was incorporated in 1996 specifically to participate in the first round
of licences granted by the Falkland Islands Government to explore for
hydrocarbons. The Company currently has the following interests in exploration
licences:
a. the exclusive right to search for hydrocarbons from the seabed and subsoil
of certain blocks within Tranches C, D, I and L of the North Falkland Basin;
b. a 12.5 per cent.interest in a licence to search for hydrocarbons from the
seabed and subsoil of certain blocks within Tranche F of the North Falkland
Basin ('Tranche F Licence ').The remaining 87.5 per cent.interest in this
licence is held by Sodra Petroleum A.B. (a subsidiary of Talisman Energy
Inc.).The interests in the Tranche F Licence are the subject of a joint
operating agreement.
In 1998, the Company's then issued ordinary share capital was admitted to
trading on AIM, following a share placing which raised £15 million before
expenses.
Desire Petroleum participated in two of the six wells drilled in the North
Falkland Basin during 1998 - one in Tranche C and the other in Tranche F. With
the exception of the well in Tranche C, five of the wells encountered oil shows,
but none provided evidence of an economically significant oil prospect. However,
the presence of a very thick (approximately 1,150m), lacustrine source rock (now
known to be the second-richest yet found worldwide) was established. The
Directors believe this source rock has operated as an effective, basin-wide
seal, which the Board suspects prevented the migration of oil to the sandstone
reservoirs encountered above it. These sandstone reservoirs were the target of
the initial drilling campaign and the presence of the seal could explain why
these reservoirs are not charged with oil.
Only one well penetrated any depth below the source rock and, although it did
encounter hydrocarbons, because the well was drilled in the centre of the North
Falkland Basin, farthest from a potential sand source, only siltstone
reservoirs, of poor quality, were encountered. However, this result does suggest
that, if suitable reservoirs do exist below and/or adjacent to the source rock,
they are likely to be charged with oil.
It has been calculated that very large volumes of oil (up to 60 billion barrels)
may have been generated and expelled from the source rock. The Board 's view is
that because the seal is so effective, this oil should not have escaped and
recent studies have concentrated on identifying where reservoirs, into which the
oil could have migrated, might be located. The Directors believe that these
areas within Tranches C and D, in respect of which Desire Petroleum is the
exclusive licensee and which straddle the main oil-generating kitchen, are
best-placed for the presence of oil accumulations and recent work has been
directed at identifying potential reservoirs within them.
As a result, a new model of the geology ('New Model') has been developed by the
Company which, if correct, may lead to the discovery of oil in commercial
quantities. The New Model has identified at least three areas each of which the
Directors believe has the potential to contain recoverable reserves of up to one
billion barrels of oil, should suitable reservoir rocks be present.
The New Model predicts sandstone development, both below and adjacent to the
source rock, which, due to the subtle geometry, is difficult to define on the
basis of 2D seismic data alone. The Directors believe that this problem should
be resolved by the use of 3D seismic data which should give a greatly enhanced
resolution of the sub-surface geology. The Company and Fugro have already signed
heads of terms which provide, once sufficient funds have been raised by the
Company, for a fixed price turnkey contract to be entered into by the Company
and Fugro to engage Fugro to acquire 3D seismic data over what the Directors
believe to be the most prospective areas of the Company 's licensed areas within
Tranches C and D ('Seismic Survey Agreement'). Fugro is one of the world 's
major off-shore seismic contractors.
Once the 3D seismic data has been interpreted, the results will, assuming that
the 3D seismic data shows enhanced drilling prospects, form the basis on which
the next phase of drilling will be designed by the Company. These results will
also be used as the basis upon which the Company conducts further negotiations
with potential partners who have expressed an interest in the North Falkland
Basin. The most probable time for the next phase of drilling, assuming that the
3D seismic data shows enhanced drilling prospects, will be the Austral summer of
2004-5.
Reasons for the Placing and the Open Offer and Use of Proceeds
Assuming the Open Offer is fully subscribed, the Placing and the Open Offer will
raise proceeds of approximately £6.97million for the Company (net of expenses).
