TIDMZPHR
RNS Number : 2697C
Zephyr Energy PLC
16 October 2020
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED
STATES, REPUBLIC OF IRELAND, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA
OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR
DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY
SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR
CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION, OFFER OR ADVICE
TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY
SECURITIES OF ZEPHYR ENERGY PLC IN ANY JURISDICTION IN WHICH ANY
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
Zephyr Energy plc
(the "Company" or "Zephyr")
Issue of equity and notice of general meeting
Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas
company focused on responsible resource development, is pleased to
announce a placing of 409,090,909 new ordinary shares of 0.1 p each
in the Company ("Placing Shares"), at a price of 0.55p per Placing
Share, to raise GBP2.25 million before expenses (the "Placing").
The Placing, which was oversubscribed, has been conducted with a
range of new, existing and institutional investors and with Turner
Pope Investments ("TPI") acting as broker for the Company.
Of the funds raised in the Placing, approximately GBP 1.15
million is conditional, inter alia, on the approval by the
Company's shareholders of resolutions to provide authority to the
Directors to issue and allot further new ordinary shares on a
non-pre-emptive basis at a general meeting to be convened by the
Company, further details of which are set out below.
Colin Harrington, Chief Executive of Zephyr, said: "We are
delighted to announce this Placing, which fully finances the
Company's maximum funding obligations for drilling the State 16-2
dual-use well on our acreage in the Paradox Basin, Utah. With the
funding now secured, the Company remains on track to spud the well
before the end of the year. We expect the processing and
interpretation of the data acquired to take place early in the New
Year, following which we hope to be in a position to commence
commercial drilling operations utilising the 16-2 wellbore shortly
thereafter.
"The Board believes that the spudding of the 16-2 well will be
the catalyst to finally unlock the significant potential of the
Company's Paradox asset - a belief evidenced by the participation
of best-in-class research and grant partners, by the dedication and
commitment of Zephyr's management team, and by the Board's
significant participation in this Placing. While the current
management team has only been involved in the Paradox project since
the middle of last year, we appreciate that many shareholders have
waited a long time for this key moment, and we thank them for their
patience to date.
"The net proceeds from the Placing, when combined with the US$2m
non-dilutive grant funding previously announced, leaves the Company
well-funded to pursue both the proposed Paradox drilling project
and other strategic ventures. In addition to funding the State 16-2
dual-use vertical well, part of the Placing proceeds may be used
for future lateral drilling on the Paradox project and/or the
funding of potential acquisitions which meet our stringent
investment criteria, at a time when there are significant
opportunities arising in the Rocky Mountain region of the U.S.
upstream oil and gas markets.
"I would like to thank TPI and the rest of our adviser team for
the successful execution of the Placing, and I would very much like
to take this opportunity to welcome our new shareholders and
institutional investors on board.
"Our mission, as always, is to act as responsible stewards of
our investors' capital and responsible stewards of the environment
in which we work. We look forward to executing on that mission for
all shareholders and we will be providing regular updates on our
activity as we progress through the next phase of the Company's
transformation."
Background to the Placing
On 5 October 2020, the Company announced that it had entered
into a definitive binding agreement (the "Agreement") with a
project team led by the University of Utah's Energy &
Geoscience Institute ("EGI"). The Agreement sets out the terms on
which EGI has agreed to sanction and fund US$2 million towards the
drilling of a vertical stratigraphic research well, subject to
final funding terms and permitting, from a Zephyr leasehold pad
which forms part of the Company's Paradox project.
The well's primary objective will be to acquire a comprehensive
data set across the Cane Creek reservoir with the aim of developing
more efficient and less environmentally-impactful oil production
strategies for the northern Paradox Basin.
The well has also been designed to facilitate re-use, which will
allow the potential for future drilling of a horizontal appraisal
lateral from the wellbore after the initial data acquired has been
processed and evaluated. Given the significant commercial benefits
of potential well re-use for the Company, Zephyr has agreed to fund
up to US$1 million of incremental costs, should the total cost of
the well go above EGI's US$2 million committed funding.
