TIDMMOIL
RNS Number : 5991A
Madagascar Oil Limited
29 September 2015
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR
JAPAN
29 September 2015
MADAGASCAR OIL LIMITED
("Madagascar Oil" or the "Company")
Financing and Operational update
Bridge Financing Facility of up to US$21.89 million agreed with
Major Shareholders
Madagascar Oil, which has over 1.7 billion barrels of contingent
resources in the Tsimiroro field, is pleased to provide a financing
and operational update.
Financing
The Company has reached agreement with its four major
shareholders to provide a Bridge Financing Facility (the
"Facility") of approximately US$21.89 million, designed to fund the
Company through to the conclusion of its previously announced
process to identify a potential strategic partner(s) to work with
the Company on the development and funding of the world class
Tsimiroro field (the "Partner Process"). As previously announced,
Jefferies International Limited ("Jefferies") has been appointed to
assist with the Partner Process.
The Facility will incorporate the existing US$5.0 million
working capital facility (the "Outrider Loan"), provided by an
associate of Outrider Management LLC., which was announced on 29
June 2015 (the "Original Outrider Facility Agreement"). The
Outrider Loan was due to be repayable, with accrued interest, on 6
October 2015. After taking into account the existing Outrider Loan,
this new Facility will provide the Company with new funds of up to
approximately US$16.89 million.
The four major shareholders who have provided the Facility,
through their associated entities, are Outrider Management LLC
("Outrider"), Benchmark Advantage Fund Ltd ("BMK"), SEP African
Ventures Ltd ("SEP") and the John Paul Dejoria Family Trust
("JEP"), together the ("Lenders").
Under the terms of the Facility, US$8.89 million of new funds
will become available, following satisfaction of certain conditions
precedent which the Company expects will be satisfied within the
next 48 hours and will be used to fund the Company's business
activities and working capital requirements during the Partner
Process.
During January 2016, the Lenders will assess, amongst other
things, the progress of the Company in meeting its objectives,
including progress towards achieving a strategic transaction and
may, on 31 January 2016 (the "Review Date") choose between options
including, inter alia, a) releasing an additional tranche of
funding under the Facility of up to US$8.0 million or b) calling
for the Facility to be immediately repaid in full (a decision
requiring the agreement of at least 66% (by loan value) of the
Lenders). In any event, the Facility becomes repayable on 30
September 2016.
This Facility is the conclusion of an extensive and thorough
process during which the Company and its advisers have discussed
short term financing options with a very wide range of potential
counterparties. As a result of those discussions, the board of
directors of the Company (the "Board") has concluded that entering
into the Facility with the Lenders is the best option open to the
Company.
A summary of the key terms of the Facility is set out in
Appendix 1 to this announcement.
Given that the Facility has been entered into with a number of
the Company's major shareholders, it is a transaction which will
constitute a related party transaction under AIM Rule 13.
The independent directors, as defined by the AIM Rules for the
purposes of AIM Rule 13 (being Robert Estill, Michael Duginski and
Iain Patrick), having consulted with the Company's nominated
adviser, Strand Hanson Limited, consider that the terms of the
Facility and ancillary documentation are fair and reasonable
insofar as the Company's shareholders are concerned.
Operational
The Steam Flood Pilot ("SFP") continues to operate within
expectations, and, as at 28 September 2015, the Company holds over
130,000 barrels of crude oil in the storage tanks at the SFP, which
are available for domestic sale. The Company has not yet secured an
offtake agreement for this crude oil, meaning that the Company
faces potential storage capacity constraints at Tsimiroro during
the upcoming rainy season. As a result, and in response to the
challenging oil price environment faced by many oil and gas
companies, management has decided to take a conservative approach
and scale down its operations from the SFP, until such a time as an
offtake agreement has been signed for the domestic sale of the
product and the Partner Process has come to a successful
conclusion.
Discussions are ongoing with a number of potential offtakers,
including a dialogue with Symbion Power LLC ("Symbion Power")
following the signing of a Protocol D'Accord directly between His
Excellency Hery Rajaonarimampianina, President of the Republic of
Madagascar and Symbion Power for the development of seven new power
plants with a total capacity of 180 megawatts, including a 116
megawatt power plant near Tsimiroro. Symbion Power has also
announced the signing of a 20-year contract with local utilities
provider Jirama for the management and operation of the 40 megawatt
Mandroseza power generation facility in Antananarivo and have
announced that they intend this to be powered by heavy fuel
oil.