The Directors intend that the net proceeds will:
a. enable the Company to enter into the Seismic Survey Agreement to engage
Fugro to carry out the 3D seismic survey described above, initially in
respect of parts of Tranches C and D. Depending on the total funds raised
from the Open Offer, funds may also be used to pay for the interpretation of
the 3D seismic data collected by Fugro;
b. repay an outstanding loan in the sum of £100,000 plus interest to Phipps and
Company Limited;
c. pay certain deferred fees to each of Phipps and Company Limited (partly in
respect of Directors' fees owed to Stephen Phipps), Molard Financial
Management Services SA (in respect of the services of Walter Ian Logan
Forrest), Dr Alan John Martin, Dr Ian Gordon Duncan and QM Marketing Limited
(in respect of the services of Dr David Quick).These deferred fees total
£396,560 (plus VAT where applicable) in aggregate. However, certain of the
aforementioned persons intend to subscribe for 4,015,600 New Ordinary Shares
in aggregate which, at the Issue Price, represents an aggregate cash
subscription of £401,560 (see 'Directors 'and Certain Shareholders
'Intentions 'below).
The balance of the funds raised from the Placing and the Open Offer will be used
as additional working capital.
Principal terms of the Placing and the Open Offer
The Company proposes to issue 35,313,100 Placing Shares and 37,500,184 Open
Offer Shares at the Issue Price which, assuming the Open Offer is fully
subscribed, will raise in aggregate approximately £7.28 million for the Company
(before expenses). Seymour Pierce has fully underwritten the Placing.
1 Open Offer Share for every 3 Existing Ordinary Shares
registered in their name on the Record Date and so on in proportion for any
other number of Existing Ordinary Shares so registered. Qualifying Shareholders
may apply for their pro rata entitlement, less than their pro rata entitlement,
or their pro rata entitlement together with any further number of Open Offer
Shares. Where appropriate, the entitlement of Qualifying Shareholders will be
rounded down to the nearest whole number of Open Offer Shares and any fractional
entitlements will be aggregated and sold, if required, for the benefit of the
Company to satisfy excess applications. The Placing Shares and the Open Offer
Shares will, when issued and fully paid, rank pari passu in all respects with
the Existing Ordinary Shares of the Company and will, once allotted, rank in
full for all dividends and other distributions declared, made or paid on the
share capital of the Company in respect of the period after such allotment.
For example, if a Qualifying Shareholder holds 10,000 Existing Ordinary Shares,
his pro rata entitlement pursuant to the Open Offer is 3,333 Open Offer Shares
('Initial Entitlement '). The excess application facility entitles applications
to be made for any number of Open Offer Shares in addition to the 3,333 Open
Offer Shares representing the Initial Entitlement.
The Placing and the Open Offer is conditional, inter alia, on both the passing
of the Resolutions to be proposed at the EGM and Admission. It is expected that
dealings in the New Ordinary Shares will commence on AIM on 22 January 2004 (or
such later date as shall be determined by Seymour Pierce and the Company, being
not later than 1 March 2004). If Admission has not so occurred by such later
date, application monies will be returned to applicants without interest as soon
thereafter as is practicable and in any event by 8 March 2004.
Further information on the Open Offer, including the procedure for application
and payment, is set out in the prospectus (and application form which
accompanies it) which will be posted today to all shareholders of the Company.
Directors 'and Certain Shareholders 'Intentions
Phipps and Company Limited, a corporate Shareholder in which Stephen
Lawrey Phipps is a shareholder and director has undertaken to subscribe for
3,218,600 New Ordinary Shares which, at the Issue Price, represents a cash
subscription of £321,860;
Dr Colin Barry Phipps,Marion Phipps and Michael Field, as trustees of the
Phipps and Company Limited retirement benefit scheme, have undertaken to
subscribe for an aggregate of 2,500,000 New Ordinary Shares which, at the
Issue Price, represents a cash subscription of £250,000;
Dr Alan John Martin has undertaken to subscribe for 225,000 New Ordinary
Shares which, at the Issue Price, represents a cash subscription of £22,500;
Walter Ian Logan Forrest has undertaken to subscribe for 225,000 New
Ordinary Shares which, at the Issue Price, represents a cash subscription of
£22,500;
QM Marketing Limited (a corporate Shareholder in which Dr David Quick is
a director and shareholder) has undertaken to subscribe for 225,000 New
Ordinary Shares which, at the Issue Price, represents a cash subscription of
£22,500; and
Dr Ian Gordon Duncan intends to subscribe for 122,000 New Ordinary Shares
which, at the Issue Price, represents a cash subscription of £12,200.
