TIDMARG

RNS Number : 5573U

Argos Resources Ltd

07 April 2021

This announcement contains inside information

Argos Resources Limited

("Argos" or "the Company")

Subscription to Raise US$550,000

Argos is pleased to announce it has conditionally raised gross proceeds of US$550,000 (approximately GBP400,000) through the issue of 14,428,001 Subscription Shares at a price equivalent to 2.75 pence each (the "Subscription Price") by certain new shareholders and Ian Thomson, Executive Chairman of the Company (the "Fundraise").

Further to Argos' announcement on 18 September 2020, the Company remains engaged in discussions with counterparties who have expressed an interest in participating in drilling on Licence PL001, a production licence covering an area of approximately 1,126 square kilometres in the North Falkland Basin. In order to enable the Company to progress these discussions with potential farm-in partners, on 10 February 2021 the Board requested that the Falklands Islands Government grant a 12 month extension to the second term of Licence PL001, which is currently due to expire on 1 May 2021. The Falkland Islands Government has said that as part of its consideration of this request, the Company must demonstrate that it has, or will secure, sufficient funds to meet its working capital requirements until at least the period of the extension requested.

The net proceeds of the Fundraise, along with the Company's existing cash of GBP235,000 at 25 March 2021, will provide working capital for the Group until at least 1 May 2022, being the requested extension date of Licence PL001.

The Fundraise is conditional, among other matters, on the passing of the Resolutions by Shareholders at a General Meeting. A notice convening the General Meeting for 5.00 p.m. (FKST) on 30 April 2021 at Falkland Islands Chamber of Commerce, Stanley, Falkland Islands to consider the Resolutions is expected to be posted on 7 April 2021.

Further details on the Background to and Reasons for the Fundraise are set out below in the Letter from the Executive Chairman.

For further information:

Argos Resources Limited (+500 22685)

www.argosresources.com

Ian Thomson, Chairman

John Hogan, Managing Director

Cenkos Securities PLC

Neil McDonald (+44 131 220 6939)

Derrick Lee (+44 131 220 9100)

Letter from the Executive Chairman

On 7 April 2021, the Company announced that it had conditionally raised gross proceeds of US$550,000 (being the US$ equivalent of approximately GBP400,000) through the issue of 14,428,001 Subscription Shares at a price of 2.75 pence each (the Issue Price).

The Fundraise comprises a subscription by certain new shareholders and Ian Thomson, Executive Chairman of the Company, to raise US$550,000 (being the US$ equivalent of approximately GBP400,000 (before expenses)).

Following their issue, the Subscription Shares will represent approximately 6.14% per cent. of the Enlarged Share Capital.

The Fundraise is conditional, among other matters, on the passing of the Resolutions by Shareholders at a General Meeting.

The purpose of the Circular is to provide information about the background to and the reasons for the Fundraise and to explain why the Board considers it to be in the best interests of the Company and its Shareholders as a whole and, further, why the Directors recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

Further background information is set out below under the heading "Background to and Reasons for the Fundraise".

Background to and Reasons for the Fundraise

The Company's principal asset is a 100 per cent. interest in Licence PL001, a production licence covering an area of approximately 1,126 square kilometres in the North Falkland Basin. Licence PL001 is adjacent and to the west of the large Sea Lion oil discovery which is reported to contain some 530 million barrels of recoverable oil. A 3D seismic survey was acquired by the Company in early 2011 covering the entire Licence Area. The high quality of the seismic data acquired enabled the Company to identify 52 prospects and 40 leads within the Licence. The Company's Competent Person's Report ("CPR") issued in July 2013 described 52 prospects with a total unrisked potential of 3.1 billion barrels of prospective recoverable resource in the most likely case, and up to 10.4 billion barrels in the upside case.

Following the withdrawal of Noble Energy Falklands Limited and Edison International S.p.A. from Licence PL001 and the subsequent reassignment of Licence PL001 to the Company in February 2019, the Company has continued to seek financially and operationally strong farm-in partners to participate in the development of PL001 and help fund the costs of certain drilling commitments during the second term of Licence PL001.

