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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Max Petrol | LSE:MXP | London | Ordinary Share | GB00B0H1P667 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.16 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMMXP
RNS Number : 8406S
Max Petroleum PLC
13 July 2015
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
FOR IMMEDIATE RELEASE
13 July 2015
Max Petroleum Plc
("Max Petroleum" or the "Company")
AGR Energy to invest US$13.8 million in Max Petroleum
Summary
-- Max Petroleum announces a conditional cash subscription by AGR Energy to raise US$13.8 million (GBP8.98 million) before expenses for 3,834,590,973 new Ordinary Shares at a price of 0.2341 pence per share such that AGR Energy will hold 63.8% of the Enlarged Issued Share Capital immediately following completion of the Subscription.
-- As part of the Subscription, AGR Energy will provide an unsecured convertible loan of US$2.0 million (GBP1.3 million) comprising: (i) a first tranche of US$250,000 (GBP162,623); and (ii) a second tranche of US$1.75 million (GBP1.1 million). The loan is conditional upon, inter alia:
o the appointments of: (i) Mr. Kanat Assaubayev to the Company's Board as an executive director (Co-Chairman); (ii) Mr. Aidar Assaubayev as a chief executive officer of the Company (but not a member of the Company's Board) and as the general director of Samek; and (iii) Mr. Alastair Murray as a deputy general director of Samek.
-- The Subscription will provide working capital to the Company to alleviate its severe immediate financial stress. Further significant financing will be required in the mid and longer term to reestablish going concern status and viability of the business. AGR Energy intends to work with the existing shareholders of the Company progressively to strengthen Max Petroleum's financial position and evaluate exploration and production upside.
-- The Subscription Price represents a premium of 46.3% to the closing middle market price of an Ordinary Share of 0.16 pence on 27 February 2015, the date immediately prior to the suspension of the Company's Ordinary Shares from trading on AIM.
-- AGR Energy is a vehicle owned by the Assaubayev family established for the purpose of the Subscription. Neither AGR Energy, nor any member of the Assaubayev family nor any of their respective associates ("AGR Energy Group") currently holds any Ordinary Shares or any other securities in Max Petroleum.
-- The Subscription is conditional, inter alia, upon each of the following conditions being satisfied on or before the Long Stop Date, being 1 October 2015:
o the posting of the Shareholder Circular to Shareholders by no later than 21 August 2015;
o the Panel having waived the obligation that would otherwise arise under Rule 9 of the Takeover Code for AGR Energy to make a general offer to all other Shareholders to acquire their Ordinary Shares in the Company;
o Shareholders passing resolutions to: (i) approve the Rule 9 Waiver; (ii) grant the Directors the authority to allot the Subscription Shares and Conversion Shares; and (iii) disapply the statutory pre-emption rights arising in respect of those allotments;
o the appointment of the Investor Managers and/or Investor Directors not having been terminated;
o certain Kazakh regulatory approvals being obtained;
o no Insolvency Event having occurred;
o Admission becoming effective on or before the Long Stop Date; and
o satisfaction or waiver by AGR Energy of all conditions to drawdown under the Bridging Loan within the applicable time frame or as otherwise agreed to between the Company and AGR Energy.
-- Admission of the Company's Ordinary Shares to trading on AIM will remain suspended until further notice.
Background
-- On 9 February 2015, Max Petroleum announced that the fall in the oil price since November 2014 had had a very severe adverse impact on its current and forecast liquidity position in 2015 and beyond. As a result, Max Petroleum's business had been rendered unviable unless further material investment was made into the Company in addition to there being a comprehensive debt restructuring agreed with Sberbank. In addition, negotiations with Sberbank regarding the terms of such debt restructuring had not been successful and, as a result, the Prior AGR Subscription would not proceed.
-- On 2 March 2015, shares in Max Petroleum were suspended from trading on AIM as a result of increased uncertainty as to the Company's continuing solvency in light of the protracted nature of the financing discussions as well as outstanding creditor payments and other events outside the control of the Company that could require that it ceases trading.
-- Subsequent announcements highlighted various operational and financial difficulties and that the Company continued in operation under severe financial stress.
-- In recent weeks a small number of indicative and pre-conditional alternative third party proposals were received by the Board. The proposals principally related to the acquisition of Samek and would have left little or no value for Shareholders after the discharge of the Company's liabilities to its creditors.
-- Subsequent to the receipt of these proposals, however, and within the last 10 days the Company has updated its forecasts of solvency and financing requirements as a result of, inter alia, the recent fall in the oil price, a forecast reduction in cash flows as a result of the Sagiz West and East Kyzylzhar I wells not coming back to full production as quickly as expected, new creditor claims and limited options for mitigating actions that had previously been possible. These revised forecasts required an immediate decision of the Board either to accept the AGR Energy proposal, being the only immediately deliverable proposal available to the Board, or put the Company into administration. In these extreme circumstances the Board determined that it was in the best interests of all stakeholders immediately to commit to enter into an agreement with AGR Energy.
