TIDMHUR
RNS Number : 0966N
Hurricane Energy PLC
20 October 2016
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DOMAIN.
20 October 2016
Hurricane Energy plc
("Hurricane" or the "Company")
GBP70 million Placing and up to GBP4.4 million Open Offer and
Notice of General Meeting
Hurricane Energy plc, the UK-based oil and gas company focused
on hydrocarbon resources in naturally fractured basement
reservoirs, is pleased to announce that it has conditionally raised
gross proceeds of GBP70 million through a proposed issue of
205,882,353 Placing Shares at a price of 34 pence per share.
The Company is also proposing separately to make an Open Offer
to all Qualifying Shareholders to enable Qualifying Shareholders to
have the opportunity to participate in the capital raising process
at the Issue Price. It is proposed that the Open Offer will raise
up to GBP4.4 million (being less than the EUR5 million maximum
amount permitted without requiring the publication by the Company
of a prospectus under the Prospectus Rules), in addition and
separate to the funds raised pursuant to the Placing.
The Company is grateful for the support of its existing
shareholders, including Kerogen Investor and Crystal Amber who have
conditionally subscribed for 93,017,647 of the Placing Shares to
raise gross proceeds of GBP31.63 million. Kerogen Investor has
agreed not to subscribe for any Open Offer Shares under the Open
Offer in order to allow for other Qualifying Shareholders to apply
for Excess Shares under the Excess Application Facility. The
Company is pleased with the strong demand received, which led to
the Placing being oversubscribed at the Issue Price, and is
delighted to welcome a number of new institutional shareholders to
the share register.
Further details on the Open Offer will be provided in due course
and the Company expects to post a Circular to Shareholders in
connection with the Open Offer tomorrow. The Placing and the Open
Offer are conditional, amongst other things, on Shareholder
approval.
Highlights and Use of Proceeds
-- GBP70 million to be raised by way of the Placing with
existing and other institutional investors at a price of 34 pence
per share
o significant demand received from a number of institutions
leading to the Placing being oversubscribed at the Issue Price;
o a discount of 12.26 per cent. to the closing middle market
price of 38.75 pence per Ordinary Share on 19 October 2016 and a
discount of 11.13 per cent. to the 30 trading day volume weighted
average price of 38.26 pence per Ordinary Share
-- GBP70 million secures EPS development timeline and drilling
of two wells with the net proceeds primarily to be used to:
o advance the development of the Greater Lancaster Area fields
by funding the FEED and certain other engineering studies for the
EPS phase of Lancaster;
o secure the development timetable for the EPS by acquiring the
Subsea Equipment, buoy, mooring and control system long lead items;
and
o further delineate the Greater Lancaster Area by drilling an
exploration well on Lincoln and an exploration well on Warwick or
another similarly risked Rona Ridge prospect with the potential for
up to approximately 500 million barrels of unrisked Prospective
Resources across the Lincoln and Warwick prospects (assuming
analogous to Lancaster);
-- The Directors believe that the opportunity to commence
drilling in November potentially locks in bottom-of-the-cycle rig
costs
o This timing also allows the Company to potentially drill
back-to-back wells and continue using Transocean's Spitsbergen Rig,
which is designed for use in challenging weather conditions, as
well as the same experienced crew that has drilled the Lancaster 7
wells
-- Purchasing certain long lead items now will reduce scheduling
risk and reliance on EPS financing in H1 2017
-- Farmout discussions expected to recommence later this year
following completion of technical analysis of Lancaster 7 wells
with the Company in a stronger negotiating position as a result of
recent operational delivery, enhanced resources expectation for the
Greater Lancaster Area and strengthened financial position
-- Continued support from Kerogen Investor demonstrates
endorsement by a technically experienced, specialist upstream
investor
-- Introduction of a number of new institutional investors adds
further credibility to the Company's continuing transformation and
delivery of its strategy
-- The Directors believe the Company will be in a position to
make a final investment decision on the EPS phase of development in
H1 2017, with first oil targeted for in H1 2019
-- The Placing and the Open Offer are subject to Shareholder
approval, with the General Meeting to be held on 7 November
2016
o Support from Shareholders of the Company, who have provided
irrevocable undertakings to vote in favour of the transaction in
respect of, in aggregate, approximately 355 million of the Existing
Ordinary Shares.
A circular in connection with the proposed Fundraising and
notice of General Meeting (the "Circular") will be posted to
Shareholders tomorrow. The Circular sets out in detail (i) the
background to and reasons for the Fundraising and (ii) the
resolutions which are required to be passed by Shareholders at the
General Meeting to be held at the offices of Dentons UKMEA LLP, One
Fleet Place, London EC4M 7WS at 2.30 p.m. on 7 November 2016. All
capitalised terms in this announcement are as defined in the
Circular which will be available on the Company's website
www.hurricaneenergy.com.
Dr Robert Trice, Chief Executive, commented:
"Hurricane has had an exceptionally busy operational period of
activity with outstanding results from the Pilot and Horizontal
Sidetrack wells. Building on those results, we are delighted to
announce today's Fundraising which allows us to capitalise on the
operational momentum and proceed imminently with a campaign to
further improve our understanding of the Greater Lancaster Area,
potentially add considerable near-field resources and secure the
development timetable for the Lancaster Early Production System. I
am delighted that the proceeds from the Fundraising enable us to
benefit from valuable operational continuity through the continued
use of Transocean's Spitsbergen Rig and experienced crew at a
beneficial point in the oilfield services cycle. Together with the
recently announced appointment of Technip and FMC Technologies as
our exclusive subsea solutions provider, our work on Lancaster and
its wider potential is achieving genuine momentum which we believe
will deliver significant value to shareholders and a sizeable
resource for the UK.
"The transaction also allows us to continue to strengthen the
quality of our investor base. We are grateful for the support from
our existing shareholders, particularly Kerogen Investor and
Crystal Amber, and also extremely pleased to welcome a number of
new blue-chip institutional shareholders to our register following
the strong interest received in the Placing. We believe that this
reflects both the potential of Hurricane's resource base and our
ability to deliver against our strategy, as well as the growing
confidence in the fractured basement opportunity in the UK.
"With a number of catalysts including the results from the two
new wells, securing an FPSO for the EPS, further results from the
Lancaster 7 well drilling, a new Competent Person's Report in 1H
2017, and sanction of the EPS, the next twelve months are expected
to be an exciting period for the Company."
Contact Details:
+44 (0)1483 862
Hurricane Energy plc 820
Dr Robert Trice, Chief Executive
Officer
Alistair Stobie, Chief Financial
Officer
+44 (0)131 220
Cenkos Securities plc 6939
Nominated Adviser, Joint Broker
and Joint Bookrunner
Derrick Lee/Nick Tulloch/Beth
McKiernan
+44 (0)20 3037
Macquarie Capital (Europe) Limited 2000
Joint Broker and Joint Bookrunner
Alex Reynolds / Guy de Freitas
Vigo Communications +44 (0) 7830 9700
Public Relations Adviser to
Hurricane
Patrick d'Ancona/Ben Simons
This announcement contains certain statements that are or may be
deemed to be "forward-looking statements" which are based on
current expectations and projections about current events. These
statements typically contain words such as "targets", "believes",
"intends", "may", "will", "should", "expects" and "anticipates" and
words of similar import. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future
performance.
Statements contained in this announcement regarding past trends
or activities should not be taken as a representation that such
trends or activities will continue in the future.
The information contained in this announcement is subject to
change without notice and, except as required by applicable law or
the AIM Rules, the Company does not assume any responsibility or
obligation to update publicly or review any forward-looking
statements contained herein. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this
announcement. No statement in this announcement is or is intended
to be a profit forecast or to imply that the earnings of the
Company for the current or future financial years will necessarily
match or exceed the historical or published earnings of the
Company.
The price of shares and the income from them may go down as well
as up and investors may not get back the full amount invested on
disposal of the shares. Past performance is no guide to future
performance and persons who require advice should consult an
independent financial adviser.
The distribution of this announcement and the offering of the
Placing Shares and Open Offer Shares in certain jurisdictions may
be restricted by law. No action has been taken by the Company or
any of the Joint Bookrunners that would permit an offering of such
shares or possession or distribution of this announcement or any
other offering or publicity material relating to such shares in any
jurisdiction where action for that purpose is required. Persons
into whose possession this announcement comes are required by the
Company and the Joint Bookrunners to inform themselves about, and
to observe, any such restrictions.
Background to and reasons for the Fundraising
Hurricane is a UK-based oil and gas company focused on the
exploration and exploitation of fractured basement reservoirs.
On 10 May 2016, the Company successfully completed a fundraising
whereby pursuant to the April 2016 Placing and the Kerogen
Subscription the Company raised approximately GBP52.1 million
(before expenses) through the issue of 347,245,265 new Ordinary
Shares to Kerogen Capital, Crystal Amber and Marlborough Fund
Nominees at a price of 15 pence per share. The net proceeds of the
April 2016 Placing and the Kerogen Subscription have been used to
fund the drilling of a pilot well and a horizontal sidetrack well
on the Lancaster field and for general corporate purposes.
The Directors believe there is an opportunity to secure
attractive oilfield service contract rates given the continued
depressed environment for the oilfield service supply chain. The
support of Kerogen Investor, together with certain existing and new
institutional Shareholders and the availability of the Rig, will
allow the Company to capitalise on this opportunity. As a result of
the Rig Contract Amendments the Company is in a position to begin
drilling the first of the two new wells in early November with the
drilling of these wells potentially contributing to the delineation
of the Greater Lancaster Area to enable a more considered full
field development. The Fundraising will also assist the Company to
secure the critical path development timeline of the EPS phase of
the Lancaster development.
Use of proceeds
The gross proceeds receivable by the Company pursuant to the
Fundraising will be GBP70 million, before expenses (excluding any
proceeds of the Open Offer). The Company intends to use the net
proceeds it receives from the Fundraising, together with its
existing cash resources, to:
-- advance the development of the Greater Lancaster Area fields
by funding the FEED and certain other engineering studies for the
EPS phase of the Lancaster development - approximately GBP7m;
-- acquire the Subsea Equipment, buoy, mooring and control
system long lead items for the EPS phase of Lancaster, including
additional engineering work and contingency - approximately GBP21m;
and
-- further delineate the Greater Lancaster Area by drilling an
exploration well on Lincoln and an exploration well on Warwick. The
Company is also actively seeking a number of targets in order to
establish the potential to drill a well on the Rona Ridge including
in areas contiguous to the Company's existing licence areas, which
would have a risk profile no worse than that of Warwick, instead of
the proposed exploration well on Warwick - approximately
GBP43m.
Given Hurricane's existing cash position, and assuming receipt
of the net proceeds anticipated to be raised under the Placing,
Hurricane's strategy is not contingent upon a full take-up under
the Open Offer, and any Open Offer funds received will be
additional to the Company's immediate funding requirements. The
Open Offer will primarily be used to allow retail and other
non-institutional Shareholders to participate in the
Fundraising.
The amount of approximately GBP43m in relation to further
drilling to delineate the Greater Lancaster Area assumes that
Hurricane exercises its option under the Rig Contract Amendments by
21 November 2016 to use the Rig to drill a back-to-back well on
Warwick or another Rona Ridge prospect which has a risk profile no
worse than that of Warwick. If the Company does not exercise this
option, and instead drills the second well between April and
September 2017, there may be additional costs involved in securing
a new rig.
Lancaster
Preliminary third party analysis of the Pilot Well has indicated
that a very significant hydrocarbon column of at least 620 metres
is present within the basement extending well below structural
closure, confirming the Company's reservoir model for Lancaster.
Provisional third party analysis indicates a minimum ODT at 1,620
metres TVDSS and 240 metres TVD below structural closure. The
penetrated aquifer interval is porous and permeable. Initial
interpretation of well test data indicates that there are no
pressure barriers detected in the reservoir in the vicinity of this
wellbore. This is consistent with third party well test analysis of
the Company's Lancaster wells which indicate that no pressure
barriers have been identified within the basement reservoir. A DST
of the basement reservoir produced a maximum natural flow rate of
6,600 bopd and a maximum flow rate of 11,000 bopd (artificial lift
with an electrical submersible pump) of good quality 38 API oil
with no indication of aquifer water being produced at surface. This
flow is interpreted as predominantly emanating from a short
interval of high-permeability fractures within the basement. The
Directors now estimate recoverable resources in excess of 300
MMbbls, an increase of approximately 50 per cent. from the previous
estimate of 200 MMbbls based on the 2C case from the CPR.
After plugging and abandoning the Pilot Well as planned, the
Company has drilled the Horizontal Sidetrack Well. A DST of the one
km Horizontal Sidetrack Well produced a sustainable flow rate of
14,500 stock tank bopd (artificial lift with an electrical
submersible pump) of good quality 38 API oil with no produced
formation water. The flow rate was constrained by test
equipment.
