TIDMAZO
RNS Number : 6768U
Azonto Petroleum Ltd
31 July 2015
Azonto Petroleum
Ltd
Suite 5, 531 Hay
Street
Subiaco, WA,
6008
Australia
Portland House,
8(th) Floor
Bressenden Place
London SW1E 5BH
United Kingdom
Grégory Stoupnitzky
Jay Smulders
T: +44 (0)20
7042 8500
---------------------------
RFC Ambrian Limited
Nomad and Joint
Broker
Samantha Harrison
T: +44 (0)20
3440 6800
---------------------------
GMP Securities
Europe LLP
Joint Broker
Rob Collins
Emily Morris
T: +44 (0)20
7647 2816
---------------------------
Buchanan
Financial PR London
Ben Romney
Gordon Poole
T: +44 (0)20
7466 5000
E: azonto@buchanan.uk.com
---------------------------
June 2015
Azonto Quarterly Activities Report
Recent Highlights
1. Conditional agreement for sale
of Azonto's 35% interest in Vioco
Petroleum Limited and CI-202 wellhead
drilling equipment to Vitol E&P Limited.
2. Further cost-cutting measures
resulting in additional reductions
of staff and some senior management.
------------------------------------------
A message from the Managing Director - Grégory Stoupnitzky
Your management team has pursued various alternatives to effect
a merger or sale of the company and or its assets during the 2(nd)
Quarter of 2015, as disclosed in the press release of July 7(th)
and subsequently explained on July 17(th) within the Notice of
Meeting ("NoM") scheduled for August 17(th) 2015. There is little
in terms of operational news as the Vioco JV began the process of
discussing a possible cluster development project with its local
partner, Petroci and with the Direction Generale des Hydrocarbures
("DGH"). Both Azonto and Vioco personnel numbers were reduced
during the period to reflect a slowdown in activity.
Subsequent to the reporting period, the Company announced that
the Company's subsidiary, Azonto Petroleum Holdings Limited (the
Vendor), had entered into a conditional sale and purchase agreement
(the Agreement) for the sale of the Vendor's entire shareholding in
Vioco Petroleum Limited (Vioco) and certain wellhead drilling
equipment in Côte d'Ivoire to Vitol E&P Ltd (the Purchaser)
(the sale of the shares in Vioco and the drilling equipment,
together "the Disposal"). Since this date your Management team has
continued to progress the steps necessary to comply with various
conditions outlined in the Vitol Share Purchase Agreement ("SPA")
and as described in the NoM. Vioco management has communicated with
the DGH setting out its view that due to current economics of the
project, development of the Gazelle field should be deferred and
folded into an integrated development plan the next stage of which
will be a commitment to undertake exploration drilling of the Hippo
North prospect. The DGH has responded to Vioco acknowledging
receipt of these proposals. At this stage the relevant Ivorian
authorities have indicated that they are encouraging Vioco to
proceed with the integrated development plan.
The outstanding assets and liabilities schedule is being managed
and monitored daily to take account of receipts and credits from
both Petroci, a number of suppliers, and disputed amounts in
relation to past JV partner audits. Management has been able to
negotiate and settle a number of liabilities.
Vitol, and Azonto personnel, assisted by Counsel and tax
advisors, are actively engaged in discussions with the Ivorian tax
authorities to negotiate final settlement for disputed historic
withholding of tax liabilities. Management believes it has strong
merit in its defense and that together with Vitol, a settlement of
the penalties will be achieved within the estimates agreed as part
of the SPA.
Net asset projections contained within this Report take full
account of all potential Ivorian tax liabilities.
Grégory Stoupnitzky
Managing Director
CI-202 - Côte d'Ivoire
Azonto holds a 35% ownership interest in Vioco Petroleum Ltd,
which holds an 87% operating working interest in offshore Block
CI-202. Vioco's working interest will be reduced to 71% if Petroci
exercises its 16% back-in right, which will be decided Q2 2015.
Vitol E&P Ltd holds the remaining 65% of Vioco.
On 7th July 2015 Azonto signed a conditional agreement with
Vitol E&P Limited for sale of its 35% interest in Vioco
Petroleum Limited and certain associated wellhead drilling
equipment. Assuming shareholder approval is granted and all sale
conditions precedent are satisfied, the disposal will close on or
about 24th August 2015.
Disposal of Vioco
The Directors continue to believe that following an assessment
of the advantages and disadvantages discussed below, the Disposal
is in the best interests of the Company and shareholders should
vote to approve the disposal of Vioco:
Advantages
The Directors believe that the following non-exhaustive list of
advantages may be relevant to a Shareholder's decision on how to
vote on the proposed Disposal:
(a) the Disposal will allow the Company to realise value for its
interest in Block CI-202 following a challenging period of cost
overruns, delays to approvals and financing arrangements and the
wider context of an oil and gas market which has experienced
significant deterioration over the past year;
(b) the Disposal will allow the Company to exit its ongoing
expenditure obligations under the PSC, which would otherwise
require the Company to spend substantial funds on exploration
drilling over the next 18 months. These obligations, which would
need to be committed to from October 2015, constitute expenditure
which the Company currently does not have the funds to meet and
which the Board feels there is a very high risk the Company will
not be able to obtain before October 2015; and
(c) the Disposal will enable the Company to consider alternative
asset acquisitions that the Directors believe will add value to
Shareholders.