Shareholder Circular and Notice of General Meeting
-- The Shareholder Circular will be issued, in due course, to Shareholders containing details of the Subscription, the Bridging Loan and the Conversion and the Notice of General Meeting at which the Resolutions will be put to Shareholders and, when issued, the Shareholder Circular will also be available on the Company's website: www.maxpetroleum.com
James A. Jeffs, Chairman of Max Petroleum, and Kanat Assaubayev, Executive Chairman of AGR Energy, commented:
"We are very pleased to announce this initial funding phase to bring some stability to Max Petroleum's stakeholders which will, we hope, be the first step in creating value over time.
"The shareholders in AGR Energy have a substantive track record of value creation in emerging markets (both within Central Asia and elsewhere). Substantial value has previously been created from distressed companies by the AGR shareholders.
"AGR Energy looks forward to working with the Max Petroleum Board to stabilise the Company and create the strong foundations from which a successful enterprise can be built. Together we will be aiming to develop a strong and commercially focused business over the coming months and years.
"This transaction sees the conclusion of a process that started over a year ago and it is a testament to both management teams' resilience that we have finally concluded a process that has seen so many different, primarily unfavourable, changes in the macroeconomic environment in which Max Petroleum operates.
"AGR Energy seeks to create value by directly investing in both businesses and management teams, this process takes time to yield results and stakeholders must be equally patient whilst AGR Energy works with the Max Petroleum board to create value going forwards."
The above summary should be read in conjunction with, and is subject to, the full text of this announcement (including the Appendices).
ENQUIRIES
Max Petroleum Plc +44 (0) 20 3713 4015 James A. Jeffs Tom Randell Stifel Nicolaus Europe Limited +44 (0) 20 7710 7600 Michael Shaw
AGR Energy has given and not withdrawn its consent to the inclusion in this announcement of its name and that of the AGR Energy Group and references thereto in the form and context in which they appear, including, without limitation, statements concerning its intentions in respect of Max Petroleum.
AGR Energy to invest US$13.8 million in Max Petroleum
1. Introduction
Max Petroleum announces a conditional cash subscription by AGR Energy to raise US$13.8 million (GBP8.98 million) before expenses for 3,834,590,973 new Ordinary Shares at price of 0.2341 pence per Ordinary Share (the "Subscription Price") such that AGR Energy will hold 63.8% of the Enlarged Issued Share Capital immediately following completion of the Subscription (60.4% of the fully diluted Enlarged Issued Share Capital).
As part of the Subscription, AGR Energy will provide an unsecured convertible loan of US$2.0 million (GBP1.3 million) to the Company (the "Bridging Loan") comprising: (i) a first tranche of US$250,000 (GBP162,623); and (ii) a second tranche of US$1.75 million (GBP1.1 million). Under the terms of the Bridging Loan, AGR Energy may at its discretion provide a further tranche of up to US$11.8 million as part of the Bridging Loan. The Bridging Loan will have a stated maturity date of 31 December 2015 and will be convertible (including in respect of any interest that may have accrued) into Ordinary Shares subject to Shareholder approval and certain regulatory approvals at a conversion price equal to the Subscription Price.
The Bridging Loan is conditional upon, inter alia, each of the following conditions being satisfied on or before the Long Stop Date, being 1 October 2015:
(a) the following appointments being made in each case by no later than 14 July 2015: (i) Mr. Kanat Assaubayev to the Company's Board as an executive director (Co-Chairman); (ii) Mr. Aidar Assaubayev as a chief executive officer of the Company (but not a member of the Company's Board) and as the general director of Samek; and (iii) Mr. Alastair Murray as a deputy general director of Samek, and each such appointment outlined in (i) to (iii) not having been terminated; and
(b) no Insolvency Event or Change of Control having occurred.
Interest shall accrue on any outstanding principal amount at a rate of 0% per annum, unless the Shareholders do not approve, prior to the Long Stop Date, the Subscription or the Conversion in which case interest shall accrue at a rate of 15% per annum compounded on a quarterly basis from the date of the Bridging Loan. All outstanding liabilities under the Bridging Loan will be set-off against the subscription amount payable by AGR Energy under the Subscription.
The Subscription and Bridging Loan will provide working capital to the Company to alleviate its severe immediate financial stress. Further significant financing will be required in the mid and longer term to reestablish going concern status and viability of the business. AGR Energy intends to work with the existing shareholders of the Company progressively to strengthen Max Petroleum's financial position and evaluate exploration and production upside.
AGR Energy is a vehicle owned by the Assaubayev family established for the purpose of the Subscription. Neither AGR Energy, nor any member of the Assaubayev family nor any of their respective associates ("AGR Energy Group") currently holds any Ordinary Shares or any other securities in Max Petroleum.
The Subscription Price represents a premium of 46.3% to the closing middle market price of an Ordinary Share of 0.16 pence on 27 February 2015, the date immediately prior to the suspension of the Company's Ordinary Shares from trading on AIM.
The Subscription Shares and Conversion Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared following Admission.