Following completion of the DST testing, the Horizontal
Sidetrack Well will now be suspended as a future producer for the
EPS phase of the Lancaster development.
The Company believes the development of the Greater Lancaster
Area will occur by way of a phased development, the first phase of
which is the EPS phase. In addition, the Company intends to further
delineate the Greater Lancaster Area to assist with planning for
future phases of development.
The EPS phase of development comprises the two previously
drilled and tested one kilometre horizontal subsea production wells
on Lancaster which will be tied back to a FPSO host facility. The
Directors' current expectation is that the EPS should produce
approximately 62 million barrels in aggregate with plateau
production of approximately five years. It is currently expected
that the annual average aggregate production during plateau per day
from the two-well development will be 17,000 barrels, taking into
account the expected downtime for maintenance, weather and
unplanned interruptions to production. Current indications are that
the operating costs per barrel will be approximately USD26.
The Company currently expects to sanction the EPS phase of the
Lancaster development by the end of H1 2017 and to achieve first
oil during H1 2019. To expedite this, the Company has identified a
FPSO which can be redeployed to the Lancaster field and is at
present undertaking early stage FEED studies. The Company expects
to obtain an exclusive right to deploy the FPSO before the end of
2016, subject to the Directors concluding acceptable commercial
terms with the owner of the FPSO and confirming that the FPSO can
be converted at an acceptable cost to operate on the Lancaster
field.
Additionally, the Directors have selected providers for the
Subsea Equipment. The Company intends to acquire the most time
critical part of the required Subsea Equipment, buoy, mooring and
control system long lead items with part of the proceeds of the
Fundraising such that, subject to the final selection of the FPSO,
agreement of the commercial terms and successful conversion of the
FPSO, the installation of the Subsea Equipment should not delay the
development of the EPS phase of Lancaster.
On 12 October 2016, Hurricane announced that it had
provisionally selected Technip and FMC Technologies, under their
alliance, as its exclusive provider of subsea solutions for the EPS
and for subsequent development of the Greater Lancaster Area.
Following completion of operations at the Horizontal Sidetrack
Well and the removal of the wear bushing from the Lancaster 6 Well,
the necessary well stock for the EPS phase of development will have
been drilled and subject to final completions will be ready to be
connected to the Subsea Equipment.
A preliminary estimate is that the capital expenditure required
to achieve first oil from the EPS, excluding the two horizontal
wells which have already been drilled and tested, is expected to be
up to USD400 million. This estimate comprises vessel hull and
topside conversion, vessel repair and life extension, turret, buoy
and mooring, Subsea Equipment, well completions and vessel
deployment and associated service and engineering costs (including
the Subsea Equipment, buoy, mooring and control system long lead
items funded by the Fundraising).
Hurricane is considering a range of financing options for the
EPS phase of the Lancaster development and currently intends to
finance the EPS via a combination of some or all of the following
options: equity, production pre-payment facility, deferred vendor
finance, deferred yard and fabricator finance, hybrid ownership of
the FPSO, export credit agency guarantees and farmout.
On completion of the initial FEED studies, the Company intends
to progress its production pre-payment facility, deferred yard
finance and export credit agency options with a view to these being
executable at the end of FEED.
The Directors believe that Hurricane's Rona Ridge prospects have
been significantly de-risked following the results of the Pilot
Well. Accordingly, Hurricane also intends to further delineate the
Greater Lancaster Area and to continue to benefit from reduced oil
field service rates. On 7 October 2016 and 14 October 2016, the
Company entered into the Rig Contract Amendments with Transocean.
These gave the Company the option to use the Rig to drill one well
on the Lincoln prospect, which the Company exercised on 19 October
2016, and one well on Warwick or another prospect specified by the
Company in the West of Shetland area, as further set out below.
Lincoln and Warwick are both located on the Rona Ridge to the
south-west of Lancaster and are believed by the Directors to be
analogous to the Lancaster discovery. Both wells are planned to be
inclined deviated wells whose principal aim will be to determine
the extent of the oil column. A high quality geological dataset
will also be obtained in order to fully evaluate the basement
reservoir post drilling. The Directors believe that these wells
will establish Contingent Resources which will assist the Company
in sizing a full field development.
The Company is currently evaluating a number of prospects on the
Rona Ridge, including in areas contiguous with the Company's
existing licence areas which are expected to have a risk profile no
worse than that of Warwick. The Board may opt to drill one of these
prospects in preference to the Warwick prospect if, in the opinion
of the Directors, it better delineates the extent of the Rona
Ridge.
Proposed new wells
Lincoln
The Lincoln basement prospect is geologically similar to the
nearby Lancaster structure. Seismic interpretation indicates the
likely presence of fracturing within the Lincoln basement and,
encouragingly, a previous well (205/26-1) drilled in 1975 by Arco
on the down-dip flank of the Lincoln structure found oil in
sandstones immediately above the basement, thus mitigating the oil
charge risk to the prospect. Subsequent analysis by Hurricane
identified traces of oil in the short interval of basement that was
drilled below the oil bearing sandstones. The basement interval in
which the Company believes oil to be is 2,135m TVDSS which is 355m
TVD below the structural closure interpreted by RPS Energy Limited
in the CPR.
Given its proximity to the Lancaster field (approximately nine
kilometres) and its resource potential, the Directors believe
Lincoln is an attractive prospect that could deliver significant
incremental value via tie-back to a Lancaster development hub in a
subsequent phase of development of the Greater Lancaster Area. The
CPR identified P50 Prospective Resources of 150 million barrels in
the Lincoln field. Following the success of the Pilot Well drilled
by the Company on the Lancaster field, the Directors believe that
the Lincoln field could have unrisked Prospective Resources of up
to approximately 250 million barrels assuming, as the Director
believe, the Lincoln field is analogous to the Lancaster field.
It is expected that the Lincoln well will spud in November this
year, directly following the completion of the Horizontal Sidetrack
Well and the anticipated removal of the wear bushing from the
Lancaster 6 Well. It is expected to be completed before year
end.
Drilling the Lincoln well will also contribute towards the
Company fulfilling its commitments under Licence P1368.
Warwick
The Warwick prospect comprises a robust four-way dip closure at
top basement level. It is located approximately 13 kilometres
southwest of the Lancaster field on the same Rona Ridge trend.
Although slightly deeper than Lancaster at around 1,700 metres
below sea level, conceptually Warwick and Lancaster are very
similar. From seismic data, the Warwick basement appears to be
highly faulted and fractured, so is expected to have reservoir
properties analogous to those found at Lancaster. The Warwick
structure is believed to have been charged from the prolific
Kimmeridge Clay source rock in the Faroe-Shetland Basin, located
immediately to the north.
The seal on Warwick is comprised of the same thick succession of
Upper Cretaceous claystones that cover Lancaster. The four-way dip
closure on Warwick does not benefit from any existing well
penetrations. However, nearby offset well data has been used to
help constrain the geological analysis of the region, and much of
the data that has been gathered from the Lancaster field is
directly applicable to Warwick.
The Warwick prospect was not included in the CPR because the
Company did not have the applicable licence at the time. However,
based on assumptions derived from the results of the Pilot Well and
the work undertaken for the CPR, the Directors believe that the
Warwick prospect may have unrisked Prospective Resources of up to
approximately 250 million barrels assuming, as the Directors
believe, the Warwick prospect is analogous to the Lancaster
field.
Under the Rig Contract Amendments, Hurricane has the option to
use the Rig to drill a back-to-back well on Warwick or on another
Rona Ridge prospect exercisable until 21 November 2016.
The Company continues to evaluate other prospects on the Rona
Ridge, including in area contiguous to the Company's existing
licence areas which may contribute to the delineation of the
Greater Lancaster Area to enable a more considered full field
development. As stated above, in the event that such a prospect is
identified prior to electing to drill a back-to-back well by 21
November 2016, the Company may substitute the drilling of the
Warwick well for a more suitable prospect.
The Board's decision whether to exercise this option will be
taken among other things in light of the preliminary work the
Company is able to undertake prior to that date and the required
regulatory approvals. If the Company does not exercise this option,
the Company intends to drill the second well between April and
September 2017, subject to rig availability.
Rig Contract
The Rig Contract was originally due to expire on completion of
the Horizontal Sidetrack Well in October 2016. On 7 October 2016
and 14 October 2016, the Company and Transocean entered into the
Rig Contract Amendments, pursuant to which Transocean granted the
Company the following options to extend the Rig Contract:
-- an option for running downhole gauges into well 7Z prior to
temporary suspension ,which the Company exercised on 14 October
2016;
-- an option for a mutually agreed scope of work at the nearby 6
well ,which the Company exercised on 14 October 2016;
-- an option to drill one well on the Lincoln prospect , which
the Company exercised on 19 October 2016;
-- a further option to drill one well in the West of Shetland
area (which includes Warwick), which the Company may exercise at
any time up to 21 November 2016; and
-- subject to Transocean's agreement, an option to drill a
further well in the West of Shetland area, which the Company may
exercise if it exercises its further option referred to above to
drill a well in the West of Shetland area, and which is exercisable
within 21 days following the commencement of that well.
Update on farmout
In June 2016, the Company temporarily suspended farmout
discussions until completion of the Lancaster 7 Wells and
subsequent analysis.
It is expected that the farmout process will recommence towards
the end of the year once the Lancaster 7 Wells data has been fully
analysed.
Interim results for the six months ended 30 June 2016
On 22 September 2016, the Company announced its interim results
for the six months ended 30 June 2016. These are available from the
Company's website at www.hurricaneenergy.com
Details of the Placing
The Company has conditionally raised GBP70 million (before
expenses) through the issue of 205,882,353 Placing Shares to
existing and other institutional investors at a price of 34 pence
per Placing Share.
The Placing Shares will represent approximately 17.12 per cent.
of the Enlarged Share Capital immediately following completion of
the Fundraising assuming full take-up under the Open Offer.
The Placing Shares will be allotted and issued free of all
liens, charges and encumbrances and will, when issued and fully
paid, rank pari passu in all respects with the Existing Ordinary
Shares, including the right to receive all dividends and other
distributions declared, made or paid after the date of their issue.
Application will be made for the Placing Shares to be admitted to
trading on AIM. It is expected that Admission and dealings in
Placing Shares will commence at 8.00 am on 8 November 2016.
Placing Agreement
On 20 October 2016 the Company entered into the Placing
Agreement with the Joint Bookrunners pursuant to which the Joint
Bookrunners, as agents for the Company, have agreed to use their
reasonable endeavours to procure subscribers for the Placing Shares
at the Issue Price.
The Placing is conditional upon, amongst other things:
-- the passing of the Resolutions without amendment to be proposed at the General Meeting;
-- the Rig Contract not having lapsed or been terminated or
amended in any material respect (without the prior consent of the
Joint Bookrunners which shall not be unreasonably withheld or
delayed);
-- the Placing Agreement having become unconditional (save for
Admission) and not having been terminated in accordance with its
terms prior to Admission; and
-- Admission taking place by no later than 8.00 a.m. on 8
November 2016 (or such later date as the Joint Bookrunners may
agree, being not later than 8.00 a.m. on 21 November 2016).
The Placing Agreement contains customary warranties given by the
Company in favour of the Joint Bookrunners in relation to, inter
alia, the accuracy of the information in this document and other
matters relating to the Group and its business. In addition, the
Company has agreed to indemnify the Joint Bookrunners in relation
to certain liabilities which the Joint Bookrunners may incur in
respect of the Placing.
The Joint Bookrunners have the right to terminate the Placing
Agreement in certain circumstances prior to Admission, in
particular, in the event of a breach of any of the warranties or a
material adverse change.
The Placing Agreement also provides for the Company to pay all
costs, charges and expenses of, or incidental to, the Placing and
Admission including all legal and other professional fees and
expenses.
The Placing Shares have not been made available to the public
and have not been offered or sold in any jurisdiction where it
would be unlawful to do so.
Details of the Open Offer
The Company considers it important that Qualifying Shareholders
have an opportunity (where it is practicable for them to do so) to
participate in the Fundraising on equivalent terms and conditions
to the Placing, and accordingly the Company is making the Open
Offer to Qualifying Shareholders. The Company is proposing to raise
up to GBP4,402,241 (before expenses) through the issue of up to
12,947,767 Open Offer Shares.
The Open Offer Shares are available to Qualifying Shareholders
pursuant to the Open Offer at the Issue Price of 34 pence per Open
Offer Share, payable in full on acceptance. Any Open Offer Shares
not subscribed for by Qualifying Shareholders will be available to
Qualifying Shareholders under the Excess Application Facility. The
balance of any Open Offer Shares not subscribed for under the
Excess Application Facility will not be available to placees under
the Placing.