The spudding of this proposed dual-use well is now only
conditional on customary permitting, and with detailed design work
already underway, drilling is due to commence by the end of this
year.
The Board has considered various funding options, including a
debt facility with Booner Capital LLC as detailed in the
announcement of 5 October 2020, but has concluded that the Placing
represents the best outcome to fund this stage of the Paradox
project.
The net proceeds of the Placing are to be used for the Paradox
activities announced on 5 October and general working capital
purposes, as well as for future lateral drilling on the Paradox
project and/or the funding of potential acquisitions which meet
Zephyr's stringent investment criteria.
Details of the Placing
In total, 409,090,909 Placing Shares are proposed to be issued
pursuant to the Placing, at a price of 0.55p per Placing Share. The
Placing Shares have been conditionally placed by Turner Pope
Investments Limited ("TPI"), as agent and broker of the Company,
with certain existing, new and institutional investors pursuant to
a Placing Agreement.
The Company currently has limited shareholder authority to issue
new Ordinary Shares for cash on a non-pre-emptive basis.
Accordingly, the Placing is being conducted in two tranches as set
out below.
1. First placing shares
A total of GBP1.1 million, representing the issue of 200,000,000
Placing Shares at the Placing Price (the "First Placing Shares"),
has been raised within the Company's existing share allotment
authorities which was granted at the Company's annual general
meeting held on 29 July 2020 (the "First Placing"). Application
will be made for the First Placing Shares to be admitted to trading
on AIM and it is expected that their admission to AIM will take
place on or around 23 October 2020 ("First Admission"). The issue
of the First Placing Shares is conditional, inter alia, on First
Admission and the Placing Agreement becoming unconditional in
respect of the First Placing Shares and not being terminated in
accordance with its terms prior to First Admission. The issue of
the First Placing Shares is not conditional on the Second Placing
completing.
2. Second placing shares
The balance of the Placing, being GBP1.15 million and
representing the issue of 209,090,909 Placing Shares at the Placing
Price (the "Second Placing"), is conditional upon, inter alia, the
passing of resolutions to be put to shareholders of the Company at
a general meeting of the Company to be held on 2 November 2020 (the
"GM") to provide authority to the Directors to issue and allot
further new ordinary shares on a non-pre-emptive basis, whereby
such authority will be utilised by the Directors to enable
completion of the Second Placing. A circular containing a notice of
the GM will be posted to shareholders shortly.
Conditional on the passing of the resolutions at the GM,
application will be made for the Second Placing Shares to be
admitted to trading on AIM and it is expected that their admission
to AIM will take place on or around 3 November 2020 ("Second
Admission").
In addition to the passing of the resolutions at the GM, the
Second Placing is conditional, inter alia, on Second Admission and
the Placing Agreement becoming unconditional in respect of the
Second Placing Shares and not being terminated in accordance with
its terms prior to Second Admission. The First Placing is not
conditional on the Second Placing completing.
The Placing as a whole would, if the necessary resolutions are
approved at the GM, result in the issue of 409,090,909 Ordinary
Shares, representing, in aggregate, approximately 59 per cent. of
the Company's issued ordinary share capital as enlarged by the
Placing.
The Placing Shares will, when issued, be credited as fully paid
and will rank pari passu in all respects with the existing ordinary
shares of the Company, including the right to receive all dividends
or other distributions made, paid or declared in respect of such
shares after the date of issue of the Placing Shares.
Director subscriptions
Origin Creek Energy LLC ("OCE") has subscribed for 66,000,000
Placing Shares in the Second Placing, equivalent to GBP363,000 at
the Placing Price. Rick Grant, the Chairman of Zephyr, and Colin
Harrington, the CEO of Zephyr are both shareholders and directors
of OCE, and Colin Harrington is indirectly the controlling
shareholder of OCE. Upon First Admission, OCE's interest in
Ordinary Shares will remain unchanged at 68,636,364 Ordinary Shares
but will represent 14.09% of the then issued share capital. Upon
Second Admission, OCE will have an interest in 134,636,364 Ordinary
Shares, equivalent to 19.34% of the Company's then issued share
capital.