The Subscription is conditional, inter alia, upon each of the following conditions being satisfied on or before the Long Stop Date, being 1 October 2015:
(a) the posting of the Shareholder Circular to Shareholders, including a recommendation of the Board to vote in favour of the Resolutions, by no later than 21 August 2015;
(b) the Panel having waived the obligation that would otherwise arise under Rule 9 of the Takeover Code for AGR Energy to make a general offer to all other Shareholders to acquire their Ordinary Shares in the Company;
(c) Shareholders passing resolutions to: (i) approve the Rule 9 Waiver; (ii) grant the Directors the authority to allot the Subscription Shares and the Conversion Shares; and (iii) disapply the statutory pre-emption rights arising in respect of those allotments;
(d) the appointment of the Investor Managers and/or Investor Directors not having been terminated;
(e) certain Kazakh regulatory approvals being obtained;
(f) no Insolvency Event having occurred;
(g) Admission becoming effective on or before the Long Stop Date; and
(h) satisfaction or waiver by AGR Energy of all conditions to drawdown under the Bridging Loan within the applicable time frame or as otherwise agreed to between the Company and AGR Energy.
Kazakh governmental consents and approvals:
The Subscription and Conversion are conditional upon the Company receiving the following governmental consents and approvals:
-- consent and approval from the MOE under the Law of Subsoil Use No. 291-IV, dated 24 June 2010, as amended;
-- consent and approval from the National Bank of Kazakhstan; and -- consent of the Kazakh antimonopoly authorities.
Takeover Code
Ordinarily, the subscription by AGR Energy for the Subscription Shares and/or the Conversion Shares would trigger an obligation under Rule 9 of the Takeover Code for AGR Energy to make a general offer to all other Shareholders to acquire their Ordinary Shares in the Company. The Company intends to seek the Panel's agreement to waive this obligation, subject to the approval of the Rule 9 Waiver by Independent Shareholders. Accordingly, an ordinary resolution will be proposed at the General Meeting for this purpose which will be taken on a poll.
Further details regarding the Rule 9 Waiver will be set out in the Shareholder Circular.
2. Background to and reasons for the Subscription
The November 2014 Circular contained information on the financial position and future prospects of the Group absent the Prior AGR Subscription. This included details of:
-- the Company's highly geared debt position and the fact that the Group would not be able to continue servicing its interest and principal payments under the Sberbank Facility Agreement should oil prices remain below US$85/bbl Brent crude;
-- the Company's unfunded capital programme absent additional financing; -- the Group's limited post-salt exploration upside from existing or new licence areas; and
-- a projected US$113 million impairment to the Group's pre-salt assets absent additional financing.
In addition, a review of strategic options and formal sale process announced on 22 July 2014, the purpose of which was to elicit competing, superior proposals to the Prior AGR Subscription, resulted in no deliverable proposal being put forward to the Board at that time.
Shareholder approval for the Prior AGR Subscription was granted on 1 December 2014 and the Company and AGR Energy worked on fulfilling the remaining conditions to completion.
On 9 February 2015, Max Petroleum announced that the fall in the oil price since November 2014 had had a very severe adverse impact on its current and forecast liquidity position in 2015 and beyond. As a result, Max Petroleum's business had been rendered unviable unless further material investment was made into the Company in addition to there being a comprehensive debt restructuring agreed with Sberbank. In addition, negotiations with Sberbank regarding the terms of such debt restructuring had not been successful and, as a result, the Prior AGR Subscription would not proceed.
Negotiations in the subsequent period continued, both with Sberbank regarding an appropriate debt restructuring and with AGR Energy regarding an equity investment that, together with the debt restructuring, would render the Company viable at current oil prices.
The Company announced on 19 February 2015 that in light of upcoming creditor payments, including a material amount that became due on 25 February 2015 to the Kazakh tax authorities and payable by early March 2015, there was only a short period remaining to achieve the refinancing and if efforts were unsuccessful then the consequences will be negative for all stakeholders in the Company.
On 2 March 2015, the Ordinary Shares in Max Petroleum were suspended from trading on AIM as a result of increased uncertainty as to the Company's continuing solvency in light of the protracted nature of the financing discussions as well as outstanding creditor payments and other events outside the control of the Company that could require that it ceases trading.
On 20 March 2015, the Company announced that it had been notified that its operational bank accounts in Kazakhstan would be suspended as a result of non-payment of sums owed to the Kazakh tax authorities. In addition, export sales were halted due to uncertainty over the Company's ability to guarantee future payment for transport and other costs necessary to ensure delivery of such sales. Further, as a result of the demobilisation of the Company's workover rig, due to non-payment of invoices, production had been impacted by the failure of one producing well at Zhana Makat, representing a loss of approximately 170 bopd. In addition, Sagiz West production had been shut-in pending regulatory permission to proceed to TPP and total production was approximately 3,100 bopd, which was being delivered on a non-cash basis as settlement towards the Company's domestic crude oil sales prepayment liability.
On 1 May 2015, Max Petroleum announced that financing discussions were continuing, that bridge financing was required to ensure the Company was viable prior to completion of any transaction and that it continued in operation, producing circa 2,900 bopd, under severe financial stress.
On 3 July 2015, the Company announced that Sberbank had unconditionally granted a six month standstill on all principal and interest payments due under the Company's c.US$80 million loan through to 14 December 2015, that it had accrued US$3.8 million of interest as of 30 June 2015 and that interest would continue to accrue during the standstill period. In addition, the Company announced that it continues in operation under severe financial stress, producing in excess of 3,500 barrels of oil per day, including from the Sagiz West field after regulatory permission was granted in June to resume production from both Sagiz West and East Kyzylzhar I fields under TPP. Further, the Company announced that it had received notification from the tax authorities of the Republic of Kazakhstan alleging that, under tax legislation, payments of over US$20 million (according to the tax authorities, payable within 10 years starting from 2012) were due for Soviet-era historical data costs incurred in the Company's Blocks A&E licence area (the "Licence"). The Company disagrees with this interpretation and application of the tax legislation and considers that to date it has met its obligations to reimburse historical costs as they fall due. The Company intends to put its case to the tax authorities.
