THIS ANNOUNCEMENT, INCLUDING THE APPENDIX TO THIS ANNOUNCEMENT, AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT, INCLUDING THE APPENDIX TO 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 AND THE APPENDIX 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 VICTORIA OIL & GAS PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
6 March 2019
Victoria Oil & Gas Plc
(“VOG” or the “Company”)
Subscription and Placing to raise up to approximately
£12.6 million and Proposed Board Changes
Victoria Oil & Gas Plc, the integrated natural gas producing utility company in Cameroon, is pleased to announce a £12.6 million (c.US$16.5 million) equity fundraise.
- Binding conditional direct share subscription by YF Finance Limited to raise £6.5 million
- Proposed Placing to raise up to £6.1 million
- Fundraising to be conducted at an issue price of 13 pence per share
- The Placing is being conducted by way of an accelerated book build process which will open with immediate effect following this announcement
- On completion of the Fundraising, Kevin Foo will retire as Director and Executive Chairman
- Roger Kennedy, currently Senior Non-Executive Director, will assume the role of Executive Chairman
- Two additional independent non-executive directors will be appointed to the Board
The Company has entered into a conditional agreement for a subscription of 50,000,000 new Ordinary Shares, at an issue price of 13 pence per share (the “Issue Price”), by YF Finance Limited (“YF Finance” or the “Subscriber”) to raise £6.5 million, before expenses (the “Subscription”). YF Finance is the Company’s largest shareholder and is currently interested in 11,085,239 ordinary shares, representing approximately 7.37 per cent. of the Company’s existing issued share capital. YF Finance is wholly owned by Mr Askar Alshinbayev and has investments in several other international oil & gas companies.
In addition, the Company is seeking to raise an additional £6.1 million, before expenses, by way of a proposed placing to certain new and existing institutional and sophisticated investors via its joint brokers, Shore Capital Stockbrokers Limited (“Shore Capital”) and FirstEnergy Capital LLP (“GMP FirstEnergy”), at the Issue Price (the “Placing”). The maximum targeted amount for the fundraising, comprising the Subscription and the Placing, is approximately £12.6 million (approximately US$16.5 million) (the “Fundraising”). The Subscription is not conditional on any minimum amount being raised in the Placing.
The Placing is being conducted as an accelerated book build process which will open with immediate effect following this announcement.
The Fundraising is subject to the requisite shareholder approval and, accordingly, the issue of the New Ordinary Shares is conditional on, inter alia, the passing of certain resolutions by Shareholders (the “Resolutions”) at a duly convened general meeting of the Company (the “General Meeting”), notice of which, together with full details of the Fundraising, will be set out in the circular to be posted to Shareholders shortly.
Ahmet Dik, CEO of VOG, commented:
“This morning’s announcement to raise up to £12.6 million in conjunction with the proposed Board changes is a new beginning for VOG. The Fundraising will strengthen the Company’s financial position and provide the necessary support for the new Board and Senior Management to take the Company to the next level. Given the gas demand in the industrial city of Douala Cameroon, and the Company’s strategic position of being the only onshore gas supplier and operator of the gas pipeline network, the Company can now look to develop its Matanda project and optimise its Logbaba operations with a view to becoming cashflow positive in the near term.
“Finally, a reduction of director salaries, which I welcome, is evidence of the new Board’s focus to drive the Company to ensure Shareholder returns.”
Background to and reasons for the Fundraising
The Fundraising serves to demonstrate the strong financial support and interest in the Company’s activities from the Subscriber and other new and existing institutional shareholders and recognises both the achievements to date of the Company’s business model as well as the changes required to ensure that the business can maximise its full growth potential and value creation for all Shareholders.
The period from December 2017 to December 2018 was particularly challenging for the Company. Following completion of an expensive drilling programme in December 2017, the Company experienced the non-renewal on 1 January 2018 of a key gas sales agreement with Eneo Cameroon S.A. (“ENEO”), its major grid-power customer. Consequently, with significantly reduced revenues in 2018, the Company immediately took steps to reduce its operating costs and restructure certain bank debt obligations.