In the meantime, the Partner Process is making steady progress,
despite the current adverse market conditions, with interest being
expressed by a number of credible parties. A timetable has been
established and the process is currently expected to run through to
the end of 2015, with the Board targeting the finalisation of any
transaction by the end of Q1 2016.
The planning for the Anchor Phase of the Tsimiroro Development
continues to progress well, with tenders for long lead items such
as casing and tubulars under way. Further tenders will be issued
shortly for downhole/surface pumps, drilling fluids & cement
materials. The Board would note that the fall in oil price has
resulted in a significant reduction in service costs across the
sector. In light of this, the Company is developing a drilling,
tubular and supply procurement strategy to take advantage of this
opportunity, in order to reduce the initial project development
cost estimates.
Chief Executive Officer, Robert Estill, commented:
"We are very pleased to have secured this Bridge Financing
Facility of up to US$21.89 million in this current market and we
appreciate the on-going support of our long-standing, major
shareholders who have participated in this Facility as Lenders to
the Company. Current market conditions remain challenging for a
number of oil and gas companies, particularly with respect to short
term financing and we are pleased that we have now secured the
financing that enables us to focus on meeting our strategic
objectives through the Partner Process.
"Given the size and long term nature of our world class asset,
the Company has a certain amount of flexibility in this challenging
oil environment. The Steam Flood Pilot has run for nearly 27 months
and that, together with our other planning activities, means that
we now have sufficient data to scope fully our Anchor Phase. With
this in mind, we have decided to scale down our SFP operations, to
protect our resources, while we work on securing an offtake
agreement and a strategic partner".
Contact Information:
Robert Estill - Chief Executive
Officer
Stewart Ahmed - Chief Operating
Officer
Gordon Stein - Chief Financial +44 (0) 20 3356
Officer 2731
Strand Hanson Limited - Nominated
& Financial Adviser
Stuart Faulkner
Angela Hallett +44 (0) 20 7409
James Dance 3494
Jefferies International Limited +44 (0) 20 7029
- Strategic Advisor 8102
Richard Kent +44 (0) 20 7029
Nima Mehdian 8105
VSA Capital Limited - Joint broker
Andrew Monk
Andrew Raca +44 (0) 20 3005
Justin McKeegan 5000
Mirabaud Securities LLP - Joint
broker +44 (0) 20 7878
Rory Scott 3360
Camarco - PR
Billy Clegg +44 (0) 20 3757
Georgia Mann 4980
Notes to Editors:
Madagascar Oil (AIM: MOIL) is the leading independent oil and
gas company in Madagascar and is quoted on the AIM market of the
London Stock Exchange.
The Company has a variety of exploration and development
opportunities, through its five licence interests in western
Madagascar, with significant upside potential from the Tsimiroro
heavy oil field, which includes over 1.7 billion barrels of
contingent resources, and additional exploration prospectivity from
its four exploration licences.
Madagascar Oil has a strong track record of operational success
in country and, in April 2015, received Field Development Plan
approval from the Malagasy Government, securing the first-ever
25-year development licence to be issued in Madagascar, for the
Tsimiroro Block 3104, thereby moving the Company's flagship asset
from the exploration to the development phase. The 25-year licence
period may be extended to up to 50 years if the field is still
commercial beyond 25 years.
The Company is currently in the process of identifying and
securing a strategic partner(s) with Jefferies International
Limited to assist the Company with the development and funding of
the world class Tsimiroro field. The Company is focused on
delivering profitable future development and significant long term
value to its shareholders and the people of Madagascar.
Appendix 1
Bridge Financing Facility of up to US$21,886,301
(MORE TO FOLLOW) Dow Jones Newswires
September 29, 2015 10:28 ET (14:28 GMT)
The Company has entered into an amendment agreement, with the
Lenders, to the Original Outrider Facility Agreement, which appends
an amended and restated facilities agreement (the "New Facility
Agreement"), pursuant to which the Lenders will provide a Bridge
Financing Facility (the "Facility") of up to US$21,886,301 (of
which US$5m has already been drawn under the Original Outrider
Facility Agreement (the "Original US$5m")), designed to fund the
Company through to the conclusion of its previously announced
process to identify a potential strategic partner(s) to work with
the Company on the development and funding of the world class
Tsimiroro field (the "Partner Process").
