Cabot Energy PLC Proposed cancellation of AIM admission (4024R)

TIDMCAB

RNS Number : 4024R

Cabot Energy PLC

29 October 2019

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. With the publication of this announcement, this information is now considered to be in the public domain.

29 October 2019

Cabot Energy Plc

("Cabot", the "Group" or the "Company")

Proposed cancellation of admission of Ordinary Shares to trading on AIM

Proposed re-registration as a Private Limited Company and Update to Articles of Association

Corporate Update

Cabot Energy Plc (AIM: CAB), the AIM quoted oil and gas company focussed on creating predictable production growth in Canada, announces the proposed cancellation of admission of its ordinary shares of 1p each ("Ordinary Shares") to trading on AIM (the "Cancellation"), re-registration as a private limited company (the "Re-registration") and adoption of updated articles of association ("Updated Articles"), conditional on approval by shareholders.

Following a careful review of the benefits and drawbacks of being an AIM quoted company, the board of directors of Cabot (the "Board") has concluded that the cancellation of its admission to trading on AIM is in the best interests of both shareholders and the Company. The Company therefore announces that it intends to seek shareholder approval for the cancellation of the admission of its Ordinary Shares to trading on AIM.

Circular and General Meeting

The Board is proposing a resolution to approve the Cancellation (the "Cancellation Resolution") at a general meeting to be held in November 2019 (the "General Meeting").

A circular is being prepared and will shortly be posted to shareholders (the "Circular") setting out the reasons for the proposed Cancellation, Re-registration and adoption of Updated Articles. It also explains why the Board unanimously considers the proposed Cancellation, Re-registration and Adoption of Updated Articles to be in the best interests of the Company and its shareholders as a whole and why it is recommending that shareholders should vote in favour of the proposed Cancellation at the General Meeting. The notice convening the General Meeting will also be set out in the Circular.

The Ordinary Shares will continue to be admitted to trading on AIM prior to the proposed Cancellation.

The independent directors of the Company, being James Dewar, Rachel Maguire and Paul Lafferty (the "Independent Directors"), believe that the proposed Cancellation is in the best interests of the Company and all shareholders and intend to unanimously recommend that shareholders vote in favour of the Cancellation Resolution at the General Meeting. As such, the Independent Directors have waived the restriction imposed by the Relationship Agreement between Cabot and the Company's majority shareholder High Power Petroleum LLC ("H2P") to allow H2P to vote on the Cancellation Resolution at the General Meeting. The Independent Directors believe that due to the Company's current financial position, if the Cancellation Resolution is not approved by shareholders, given the burden of public company costs, the Group may not be able to continue operations and trading in the Ordinary Shares would be at risk of suspension.

As stated in the Interim Results announced on 30 September 2019, H2P committed to participating in a second subscription tranche of at least US$0.35 million in October 2019 (totalling a minimum subscription of US$0.7 million in the current funding round). Cabot also stated that the Company intended to enable all shareholders to participate in this funding round via an open offer. Further to today's announcement, the Company will not now be proceeding with an open offer, as the Company believes that the open offer transaction fees and costs will outweigh the expected open offer gross proceeds at this time, based upon initial enquiries with significant non-H2P shareholders. However, H2P has affirmed its commitment to providing the second subscription tranche of US$0.35 million which will provide the Company with the necessary funds to proceed with its Summer Work Programme. However, this is subject to a final assessment at that time, by H2P, of the merits of, and business case for, further investment.

The Cancellation is conditional, pursuant to Rule 41 of the AIM Rules for Companies (the "AIM Rules"), upon the approval of not less than 75 per cent of the votes cast by shareholders (whether present in person or by proxy) at the General Meeting.

In accordance with Rule 41 of the AIM Rules, the Company will notify the London Stock Exchange of the date of the proposed Cancellation prior to the publication of the Circular and a detailed timetable of the principal events leading up to the Cancellation will be included in the Circular.

Background to, and reasons for, the Cancellation

The Directors have conducted a review of the benefits and drawbacks to the Company and its shareholders in retaining its quotation on AIM and believe that the Cancellation is in the best interests of the Company and its shareholders as a whole. In reaching this conclusion, the Board has consulted certain shareholders and has considered the following key factors, amongst others:

-- The Board believes that the Company is unlikely to attract material investment from third party equity investors (i.e. investors with no current connection to the Company) in these current market conditions. The Board believes this is largely due to historical challenges faced by the Company as well as a drop in investment "appetite" in oil and gas companies globally, specifically fossil fuels.