On 22 December 2018, the Company announced an agreement, subject to documentation, with ENEO to resume gas supply for a period of three years to the Logbaba 30MW Power Station on a take or pay basis with a minimum load of 80 per cent., thereby securing significant revenues. The Company welcomes the resumption of its gas supply to ENEO, which will add significant revenues to the Company from January 2019; however, the Company requires an injection of new equity to satisfy its working capital requirements and planned capital expenditure on its projects.
Reflecting the support from the Subscriber and new and existing Shareholders, the Company will continue to cut costs in its London and Cameroon operations. This includes a reduction of 41% in the cash cost of salaries of directors, comprising a 33% reduction in the CEO’s salary and a 50% reduction of the Executive Chairman’s salary. To further align the interests of the Directors with Shareholders, it is proposed, subject to Board approval, to grant options to Directors and senior management over a number of Ordinary Shares equivalent to 6% of the enlarged issued capital of the Company with an exercise price of 14p and exercise period of 5 years.
The changes to the Board will rejuvenate and energise the management team, paving the way for the Company to achieve its targets with a view to providing positive returns to Shareholders. The Company will use the proceeds of the Fundraising to continue to invest in its Logbaba and Matanda projects in Cameroon with a focus on connecting new customers; to execute the cost reduction plans; to re-pay certain debt and outstanding creditors obligations; and to improve the Group’s general working capital (see “Use of Proceeds” section below)
By way of a financial update, the Company notes:
- Unaudited net revenue for 2018 was US$10.6 million (2017: US$23.5 million), reflecting the loss of revenue from the Company’s grid-power business.
- Unaudited cash and cash equivalents as at 31 December 2018 were US$3.6 million (2017: US$11.5 million).
- Trade receivables were US$2.7 million (2017: US$6.2 million) and trade payables were US$5.5 million (2017: US$8.8 million).
- Total borrowings were US$20.9 million (2017: US$24.5 million).
- Net debt was US$17.3 million (2017: US$13.1 million).
Use of Proceeds
The net proceeds of the Fundraising will enable the Company to:
- maintain and expand its existing operations in Cameroon, with a focus on securing new customers and increasing revenue;
- complete Well LA 108 at Logbaba and fund the ongoing development of the Matanda project, a key focus for the Company;
- continue to implement its cost reduction programme in both the London and Cameroon operations;
- restructure and reduce the Group’s existing bank and trade indebtedness; and
- fund its working capital requirements.
Additional information on the Fundraising is set out in the pdf of the full RNS. Attention is also drawn to the section headed 'Important Notice' and to the Appendix to this Announcement containing, inter alia, the terms and conditions of the Placing (representing important information for Placees only). The final number of Placing Shares to be issued in connection with the Placing will be determined by GMP FirstEnergy and Shore Capital at the close of the book build process, and the results of the Placing will be announced as soon as practicable thereafter. The timing of the closing of the book, pricing and allocations is at the absolute discretion of the Company, GMP FirstEnergy and Shore Capital.
For further information, please visit www.victoriaoilandgas.com or contact:
Victoria Oil & Gas Plc
Ahmet Dik (Chief Executive Officer), Andrew Diamond (Finance Director)
Tel: +44 (0) 20 7921 8820
Strand Hanson Limited (Nominated & Financial Adviser)
Rory Murphy / Ritchie Balmer / Jack Botros
Tel: +44 (0) 20 7409 3494
Shore Capital Stockbrokers Limited (Joint Broker)
Mark Percy / Toby Gibbs (corporate finance)
Jerry Keen (corporate broking)
Tel: +44 (0) 207 408 4090
GMP FirstEnergy (Joint Broker)
Jonathan Wright / Hugh Sanderson
Tel: +44 (0) 207 448 0200
Camarco (Financial PR)
Tel: +44 (0) 203 757 4983
Tel: +44 (0) 203 781 8330
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.
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