Disadvantages
The Directors believe that the following non-exhaustive list of
disadvantages may be relevant to a Shareholder's decision on how to
vote on the proposed Disposal:
(a) the Company will not be able to participate in or derive any
future benefit or profits from Block CI-202, if any, should any
asset within Block CI-202 be developed to production other than the
potential contingent payments referred to in sections 1.2(b)(ii)
and 1.2(c) of the Explanatory Statement accompanying the NoM;
(b) the Disposal involves the Company selling its principal
asset which comprises substantially all of the Company's value.
This may not be consistent with the investment objectives of all
Shareholders; and
(c) there is a risk that the Company may not be able to locate
and complete the acquisition of other suitable investment
opportunities within a reasonable time.
Future activities and direction of the Company upon completion
of the Disposal
Should shareholders approve the Disposal, and the conditions
precedent be satisfied, which include inter alia approval by the
Company's shareholders to the Disposal, the Company's assets
following completion of the Disposal will comprise cash of
approximately AUS$8.0 million and receivables of approximately
AUS$1.6 million. Current liabilities will be approximately AUS$1.85
million, resulting in a net asset position of approximately AUS$8.1
million as per the pro-forma balance sheet for 31 May 2015 referred
to in the NoM.
After completion of the Disposal, the directors will consider
other potential investment opportunities that have potential to
generate attractive shareholder returns. The investment
opportunities may not be within the resources sector.
The Company is highly likely, as a condition of any future
investment, to be required by the ASX to obtain shareholder
approval for any new investment following the disposal of its main
undertaking. The ASX may also exercise its discretion to require
the company to re-comply with ASX listing requirements. The ASX
will generally allow a company to remain as a cash box for up to 6
months after disposing of its main undertaking to give it time to
identify, and make an announcement of its intention to acquire,
another business, failing which ASX usually suspends the Company
until such time as an announcement is made.
Given the above, the Company's expectation is that it will,
within 6 months of the Disposal, identify and enter into an
agreement to acquire a new business and have to obtain shareholder
approval to complete the acquisition.
Management Changes
As highlighted above, a number of personnel reductions have
taken place consistent with the decreased activity associated with
the CI-202 Block pending new plans for an integrated development
plan for Hippo North and Gazelle. Jay Smulders, our Technical
Director will leave the company effective August 10. This will
leave Gregory Stoupnitzky, Managing Director, Jeff Durkin, General
Counsel and Ron Nelmes, Group Financial Manager. Following the
shareholder meeting on 17 August, it is expected that further
management changes will occur. In the event that the Disposal is
implemented, the Company will no longer have any active operations
and the priority then will be to maintain the Company's cash
position pending consideration of a recommendation by the Directors
for a new investment opportunity.
Treatment of Management Performance Rights
In response to challenging conditions in the oil and gas sector,
including low and volatile oil prices and weak equity market
conditions, the Board of Azonto announced in January 2015 the
implementation of austerity measures including accepting the
resignations of the former CEO and CFO, and the commencement of
company-wide redundancies. In addition to save cash, the Company
implemented salary reduction deferrals across all executive
management positions. At the same time, all non-executive director
fees were deferred pending an improvement in market conditions or
completion of a merger or asset sale.
In order to minimise the cash impact of resignations and
redundancies the Board of Azonto agreed in March 2015 to exercise
its discretion as provided for under the Company's Performance
Rights Plan to enable all departing personnel (including executive
management and directors) to be deemed as "good leavers", which
results in all eligible participants to continue to hold their
Performance Rights upon conclusion of employment or office, subject
to the same strategic and share price related vesting conditions
associated with the original grants of the Performance Rights and
to enable vesting in the event of a change of control under the
Corporations Act.
In the event of shareholder approval to the Disposal at the
General Meeting on 17 August 2015, and subsequently completion of
the Disposal, all Performance Rights currently on issue at that
time (being approximately 148 million Performance Rights, inclusive
of the 10.4 million Performance Rights to be granted to CEO Gregory
Stoupnitzky if these are approved by shareholders at the General
Meeting) will remain on issue subject to the existing strategic and
share price related vesting conditions as outlined in Azonto's 2014
Annual Report. For the avoidance of doubt, the successful disposal
of Azonto's main business undertaking will not constitute a change
of control event under the Corporations Act and accordingly will
not give rise to the vesting of those Performance Rights.
Financial
Equity Issues
There were no equity issues in the quarter.
Capital Structure at 30 June 2015
Number
----------------- -------------
Shares 1,159,375,100
----------------- -------------
Unlisted options 35,310,150
----------------- -------------
Cash
Cash on hand at 30 June 2015 was A$3.6 million (unaudited).
Significant Shareholders
at 30 June 2015
Number %
--------------------- ---------- -----
Genesis Asset
Managers LLP 70,138,995 6.05%
--------------------- ---------- -----
International
Finance Corporation
(IFC) 63,707,267 5.49%
--------------------- ---------- -----
This information is provided by RNS
The company news service from the London Stock Exchange
END
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