In recent weeks a small number of indicative and pre-conditional alternative third party proposals were received by the Board. The proposals principally related to the acquisition of Samek and would have left little or no value for Shareholders after the discharge of the Company's liabilities to its creditors.
Subsequent to the receipt of these proposals, however, and within the last 10 days the Company has updated its forecasts of solvency and financing requirements as a result of, inter alia, the recent fall in the oil price, a forecast reduction in cash flows as a result of the Sagiz West and East Kyzylzhar I wells not coming back to full production as quickly as expected, new creditor claims and limited options for mitigating actions that had previously been possible. These revised forecasts required an immediate decision of the Board either to accept the AGR Energy proposal, being the only immediately deliverable proposal available to the Board, or put the Company into administration. In these extreme circumstances the Board determined that it was in the best interests of all stakeholders immediately to commit to enter into an agreement with AGR Energy.
Current trading
The Group has seven post-salt discoveries with three fields producing under FFD (Zhana Makat, Asanketken and Borkyldakty), two fields under TPP (Sagiz West and East Kyzylzhar I), and the remainder at varying stages of appraisal. As the Group continues to appraise and develop its discoveries they progress from Test Production into TPP, where they are able to resume continuous production, and then they move from TPP to FFD, where 80% of the production is available to sell on export markets for a substantially higher price per barrel.
In June 2015, Amendment 16 to the Group's A&E Licence was signed which extended the appraisal period for the blocks until 4 March 2017 and also permitted the Sagiz West field, East Kyzylzhar I field and Baichunas West field to resume production under TPP. The Group also formally relinquished the Eskene North field which has been determined to be non-economic. Amendment 16 also permits the Group to further appraise several Soviet-era structures that had varying indications of hydrocarbon presence during their exploration phase. The right to appraise a geological feature that could extend Zhana Makat field was granted in October 2014.
The exploration rights to complete the drilling of NUR-1 and a follow on pre-salt well expired on 4 March 2015. The Company plans to apply to the MOE for a further extension to complete NUR-1 and drill pre-salt wells in Block E in due course. Faced with the dual uncertainties of funding and the requirement for a licence extension beyond March 2015, the directors have concluded that the most prudent course of action would be to book a one-time accounting charge to impair fully the carrying value of NUR-1 and associated pre-salt exploration costs as at 31 March 2015. Accordingly, the Group will book a non-cash impairment charge of approximately US$113 million in the financial statements for the year ending 31 March 2015. Finishing the well and evaluating this high potential target remains an important objective for the Group. As the Eskene North field has been determined to be non-economic and has now been relinquished, the Group has also recorded an impairment of approximately US$5 million to fully write down the field at 31 March 2015. As a result, impairment charges related to exploration and appraisal assets for the year ended 31 March 2015 will be approximately US$118 million.
As a result of the fall in oil prices during 2014, the Group is currently reviewing the carrying value of post-salt oil and gas properties and associated property, plant and equipment ("oil and gas assets") as at 31 March 2015. Based on this review, the Group expects to revalue its oil and gas assets to between US$50 and US$60 million at 31 March 2015. Accordingly the Group expects to record a non-cash impairment charge of its oil and gas assets of between US$62 to US$72 million in its financial statements for the year ended 31 March 2015.
The Group's operating performance during the current calendar year for the six months ending 30 June 2015 is summarised in the table below:
Hot Features
Premium
Jan Feb Mar Apr May June 6 months
2015 2015 2015 2015 2015 2015 June
2015
------------------------ ------ ------ ------ ------ ------ ------ ---------
Production (mbo) 118 119 102 88 95 94 616
Average daily
production (bopd) 3,814 4,228 3,292 2,937 3,072 3,117 3,401
Export sales (mbo) 72 51 36 - 87 43 289
Domestic sales
(mbo) 44 31 104 87 22 15 303
------ ------ ------ ------ ------ ------ ---------
Total sales (mbo) 116 82 140 87 109 58 592
------ ------ ------ ------ ------ ------ ---------
Export sales (US$'000) 3,076 2,879 2,049 - 5,005 2,560 15,569
Domestic sales
(US$'000) 792 710 2,211 1,984 541 346 6,584
------ ------ ------ ------ ------ ------ ---------
Total sales (US$'000) 3,868 3,589 4,260 1,984 5,546 2,906 22,153
------ ------ ------ ------ ------ ------ ---------
Average realised
export price (US$
per bbl) 42.72 56.45 56.92 n/a 57.53 59.53 53.87
Average realised
domestic price
(US$ per bbl) 18.00 22.90 21.26 22.80 24.59 23.07 21.73
During the six months ended 30 June 2015, the Group's average realised export selling price was US$54 per barrel, generating an average netback of US$19 per barrel after production costs, selling and transportation and taxes. The Group's average realised domestic selling price was US$22 per barrel, generating an average netback of US$9 per barrel.
The Group is currently producing approximately 4,100 bopd from its fields on continuous production.