-- In order to put the Company in a position whereby providers of finance may be more inclined to advance funds, the Board believes that a material reduction in corporate overheads is required. Hence the Board is of the view that for the foreseeable future, the considerable cost, management time and the legal and regulatory obligations associated with maintaining the Company's admission to trading on AIM are materially disproportionate to the benefits to the Company. The Company has estimated that a delisting could save Cabot up to approximately US$1 million per annum in overhead and transaction costs. This is significant for all shareholders given the Company's current market capitalisation and the Board believes that these funds could be better invested in the workover programmes and production improvements that are the basis for future growth.

-- The current shareholding structure of Cabot is such that the Company has a limited free float and liquidity in the Ordinary Shares, with the consequence that the AIM quotation does not offer investors the opportunity to trade in meaningful volumes or with frequency within an active market.

-- The Board also believes that a delisting could allow for a period of restructuring, cost reduction and general repositioning of Cabot that would benefit all shareholders in the longer term. Following this period of restructuring, the Board could be in a better position to consider re-listing the Company in the future, in London or elsewhere.

-- Even after the Cancellation, the Board is committed to continued rigorous corporate governance procedures for the protection of all shareholders and investors.

-- The Board believes that it can make satisfactory arrangements for shareholders to freely transfer their shares periodically via Asset Match Limited, a secondary market dealing facility (see below for further details).

Following careful consideration, and having consulted with certain shareholders, the Board has concluded that it is in the best interests of the Company and shareholders to seek the proposed Cancellation at the earliest opportunity in line with AIM Rule 41.

Process for, and principal effects of, the Cancellation

The Board is aware that certain shareholders may be unable or unwilling to hold Ordinary Shares in the event that the Cancellation is approved and becomes effective. Such shareholders should consider selling their Ordinary Shares in the market prior to the Cancellation becoming effective.

Under the AIM Rules, the Company is required to give at least 20 clear Business Days' notice of Cancellation. Additionally, Cancellation will not take effect until at least five clear Business Days have passed following the passing of the Cancellation Resolution. A timetable of the principal events leading up to the Cancellation will be included in the Circular.

The principal effects that the Cancellation will have on shareholders include the following:

-- There will no longer be a formal market mechanism enabling shareholders to trade their Ordinary Shares on AIM (or any other recognised market or trading exchange).

-- However, the Ordinary Shares will remain freely transferable and an auction-based secondary market trading facility is intended to be set up through Asset Match Limited for a period following Cancellation (see below for further details). Notwithstanding this, the Ordinary Shares may be more difficult to sell compared to shares of companies traded on AIM.

-- It may be more difficult for shareholders to determine the market value of their investment in the Company at any given time.

-- The Company will no longer be subject to the AIM Rules and, accordingly, shareholders will no longer be afforded the protections given by the AIM Rules - in particular, the Company will not be bound to:

o Make any public announcements of material events, or to announce interim or final results; comply with any of the corporate governance practices applicable to AIM companies; announce substantial transactions and related party transactions; or comply with the requirement to obtain shareholder approval for reverse takeovers and fundamental changes in the Company's business.

o The Company will cease to retain a nominated adviser and broker.

o The Cancellation might have either positive or negative taxation consequences for shareholders (shareholders who are in any doubt about their tax position should consult their own professional independent adviser immediately).

The Board intends to continue to maintain the Company's website (www.cabot-energy.com) and to post updates on that website from time to time, although shareholders should be aware that there will be no obligation on the Company to include the information required under AIM Rule 26 or to update the website as required by the AIM Rules.

The Company will remain registered with the Registrar of Companies in England & Wales in accordance with and subject to the Companies Act 2006, notwithstanding the Cancellation. Shareholders should also note that the Takeover Code (the "Code") will continue to apply to the Company following the Cancellation for the period of 10 years from the date of Cancellation (subject to the Re--registration occurring).

Shareholders should note that, if the Cancellation becomes effective (and subject to the Re-registration occurring), after the expiry of 10 years from the date of the Cancellation they will not receive the protections afforded by the Code in the event that there is a subsequent offer to acquire their Ordinary Shares. Brief details of the Panel on Takeovers and Mergers (the "Panel"), the Code and the protections given by the Code will be included in the Circular.

Following the Cancellation it will still be possible to hold Ordinary Shares in uncertificated form in CREST.

Before giving consent to the Re-registration of the Company as a private company, shareholders may want to take independent professional advice from an appropriate independent financial adviser.

The resolutions to be proposed at the General Meeting include the adoption of the Updated Articles with effect from completion of the Cancellation. A summary of the principal changes being made by the adoption of the Updated Articles will be included in the Circular.