Kerogen Investor has agreed not to subscribe for any Open Offer
Shares under the Open Offer in order to allow for other Qualifying
Shareholders to apply for Excess Shares under the Excess
Application Facility.
Qualifying Shareholders may apply for Open Offer Shares under
the Open Offer at the Issue Price on the following basis:
1 Open Offer Share for every 76 Existing Ordinary Shares held by
the Shareholder on the Record Date
Entitlements of Qualifying Shareholders will be rounded down to
the nearest whole number of Open Offer Shares. Fractional
entitlements which would otherwise arise will not be issued to the
Qualifying Shareholders but will be made available under the Excess
Application Facility. The Excess Application Facility enables
Qualifying Shareholders to apply for Excess Shares in excess of
their Open Offer Entitlement. Not all Shareholders will be
Qualifying Shareholders.
Qualifying Shareholders should note that the Open Offer is not a
rights issue and therefore the Open Offer Shares which are not
applied for by Qualifying Shareholders will not be sold in the
market for the benefit of the Qualifying Shareholders who do not
apply under the Open Offer.
Further details of the Open Offer and the terms and conditions
on which it is being made will be made available to Qualifying
Shareholders in the Circular.
Participation by existing major shareholders and Related Party
Transaction
Kerogen Investor and Crystal Amber have conditionally subscribed
for 93,017,647 Placing Shares pursuant to the Placing to raise
gross proceeds of GBP31.63 million.
Kerogen Investor, by virtue of its holding of more than 10 per
cent. of the Existing Ordinary Shares, is considered a related
party of the Company under the AIM Rules and its participation in
the Placing is considered a related party transaction under the AIM
Rules. The Directors, having consulted with the Company's nominated
advisor Cenkos, consider that the terms of the Placing are fair and
reasonable insofar as Shareholders are concerned.
Effect of the Fundraising
Upon Admission, and assuming full take up of the Open Offer
Entitlements and no further exercise of options under the Company's
share schemes, the Enlarged Share Capital is expected to be
1,202,860,397 Ordinary Shares. On this basis, the New Ordinary
Shares will represent approximately 18.19 per cent. of the
Company's Enlarged Share Capital.
Following the issue of the New Ordinary Shares pursuant to the
Placing and the Open Offer, assuming full take up of the Open Offer
Entitlements and no further exercise of options under the Company's
share schemes, Qualifying Shareholders who do not take up any of
their Open Offer Entitlements nor participate in the Placing will
suffer a dilution of approximately 18.19 per cent. to their
interests in the Company. If a Qualifying Shareholder takes up his
Open Offer Entitlement in full, and does not participate in the
Placing, he will suffer a dilution of approximately 17.12 per cent.
to his interest in the Company.
Management incentivisation arrangements
At the same time as the Fundraising, the Company intends to
implement a new management incentivisation arrangement, being the
Value Creation Plan.
The purpose of the Value Creation Plan is to incentivise, retain
and reward executive Directors and other staff members an fully
align the Hurricane management team with the shareholders. It has
been proposed as an alternative to the existing Performance Share
Plan to better reflect the Company's current and long-term
strategy.
The participants in the Value Creation Plan will be entitled to
subscribe for growth shares in a wholly owned subsidiary of the
Company, Hurricane Group Limited (the "Growth Shares"). The Value
Creation Plan has been designed so that participants will only
benefit if exceptional, additional value is delivered to
Shareholders.
The Value Creation Plan will run for five years from the date of
grant of the Growth Shares (or vesting may occur earlier upon
certain defined maturity events occurring). At the end of the
performance period the value delivered to the participants will
represent 10% of the increase in value of the Ordinary Shares above
the Issue Price subject to a defined hurdle price (the "Hurdle
Price") being achieved. The Hurdle Price will be set at
approximately 61% above the Issue Price (being an implied 10%
compound annual growth rate over the five year performance period).
The proportion of the value increase that will ultimately be
delivered to participants will also be subject to certain other
performance targets having been met. Subject to these conditions
and the Hurdle Price being reached, the participants will be
entitled to sell their Growth Shares to the Company to be satisfied
by the issue of new Ordinary Shares of an equivalent value.
For the avoidance of doubt, the Growth Shares will have no value
if, at the relevant maturity event, the price per Ordinary Share is
less than the Hurdle Price of GBP0.55 per Ordinary Share.
It is proposed that participation in the Value Creation Plan
will be offered to the following executive Directors (in addition
to other staff members):
Name Role Percentage allocation
of total Growth
Shares
----------------- ------------------ ----------------------
Chief Executive
Dr Robert Trice Officer 14%
----------------- ------------------ ----------------------
Chief Operations
Neil Platt Officer 14%
----------------- ------------------ ----------------------
Chief Financial
Alistair Stobie Officer 14%
----------------- ------------------ ----------------------
The awards mentioned above are conditional on the participants
electing to participate in the Value Creation Plan failing which
they will have the ability to remain within the existing
Performance Share Plan (which shall be amended to align with the
performance conditions in the Value Creation Plan). Any current
employees wishing to join the Value Creation Plan, will surrender
all interests in the current Performance Share Plan.
In the event that they elect to participate in the Value
Creation Plan, participants will have the option of becoming
employee shareholders under section 205A of the Employment Rights
Act 1996 and, in such event, Growth Shares will, subject to the
relevant statutory requirements, be issued within the employee
shareholder scheme.
The existing NED Plan shall remain in place (which shall also be
amended to align with the performance conditions in the Value
Creation Plan).
Working capital
Having made due and careful enquiry, the Directors are of the
opinion that, taking into account the net proceeds of the Placing,
the Company will have sufficient working capital available for its
present requirements, that is, for at least 12 months following the
date of Admission.
Additional information
The attention of Shareholders is drawn to the risk factors set
out in Appendix I, which provide additional information on the
Fundraising.
General Meeting
The General Meeting will be convened by the Company for 2.30
p.m. on 7 November 2016. The Circular, containing a notice of the
General Meeting and further details on the Fundraising, will be
despatched to Shareholders of the Company tomorrow outlining terms
of the Fundraising and seeking the necessary Shareholder
approvals.
A summary and explanation of the Resolutions to be included in
the notice of General Meeting is set out below. Shareholders will
be asked to consider and, if thought fit, to pass the Resolutions.
Should shareholder approval of the Resolutions required to enable
the Fundraising to proceed not be obtained at the General Meeting,
then the Fundraising as currently envisaged will not proceed and
the proceeds of the Fundraising will not be available to the
Company with a consequent likely adverse impact on the expenditure
plans for the Company as detailed in the Use of Proceeds paragraph
above.
-- Resolution 1, which is an ordinary resolution to authorise
the Directors to allot relevant securities up to an aggregate
nominal amount of GBP218,830.12, being equal to 218,830,120 New
Ordinary Shares (i.e. the maximum number of New Ordinary Shares
available under the Placing and the Open Offer); and
-- Resolution 2, which is conditional on the passing of
Resolution 1 and is a special resolution to authorise the Directors
to issue and allot up to 218,830,120 New Ordinary Shares pursuant
to the Placing and the Open Offer on a non-pre-emptive basis.
The authorities to be granted pursuant to the Resolutions will
expire on the date falling six months from the date of the passing
of the Resolutions (unless renewed varied or revoked by the Company
before or on that date) and will be in addition to the Directors'
authorities to allot relevant securities on a non pre-emptive basis
granted at the Company's annual general meeting held on 8 June
2016.
Application will be made for Admission and, subject to the
necessary shareholder approvals being obtained at the General
Meeting, it is expected that Admission will become effective at
8.00 a.m. on 8 November 2016.
Irrevocable Undertakings
The Company has received irrevocable undertakings from Kerogen
Investor, Awal Bank B.S.C and Dr Robert Trice to vote in favour of
the Resolutions in respect of their respective entire holdings of
Existing Ordinary Shares representing, in aggregate, approximately
36.04 per cent. of the Existing Ordinary Shares. When aggregated
with the holdings of the other Directors (which represent 0.15 per
cent. of the Existing Ordinary Shares, and which the Directors
intend to vote in favour of the Resolutions), these represent, in
aggregate, approximately 36.19 per cent. of the Existing Ordinary
Shares.
Disclaimer
This Announcement is not for release, publication or
distribution, in whole or in part, directly or indirectly, in or
into the United States, Australia, Canada, Japan or the Republic of
South Africa or any jurisdiction into which the publication or
distribution would be unlawful. This Announcement is for
information purposes only and does not constitute an offer to sell
or issue or the solicitation of an offer to buy or acquire shares
in the capital of the Company in the United States, Australia,
Canada, the Republic of South Africa or Japan or any jurisdiction
in which such offer or solicitation would be unlawful or require
preparation of any prospectus or other offer documentation or would
be unlawful prior to registration, exemption from registration or
qualification under the securities.
Neither the Placing Shares nor the Open Offer Shares have been
nor will be registered under the United States Securities Act of
1933, as amended ("Securities Act"), and may not be offered, sold
or transferred, directly or indirectly, within the United States
except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and
the securities laws of any state or other jurisdiction of the
United States. Any offering to be made in the United States will be
made to a limited number of "qualified institutional buyers"
("QIBs") within the meaning of Rule 144A under the Securities Act
pursuant to an exemption from registration under the Securities Act
in a transaction not involving any public offering. The Placing
Shares and the Open Offer Shares are being offered and sold outside
the United States in accordance with Regulation S under the
Securities Act ("Regulation S"). No public offering of the Placing
Shares or the Open Offer Shares is being made in the United States,
United Kingdom or elsewhere.
Cenkos Securities plc ("Cenkos") is authorised and regulated in
the United Kingdom by the FCA. Cenkos is acting exclusively for the
Company and no one else in connection with the Placing. Cenkos does
not regard any other person as its client in relation to the
Placing and will not be responsible to anyone other than the
Company for providing the protections afforded to its clients, nor
for providing advice in relation to the Placing, the contents of
this announcement or any transaction, arrangement or other matter
referred to herein.
Macquarie Capital (Europe) Limited ("Macquarie") is authorised
and regulated in the United Kingdom by the FCA. Macquarie is acting
exclusively for the Company and no one else in connection with the
Placing. Macquarie does not regard any other person as its client
in relation to the Placing and will not be responsible to anyone
other than the Company for providing the protections afforded to
its clients, nor for providing advice in relation to the Placing,
the contents of this announcement or any transaction, arrangement
or other matter referred to herein.
This Announcement has been issued by, and is the sole
responsibility, of the Company. No representation or warranty,
express or implied, is or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by either
Cenkos or Macquarie or by any of their respective affiliates or
agents as to or in relation to, the accuracy or completeness of
this Announcement or any other written or oral information made
available to or publicly available to any interested party or its
advisers, and any liability therefore is expressly disclaimed.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for entitlement 6.00 p.m. on 18 October2016
under the Open Offer
Announcement of the Placing 20 October 2016
and the Open Offer
Posting of the Circular, Proxy
Form and, to Qualifying non-CREST
Shareholders only, the Application
Form 21 October 2016
Ex-entitlement Date for the 21 October 2016
Open Offer
Open Offer Entitlements and
Excess Open Offer Entitlements
credited to stock accounts
in CREST of Qualifying CREST 8.00 a.m. on 21 October
Shareholders 2016
Latest recommended time and
date for requesting withdrawal
of Open Offer Entitlements
and Excess CREST Open Offer 4.30 p.m. on 1 November
Entitlements from CREST 2016
Latest time for depositing
Open Offer Entitlements and
Excess CREST Open Offer Entitlements 3.00 p.m. on 2 November
into CREST 2016
Latest time and date for splitting
Application Forms
(to satisfy bona fide market 3.00 p.m. on 3 November
claims) 2016
Latest time and date for receipt 2.30 p.m. on 5 November
of Forms of Proxy 2016
Latest time and date for receipt
of completed Application Forms
and payment in full under
the Open Offer or settlement
of relevant CREST instruction 11.00 a.m. on 7 November
(as appropriate) 2016
General Meeting 2.30 p.m. on 7 November
2016
Announcement of results of 7 November 2016
the General Meeting and Open
Offer
Admission effective and dealings
in New Ordinary Shares expected 8.00 a.m. on 8 November
to commence on AIM 2016
Expected date for crediting
of New Ordinary Shares in
uncertificated form to CREST 8.00 a.m. on 8 November
stock accounts 2016
Despatch of share certificates
in respect of Placing Shares
and Open Offer Shares in certificated within 14 days from
form Admission
Notes:
1. Each of the times and dates in the above timetable, and shown
elsewhere in this document, are indicative only and if any of the
details contained in the timetable above should change, the revised
times and dates will be notified to Shareholders by means of an
announcement through a Regulatory Information Service.
2. All of the above times refer to London time unless otherwise stated.
3. All events listed in the above timetable following the
General Meeting are conditional on the passing of the Resolutions
at the General Meeting.