The Company has contractual obligations to deliver crude oil arising from prepayments received from customers for crude oil sales. The last prepayment received from domestic oil buyers was in November 2014. Domestic crude oil sales are applied against this prepayment, and hence domestic crude oil sales currently do not generate cash revenue because of the large balance outstanding. Domestic crude oil prices which the Company receives as it delivers against its domestic prepayment are variable and hence lower domestic oil prices require higher volumes to be delivered. Export sales are generally made on a one month prepayment basis, and accordingly, are currently the Company's only means of generating cash revenue.
At 30 June 2015, prepayments from customers for the future delivery of oil totalled US$18.7 million, split as follows:
-- Prepayments from domestic customers were US$15.0 million, with a minimum remaining delivery commitment of approximately 416 thousand barrels during the remainder of 2015.
-- Prepayments from export customers were US$3.7 million for July exports.
Export sales were halted in March 2015 owing to uncertainty over the Company's ability to guarantee future payment for transport and other costs necessary to ensure delivery of such sales because of a threatened suspension of its operational bank accounts due to the inability to pay approximately US$4.5 million of export taxes and mineral extraction taxes at the end of February 2015. In March 2015, the operational bank accounts in Kazakhstan were suspended by the Kazakh tax authorities as a result of the non-payment of these taxes. On 13 April 2015, the Kazakh tax authorities seized US$3.3 million which the Company was holding in an escrowed bank account as an environmental restoration and rehabilitation fund (the "Liquidation Fund") under the terms of the Group's Licence and applied it against the approximately US$4.5 million in taxes owed to reduce the balance of taxes outstanding to approximately US$1.2 million.
The Company was able to obtain a prepayment for May exports at the end of April, such that it was able to clear the balance of US$1.2 million of taxes owed to allow the un-suspension of its operational bank accounts by the Kazakh tax authorities, pay sales and marketing costs to transport its crude oil production to buyers in May, and to pay its essential operating expenses to maintain crude oil production, with continued creditor forbearance on its large trade and other payables liabilities which are in arrears and, as at 30 June 2015, amounted to US$20.7 million. The Company has continued to trade on this basis to date.
Under the terms of the Group's Licence, the Group has an obligation to replenish the Liquidation Fund with the US$3.3 million cash seized by the tax authorities. Further, an additional contribution of US$0.3 million in respect of calendar year 2014 is now overdue. As of today's date, the Group has a requirement to pay US$3.6 million into the Liquidation Fund.
As at 30 June 2015, the Group's current liabilities, excluding the principal of the Sberbank Loan, were as follows:
30
June
2015
US$'000
Export customer
prepayments 3,729
Domestic customer
prepayments 14,997
--------------------------------------- ---------
Customer prepayments
total 18,726
Trade payables 11,242
Accrued expenses 2,716
Other payables
(inc. taxes) 2,485
Provision for restructuring/severance 487
Sberbank interest
payable 3,757
--------------------------------------- ---------
Trade and other
payables total 20,687
Liquidation fund 3,600
Total current liabilities 43,013
--------------------------------------- ---------
Trade and other payables of US$20.7 million include payables of US$11.7 million for which settlement is overdue. In respect of these overdue payables, the Group has signed settlement agreements with vendors totalling US$6.7 million to settle the outstanding payables in instalments over the six months ended 31 December 2015.
Inclusive of the Sberbank Loan of US$79.6 million and the provision for decommissioning obligations of US$4.9 million but before deferred tax liabilities, total liabilities of the Group at 30 June 2015 were US$127.5 million.
As at 30 June 2015, the Group had cash balances of US$0.8 million.
Sberbank Loan
The Group is highly geared, with US$79.6 million currently outstanding under the Sberbank Facility Agreement ("Sberbank Loan"). With effect from 16 February 2015, Samek defaulted on the Sberbank Facility Agreement as it ceased making payments of interest and principal when due. As a result of these defaults, Sberbank notified Samek that the full amount of the principal plus accrued interest and penalties had been accelerated such that it was repayable in full immediately.
On 30 June 2015, Samek and Sberbank signed Addendum #5 to the Sberbank Facility Agreement, according to which Samek has been granted a six month standstill on all principal and interest payments due under the Sberbank Facility Agreement through to 14 December 2015. Principal payments due from March 2015 through 14 December 2015 have been deferred to 15 December 2015. Interest that was unpaid from 16 February 2015 through 30 June 2015 will be payable 15 December 2015, along with interest accrued during the standstill period at an interest rate of 11%. Penalties for the late payment of principal and interest accrued up to the date of Addendum #5 have been cancelled.
The Company will continue to work with AGR Energy and Sberbank regarding an appropriate debt restructuring which would render the Company viable at current oil prices.
Short term solvency outlook
The Group forecasts a positive end-of-month cash balance until October 2015. Thereafter additional financing will be required to ensure the Group continues in operation.