The above considerations are not exhaustive and shareholders should seek their own independent advice when assessing the likely impact of the Cancellation on them.

Transactions in Ordinary Shares

Shareholders should note that they are able to trade in the Ordinary Shares on AIM prior to a Cancellation.

The Board is aware that the proposed Cancellation, should it be approved by shareholders at the General Meeting, would make it more difficult for shareholders to buy and sell Ordinary Shares should they wish to do so. Therefore, following the Cancellation, the Company intends to put in place an auction-based secondary market trading facility with Asset Match Limited to assist shareholders to trade in the Ordinary Shares from the day of Cancellation. Asset Match Limited is authorised and regulated by the Financial Conduct Authority. This facility will initially be established by the Company for a minimum of one year from the date of Cancellation and will be reviewed by the Company on a quarterly basis thereafter. Shareholders should note that there can be no guarantee that this facility will be available on a continuous basis, or at all, after one year from the Cancellation date.

Re-registration

Following the proposed Cancellation, the Board believes that the requirements and associated costs of the Company maintaining its public company status will be difficult to justify and that the Company will benefit from the more flexible requirements and lower overhead costs associated with private limited company status. It is therefore proposed to re-register the Company as a private limited company. In connection with the Re-registration, it is proposed that the Updated Articles be adopted to reflect the change in the Company's status to a private limited company. The principal effects of the Re-registration and the adoption of the Updated Articles on the rights and obligations of shareholders and the Company will be summarised in the Circular.

Application will be made to the Registrar of Companies for the Company to be re-registered as a private limited company. Re-registration will take effect when the Registrar of Companies issues a certificate of incorporation on re-registration. The Registrar of Companies will not issue the certificate of incorporation on Re-registration until the Registrar of Companies is satisfied that no valid application can be made to cancel the resolution to re-register as a private limited company.

Current Financial Position

Sales volumes in Q3 2019 ("Q3") totalled 37,987 barrels ("bbls") (413 barrels of oil per day ("bopd")) and an average Q3 Edmonton light oil sales price (after transportation costs and crude oil marketing fees) of US$45/bbl, resulting in Q3 revenues of US$1.7 million. The Edmonton average price discount to West Texas Intermediate in Q3 was approximately 8%. The Group's unaudited cash balance as at 25 October 2019 was US$1.125 million, following the receipt of oil revenues for October 2019. The H2P gross subscription proceeds of US$0.35 million (GBP0.28 million), as announced by the Company on 19 September 2019, have been received in full although H2P has not yet been issued with the shares relating to this subscription, as the issue of these shares is conditional upon shareholders approving a resolution at the General Meeting. In addition, the Company has received the payment from Shell E&P S.p.A. pursuant to the agreement reached with the Company to withdraw from the Cascina Alberto onshore exploration licence in the Po Valley, Northern Italy, as announced by the Company on 26 September 2019.

H2P has affirmed its commitment to providing a second subscription tranche of US$0.35 million which is expected to be received during November 2019 and which will provide the Company with the necessary funds to proceed with its Summer Work Programme. Receipt of H2P's proposed second subscription tranche and the increased cash flows resulting from a successful Summer Work Programme are expected to provide the Group with sufficient liquidity until late November 2019.

Canadian Operations

Further to the Interim Results RNS dated 30 September 2019, the Company has commenced the Summer Work Programme activities of up to 10 well repairs and stimulations, with a budget of C$1 million to restore and increase production levels. These activities are being optimised around lowest cost of operation and accessibility to well locations and shall continue until early December 2019. The successful execution of such activities shall progress the unlocking of development debt facilities such as the non-binding term sheet entered into with a Calgary-based private energy lender as detailed in the Company's announcement of 2 September 2019.

-Ends-

Enquiries:

 
Cabot Energy Plc                          [phone] 
James Dewar, Chairman 
 Scott Aitken, CEO 
 Petro Mychalkiw, CFO 
 
SP Angel Corporate Finance LLP            [phone] 
Nominated Adviser and Broker 
David Hignell, Richard Hail, Richard 
 Redmayne 
 
Luther Pendragon                          [phone] 
Financial PR 
Harry Chathli, Alexis Gore, Joe Quinlan 
 

Note to Editors:

Cabot Energy Plc (AIM: CAB) is an oil and gas company focussed on creating predictable production growth in Canada. Comprehensive information on Cabot and its oil and gas operations, including press releases, annual reports and interim reports are available from Cabot's website: www.cabot-energy.com

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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October 29, 2019 03:00 ET (07:00 GMT)