FUNDRAISING STATISTICS
Issue Price 34p
Number of Placing Shares 205,882,353
Number of Open Offer Shares 12,947,767
Number of Existing Ordinary
Shares in issue as at the
date of this document 984,030,277
Enlarged Share Capital following
Admission 1,202,860,397*
Percentage of the Enlarged 18.19 per cent.*
Share Capital represented
by the New Ordinary Shares
Gross Proceeds of the Placing GBP70 million
Gross Proceeds of the Open GBP4.4 million*
Offer
Estimated net proceeds of Approximately GBP71.7
the Placing and the Open Offer million*
Entitlement under the Open 1 Open Offer share
Offer for every
76 Existing Ordinary
Shares
Ordinary Share ISIN GB00B580MF54
Open Offer Basic Entitlements GB00BZCNTB57
ISIN
Open Offer Excess Entitlements GB00BZCNTC64
ISIN
* assuming full take-up under
the Open Offer
DEFINITIONS
The following definitions apply throughout this document unless
the context otherwise requires:
"Admission" admission of the New Ordinary Shares to trading on AIM becoming
effective in accordance with
the AIM Rules
"AIM" the AIM market operated by the London Stock Exchange
"AIM Rules" the rules published by the London Stock Exchange entitled AIM
Rules for Companies in force
from time to time
"April 2016 Chairman's Letter" the letter from the Chairman of the Company included in the
April 2016 Circular
"April 2016 Circular" the circular dated 18 April 2016 sent by the Company to
Shareholders in connection with the
April 2016 Placing and the Kerogen Subscription
"April 2016 Placing" the placing of 53,333,334 Ordinary Shares at 15 pence per
Ordinary Share by the Joint Bookrunners
on behalf of the Company described in the April 2016 Circular
"Articles" the articles of association of the Company
"Business Day" any day which is not a Saturday, Sunday or public holiday on
which banks are open for business
in the City of London
"Cenkos" Cenkos Securities plc
"certified" or in "certificated form" a share or other security which is not in certificated form
(that is, not in CREST)
"Circular" the circular to be sent tomorrow by the Company to the
Shareholders in connection with the
Fundraising
"Company" or "Hurricane" Hurricane Energy plc, a company registered in England and Wales
with company number 05245689
"Computershare Investor Services" Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol, BS99 6ZZ
"CPR" the Group's Competent Person's Report dated 19 November 2013
prepared by RPS Energy Limited
"CREST" the relevant system (as defined in the Uncertificated
Securities Regulations 2001) in respect
of which Euroclear UK & Ireland Limited is the Operator (as
defined in such regulations)
"CREST Manual" the CREST manual published by Euroclear
"Crystal Amber" Crystal Amber Fund Limited
"Directors" or "Board" the directors of the Company as at the date of this document,
or any duly authorised committee
thereof
"EHS" environment, health and safety
"Enlarged Share Capital" the issued Ordinary Shares immediately following Admission
"Euroclear" Euroclear UK & Ireland Limited
"Excess Application Facility" the arrangement pursuant to which Qualifying Shareholders may
apply for additional Open Offer
Shares in excess of their Open Offer Entitlement in accordance
with the terms and conditions
of the Open Offer
"Excess CREST Open Offer Entitlements" in respect of each Qualifying CREST Shareholder, the
entitlement (in addition to his Open
Offer Entitlement) to apply for Open Offer Shares pursuant to
the Excess Application Facility,
which is conditional on him taking up his Open Offer
Entitlement in full and which may be
subject to scaling back in accordance with the provisions of
the Circular
"Excess Open Offer Entitlements" an entitlement for each Qualifying Shareholder to apply to
subscribe for Open Offer Shares
in addition to his Open Offer Entitlement pursuant to the
Excess Application Facility which
is conditional on him taking up his Open Offer Entitlement in
full and which may be subject
to scaling back in accordance with the provisions of the
Circular
"Excess Shares" Open Offer Shares applied for by Qualifying Shareholders under
the Excess Application facility
"Ex-entitlement Date" the date on which the Existing Ordinary Shares are marked "ex"
for entitlement under the Open
Offer, being 21 October 2016
"Existing Ordinary Shares" the 984,030,277 Ordinary Shares currently in issue at the date
of this Announcement
"FCA" the Financial Conduct Authority
"FSMA" the Financial Services and Markets Act 2000, as amended
"Fundraising" the Placing and the Open Offer
"General Meeting" the general meeting of the Company convened for 2.30 p.m. on 7
November 2016, notice of which
is set out in this document, and any adjournment thereof
"Greater Lancaster Area" the potential development comprising Lancaster, Lincoln,
Warwick and other potential discoveries
which may be developed together
"Group" the Company, its subsidiaries, and its subsidiary undertakings
"Growth Shares" the growth shares to be issued under the Value Creation Plan,
as described in this Announcement
"Horizontal Sidetrack Well" well 205/21a-7Z, being the one km horizontal sidetrack well
which is one of the Lancaster
7 Wells
"Issue Price" 34 pence per New Ordinary Share
"Joint Bookrunners" Macquarie and Cenkos
"Kerogen Capital" Kerogen Manager and its associated companies which act as a
manager of other funds
"Kerogen General Partner" Kerogen General Partner II Limited
"Kerogen Investor" Kerogen Investments No.18 Limited
"Kerogen Manager" Kerogen Capital II Limited, the manager of Kerogen Investor
"Kerogen Subscription" the subscription for 293,911,931 new Ordinary Shares by Kerogen
Investor pursuant to the Subscription
Agreement described in the April 2016 Circular
"Lancaster" the Group's wholly owned oil discovery West of Shetland known
as Lancaster
"Lancaster 6 Well" well 205/21a-6, being the one kilometre horizontal well on
Lancaster which the Company drilled
and tested in 2014
"Lancaster 7 Wells" the Company's 2016 drilling and testing programme for
Lancaster, incorporating among other
things a Pilot Well and a Horizontal Sidetrack Well, drilled
from the same top hole location,
as described in the letter from the Chairman of the Company
included in the April 2016 Circular
"Lincoln" the Group's prospect West of Shetland known as Lincoln, lying
to the south west of the Lancaster
discovery
"London Stock Exchange" London Stock Exchange plc
"Macquarie" Macquarie Capital (Europe) Limited
"Money Laundering Regulations" the Money Laundering Regulations 2007 and obligations in
connection with the money laundering
under the Criminal Justice Act 1993 and the Proceeds of Crime
Act 2002
"NED Plan" the existing "Hurricane Energy 2013 Nominal-Cost Share Option
Plan" adopted by the Company
by resolution of the Board on 15 April 2013 (as amended on 11
November 2013 and further amended
on 23 September 2014) offered to non-executive Directors as a
non-executive management incentive
plan
"New Ordinary Shares" the Placing Shares and the Open Offer Shares
"Notice of General Meeting" the notice convening the General Meeting which will be set out
in the Circular
"Open Offer" the conditional invitation by the Company to Qualifying
Shareholders to apply to subscribe
for the Open Offer Shares at the Issue Price on the terms and
subject to the conditions set
out in the Circular and, in the case of Qualifying Non-CREST
Shareholders, in the Application
Form
"Open Offer Entitlement" the individual entitlements of Qualifying Shareholders to
subscribe for Open Offer Shares
allocated to Qualifying Shareholders pursuant to the Open Offer
"Open Offer Shares" the up to 12,947,767 new Ordinary Shares to be issued by the
Company pursuant to the Open
Offer
"Ordinary Shares" ordinary shares of GBP0.001 each in the capital of the Company
"Overseas Shareholders" Shareholders with a registered address outside the United
Kingdom
"Performance Share Plan" the existing "Hurricane Energy 2013 Performance Share Plan"
adopted by the Company by resolution
of the Board on 15 April 2013 (as amended) offered to executive
Directors and other staff
members as an incentive plan
"Pilot Well" well 205/21a-7 which is one of the Lancaster 7 Wells
"Placing" the conditional placing of the Placing Shares at the Issue
Price by the Joint Bookrunners,
details of which are set out in this Announcement
"Placing Agreement" the conditional agreement dated 20 October 2016 between the
Company and the Joint Bookrunners
relating to the Placing, further details of which are set out
in this Announcement
"Placing Shares" the205,882,353 new Ordinary Shares to be issued by the Company
pursuant to the Placing
"Prospectus Rules" the rules made for the purposes of Part VI of FSMA in relation
to offers of securities to
the public and admission of securities to trading on a
regulated marked
"Proxy Form" the form of proxy for use in connection with the General
Meeting which will accompany the
Circular
"Qualifying CREST Shareholders" Qualifying Shareholders holding Existing Ordinary Shares in
uncertificated form
"Qualifying Non-CREST Shareholders" Qualifying Shareholders holding Existing Ordinary Shares in
certificated form
"Qualifying Shareholders" holders of Existing Ordinary Shares on the register of members
of the Company at the Record
Date but excluding any Overseas Shareholder who has a
registered address in any Restricted
Jurisdiction
"Record Date" 6.00 p.m. on 18 October 2016
"Registrars" Computershare Investor Services PLC, The Pavilions, Bridgwater
Road, Bristol, BS99 6ZZ
"Regulatory Information Service" a regulatory information service that is approved by the FCA as
meeting primary information
provider criteria and that is on the list of regulatory
information services maintained by
the FCA
"Resolutions" the resolutions set out in the Notice of General Meeting
"Restricted Jurisdiction" the United States of America, Canada, Australia, Japan, the
Republic of Ireland and the Republic
of South Africa and any other jurisdiction where the extension
or availability of the Open
Offer would breach any applicable law or regulations
"Rig" the Transocean Spitsbergen semi-submersible drilling rig which
the Company has contracted
from Transocean under the terms of the Rig Contract
"Rig Contract" the agreement dated 18 April 2016 between the Company and
Transocean under which the Company
conditionally contracted the Rig, as described in paragraph 4
of the April 2016 Chairman's
Letter, as amended by the Rig Contract Amendments
"Rig Contract Amendments" together the agreements dated between 7 October 2016 and 19
October 2016 between the Company
and Transocean by way of amendment to the Rig Contract under
which Transocean has granted
the Company options for further use of the Rig, as described in
this Announcement
"Rona Ridge" a prominent NE-SW-trending basement high which acts as a
structural feature separating the
Faroe-Shetland Basin from the West Shetland and the East Solan
basins
"Shareholders" holders of Ordinary Shares
"stock account" an account within a member account in CREST to which a holding
of a particular share or other
security in CREST is credited
"Subscription Agreement" the agreement dated 18 April 2016 between the Company, Kerogen
Investor and Kerogen General
Partner pursuant to which Kerogen Investor agreed to subscribe
for the Kerogen Shares, as
described in paragraph 10 of the April 2016 Chairman's Letter
"Transocean" Transocean Drilling UK Limited
"UKCS" the UK Continental Shelf
"uncertificated" or "in uncertificated form" a share or security recorded in the Company's register of
members as being held in uncertificated
form, and title to which may be transferred by means of CREST
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
"United States of America", "United States" or "US" the United States of America, its territories and possessions,
any state of the United States
of America and the District of Columbia and all areas subject
to its jurisdiction
"USD" United States Dollars, the lawful currency of the United States
of America
"US Securities Act" the United States Securities Act of 1933 (as amended)
"Value Creation Plan" the new management incentivisation growth share plan
("Hurricane Energy 2016 Value Creation
Plan") to be adopted on or around the date of the Placing and
offered to executive Directors
and other staff members
"Warwick" the Group's prospect West of Shetland known as Warwick, lying
to the south-west of the Lancaster
discovery
"GBP" and "pence" respectively, pounds and pence sterling, the lawful currency of
the United Kingdom
GLOSSARY
The following glossary of terms applies throughout this
document, unless the context otherwise requires:
2C denotes a best estimate scenario
of Contingent Resources
2D seismic seismic data acquired in a
single traverse or series of
traverses. 2D seismic data
provides single cross sections
3D seismic seismic data acquired as multiple,
closely spaced traverses. 3D
seismic data typically provides
a more detailed and accurate
image of the subsurface than
2D seismic
API American Petroleum Institute
appraisal the phase of petroleum operations
immediately following a successful
discovery. Appraisal is carried
out to determine size, production
rate and the most efficient
development of a field
appraisal well a well drilled as part of an
appraisal of a field
aquifer a water-bearing portion of
a petroleum reservoir which
can act as a reservoir-drive
mechanism, driving the oil
through the reservoir. As the
reservoir depletes, the water
moving in from the aquifer
below displaces the oil until
the aquifer energy is expended
or the well eventually produces
too much water to be viable
boe barrels of oil equivalent.
Converting gas volumes to oil
equivalent
is customarily done on the
basis of the nominal heating
content or
calorific value of the fuel.
Before aggregating, the gas
volumes must be converted to
the same temperature and pressure.
