TIDMPCI
RNS Number : 1037K
Petroceltic International PLC
23 December 2015
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT
JURISDICTION.
THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO
MAKE AN OFFER UNDER RULE 2.5 OF THE IRISH TAKEOVER PANEL ACT,
TAKEOVER RULES 2013 ("IRISH TAKEOVER RULES") AND THERE CAN BE NO
CERTAINTY THAT AN OFFER WILL BE MADE, NOR AS TO THE TERMS ON WHICH
ANY OFFER WILL BE MADE.
Dublin
23 December 2015
PETROCELTIC INTERNATIONAL PLC
Operational and Financing Update
Initiation of Strategic Review and commencement of Offer
Period
The Board of Petroceltic International plc (AIM: PCI)
("Petroceltic" or the "Company" or the "Group"), the oil and gas
exploration, development and production company focused on the
North Africa and the Mediterranean region, today provides an
operating and financial update, and announces that it has initiated
a formal strategic review of the Company's business and assets with
a view to considering all options to maximise value for
shareholders and stakeholders.
Operating Update
Since the announcement of the Group's 2015 Half Year Results on
30 September 2015, production and development have continued in
accordance with expectations, and the Company confirms that it
expects full year production to average approximately 14.4 Mboepd,
in line with earlier guidance.
Algeria
Development activities in relation to the Ain Tsila project are
progressing. Plans to commence development drilling are at an
advanced stage, with operating teams in the field and civil works
and preparation of well sites on-going. The Sinopec development
drilling rig has arrived in Algeria and is currently being
mobilised to the first wellsite. Development drilling is expected
to commence by early February 2016. In parallel, the Front End
Engineering and Design (FEED) process has concluded and the tender
process in relation to the award of the major Engineering,
Procurement and Construction ("EPC") contract is continuing. It is
currently anticipated that the EPC award will be made during Q3
2016; based on this timeline, the current best estimate for first
gas production is now early 2019. The Sonatrach carry of
Petroceltic's development obligations pursuant to the 2014 farm-out
agreement remains fully effective and based on this amended
schedule is forecast to cover all of Petroceltic's project costs
until Q3 2016. Amounts remaining to be claimed under the carry
stood at approximately $89.6 million at end November 2015.
Egypt
In Egypt, Petroceltic has reached an agreement to sell its
interests in the North Thekah, North Port Fouad and South Idku
exploration licenses to its joint venture partner Edison
International S.p.A ("Edison") for a net cash consideration of
US$9.5 million, after working capital adjustments of approximately
$5.8 million. Edison is the operator of North Thekah and North Port
Fouad and a joint venture partner in South Idku.
The transaction remains subject to the receipt of Government
approvals and the waiver of pre-emption rights held by the Egyptian
Natural Gas Holding Company ("EGAS") and is expected to complete in
the first quarter of 2016. The sale of these interests will reduce
Petroceltic's exploration expenditure obligations in 2016 by
approximately US$20 million. Petroceltic expects to record a loss
of approximately $1.5 million on this transaction and the proceeds
of the sale will be applied to repayment of debt.
Italy/Greece
The environmental approval process in respect of the Carisio
licence, onshore Po Valley, is proceeding as expected; Petroceltic
has concluded a farm-out in relation to this prospect which, upon
completion, would result in substantially all its costs in relation
to the drilling of this high impact prospect being carried. The
permitting process in relation to the Elsa discovery offshore
Abruzzo is also progressing and Petroceltic understands that all
conditions within its control for the issue of the Ministerial
decree in relation to the project have been satisfied. A number of
amendments to legislation are currently under consideration by the
Italian Parliament which may have the potential to impact the Elsa
project and the Company is closely monitoring developments with a
view to understanding the impact of any amendments to the existing
legal framework on the project.
Petroceltic has also concluded negotiations to exit its interest
in the Patraikos licence offshore Greece, by transferring its
interest to its joint venture partners.
Financing Update
In its 2014 Annual Financial results released on 29 June 2015
and 2015 Half Year Results released on 30 September 2015, the
Company stated that a combination of adjustments to reserves
arising from the 2014 Competent Person's Report, the drop in oil
prices and a reduction in capital investment programmes in relation
to the Group's assets in Egypt and Bulgaria had impacted on
availability under the Group's Senior Bank Facility during 2015.