Chris Eadie (CFO of Zephyr) and Gordon Stein (Non-Executive
Director of Zephyr) have also each subscribed for 1,850,000 Placing
Shares, in the Second Placing, equivalent to a total of GBP20,350
at the Placing Price.
OCE's, Chris Eadie's and Gordon Stein's aggregated participation
in the Placing is a related party transaction pursuant to rule 13
of the AIM Rules for Companies. Accordingly, Tom Reynolds, being
the director independent of the Placing, considers, having
consulted with the Company's nominated adviser, that the terms of
the transaction are fair and reasonable insofar as the Company's
shareholders are concerned.
Warrants
The Company is proposing to issue TPI with 70,249,091 warrants
to subscribe for 70,249,091 new Ordinary Shares ("Broker Warrants")
as part of TPI's fees for undertaking the Placing. 19,881,818 of
the Broker Warrants will be exercisable at a price of 0.55 pence
per Ordinary share, equivalent to the Placing Price, and the
remaining 50,367,273 Broker Warrants will be exercisable at a price
of 0.6875 pence per Ordinary share, a 25% premium to the Placing
price, all for a period of two years from issue.
The issue of the Broker Warrants is conditional on the passing
of the resolutions to be put to shareholders of the Company at the
GM to provide authority to the Directors to issue and allot further
new ordinary shares on a non-pre-emptive basis. The Broker Warrants
will not be admitted to trading on AIM or any other stock
exchange.
Placing Agreement
Under the terms of a Placing Agreement between the Company and
TPI, TPI will receive commission from the Company conditional on
First Admission and Second Admission and the Company will give
customary warranties and undertakings to TPI in relation, inter
alia, to its business and the performance of its duties. In
addition, the Company has agreed to indemnify TPI in relation to
certain liabilities that they may incur in undertaking the Placing.
TPI has the right to terminate the Placing Agreement in certain
circumstances prior to First Admission and Second Admission, in
particular, in the event that there has been, inter alia, a
material breach of any of the warranties. The Placing is not being
underwritten.
Total voting rights
Following First Admission, the Company's total issued share
capital will consist of 487,111,606 Ordinary Shares, with one
voting right per share. The Company does not hold any shares in
treasury. Therefore, the total number of Ordinary Shares and voting
rights in the Company will be 487,111,606 from First Admission.
This figure may be used by shareholders in the Company as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change in their
interest in, the share capital of the Company pursuant to the FCA's
Disclosure Guidance and Transparency Rules.
Following Second Admission, the Company's total issued share
capital will consist of 696,202,515 Ordinary Shares, with one
voting right per share. The Company does not hold any shares in
treasury. Therefore, the total number of Ordinary Shares and voting
rights in the Company will be 696,202,515 from Second Admission.
This figure may be used by shareholders in the Company as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change in their
interest in, the share capital of the Company pursuant to the FCA's
Disclosure Guidance and Transparency Rules.
Notice of General Meeting
The Company will publish a Circular to convene the GM to propose
resolutions to enable completion of the Placing.
The general meeting will be held at 10.00 a.m. on 2 November
2020. The circular containing the notice of general meeting will be
published and sent to shareholders today and will be available
shortly thereafter on the Company's website, www.zephyrplc.com.
Shareholders will not be able to attend the meeting due to current
COVID-19 restrictions and are strongly urged to vote by proxy in
accordance with the instructions set out in the notice of general
meeting.
MAR
The Market Abuse Regulation (MAR) became effective from 3 July
2016. Market soundings, as defined in MAR, were taken in respect of
the Placing with the result that certain persons became aware of
inside information, as permitted by MAR. That inside information is
set out in this announcement has been disclosed as soon as possible
in accordance with paragraph 7 of article 17 of MAR. Therefore,
those persons that received inside information in a market sounding
are no longer in possession of inside information relating to the
Company and its securities.