Common
industry gas conversion factors
usually range between 1 barrel
of
oil equivalent = 5,600 scf
of gas to 6,000 scf of gas
bopd barrels of oil per day
Christmas Tree an assembly of valves, spools,
and fittings used for an oil
well and other types of wells
Contingent Resources these are resources that are
potentially recoverable but
not yet considered mature enough
for commercial development
due to technological or business
hurdles. For contingent resources
to move into the reserves category,
the key conditions, or contingencies,
that prevented commercial development
must be clarified and removed.
As an example, all required
internal and external approvals
should be in place or determined
to be forthcoming, including
environmental and governmental
approvals. There also must
be evidence of firm intention
by a company's management to
proceed with development within
a reasonable time frame (typically
five years, though it could
be longer)
dip the angle at which a rock stratum
or structure is inclined from
the horizontal
discovery an exploration well which has
encountered oil and gas for
the first
time in a structure
DST drill stem test
EPS early production system
exploration the phase of operations which
covers the search for oil or
gas by
carrying out detailed geological
and geophysical surveys followed
up where appropriate by exploratory
drilling
exploration well a well drilled to find hydrocarbons
in an unproved area or to extend
significantly a known oil or
natural gas reservoir
farmout a term used to describe when
a company sells a portion of
the
acreage in a block to another
company, usually in return
for
consideration and for the buying
company taking on a portion
of
the selling company's work
commitments
FEED front end engineering and design
field a geographical area under which
either a single oil or gas
reservoir
or multiple oil or gas reservoirs
lie, all grouped on or related
to the
same individual geological
structure feature and/or stratigraphic
condition
FPSO floating production storage
and offloading vessel
formation a body of rock identified by
lithic characteristics and
stratigraphic position which
is mappable at the earth's
surface or traceable in the
subsurface
formation water water that occurs naturally
within the pores of rock
fracture a natural break in the rock
forming due to the effects
of cooling of the original
rock melt and/or tectonic forces
acting on the rock mass. These
result in a void extending
away from the wellbore for
varying distance (centimetres
to hundreds of metres) which
can be associated with commercially
producible oil
geophysical geophysical exploration is
concerned with measuring the
earth's
physical properties to delineate
structure, rock type and fluid
content - these measurements
include electrical, seismic,
gravity
and magnetics
hook-up the connection of the wells
via the Subsea Equipment to
the FPSO such that production
can commence
hydrocarbon a compound containing only
the elements hydrogen and carbon.
May exist as a solid, a liquid
or a gas. The term describes
any
combination of oil, gas and/or
condensate
infrastructure oil and gas processing, transportation
and off-take facilities
licence an exclusive right to explore
for petroleum, usually granted
by a
national governing body
long lead item the equipment, product or system
that is identified at the earliest
stage of a project to have
a delivery time long enough
to affect directly the overall
lead time of the project
MMbbl million barrels
ODT oil down to
oil a mixture of liquid hydrocarbons
of different molecular weight
oil column vertical thickness of an oil
accumulation above an oil/water
contact
P50 denotes a scenario which has
at least a 50 per cent. probability
of occurring
petroleum a generic name for oil and
gas, including crude oil, natural
gas
liquids, natural gas and their
products
phase a distinct state of matter
in a system, e.g. liquid phase
or gas phase
pressure barriers a barrier that prevents the
pressure pulse generated by
the DST being transmitted through
the reservoir, in effect compartmentalising
the reservoir
production well a well producing fluids (oil,
gas or water)
prospect an identified trap that may
contain hydrocarbons. A potential
hydrocarbon accumulation may
be described as a lead or prospect
depending on the degree of
certainty in that accumulation.
A prospect is generally mature
enough to be considered for
drilling
Prospective Resources are estimated volumes associated
with undiscovered accumulations.
These represent quantities
of petroleum which are estimated,
as of a given date, to be potentially
recoverable from oil and gas
deposits identified on the
basis of indirect evidence
but which have not yet been
drilled. This class represents
a higher risk than Contingent
Resources since the risk of
discovery is also added. For
prospective resources to become
classified as Contingent Resources,
hydrocarbons must be discovered,
the accumulations must be further
evaluated and an estimate of
quantities that would be recoverable
under appropriate development
projects prepared
reservoir an underground porous and permeable
formation where oil and
gas has accumulated
seal a relatively impermeable rock,
commonly shale, anhydrite or
salt, that forms a barrier
or cap above and around reservoir
rock such that fluids cannot
migrate beyond the reservoir.
A seal is a critical component
of a complete petroleum system
scf standard cubic feet measured
at 14.7 pounds per square inch
and
60deg F
sedimentary a deposit made up of pieces
of other rocks
shut-in to stop a well from flowing
and close the valves
Sidetrack a secondary wellbore drilled
away from the original hole
Spud to start the well drilling
process by removing rock, dirt
and other sedimentary material
with the drill bit
structural closure a term used to define the volume
of rock in which oil, or gas,
can accumulate; closure is
based on the shape of a geological
structure and is usually defined
as a specific depth; in some
reservoirs oil can accumulate
outside of structural closure
and such reservoirs are referred
to as having their hydrocarbon
stratigraphically trapped;
stratigraphic traps accumulate
oil in deposits shaped by processes
such as rivers, beaches, reefs
and fractures
Subsea Equipment fully submerged ocean equipment,
comprising, inter alia, Christmas
Trees and subsea control modules,
electrical submersible pumps,
variable speed drives and subsea
umbilicals, risers and flexibles
TVD true vertical depth
TVDSS true vertical depth (sub-sea)
wear bushing retrievable cylindrical device
that protects the internal
surfaces of wellhead equipment
and the top of the last casing
suspended
Wireline a cabling technology used by
operators of oil and gas wells
to lower a wireline tool, which
is equipment or measurement
devices, into a borehole
APPIX I - RISK FACTORS
Any investment in the Company is subject to a number of risks.
Accordingly, prospective investors should carefully consider the
risk factors set out below as well as the other information
contained in this document before making a decision whether to
invest in the Company. The risks described below are not the only
risks that the Group faces. Additional risks and uncertainties that
the Directors are not aware of or that the Directors currently
believe are immaterial may also impair the Group's operations. Any
of these risks may have a material adverse effect on the Group's
business, financial condition, results of operations and prospects.
In that case, the price of the Ordinary Shares could decline and
investors may lose all or part of their investment. Prospective
investors should consider carefully whether an investment in the
Company is suitable for them in light of the information in this
document and their personal circumstances.
Before making an investment, prospective investors are strongly
advised to consult an investment adviser authorised under FSMA who
specialises in investments of this kind. A prospective investor
should consider carefully whether an investment in the Company is
suitable in the light of his or her personal circumstances, the
financial resources available to him or her and his or her ability
to bear any loss which might result from such investment.
The following factors do not purport to be a complete list or
explanation of all the risk factors involved in investing in the
Company. In particular the Company's performance may be affected by
changes in the market and/or economic conditions and in legal,
regulatory and tax requirements.
1. RISKS RELATING TO THE GROUP'S BUSINESS
1.1. The Group may not be able to develop commercially its
contingent and prospective resources
The Company is an oil and gas exploration company focused on
fractured basement reservoirs which has not yet begun to generate
revenues and is not yet trading profitably. However, none of the
assets has achieved commercial production to date and the
commercial viability of each of the Company's assets is dependent
on a range of factors, including establishing the presence of
extensive fracture networks at such fields.
All the Group's assets are currently classified as Contingent or
Prospective resources. The Group's success will depend upon
converting its assets, that are currently classified as Contingent
or Prospective resources, into reserves and commercial production.
The resources may not be considered commercially recoverable by the
Group for a variety of reasons, including the high costs involved
in recovering the resources, the price of oil and gas at the time,
the availability of the Group's operational resources and other
development plans that the Group may have.
If the Group is not successful in achieving commercial
production from its assets, or fails to meet its targeted
production timelines, the Group's business, financial condition,
results of operations and prospects would be materially adversely
affected.
1.2. The Group's business plan requires substantial capital
expenditure and the future expansion and development of the Group's
business may require additional capital. As such, the Group may not
be able to generate sufficient cash flows or finance its activities
in the longer term if it is unable to raise additional capital
The Group's business plan to exploit and commercialise its
assets will require significant capital expenditure. The Group will
also be required to make substantial capital expenditure for the
identification, acquisition, exploration, development and
production of oil and gas resources and/or reserves in the
future.
The Group has good visibility of its near term capital
expenditure requirements, and specifically for the EPS phase on
Lancaster and upcoming well drilling which are supported by
detailed internally produced current year annual budgets. These
annual budgets detail, inter alia, the necessary equipment,
personnel and time lines for such programmes, and estimates for the
year's expenditure based on the current market rates plus
appropriate contingencies. In addition, regular meetings of
management committees support forecast estimates for the work
programme and expenditure in the next period.
However, in the longer term, future annual budgets may turn out
to be higher than currently planned by the Group (for example, for
reasons of oil industry-wide cost inflation, project delays or
redesign, new technology, acceleration of work programmes in
particular decommissioning, and/or best practice for seismic,
drilling, development and/or decommissioning and other operations)
and the Group may need to seek additional funds at that time to
cover increased costs or the fact that the Group may no longer be
tax optimised as planned due to unforeseen or earlier than expected
costs, which it may not be able to secure on reasonable commercial
terms or at all or it may need to divert funds from other projects
to satisfy the increased capital expenditure requirements. If this
happens, it may have a material adverse effect on the Group's
business and financial condition in the longer term.
The Group currently intends to use the net proceeds from the
Fundraising to (i) advance the development of the Greater Lancaster
Area fields by funding the FEED and certain other engineering
studies for the EPS phase of Lancaster; (ii) acquire the Subsea
Equipment, buoy, mooring and control system long lead items for the
EPS phase of Lancaster; and (iii) further delineate the Greater
Lancaster Area by drilling an exploration well on Lincoln and an
exploration well on Warwick or another Rona Ridge prospect which
has a risk profile no worse than that of Warwick, if deemed
appropriate by the Board.
However, given that the Group's business involves substantial
capital expenditure, it would require additional capital to fund
expenditure beyond the above mentioned work programme. In the
opinion of the Directors, subject as referred to in paragraph 1.16
below, the net proceeds of the Fundraising receivable by the
Company will be sufficient to finance such work programme, and
beyond this, the Group may enter into arrangements for debt or
equity financing for its operations or exploration, appraisal,
development or production plans. However, there is no assurance
that the Group will be able to generate sufficient internal cash
flow, or that additional debt or equity financing, will be
available, or will be sufficient, to meet the Group's funding
requirements in the longer term to pursue its future strategic
decisions, or that, if additional debt or equity financing is
available, it will be on terms acceptable to the Group given, for
example in the context of debt financing, the limited amount of
cash reserves the Group currently has.
More generally, the Group may not be able to generate sufficient
cash flows or finance its activities in the longer term if it is
unable to raise additional capital. The Group's inability to access
sufficient capital for its operations may have a material adverse
effect on its business, financial condition, results of operations
and prospects.
1.3. The Group's operation and success depends on its ability to
explore, appraise and develop oil and gas resources, in particular
fractured basement reservoirs, that are economically
recoverable
The Group's long-term commercial success depends on its ability
to explore, appraise, develop and commercially produce oil and gas
resources. Future increases in the Group's resources or conversion
of any of them into reserves will depend not only on its ability to
explore, appraise and develop its existing assets but also on its
ability to select and acquire suitable additional assets either
through awards at licensing rounds or through acquisitions. From
time to time the Group may submit applications for further licences
in the UKCS. However, there can be no assurance that the Group will
be awarded such licences, that the Group will accept such licences
(if so awarded) or that the Group will be able to commercially
develop the assets which are the subject of such licences.
There are many reasons why the Group may not be able to find or
acquire oil and gas reserves or resources or develop them for
commercially viable production. For example, the Group may be
unable to negotiate commercially reasonable terms for its
acquisition, appraisal, development or production activities.
Factors such as adverse weather conditions, natural disasters,
equipment or services shortages, procurement delays or difficulties
arising from the political, environmental and other conditions in
the areas where the reserves or resources are located or through
which the Group's products are transported may increase costs and
make it uneconomical to develop potential reserves or resources.
The Group is exploring in remote geographical areas with a lack of
existing infrastructure, where environmental conditions are
challenging and costs can be high. The costs of drilling,
completing and operating wells is often uncertain. As a result, the
Group may incur cost overruns or may be required to curtail, delay
or cancel drilling operations because of many factors, including
unexpected drilling conditions, unforeseeable operating problems,
irregularities in geological formations, equipment failures or
accidents, adverse weather conditions, compliance with
environmental regulations, governmental requirements and shortages
and delays in the availability of drilling rigs and the delivery of
equipment. Without successful acquisition or exploration
activities, the Group's resources, production and revenues (if
achieved) will decline. There is no assurance that the Group will
discover, acquire or develop further commercial quantities of
hydrocarbons.