The above forecast assumes:
-- US$0.25 million received under the first tranche of the Bridging Loan in the week commencing 13 July 2015, with the remaining balance of US$1.75 million received by the end of July and the proceeds of the Subscription of US$11.8 million (net of the Bridging Loan) received prior to the end of August 2015, following the fulfilment (or where appropriate waiver) of all conditions thereto as set out in detail in this announcement;
-- Future revenues and expenses cash flows remain in line with expectations; in particular stable oil production of approximately 4,100 bopd and Brent crude oil prices of US$57 per barrel or above during the period;
-- Contracted volumes are delivered to domestic oil customers throughout the remainder of 2015 as settlement towards their outstanding prepayments with no further cash received;
-- Payments with certain creditors are made through to December 2015 in accordance with the settlement plans agreed with them;
-- Creditors which are currently overdue and immediately payable, amounting to approximately US$3.5 million are paid in September following completion of the Subscription and no legal actions are initiated for immediate payment;
-- No payments are made in relation to the potential historical costs claim by the tax authorities in Kazakhstan, described below;
-- No payments are made in relation to any penalties relating to shortfalls on the 2014 work programme commitment, described below;
-- No payments are made to Sberbank for either principal or interest during the standstill period; and
-- No payment of US$3.6 million is made to replenish the Liquidation Fund during the period.
Should any of the above assumptions prove inaccurate the Company would require additional financing, which, if not forthcoming from AGR Energy or any other party, would likely render the Group insolvent and require the Board to put the Company into administration.
Historical costs claim
Samek has received notification from the tax authorities of the Republic of Kazakhstan alleging that, under tax legislation, payments of over US$20 million (according to the tax authorities, payable within 10 years starting from 2012) are due for Soviet-era historical data costs incurred in the Company's Licence area. The Company disagrees with this interpretation and application of the tax legislation and considers that to date it has met its obligations to reimburse historical costs as they fall due. The Company intends to put its case to the tax authorities. The timing and amounts of any payments that will be required by the tax authorities is uncertain.
Work Programme Commitments
Under the Licence the Group is committed to certain expenditures, which include a work programme agreed with the MOE. The work programme covers the period through to the year 2027 and includes capital and operating expenditure, social infrastructure contributions and commitments for the training of local personnel. The Group fulfils its commitments by carrying out qualifying exploration, development and operating expenditure and by making the required contributions.
The Group's total commitment under the work programme for the calendar year ended 31 December 2014, as revised by Addendum 15 in October 2014, was US$98.1 million. In June 2014, the Group suspended its capital expenditure programme pending the arrangement of additional financing. As a result, the Group did not meet its work programme commitments for 2014. The shortfall was US$61.0 million. The MOE has the ability to impose a fine on the Group of up to 30% of this shortfall. The Group therefore estimates the MOE could impose a fine of up to US$18.3 million for non-compliance with the work programme.
In June 2015, the Group signed Addendum 16 to the Licence, which deferred a portion of the shortfall to calendar year 2015. The Group is working with the MOE to put in place the necessary regulatory approvals to defer the remaining shortfall on the 2014 work programme to future years. However, there remains a possibility that the MOE could still impose a fine based on the shortfall as at 31 December 2014, prior to the work programme amendments of Addendum 16 and future addendums currently under discussion, or that it will not agree to future amendments.
The Group's current work programme commitments, as amended by Addendum 16 are as follows:
US$'000
------------------------ --------
Year ended 31 December
2015 38,237
Year ended 31 December
2016 18,850
Years 2017 to 2027 45,228
------------------------ --------
Total 102,315
------------------------ --------
The Group requires additional funding to meet the above work programme commitments. The Group is working with the MOE to defer work programme commitments from 2015 to future years in order to avoid potential fines for non-compliance.
3. Information about the AGR Energy Group
The principals of the AGR Energy Group, namely the Assaubayev family, are long-term investors in natural resources and metals and mining, and have a track record of effective investment and support of enterprises (both public and private), particularly in Central Asia.
Immediately upon completion, AGR Energy will focus on stabilizing Max Petroleum in line with AGR Energy's expertise as a shareholder in turning around distressed companies. This will initially comprise three distinct strands:
-- Identifying longer term capital requirements and engaging with stakeholders (shareholders, lenders and trade creditors) to determine the most appropriate funding mechanisms to deliver a comprehensive and sustainable restructuring.
-- Working with the regulators in Kazakhstan with respect to historic costs.
-- Working with the Max Petroleum team to create future shareholder returns through optimizing asset performance and exploration/appraisal upside.
Additional growth opportunities will be evaluated once stability and shareholder certainty is achieved.
AGR Energy remains committed for the forseeable future to Max Petroleum remaining an independent company whose shares are publicly traded in order to enable the Company's existing shareholders to participate in the future of the Company. Full engagement by AGR Energy with the Company's shareholder base will occur during the determination of future funding strategies.
4. Shareholder Circular and Notice of General Meeting
The Shareholder Circular will be issued, in due course, to Shareholders containing details of the Subscription, the Bridging Loan and the Conversion and the Notice of General Meeting at which the Resolutions will be put to Shareholders and, when issued, the Shareholder Circular will also be available on the Company's website: www. maxpetroleum.com
5. Suspension of trading on AIM
Admission of the Company's Ordinary Shares to trading on AIM will remain suspended until further notice
APPENDIX I - Sources and bases
The number of Subscription Shares has been based on 2,175,305,483 Ordinary Shares currently in issue.