On 31 October 2019, Argos announced that the Falkland Islands Government had agreed to extend the second term of Licence PL001 by a period of 18 months, to 1 May 2021, with no additional work requirements being required beyond the requirement to drill one exploration well within the Licence Area by the end of the second term of Licence PL001. Fulfilling this work obligation would allow a continuation of Licence PL001 into the Third Exploration Term for up to a further 10 years from May 2021 in accordance with its terms and applicable law.

On 18 September 2020, the Company announced that it was engaged with counterparties who had expressed an interest in participating in drilling on Licence PL001. However, the Company noted that the oil & gas industry had experienced a sharp drop in crude oil prices as a result of increased competition from OPEC for market share, which was exacerbated by the significant drop in global energy demand as a result of the Covid-19 pandemic and the industry's response to the challenging market conditions was focused on reducing costs, cutting capital expenditure and delaying projects. Against this backdrop, whilst the Company's discussions with potential farm-in partners remain on-going, the Board believes it may be some time before any farm-in partner's expression of interest is translated into commitments.

In order to enable the Company to progress its discussions with potential farm-in partners, on 10 February 2021 the Board requested that the Falklands Islands Government grant a 12 month extension to the second term of Licence PL001, which is currently due to expire on 1 May 2021. The Falkland Islands Government has said that as part of its consideration of this request, the Company must demonstrate that it has, or will secure, sufficient funds to meet its working capital requirements until at least the period of the extension requested.

The net proceeds of the Fundraise, along with the Company's existing cash of GBP235,000 at 25 March 2021, will provide working capital for the Group until at least 1 May 2022, being the requested extension date of Licence PL001. Part of the working capital raised will be retained in US$ to meet the Company's anticipated US$ expenditures and part will be converted to GBP after the conditions set out in the next paragraph are satisfied.

Completion of the Fundraise is conditional on: (i) the passing of Resolutions; (ii) the Falkland Islands Government consenting to the extension of PL001 for a further period to expire not earlier than 30 April 2022; and (iii) admission of the Subscription Shares to trading on AIM becoming effective on or before 31 May 2021. In the event that the Subscription does not become unconditional on or before 31 May 2021, the Fundraising will not proceed.

In the event that the Company is unable to complete the Fundraise or an alternative means by which to raise capital, find a farm-in partner, or negotiate an extension to PL001, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business and in these circumstances there would be a significant material uncertainty over the Group's and Company's ability to continue as a going concern.

Ongoing activities and strategy

The Company has a strong and experienced management team with extensive experience in both the oil and gas industry and the Falkland Islands.

Argos is focused on the North Falkland Basin, specifically Licence PL001, which is a production licence covering an area of approximately 1,126 square kilometres in the North Falkland Basin. Licence PL001 is adjacent and to the west of the large Sea Lion oil discovery which is reported to contain some 530 million barrels of recoverable oil. The Company is currently seeking partners to participate in drilling on Licence PL001 to unlock the value of what the Directors consider to be a significant and exciting opportunity.

Details of the General Meeting

As described above, the Fundraise is conditional on the passing of the Resolutions at a General Meeting. The Resolutions will grant authority to the Directors to issue and allot the Subscription Shares as if the statutory pre-emption restrictions under the Companies Acts did not apply to such issue and allotment.

A notice convening the General Meeting is available on the Company's website www.argosresources.com . The General Meeting is to be held at 5.00 p.m. (FKST) on 30 April 2021 at Falkland Islands Chamber of Commerce, Stanley, Falkland Islands and Shareholders will be asked to consider and, if thought fit, approve the Resolutions set out in full in the Notice of General Meeting, as summarised below:

-- Resolution 1 is an ordinary resolution to grant the Directors authority to allot the Subscription Shares for the purposes of the Fundraise.

-- Resolution 2 is conditional on the passing of Resolution 1. Resolution 2 is a special resolution which disapplies the statutory pre-emption rights in respect of the allotment of the Subscription Shares to be allotted pursuant to Resolution 1.

Recommendation

The Board considers the Transaction and passing of the Resolutions to be in the best interests of the Company and Shareholders as a whole.

Note: Capitalised terms in this announcement are as defined in the circular dated 7 April 2021, which is available on the Company's website at www.argosresources.com

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END

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April 07, 2021 02:00 ET (06:00 GMT)

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