These circumstances led to the requirement to make material
repayments, which the Group has not to date been in a position to
satisfy and other breaches to the covenants of the Senior Bank
Facility, which is secured over substantially all the assets of the
Group. In respect of these breaches of covenants and repayment
obligations, the Group has received various waivers from the
lending group (together, the "Lenders"). The most recent waiver
under the Senior Bank Facility extends to 15 January 2016.
Throughout 2015, the Group has been pursuing a number of debt
and portfolio management initiatives to secure additional
financing, create liquidity and/or reduce financial commitments,
with a variety of counterparties, including existing shareholders,
licence partners and other parties. The Board continues to believe
that the value of the Group's producing and development interests
is materially in excess of its current borrowings and in particular
that its Algerian asset will be the principal driver of the
long-term future value of the Company. However, 2015 has presented
a period of exceptionally challenging market conditions, especially
for smaller oil and gas companies such as Petroceltic and
consequently it has not been possible to conclude the required
financing on commercially acceptable terms.
Amounts currently outstanding under the Senior Bank Facility
amount to $217.8 million, while cash balances total approximately
$28.1 million, of which $24.6 million is held in local currencies
and not readily convertible; as a consequence, absent new funding
being made available, the Group does not have certainty on
liquidity beyond early January 2016. Given the very limited
liquidity available to the Group, the Lenders have confirmed their
intention to provide further conditional financial support to the
Group, in the form of a limited advance of new funds which the
Directors estimate will enable a variety of funding and portfolio
management initiatives to be pursued in an orderly manner during
January 2016.
The Company has also received a number of conditional proposals
and expressions of interest in respect of the potential disposal of
certain of the Group's producing and exploration assets and
negotiations in relation to a potential disposal of the Group's
Egyptian production interests, along with related working capital
balances including its EGPC receivable, are continuing. In the
event of such a transaction being concluded, all proceeds would be
applied to the reduction of debt outstanding under the Group's
existing Senior Bank Facility. There can, however, be no guarantee
that these negotiations will reach a successful conclusion.
Initiation of Strategic Review
In addition to the sale of the North Thekah, North Port Fouad
and South Idku interests to Edison and the potential sale of its
Egyptian production interests, as set out above, the Company has
also received a number of conditional proposals and expressions of
interest in relation to the sale of the Company or some or all of
its assets and, in light of this, now considers it appropriate that
a more formalised sale process is undertaken. Options being
considered by the Board include, but are not limited to, a farm-out
or sale of one or more of the Company's existing assets, a
corporate transaction such as a merger with a third party, the sale
of the entire issued, and to be issued, share capital of the
Company and the raising of capital in the form of debt and/or a
subscription for new ordinary shares in the Company by one or more
third parties.
The Board has appointed Bank of America Merrill Lynch ("BAML")
and Davy Corporate Finance ("Davy") to undertake a strategic review
of corporate and other options open to the Company in order to seek
to maximise value for shareholders and stakeholders. As part of the
strategic review process, BAML and Davy will undertake discussions
with potential offerors in relation to a possible offer for the
Company.
The strategic review process may or may not result in an
agreement for the sale of, all or part of the Company's assets, an
offer for the issued, and to be issued, share capital of the
Company or another form of corporate transaction. As such there can
be no certainty as to whether any such agreement, offer or
transaction will be forthcoming or as to the terms of such
agreement, offer or transaction, if any, including any requirement
for shareholder approval.
December 23, 2015 12:24 ET (17:24 GMT)
Forward-looking statements in this announcement are current only
as of the date on which such statements are made. None of the
future projections, expectations, estimates or prospects in this
announcement should be taken as forecasts or promises nor should
they be taken as implying any indication, assurance or guarantee
that the assumptions on which such future projections,
expectations, estimates or prospects have been prepared are correct
or exhaustive or, in the case of the assumptions, fully stated in
the announcement. As a result of these risks, uncertainties and
assumptions, the recipient should not place undue reliance on these
forward-looking statements as a prediction of actual results or
otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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December 23, 2015 12:24 ET (17:24 GMT)
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