Extraordinary General Meeting
The Placing and the Open Offer are conditional, inter alia, on the approval of
Shareholders which is to be sought at an EGM convened for 10.00 a.m. on 21
January 2004. At this meeting the following resolutions will be proposed:
1. to increase the authorised share capital of the Company from £1,400,000 to
£2,500,000 by the creation of 110,000,000 New Ordinary Shares;
2. to authorise the Directors to allot, inter alia, Ordinary Shares pursuant to
section 80 of the Act, sufficient to satisfy applications under the Placing
and the Open Offer and otherwise up to an aggregate nominal value of
£1,374,994.48; and
3. to disapply the statutory pre-emption rights set out in section 89 of the
Act to enable the New Ordinary Shares to be allotted, and to authorise the
Directors to allot further Ordinary Shares pursuant to section 95 of the Act
up to an aggregate nominal value of £928,132.84.
Action to be Taken
Form of Proxy
A Form of Proxy will be enclosed with the prospectus posted to all shareholders
of the Company today for use by Shareholders at the EGM. Whether or not
Shareholders intend to be present at the EGM, they are asked to complete, sign
and return the Form of Proxy to the Company 's registrars, Capita Registrars,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible but
in any event so as to arrive no later than 10.00 a.m.on 19 January 2004.The
completion and return of a Form of Proxy will not preclude Shareholders from
attending the EGM and voting in person should they wish to do so. Accordingly,
whether or not Shareholders intend to attend the EGM in person or take up any
Open Offer Shares under the Open Offer, they are urged to complete and return
the Form of Proxy as soon as possible.
Application Form
Qualifying Shareholders who wish to apply for Open Offer Shares under the Open
Offer, you should complete the application form which accompanies the prospectus
which has today been posted to all Shareholders and return it, together with the
appropriate remittance for the full amount payable on application, to be
received no later than 3.00 p.m.on 20 January 2004 at the of offices of the
Company 's receiving agents, Capita IRG Plc, Corporate Actions, P.O.Box 166, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TH.
Recommendation
The Directors consider the Placing and Open Offer to be in the best interests of
the Company and Shareholders as a whole and accordingly unanimously recommend
that they vote in favour of the Resolutions. The following have irrevocably
undertaken to vote in favour of the Resolutions:
a. Phipps and Company Limited (a corporate Shareholder in which Stephen Lawrey
Phipps is a director and shareholder);
b. The trustees of the Phipps and Company Limited retirement benefit scheme;
c. Dr Alan John Martin;
d. Dr Ian Gordon Duncan;
e. Walter Ian Logan Forrest;
f. Dr David Huw Quick; and
g. QM Marketing Limited (a corporate Shareholder in which Dr David Huw Quick is
a director and shareholder).
The irrevocable undertakings referred to above represent beneficial holdings
amounting in aggregate to 29,193,397 Existing Ordinary Shares, representing
25.95 per cent.of the Company 's existing issued share capital.
The terms and expressions used in this announcement have the same meaning as
those defined in the prospectus which was issued by the Company on 24 December
2003.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Open Offer 22 December
2003
Prospectus published 24 December
2003
Latest time and date for splitting Application Forms to 3.00 p.m. on 15
satisfy bona fide market claims under the Open Offer January 2004
Latest time and Date for receipt of Form of Proxy 10.00 a.m. on
19 January 2004
Latest time and Date for receipt of completed 3.00 p.m. on 20
Application Forms and payment in full under the Open January 2004
Offer
EGM 10.00 a.m. on
21 January 2004
Admission effective and dealings commence in the New 8.00 a.m. on 22
Ordinary Shares on AIM and (where applicable) CREST January 2004
stock accounts expected to be credited Despatch of definitive share certificates for New 29 January 2004 Ordinary Shares no later than .This information is provided by RNS
The company news service from the London Stock Exchange.
Next league shoot is on Sunday 11th January. On behalf of all of the Shotgun Shooters in the Falkland Islands Gun Club may I wish you a merry Christmas and a happy and safe New Year. Happy shooting.