In particular, the Company is an oil and gas exploration company
focused on fractured basement reservoirs. Although the occurrence
of naturally fractured basement reservoirs has been known within
the oil and gas industry for a number of years, few of these
reservoirs have historically been optimally exploited or exploited
at all. Fractured basement reservoirs, where permeability is
limited to the fractured reservoirs (Type 1 fractured basement
reservoirs), which are the type of fractured basement reservoirs
the Company is exploring, are more difficult and expensive to
evaluate in the exploration and appraisal phase than sandstone
reservoirs due to, amongst other factors, their heterogeneous
nature and the difficulty in quantifying fluid distributions (water
and oil) due to the inability to apply traditional wireline water
saturation techniques to a Type 1 fractured basement reservoir.
Although there have been recent advances in subsurface data
acquisition technology, including 3D seismic, challenges remain in
locating and identifying fractures determining the size and shape
of drainage area, mapping formation water distribution and
determining the precise location in which to drill. The techniques
presently available to engineers and geologists to identify the
existence and location of hydrocarbons are not infallible. Personal
subjective judgement of engineers and/or geologists is involved in
the selection of any prospect for drilling.
In addition, there can be no assurance that the Group will be
able to develop its resources for commercial viable production.
Such challenges and the failure to develop its resources for
commercial viable production could have a material adverse effect
on the Group's business, financial condition, results of operations
and prospects.
1.4. The Group's operations are dependent on the availability of
drilling and other equipment and independent contractors
As described in paragraph 1.16 below, if the Company does not
exercise its option under the Rig Contract Amendments to use the
Rig to drill a back-to-back well this year, there is a risk that
the Company will be unable to obtain a suitable rig to drill the
second well between April and September 2017, or that there will be
a delay before the Company is able to obtain a suitable rig.
More generally, the Group's operations are dependent on the
availability of rigs, other drilling equipment and offshore
services, including third party services in the UKCS. The Group
contracts or leases services and equipment from third party
providers and suppliers. Such equipment and services may be scarce
and may not be readily available at the times and places required
and/or the specific service providers that the Group wishes to
engage with may not be available at the relevant times. In
addition, different types of fields require different types of rigs
- the availability of which is, amongst other things, linked to the
rig specifications. Even where the Group has secured rigs under a
contract, the rigs will usually only be available for use after the
current user has finished its drilling programme. If there are
delays in the completion of the user's current drilling programme,
the Group could be delayed in procuring contracted rigs. Under the
terms of its licences, the Group may have a commitment to drill
within a certain time frame. The Group, therefore, risks losing
licences if it is delayed in obtaining, or fails to obtain, rigs
and thus fails to meet its drilling commitments.
The scarcity of third party services and equipment
(specifically, rigs and long lead items) as well as any increases
in their costs, together with the failure of a third party provider
or supplier to perform its contractual obligations, or an inability
to achieve a commercially viable contract with a third party
provider or supplier could delay, restrict or lower the
profitability and viability of the Group's activities. This could
have a material adverse effect on the Group's business, financial
condition, results of operations and prospects.
In particular, the EPS phase requires the construction and/or
commissioning of production facilities and other forms of
infrastructure on Lancaster. The Group's ability to proceed with
and deliver the EPS phase is dependent on the Company being funded
and able to contract third party services and equipment
(specifically, rigs and long lead items) to ensure that the
fabrication, modification, construction, delivery, transportation,
installation and commissioning of all materials and equipment
required for the EPS phase can be undertaken in a timely and cost
effective manner. Prior to the Company sanctioning the EPS phase,
any delay or increase in costs, or failure by a third party
provider or supplier to perform its contractual obligations, could
lower the profitability of the EPS phase and restrict the Company's
ability to fund and/or approve the EPS phase. After sanction of the
EPS phase, any such delay or increase in costs could delay the
commencement of production of hydrocarbons from EPS and lower the
overall profitability of the EPS phase, consequently restricting
the Company's future revenues and operational activities.
1.5. The Assets are located in areas subject to variable weather
conditions which may restrict the periods in which the Group can
implement its drilling programme
The operations of the Group with respect to the assets have
historically been seasonal due to weather conditions affecting all
of the assets. In particular, implementation of its drilling
programme in the West of Shetland may be restricted outside the
April to September period due to the adverse weather conditions
outside of these months. In particular, the Group is exposed to a
higher risk of non-production time as a result of waiting on
weather during the winter months. Accordingly, weather conditions
could impede the Group's drilling and testing operations for its
assets and otherwise have a material adverse effect on its
business, financial condition, results of operations and
prospects.
1.6. Treatment of produced water and associated gas could result
in significant financial and technical costs
There may be unforeseen liabilities resulting from the
associated gas produced from the oil wells of the Group. The
production of such associated gas may result in the Company
incurring significant financial and technical costs to meet its
environmental liabilities. Any associated gas produced from the oil
wells of the Group will need to be either exported, re-injected
into a reservoir or flared. Accordingly, excess gas content could
adversely impact project economics and profitability. Controls on
the quantities of oil that can be discharged in process waters in
the course of offshore operations have been implemented in the UK
by the Offshore Petroleum Activities (Oil Pollution Prevention and
Control) Regulations 2005 (as amended). Under these Regulations,
all releases and discharges of oil are prohibited unless in
accordance with the terms of and conditions attached to a permit.
The Secretary of State may attach conditions to such permits which
are calculated to ensure that the concentration, frequency,
quantity, location or duration of any discharge is subject to
appropriate restrictions, and that appropriate measures are taken
to minimise pollution, including the appropriate use of technology
to limit discharges.
In particular, the EPS phase on Lancaster is being carried out
to evaluate sustainable and commercial reservoir performance over
an extended period of time, including whether or not the volume of
water produced (if any) can be responsibly managed in a cost
effective manner. There is a risk, following the commencement of
production of hydrocarbons at Lancaster during the EPS phase, that
there is a greater than anticipated volume of produced water which
cannot be managed in a cost effective and operationally responsible
manner, and that the level of production from the EPS phase of
Lancaster may be restricted and/or result in a temporary or
permanent cessation of production of hydrocarbons from Lancaster.
Further, any such curtailment of production at Lancaster as a
consequence of excessive water production during production
operations may have a material adverse effect on the Group's
ability to fund and/or proceed with the development of the Greater
Lancaster Area.
1.7. The Group may be unable to acquire, retain, convert or
renew the licences, permits and other regulatory approvals
necessary for its operations
The ability of the Group to develop and exploit oil and gas
resources depends on the Group's continued compliance with the
obligations of its current licences and the Group's ability to move
into the production phase of each licence. The Group depends on
licences whose grant and renewal is subject to the discretion of
the relevant governmental authorities and cannot be assured. There
can also be no assurance that the Group will be able to identify
suitable licensing acquisition opportunities or that the Group will
be able to make such acquisitions on appropriate terms.
It is also possible that the Group may be unable or unwilling to
comply with the terms or requirements of the licences it holds,
including the meeting of specified deadlines for prescribed tasks
and other obligations set out in the work programmes attached to
the licences. Non-compliance with these obligations may lead to
revocation of the licence. Whilst in certain circumstances the
relevant authority may agree to an extension of time to enable the
licensee to agree to the obligation in question there is no
guarantee that an extension will be given.
The Group, therefore, risks losing licences if it is delayed in
obtaining, or fails to obtain, rigs and thus fails to meet its
drilling commitments.
1.8. The Group's success is dependent upon its ability to
attract and retain key personnel
The Group's success depends, to a large extent, on certain of
its key personnel having expertise in the areas of exploration and
development, operations, engineering, business development, oil and
gas marketing, finance and accounting. The Group was founded by Dr
Trice and since then a number of key people have been retained by
the Group and these people are influential to the development and
continued operation of the Group's business. The loss of the
services of any key personnel (in particular Dr Trice) could have a
material adverse effect on the Group.
The Group does not maintain, nor does it plan to obtain,
insurance against the loss of any of its key personnel. In
addition, the competition for qualified personnel in the oil and
gas industry is intense. There can be no assurance that the Group
will be able to continue to attract and retain all personnel
necessary for the development and operation of its business.
1.9. The Group may be unable to manage the growth in its
operations
The Group has experienced significant growth and development in
a relatively short period of time. Management of that growth
requires, among other things: implementation and continued
development of financial, management and other controls, including
financial and reporting procedures, and information technology
systems; and hiring, training, motivating and retaining quality
personnel. Failure to successfully manage the Group's business and
expected growth and development could have a material adverse
effect on the Group's business, financial condition, results of
operations and prospects. Further, no assurance can be given that
the Group's investment strategies can be implemented in the
future.
1.10. Fluctuations in currency exchange rates may materially and
adversely affect the Group's financial condition and results of
operation
The drilling rig contracts and certain other drilling equipment
and offshore services contracts that the Group enters into are
denominated in US dollars. In addition, the Group's cash and cash
equivalents are predominately held in sterling although the Group
holds cash balances in US dollars to meet actual or expected
commitments in that currency. As a result, the Company is
potentially exposed to adverse fluctuations in the exchange rates
between sterling and US dollars.
1.11. Future litigation could adversely affect the Group's
business, results of operations or financial condition
Damages and/or other remedies claimed under any litigation are
difficult to predict, and may be material. The outcome of such
litigation may materially impact the Group's business, financial
condition, results of operations and prospects. While the Group
will assess the merits of each lawsuit and defend itself
accordingly, it may be required to incur significant expenses or
devote significant resources to defending itself against such
litigation. In addition, adverse publicity surrounding such claims
may have a material adverse effect on the Group's business,
financial condition, results of operations and prospects.
1.12. The Group cannot accurately predict its future decommissioning liabilities
The Group, through its licence interests, expects to assume
certain obligations in respect of the decommissioning of its wells,
fields and related infrastructure. These liabilities are derived
from legislative and regulatory requirements concerning the
decommissioning of wells and production facilities and require the
Group to make provisions for and/or underwrite the liabilities
relating to such decommissioning. It is difficult to accurately
forecast the costs that the Group will incur in satisfying its
decommissioning obligations. When its decommissioning liabilities
crystallise, the Group will be liable either on its own or jointly
and severally liable for them with any other former or current
partners in the field. In the event that it is jointly and
severally liable with other partners and such partners default on
their obligations, the Group will remain liable and its
decommissioning liabilities could be magnified significantly
through such default. Any significant increase in the actual or
estimated decommissioning costs that the Group incurs may adversely
affect its financial condition.
1.13. The Group may farm down part of its licence interests and
may rely on third parties to operate such licence interests and/or
certain wells
In due course the Group may, subject to Oil and Gas Authority
consent, farm down part of its licence interests to third parties,
some of which may act as operator. Operating agreements with third
party operators typically provide for a right of consultation or
consent in relation to significant matters and generally impose
standards and requirements in relation to the operator's
activities. However, in the event that the Group does not act as
operator in respect of certain of its licence interests and/or
wells, the Group will generally have limited control over the
day-to-day management or operations of those assets and will
therefore be dependent upon the third party operator. A third party
operator's mismanagement of an asset may result in significant
delays or materially increased costs to the Group. The Group's
return on assets operated by others will therefore depend upon a
number of factors that may be outside the Group's control,
including the timing and amount of capital expenditures, the
operator's expertise and financial resources, the approval of other
participants, the selection of technology and risk management
practices.
Generally, failure by any licence partner (whether the operator
or otherwise) to fulfil its financial obligations may increase the
Group's exposure related to the licence in question. Any
significant increase in costs as a consequence of joint and several
liabilities may materially adversely affect the financial condition
of the Group.
1.14. Reliance on third party infrastructure
The Group's activities and business model of field development
are dependent upon the availability of third party infrastructure
which if it fails, or is not, or ceases to be, available on
reasonable commercial terms, or at all, may result in delays to
field development and production or impossibility of field
development and production which would result in delayed, lower
than expected or no cash generation by the Group. This would have a
material adverse effect on the Group's business, prospects,
financial condition and operations.
1.15. The Group will incur Rig costs for the proposed Lincoln
well if Shareholders do not approve the Fundraising and the Lincoln
well cannot be drilled
On 19 October 2016, the Company exercised its option under the
Rig Contract Amendments to use the Rig to drill one well on the
Lincoln prospect. This is not conditional on Shareholders approving
the Fundraising or on the Fundraising proceeding. Accordingly, if
Shareholders do not approve the Fundraising or the Fundraising does
not otherwise proceed, the Company is likely to have to terminate
the contracted use of the Rig. In these circumstances, the Company
will incur an early termination fee of approximately USD7.5
million.
1.16. The Group may incur additional costs in securing a new rig
if the option to use the Rig to drill a second well is not
exercised by 21 November 2016 and may be unable to secure a
suitable new rig.