GBP:US$ conversion calculated at GBP1:US$ 1.5373
APPENDIX II - Definitions and glossary
Unless the context otherwise requires, the following definitions apply throughout this document:
"Admission" the admission of the Subscription
Shares to be issued pursuant
to the Subscription to trading
on AIM becoming effective in
accordance with Rule 6 of the
AIM Rules;
"AGR Energy" or AGR Energy Holdings Limited;
"Investor"
"AIM" the AIM market operated by the
London Stock Exchange;
"AIM Rules" the "AIM Rules for Companies"
published from time to time by
London Stock Exchange relating
to AIM;
"bbl" barrel of oil;
"Board" or "Directors" the board of directors of the
Company;
"bopd" barrels of oil per day;
"Change of Control" the occurrence of any of the
following events, without the
prior written consent of AGR
Energy: (a) the entering into
of a direct or indirect joint
venture of an interest equal
to or greater than 50% in the
Company and its subsidiaries,
taken as a whole, (b) the completion
of the acquisition of control
of the Company by a third party,
or (c) the entering into by the
Company of a legally binding
agreement to effect a transaction
contemplated by (a) or (b) unless
such agreement includes as a
condition precedent the obtaining
of AGR Energy's approval to the
transaction or the relevant part
of it;
"Conversion" the conversion of the Company's
indebtedness under the Bridging
Loan into Ordinary Shares in
accordance with the terms of
the Bridging Loan;
"Conversion Shares" the Ordinary Shares issuable
upon conversion of the Bridging
Loan in accordance with its terms;
"Enlarged Issued the issued ordinary share capital
Share Capital" of the Company immediately following
Admission;
"Existing Ordinary the Ordinary Shares in issue
Shares" prior to completion of the Subscription;
"FFD" full field development;
"General Meeting" the general meeting of the Company
(or any adjournment thereof),
to be convened for as soon as
practicable, at which the Resolutions
will be put to Shareholders,
notice of which will be contained
in the Shareholder Circular;
"Group" the Company and its subsidiaries
from time to time and "Group
Company" shall be construed accordingly;
"Insolvency Event" any corporate action, legal proceedings
or other procedure taken in relation
to a Group Company with a view
to: (i) the suspension of payments,
a moratorium of any indebtedness,
winding-up, dissolution, administration
or reorganisation; (ii) a composition,
assignment or arrangement with
any creditor of any member; (iii)
the appointment of a liquidator,
trustee in bankruptcy, judicial
custodian, compulsory manager,
receiver, administrative receiver,
administrator or similar officer
in respect of any a Group Company
or any of its assets; (iv) the
enforcement of any security over
any assets; (v) a meeting of
a Group Company, its directors
or its members convened for the
purpose of considering any resolution
for, or to petition for, or apply
for or to file documents with
a court for its winding-up, administration
or dissolution or any such resolution
passed; (vi) any person presenting
a petition or an application
for initiation of bankruptcy
or insolvency proceedings, winding-up,
administration or dissolution;
(vii) directors requesting the
appointment of or taking any
step with a view to appointing
a liquidator, trustee in bankruptcy,
judicial custodian, compulsory
manager, receiver, administrative
receiver or administrator; (viii)
initiation by any person of any
bankruptcy or insolvency proceedings,
or (ix) any analogous procedure
or step taken in any jurisdiction;
"Independent Shareholders" the Shareholders who are independent
of the AGR Energy Group (and
persons acting in concert with
it) the Subscription and the
Conversion;
"Investor Directors" Mr Kanat Assaubayev and Mr Aidar
Assaubayev;
"Investor Managers" the general director and the
deputy general director of Samek
to be appointed in accordance
with the terms of the Bridging
Loan;
"London Stock Exchange" London Stock Exchange plc;
"Long Stop Date" 1 October 2015;
"mbo" thousand barrels of oil;
"mmboe" million barrels of oil equivalent;
"MOE" the Ministry of Energy of the
Republic of Kazakhstan;
"Notice of General the notice convening the General
Meeting" Meeting which will be contained
in the Shareholder Circular;
"November 2014 the circular to Shareholders
Circular" dated 12 November 2014;
"Ordinary Shares" ordinary shares of 0.01p each
in the capital of the Company;
"Panel" The Panel on Takeovers and Mergers;
"pence" or "p" pence sterling;
"Prior AGR Subscription" the proposed subscription for
Ordinary Shares by AGR Energy
Limited No. I, details of which
were set out in the November
2014 Circular;
"Resolutions" the ordinary resolutions to be
proposed at the General Meeting
to approve the Rule 9 Waiver,
grant the Directors the authority
to allot the Subscription Shares
and the Conversion Shares; and
the special resolution to be
proposed at the General Meeting
to disapply the statutory pre-emption
rights otherwise arising in respect
of those allotments, each as
shall be set out in the Notice
of General Meeting;
"Rule 9 Waiver" the waiver proposed to be granted
by the Panel of the obligation
on the Investor to make a general
offer to all Shareholders pursuant
to Rule 9 of the Takeover Code,
conditional upon Independent
Shareholder approval of such
waiver on a poll at the General
Meeting;
"Samek" Samek International LLP, a wholly
owned indirect subsidiary of
the Company;
"Sberbank" Subsidiary Bank "Sberbank of
Russia" JSC;
"Sberbank Facility the senior credit facility and
Agreement" related loan agreements entered
into between Sberbank and Samek
dated 27 November 2012;
"Shareholder Circular" the circular to be issued to
Shareholders containing, among
other things, details of the
Subscription, the Bridging Loan
and the Conversion, the Rule
9 Waiver and the Notice of General
Meeting;
"Shareholders" holders of Ordinary Shares from
time to time;
"Subscription" the conditional subscription
of the Subscription Shares by
the Investor;
"Subscription Price" 0.2341 pence per Ordinary Share;
"Subscription Shares" 3,834,590,973 new Ordinary Shares
to be subscribed for by the Investor,
subject to adjustment such that
the number of Subscription Shares
shall equal 63.8% of the Enlarged
Issued Share Capital;
"Takeover Code" the City Code on Takeovers and
Mergers;
"Test Production" the testing and appraisal phase;
"TPP" the trial production phase;
"GBP" pounds Sterling; and
"US$" United States dollars.