Contacts:
Zephyr Energy plc Tel: +44 (0)20 7225
Colin Harrington (CEO) 4590
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328
Adviser 5656
Jeremy Porter / Liz Kirchner
Turner Pope Investments - Broker Tel: +44 (0)20 3657
Andy Thacker / Zoe Alexander 0050
Flagstaff Strategic and Investor Communications Tel: +44 (0) 20 7129
Tim Thompson / Mark Edwards / Fergus 1474
Mellon
Information to Distributors
Solely for the purposes of the product governance requirements
contained within: (a) EU Directive 2014/65/EU on markets in
financial instruments, as amended ("MiFID II"); (b) Articles 9 and
10 of Commission Delegated Directive (EU) 2017/593 supplementing
MiFID II; and (c) local implementing measures (together, the
"Product Governance Requirements"), and disclaiming all and any
liability, whether arising in tort, contract or otherwise, which
any "manufacturer" (for the purposes of the Product Governance
Requirements) may otherwise have with respect thereto, the Placing
Shares have been subject to a product approval process, which has
determined that the Placing Shares are: (i) compatible with an end
target market of retail investors and investors who meet the
criteria of professional clients and eligible counterparties, each
as defined in MiFID II; and (ii) eligible for distribution through
all distribution channels as are permitted by MiFID II (the "Target
Market Assessment"). Notwithstanding the Target Market Assessment,
investors should note that: the price of the Placing Shares may
decline and investors could lose all or part of their investment;
Placing Shares offer no guaranteed income and no capital
protection; and an investment in Placing Shares is compatible only
with investors who do not need a guaranteed income or capital
protection, who (either alone or in conjunction with an appropriate
financial or other adviser) are capable of evaluating the merits
and risks of such an investment and who have sufficient resources
to be able to bear any losses that may result therefrom. The Target
Market Assessment is without prejudice to the requirements of any
contractual, legal or regulatory selling restrictions in relation
to the Placing. Furthermore, it is noted that, notwithstanding the
Target Market Assessment, only investors who have met the criteria
of professional clients and eligible counterparties have been
procured. For the avoidance of doubt, the Target Market Assessment
does not constitute: (a) an assessment of suitability or
appropriateness for the purposes of MiFID II; or (b) a
recommendation to any investor or group of investors to invest in,
or purchase, or take any other action whatsoever with respect to
Placing Shares.
Notification and public disclosure of transactions by persons
discharging managerial responsibilities and persons closely
associated with them
1. Details of the person discharging managerial responsibilities
/ person closely associated
a) Name Rick Grant Chairman
Colin Harrington CEO
-----------------------
Chris Eadie CFO
-----------------------
Gordon Stein Non-Executive Director
-----------------------
------------------------------- ---------------------------------------------
2. Reason for the Notification
------------------------------------------------------------------------------
a) Position/status See section 1a) above
------------------------------- ---------------------------------------------
b) Initial notification/Amendment Initial notification
------------------------------- ---------------------------------------------
3. Details of the issuer, emission allowance market participant,
auction platform, auctioneer or auction monitor
------------------------------------------------------------------------------
a) Name Zephyr Energy plc
------------------------------- ---------------------------------------------
b) LEI 254900TAVH3MBZ1EMC29
------------------------------- ---------------------------------------------
4. Details of the transaction(s): section to be repeated
for (i) each type of instrument; (ii) each type of
transaction; (iii) each date; and (iv) each place where
transactions have been conducted
------------------------------------------------------------------------------
a) Description of Ordinary shares of 0.1p each
the Financial in Zephyr Energy plc
instrument, type
of instrument
Identification GB00B013M672
code
------------------------------- ---------------------------------------------
b) Nature of the Participation in a placing
transaction
------------------------------- ---------------------------------------------
c) Price(s) and volume(s) Price: 0.55p
Volumes:
Rick Grant 66,000,000
Colin Harrington 66,000,000
-----------
Chris Eadie 1,850,000
-----------
Gordon Stein 1,850,000
-----------
------------------------------- ---------------------------------------------
d) Aggregated information: N/A
--Aggregated volume
--Price
------------------------------- ---------------------------------------------
e) Date of the transaction 16 October 2020
------------------------------- ---------------------------------------------
f) Place of the transaction Outside a trading venue
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