If the Company does not exercise its option, which expires on 21
November 2016, under the Rig Contract Amendments to use the Rig to
drill a back-to-back well on Warwick or on a Rona Ridge prospect
which has a risk profile no worse than that of Warwick, there may
be additional costs involved in securing a new rig to drill the
second well between April and September 2017. In the event that
there are such additional costs, there is no certainty that the
Company will be able to fund those additional costs from its
existing resources or will be able to raise additional funds to
cover such increase in costs. There is also a risk that, in these
circumstances, the Company will be unable to obtain a suitable rig
to drill the second well between April and September 2017 or that
there will be a delay before the Company is able to obtain a
suitable rig.
2. RISKS RELATED TO THE OIL AND GAS INDUSTRY
2.1. A material decline in oil and gas prices may adversely
affect the Group's results of operations and financial condition,
and prices may not return to levels seen in recent years
Both oil and gas prices can be volatile and subject to
fluctuation in response to relatively minor changes in the supply
of, and demand for, oil and gas, market uncertainty and a variety
of additional factors that are beyond the control of the Group.
Historically and indeed recently, oil and gas prices have
fluctuated widely for many reasons, including global and regional
supply and demand; political, economic and military developments in
oil and gas producing regions, particularly the Middle East;
domestic and foreign governmental regulations and actions; global
and regional economic conditions and weather conditions and natural
disasters. It is impossible to predict accurately future oil and
gas price movements. Accordingly, oil and gas prices may not remain
at their current levels. Although the Group is not yet an active
producer of oil and gas, declines in oil and gas prices may
adversely affect market sentiment and as a consequence the market
price of the Ordinary Shares and furthermore affect the Group's
cash flow, liquidity and profitability, and limit the amount of oil
and gas that the Group could potentially market in the future.
Although oil and gas prices have fallen significantly since mid
2014, they may not return to levels previously seen within any
foreseeable timeframe.
The Group can give no assurance that future prices for oil and
gas will be sufficient to generate an economic return. Any further
decline in such prices could result in reduced cash flows from the
Group's assets and a reduction in the valuation of the Group's
assets, which in turn may result in a reduction in the debt
available to the Group. This would have a material adverse effect
on the Group's financial condition, business, prospects and results
of operations.
2.2. Conservation measures and technological advances could
reduce demand for oil and natural gas
Fuel conservation measures, alternative fuel requirements,
increasing consumer demand for alternatives to oil and natural gas,
technological advances in fuel economy and energy-generation
devices could reduce demand for oil and natural gas. The impact of
the changing demand for oil and natural gas services and products
may have a material adverse effect on the Group's business,
financial condition and results of operations.
2.3. Estimation of reserves, resources and production profiles
is not exact
The estimation of oil and gas reserves, and their anticipated
production profiles, involves subjective judgements and
determinations based on a number of variable factors and
assumptions, such as expected reservoir characteristics based on
geological, geophysical and engineering assessments, future
production rates based on historical performance and expected
future operating investment activities, future oil and natural gas
prices and quality differentials, production rates, ultimate
reserve recovery, timing and amount of capital expenditures,
marketability of oil and gas, royalty rates, the assumed effects of
regulation by governmental agencies and future operating costs, all
of which may vary materially from actual results. They are not
exact determinations and are inherently uncertain. In addition,
these judgements may change based on new information from
production or drilling activities or changes in economic factors,
as well as from developments such as acquisitions and disposals,
new discoveries and extensions of existing fields and the
application of improved recovery techniques. Published reserve
estimates are also subject to correction for errors in the
application of published rules and guidance.
The reserves, resources and production profile data contained in
this document are estimates only and should not be construed as
representing exact quantities. They are based on production data,
prices, costs, ownership, geophysical, geological and engineering
data, and other information assembled by the Group. The estimates
may prove to be incorrect and potential investors should not place
undue reliance on the forward-looking statements contained in this
document concerning the Group's reserves and resources or
production levels.
If the assumptions upon which the estimates of the Group's
reserves, resources or production profiles have been based prove to
be incorrect, the Group may be unable to recover and produce the
estimated levels or quality of oil and gas set out in this document
and this may have a material adverse effect on the Group's
business.
2.4. The Group may miss out on operational opportunities if it
is unable to successfully co-ordinate its exploration projects
The Group's operational projects require key asset delivery
personnel to be resourced and the co-ordination of a number of
activities including obtaining seismic data, carrying out subsea
surveys and securing rig capacity for the necessary drilling. There
are long lead times to arrange these activities and if the Group
fails to successfully obtain the necessary personnel in time or to
co-ordinate the timely delivery or completion, as the case may be,
of any of these activities, it may miss out on operational
opportunities or may be required to incur additional expenditure.
The Group's exploration projects also require the procurement of
long lead items such as rig contracts, well heads, well test
equipment and specialist logging tools. A failure to procure these
items in a timely manner may delay operations and increase
expenditure.
2.5. Exploration and appraisal projects do not necessarily
result in a profit on the investment or the recovery of costs
Exploration and appraisal activities are capital intensive and
inherently uncertain in their outcome. The Group's oil and gas
exploration and appraisal projects may involve unprofitable
efforts, either from dry wells or from wells that are productive
but do not produce sufficient net revenues to return a profit after
development, operating and other costs. Completion of a well does
not guarantee a profit on the investment or recovery of the costs
associated with that well. In addition, drilling hazards or
environmental damage could greatly increase the cost of operations,
and various field operating conditions may adversely affect the
production from successful wells. These conditions include delays
in obtaining governmental approvals or consents, shut-ins of
connected wells resulting from extreme weather conditions,
insufficient storage or transportation capacity, adverse geological
conditions and technical and operational difficulties as a result
of the water depth and strata depth of the drilling environment
(including operational difficulties in avoiding drilling fluid
losses and preventing substantial formation damage during drilling)
and other factors. While diligent well supervision and effective
maintenance operations can contribute to maximising production
rates over time, production delays and declines from normal field
operating conditions cannot be eliminated and may adversely affect
the Group's business, financial condition, results of operations
and prospects.
2.6. The Group's operations are subject to a number of risks and
hazards that may result in material losses in excess of insurance
proceeds
Oil and gas exploration, development and production operations
are inherently risky and hazardous. Risks typically associated with
these operations include unexpected formations or pressures,
premature decline of reservoirs, drilling damage (which can lead to
reduced productivity), early water encroachment and the intrusion
of water into producing formations. Losses resulting from the
occurrence of any of these risks could have a material adverse
effect on the Group's business, financial position, results of
operations and prospects. Hazards typically associated with
offshore oil and gas exploration, development and production
operations include fires, explosions, blowouts, marine perils
(including severe storms and other adverse weather conditions which
may restrict the periods in which the Group can implement its
drilling programme), vessel collisions, gas leaks and oil spills,
each of which could result in substantial damage to oil and gas
wells, production facilities, other property and the environment or
in personal injury or could result in government intervention which
could in turn negatively impact on the Group's operations. Oil and
gas installations are also known to be likely objects, and even
targets, of military operations and terrorism.
Although the Group will exercise due care in the conduct of its
business and obtains insurance prior to drilling in accordance with
industry standards to cover certain of these risks and hazards,
insurance is subject to limitations on liability and, as a result,
may not be sufficient to cover all of the Group's losses. In
addition, the risks or hazards associated with the Group's
operations may not in all circumstances be insurable or, in certain
circumstances, the Group may elect not to obtain insurance to deal
with specific events due to the high premiums associated with such
insurance or for other reasons. The occurrence of a significant
event against which the Group is not fully insured, or the
insolvency of the insurer of such event, could have a material
adverse effect on the Group's business, financial condition,
results of operations and prospects.
2.7. The Group's business is subject to government regulation
with which it may be difficult to comply and which may change
The Group's oil and gas operations are principally subject to
the laws and regulations of England (and in certain instances
Scotland), including those relating to health and safety, the
environment and the production, pricing and marketing of oil and
gas. In addition, the Group will be subject to laws affecting
taxation, royalties and duties. In order to conduct its operations
in compliance with these laws and regulations, the Group must
obtain licences and permits from various government authorities.
The grant, continuity and renewal of the necessary approvals,
permits, licences and consents, including the timing of obtaining
such licences and the terms on which they are granted, are subject
to the discretion of the relevant governmental and local
authorities in the United Kingdom and cannot be assured. In
addition, the Group may incur substantial costs in order to
maintain compliance with these existing laws and regulations and
additional costs if these laws are revised or if new laws affecting
the Group's operations are passed. No assurance can be given that
relevant governments and local authorities will not revoke, or
significantly alter the conditions of, the applicable exploration
and development approvals, permits, licences and consents or that
such exploration and development approvals, permits, licences and
consents will not be challenged or impugned by third parties.
2.8. The Group's operations expose it to significant compliance
costs and liabilities in respect of EHS matters
The Group's operations and assets are affected by numerous laws
and regulations concerning EHS matters including, but not limited
to, those relating to discharges of hazardous substances into the
environment, the handling and disposal of waste and the health and
safety of employees. The technical requirements of these laws and
regulations are becoming increasingly complex, stringently enforced
and expensive to comply with and this trend is likely to continue.
Any failure to comply with EHS laws and regulations may result in
regulatory action (which strict, joint and several liability can
include statutory orders requiring steps to be taken or prohibiting
certain operations), the imposition of fines or the payment of
compensation to third parties. All of these liabilities and any
other regulatory actions could have a material adverse effect on
the Group's business, financial condition, results of operations
and prospects.
2.9. A violation of EHS requirements and the occurrence of any
accidents could disrupt the Group's operations and increase
operating costs
EHS authorities such as Department for Business, Energy &
Industrial Strategy, the Health and Safety Executive and the
Offshore Safety Directive Regulator have extensive enforcement
powers under EHS laws. These powers extend to statutory notices to
require operational steps and to prohibit certain activities or
operations until compliance is achieved. A violation of EHS laws or
failure to comply with the instructions of the relevant EHS
authorities could therefore lead to, among other things, a
temporary shut down of all, or a portion of, the Group's facilities
and the imposition of costly compliance procedures. If EHS
authorities shut down all, or a portion of, the Group's facilities
or impose costly compliance measures, the Group's business,
financial condition, results of operations and prospects would be
materially and adversely affected.
The nature of the Group's operations creates a risk of accidents
and fatalities among its workforce, and the Group may be required
to pay compensation or suspend operations as a result of such
accidents or fatalities, which could have a material adverse effect
on the Group's business, financial condition, results of operations
and prospects.
2.10. The Group operates in a competitive industry
The Group competes for scarce resources with numerous other
participants, including major international oil and gas companies,
in the search for and the acquisition of oil and gas assets, and in
the marketing of oil and gas. The Group's ability to increase
resources and create reserves in the future will depend not only on
its ability to exploit and develop its present assets but also on
its ability to select and acquire suitable producing assets or
prospects for exploratory or appraisal drilling. A number of the
Group's competitors have substantially greater financial and
personnel resources. Larger and better capitalised competitors may
be in a position to outbid the Company for particular licences and
such competitors may be able to secure rigs for drilling operations
preferentially to the Company. These competitors may also be better
able to withstand sustained periods of unsuccessful drilling.
Larger competitors may be able to absorb the burden of any changes
in law and regulations more easily than the Company, which would
adversely affect its competitive position. In addition, many of the
Group's competitors have been operating for a much longer time and
have demonstrated the ability to operate through industry
cycles.
The Group's competitors have strong market power as a result of
several factors, including the diversification and reduction of
risk, including geological, price and currency risks; greater
financial strength facilitating major capital expenditures; greater
integration and the exploitation of economies of scale in
technology and organisation; strong technical experience; increased
infrastructure and reserves and strong brand recognition. In
addition, there is an increased risk of competition should these
companies decide to expand their operations into exploiting
fractured basement reservoirs. Due to this competitive environment,
the Group may be unable to acquire attractive, suitable assets,
licences or prospects on terms that it considers acceptable. As a
result, the Group's revenues may be adversely affected, thereby
materially and adversely affecting its business, financial
condition, results of operations and prospects.
Generally, risk is reduced through diversification.
Diversification is maximised for example by drilling a large number
of wells on a large number of exploration prospects having
differing geological characteristics, in differing regulatory
jurisdictions. The Group's current strategy is heavily focussed on
offshore UK, and therefore has limited diversification in terms of
the jurisdictions that it operates in.