APPENDIX III - Information required under Schedule Two paragraph (g) of the AIM Rules.
Kanat Assaubayev (aged 67) is currently Chairman of GoldBridges Global Resources plc, a mining company listed on the Main Market of the London Stock Exchange. He is also currently Chairman of Kemin Resources plc, an AIM-quoted mining company. Additionally he has been a director or partner of the following other entities in the past five years:
EMPLOYER NAME POSITION CURRENT OR CEASED DIRECTORSHIP
HELD / PARTNERSHIP
AltynGroup Kazakhstan Director Ceased
LLP
JSC Credit Altyn Director Ceased
Bank
Aidar Assaubayev (aged 37) is currently CEO of GoldBridges Global Resources plc, a mining company listed on the Main Market of the London Stock Exchange. He is also currently a Non-Executive Director of Kemin Resources plc, an AIM-quoted mining company. Additionally he is or has been a director or partner of the following other entities in the past five years:
EMPLOYER NAME POSITION CURRENT OR CEASED DIRECTORSHIP
HELD / PARTNERSHIP
Amrita Investment Director Current
Limited
Nectar Capital Director Current
Limited
AltynGroup Kazakhstan Director Ceased
LLP
JSC Credit Altyn Director Ceased
Bank
JSC Credit Altyn Bank ("JSC"), a company of which both Kanat Assaubayev and Aidar Assaubayev were Directors became dormant in October 2013. On 1 July 2011, new regulation relating to the capital base of commercial banks was issued in Kazakhstan which required the capital base for JSC to be increased significantly. Based on this, JSC ceased operations, with the license being suspended and JSC being made dormant and subsequently liquidated.
Neither Kanat Assaubayev nor Aidar Assaubayev holds any Ordinary Shares in the Company and there is no further information to be disclosed under Schedule Two paragraph (g) and Rule 17 of the AIM Rules.
APPENDIX IV - Additional Information
Kenneth Hopkins, Chief Operating Officer of Max Petroleum Plc, is the qualified person that has reviewed and approved the technical information contained in this announcement. Mr. Hopkins holds a Bachelor of Science degree in Marine Sciences and a Master of Science degree in Geology from Texas A&M University and is a certified petroleum geologist with 32 years of experience in the oil and gas industry.
Reserve estimates have been compiled in accordance with the 2011 Petroleum Resources Management System produced by the Society of Petroleum Engineers.
This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.
The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.
Stifel Nicolaus Europe Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Max Petroleum and no one else in connection with the matters referred to in this announcement, and will not be responsible to anyone other than Max Petroleum for providing the protections afforded to clients of Stifel Nicolaus Europe Limited nor for providing advice in connection with the matters referred to in this announcement.
Background to Kazakhstan field development regulations
Kazakhstan regulations require each field to progress through incremental regulatory stages of appraisal and development, including Test Production, TPP, and then FFD. Test Production may last between one and three years depending upon the complexity of the field, during which time the Group may produce each zone in a well for up to 90 days in order to gather information necessary to move onto TPP. TPP typically lasts two to three years, during which time the field may be fully appraised and wells can be produced continuously. The Group only has rights to sell its production domestically during Test Production and TPP. Once the Group has enough information to prepare state reserves and a long-term full field development plan, it may obtain FFD status. FFD lasts for up to 25 years, during which time the Group may sell up to 80% of its production on the export market for prices that have historically averaged between US$10-20 per barrel higher than domestic prices on an after-tax basis.
Forward-Looking Statements
This announcement contains certain forward-looking statements with respect to a possible subscription by AGR Energy for new Ordinary Shares in Max Petroleum. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements. Max Petroleum cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: the possibility that the Subscription will not be completed; failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the Subscription; adverse effects on the market price of the Ordinary Shares and on Max Petroleum's operating results because of a failure to complete the Subscription; failure to realise the expected benefits of the Subscription; negative effects relating to the announcement of the Subscription or any further announcements relating to the Subscription or the completion of the Subscription on the market price of the Ordinary Shares; significant transaction costs and/or unknown liabilities; general economic and business conditions that affect Max Petroleum following the completion of the Subscription; changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates; changes in tax laws, regulations, rates and policies; future business combinations or disposals and competitive developments. These forward-looking statements are based on numerous assumptions and assessments made by Max Petroleum in light of its experience and perception of historical trends, current conditions, business strategies, operating environment, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause Max Petroleum's plans with respect to the Subscription, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. Max Petroleum undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law or regulation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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