2.11. The Group's tax liability could increase substantially as
a result of changes in, or new interpretations of, tax laws in the
United Kingdom
The Group is subject to taxation in the United Kingdom where it
is faced with increasingly complex tax laws. The amount of tax the
Group pays could increase substantially as a result of changes in,
or new interpretations of, these laws, which could have a material
adverse effect on its liquidity and results of operations. During
periods of high profitability in the oil and gas industry, there
are often calls for increased or windfall taxes on oil and gas
revenue. Taxes have increased or been imposed in the past and may
increase or be imposed again in the future. Levels of taxation
relief may also decrease or be no longer available to the Group due
to changes in, or new interpretations of, tax laws. In addition,
taxing authorities could review and question the Group's tax
returns leading to additional taxes and penalties which could be
material. The tax treatment of decommissioning expenditure (where
relevant) could also have a material impact on the economics of the
Group's assets.
2.12. Macroeconomic risks could result in an adverse impact on
the Group's financial condition
Global economic slowdowns may adversely affect the Group's major
operations. The links between economic activities in different
markets and sectors are complex and depend not only on direct
drivers such as the balance of trade and investment between
countries, but also on domestic monetary, fiscal and other policy
responses to address macroeconomic conditions.
2.13. Risk of crime and corruption
Oil and gas companies have been known to experience high levels
of criminal activity and governmental and business corruption. They
may be particular targets of criminal or terrorist actions.
Criminal, corrupt or terrorist action against the Group and its
directly or indirectly held assets or facilities could have a
material adverse impact on the Group's business, results of
operations or financial condition. In addition, the fear of
criminal or terrorist actions against the Group could have an
adverse effect on the ability of the Group to adequately staff
and/or manage its operations or could substantially increase the
costs of doing so.
The Company is not aware of any current or threatened
investigations relating to or any adverse findings against the
Company or any of its directors, employees, officers or joint
venture partners. If any such investigations are made and
substantiated in future against the Company, its directors,
officers, employees or potentially its joint venture partners, or
such persons are found to be involved in corruption or other
illegal activity, this could result in criminal or civil penalties,
including substantial monetary fines, against the Company, its
directors, officers or employees. Any such findings in the future
could damage the Company's reputation and its ability to do
business and could adversely affect its financial condition and
results of operations. Furthermore, alleged or actual involvement
in corrupt practices or other illegal activities by any joint
venture partners of the Company, or others with whom the Company
directly or indirectly conducts business, could also damage the
Company's reputation and business and adversely affect the
Company's financial condition, results of operations and
prospects.
2.14. The Group is subject to cyber risks
The Group is at risk of financial loss, reputational damage and
general disruption from a failure of its IT systems or an attack
for the purposes of espionage, extortion, terrorism or to cause
embarrassment. Any failure of, or attack against, Hurricane's IT
systems may be difficult to prevent or detect, and Hurricane's
internal policies to mitigate these risks may be inadequate or
ineffective. Hurricane may not be able to recover any losses that
may arise from a failure or attack.
2.15. The Group faces risks relating to the UK's membership of
the European Union and the possible future independence of
Scotland
A referendum was held in the UK on 23 June 2016 on whether the
UK will remain a member of the European Union, the result of which
was a vote to leave. The Group faces risks associated with the
potential uncertainty during the period following the referendum.
The consequences that may flow from exiting the European Union are
at this stage uncertain. Leaving the European Union could
materially change the legal and regulatory framework that would be
applicable to the Group's operations in the future. It is not
possible to predict whether the consequences of these uncertainties
will have a positive or negative impact on the Group's business,
financial condition, results of operations and prospects.
There will also be potential uncertainty in the case of any
future vote on independence in Scotland, for example resulting from
the decision in the UK referendum on 23 June 2016 to leave the
European Union. It is uncertain whether the consequences of
independence in Scotland would have a positive or negative impact
on the Group's business and prospects, for example on the Group's
ability to obtain services from Scottish companies and on the
economic rates at which the Group may be able to deliver
hydrocarbons into Scotland in future.
3. RISK FACTORS RELATING TO THE OPEN OFFER AND THE ORDINARY SHARES
3.1. Future sales of Ordinary Shares could adversely affect the
market price of the Ordinary Shares
Sales of additional Ordinary Shares into the public market
following the Open Offer could adversely affect the market price of
the Ordinary Shares if there is insufficient demand for the
Ordinary Shares at the prevailing market price.
3.2. If Resolutions 1 and 2 are not passed, the Company will not
be able to proceed with the Open Offer in the form currently
envisaged
Resolution 1 to be proposed at the General Meeting will be
proposed as an ordinary resolution and, in order to be passed, will
require the support of a simple majority of the total voting rights
of Shareholders who (being entitled to do so) vote on such
resolution at the General Meeting. Resolution 2 to be proposed at
the General Meeting will be proposed as a special resolution and,
to be passed, will require the support of not less than 75 per
cent. of the total voting rights of Shareholders who (being
entitled to do so) vote on such resolution at the General Meeting.
The Open Offer is conditional, inter alia, on the passing of
Resolutions 1 and 2.
In the event that Resolutions 1 and 2 are not passed, the
Company will not be able to proceed with the Fundraising, with the
result that the anticipated net proceeds of the Fundraising will
not become available to fund proposed upcoming expenditure and
achieve the objectives currently pursued by the Board. The Group's
business plan and growth prospects may be adversely affected as a
result.
3.3. Holders of Existing Ordinary Shares who do not acquire Open
Offer Shares pursuant to the Open Offer will experience a further
dilution of their percentage ownership of the Company's Ordinary
Shares
The proportionate ownership and voting interest in the Company
of Shareholders not participating in the Placing will be reduced
pursuant to the Placing. Shareholders' proportionate ownership and
voting interest in the Company will be further reduced pursuant to
Open Offer to the extent that Shareholders do not take up the offer
of Open Offer Shares under the Open Offer. Subject to certain
exceptions, Shareholders in the United States and other Restricted
Jurisdictions will not be able to participate in the Open
Offer.
3.4. There is no public market for the Ordinary Shares in the
United States or elsewhere outside the United Kingdom
Neither the Placing nor the Open Offer will be registered under
the US Securities Act or the relevant laws of any state or other
jurisdiction of the United States or those of any of the Restricted
Jurisdictions and New Ordinary Shares may not be resold,
transferred or delivered, directly or indirectly, within such
jurisdictions except pursuant to an applicable exemption from the
registration requirements of the US Securities Act and in
compliance with any other applicable security laws. The Ordinary
Shares have not been registered under the US Exchange Act and are
not listed on any US securities exchange or interdealer quotation
system. The Company has no intention to file any such registration
statement or list the Ordinary Shares on any securities exchange or
interdealer quotation system (other than AIM). As a consequence, an
active trading market is not expected to develop for the Ordinary
Shares outside the United Kingdom and investors outside the United
Kingdom may not be able to sell the Ordinary Shares or achieve an
acceptable price. As a prospective purchaser, you should be aware
that you may be required to bear the financial risks of this
investment for an indefinite period of time.
3.5. Pre-emption rights may not be available to Overseas
Shareholders of Ordinary Shares
In the case of certain increases in the Company's issued share
capital, holders of Ordinary Shares have the benefit of statutory
pre-emption rights to subscribe for such shares, unless
Shareholders waive such rights by a resolution passed at a
Shareholders' meeting, or in certain other circumstances. United
States and other overseas holders of shares are very likely to be
excluded from exercising any such pre-emption rights they may have,
unless a registration statement under the US Securities Act is
effective with respect to those rights, or an exemption from the
registration requirements under the US Securities Act is available.
The Company is unlikely to file any such registration statement,
and the Company cannot assure prospective investors that any
exemption from those registration requirements would be available
to enable United States or other overseas shareholders to exercise
such pre-emption rights or, if available, that the Company will
utilise any such exemption.
3.6. Shareholders may be exposed to fluctuations in currency
exchange rates
The Existing Ordinary Shares and the New Ordinary Shares are
priced in pounds sterling, and will be quoted and traded in pounds
sterling. Accordingly, Shareholders resident in non-UK
jurisdictions are subject to risks arising from adverse movements
in the value of their local currencies against pounds sterling,
which may reduce the value of the Ordinary Shares. This is
particularly relevant given the uncertainty around the UK's exit
from the European Union.
3.7. The ability of Overseas Shareholders to bring actions or
enforce judgements against the Company or the Directors may be
limited
The ability of an Overseas Shareholder to bring an action
against the Company may be limited under law. The Company is a
public limited company incorporated in England and Wales. The
rights of holders of Ordinary Shares are governed by English law
and by the Articles. These rights differ from the rights of
shareholders in typical US corporations and some other non-UK
corporations. An Overseas Shareholder may not be able to enforce a
judgement against the Company, the Group or some or all of the
Directors and executive officers. Consequently, it may not be
possible for an Overseas Shareholder to effect service of process
upon the Company or the Directors and executive officers within the
Overseas Shareholder's country of residence or to enforce against
the Company or the Directors and executive officers within the
Overseas Shareholder's country of residence or to enforce against
the Company or the Directors and executive officers' judgements of
courts of securities laws. There can be no assurance that an
Overseas Shareholder will be able to enforce any judgements in
civil and commercial matters or any judgements under the securities
laws of countries other than the UK against the Company or the
Directors or executive officers who are residents of the UK or
countries other than those in which judgement is made. In addition,
English or other courts may not impose civil liability on the
Company or the Directors or executive officers in any original
action based solely on foreign securities laws brought against the
Company or the Directors in a court of competent jurisdiction in
England or other countries.
3.8. The New Ordinary Shares may not be suitable as an
investment
The New Ordinary Shares may not be a suitable investment for all
the recipients of this document. Before making a final decision,
investors are advised to consult an independent investment adviser
authorised under the FSMA who specialises in advising on the
acquisition of shares and other securities. The value of the New
Ordinary Shares and any income received from them can go down as
well as up and investors may get back less than their original
investment.
3.9. The Company's securities are traded on AIM rather than the
Official List
The Existing Ordinary Shares are, and the New Ordinary Shares
will be, traded on AIM rather than the Official List. An investment
in shares traded on AIM may carry a higher risk than those listed
on the Official List. The market price of the Ordinary Shares may
be subject to wide fluctuations in response to many factors,
including variations in the operating results of the Group,
divergence in financial results from analysts' expectations,
changes in estimates by stock market analysts, general economic
conditions, overall market or sector sentiment, legislative changes
in the Group's sector and other events and factors outside of the
Group's control. Stock markets have from time to time experienced
severe price and volume fluctuations, a recurrence of which could
adversely affect the market price for the Ordinary Shares.
Prospective investors should be aware that the value of the
Ordinary Shares may be volatile and could go down as well as up,
and investors may therefore not recover their original investment
especially as the market in the Ordinary Shares may have limited
liquidity. Admission to AIM should not be taken as implying that
there will be a liquid market for the Ordinary Shares.
3.10. The Company's share price fluctuates
The market price of the Ordinary Shares could be subject to
significant fluctuations due to a change in sentiment in the market
regarding the Ordinary Shares (or securities similar to them). Such
risks depend on the market's perception of the likelihood of
success of the Fundraising, and/or may occur in response to various
facts and events, including any variations in the Group's operating
results, business developments of the Group and/or its competitors.
Stock markets have, from time to time, experienced significant
price and volume fluctuations that have affected the market prices
for securities and which may be unrelated to the Group's operating
performance or prospects. Furthermore, the Group's operating
results and prospects from time to time may be below the
expectations of market analysts and investors. Any of these events
could result in a decline in the market price of the Ordinary
Shares and investors may, therefore, not recover their original
investment.
Any sale of Ordinary Shares could have an adverse effect on the
market price of the Ordinary Shares. Furthermore, it is possible
that the Company may decide to offer additional shares in the
future. An additional offering could also have an adverse effect on
the market price of the Ordinary Shares.
3.11. The Company does not plan on making dividend payments in the foreseeable future
There can be no assurance as to the level of future dividends.
The declaration, payment and amount of any future dividends of the
Company are subject to the discretion of the Directors and will
depend on, among other things, the Company's results of operations
and financial condition, its future business prospects, any
applicable legal or contractual restrictions and availability of
profits. A dividend may never be paid and, at present, there is no
intention to pay a dividend.
3.12. Major shareholder Kerogen Investor is able to exercise
significant influence over matters requiring Shareholder
approval
Kerogen Investor currently owns 29.9 per cent. in aggregate of
the Existing Ordinary Shares.
As a result, Kerogen Investor is able to exercise a significant
degree of influence over matters requiring Shareholder approval,
including the election of Directors and significant corporate
transactions. Kerogen Investor is participating in the Placing pro
rata to its current shareholding in the Company.
The risks above do not necessarily comprise all those faced by
the Company and are not intended to be presented in any assumed
order of priority. The investment offered in this document may not
be suitable for all of its recipients. Investors are accordingly
advised to consult an investment adviser, who is authorised under
the FSMA if you are resident in the United Kingdom or, if not, from
another appropriate authorised independent financial adviser and
who or which specialises in investments of this kind before making
a decision to apply for New Ordinary Shares.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCLLFISIILIFIR
(END) Dow Jones Newswires
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