The following are the key provisions of the New Facility
Agreement:
a) Principal
Maximum: US$21,886,301 (of which US$5m has already been drawn
under the Original US$5m)
First Drawdown: US$13,886,301.37 (of which the Original US$5m
has already been drawn - i.e. an additional US$8,886,301.37) made
available as follows:
Outrider US$66,301.37 (in addition to the Original US$5m)
SEP US$1,670,000
JEP US$2,000,000
BMK US$5,150,000
Second Drawdown: up to US$8m made available as follows:
Outrider: up to US$2,000,000
SEP: up to US$2,000,000
JEP: up to US$2,000,000
BMK: up to US$2,000,000
b) Drawdown - First Drawdown is available, either as a full or
partial drawdown at the Company's discretion, when each Lender
confirms that the conditions precedent have been met.
Second Drawdown is available from 1 February 2016 to the
Repayment Date subject to each Lender confirming that it is
satisfied, in its discretion, with the progress being made by the
Company towards achieving its objectives. In such event the amount
to be advanced is up to the amount specified "Second Drawdown"
above.
c) Term - The Loan is to be repaid on 30 September 2016 or such
later date as the Lenders may agree. The New Facility Agreement
includes various mandatory prepayment requirements described
below.
d) Fees - The fees for the Loan are:
(i) Arrangement fee - an arrangement fee is payable:
(A) on the First Drawdown Date equal to 5% of the Loans
drawndown from each Lender (either on the full drawdown or for each
partial drawdown made);
(B) on the Second Drawdown Date equal to 5% of the Loan made by that Lender on that date;
(ii) Maturity fee - a maturity fee equal to 20% of any and all
amounts of the Loans repaid to that Lender prior to a Strategic
Transaction on the date of that repayment (for the avoidance of
doubt, no maturity fee shall be due or payable for any repayment
made on or after the date on which a Strategic Transaction is
closed).
(iii) Lender's legal fees are payable by the Company up to a cap of US$150,000.
(iv) Escrow Agent fees are GBP GBP8,000.
e) Interest - Interest accrues at a fixed rate of 10% per annum
from the relevant drawdown date. The New Facility Agreement also
provides for default interest. Interest accrued on the Original
US$5m shall be paid by the Company to Outrider on the Drawdown Date
first following the date of the Agreement (see "Principal"
above).
f) Use of proceeds - The Company is required to apply the Loan,
as is market practice, in accordance with the use of proceeds set
out in the New Facility Agreement.
The First Drawdown under the Facility Agreement of
US$13,886,301.37 ($8,886,301.37 excluding the Outrider Loan already
utilised) will be used on the following activities to 1 March
2016:
i. Steamflood Pilot operations: Maintain low level of operations
in accordance with good oilfield practices to keep the plant
functioning effectively and safely and to continue to gather data
on steamflood response for future development activities.
ii. Development Planning: Undertake tendering processes and
essential civil & road engineering work to enable development
well drilling operations to commence in 2Q 2016, dependent on
outcome of the strategic process.
iii. Staffing: Maintain current national staffing levels in Tana
and Tsimiroro at an appropriate level in preparation for
commencement of development activity in 2016.
iv. Environmental: Continue process of public consultation and
ONE (Madagascar Environmental Office) engagement in order to ensure
issuance of the Phase 1a Environmental Permit.
v. Diesel: Order sufficient diesel to provide fuel to maintain operations as mentioned above.
vi. Corporate Social Responsibility (CSR): Maintain appropriate
CSR programme as agreed with Madagascar authorities and local
communities during Development Plan approval process.
vii. Crude Sales: Progress towards crude oil sales with third
parties and establish commercial arrangements with power-generation
companies.
viii. Licence and PSC Payments: Meet Block 3104 Governmental and
partner payments as required under the terms of the PSC.
ix. Corporate activities & Jefferies Strategic Process:
Undertake all required activities to deliver optimal strategic deal
for all shareholders, including visits to potential partners, etc.
Will involve third party costs.
x. Fund Raising Costs: Arrangement fees on new loan facility and
accrued interest on original Outrider loan.
xi. VAT: VAT payable on local services.
The use of proceeds for the Loans drawndown from the Second
Drawdown Date will be proposed by the Company prior to the Second
Drawdown Date and will be determined by business circumstances at
that time.
g) Conditions precedent - The New Facility Agreement is
conditional on certain documentary conditions precedent.
The obligation of the Lenders to make the Loans under the New
Facility Agreement is subject to various conditions, including
there being no event of default or a potential event of default in
accordance with the terms of the New Facility Agreement and the
representations and warranties (see below) given by the Company
being true in all material respects.
The Company expects all conditions precedent to be satisfied
within 48 hours.
h) Mandatory prepayment - Mandatory prepayment provisions apply
on the occurrence of certain events including:
I. Sale of assets: upon the sale of all or substantially all of
the assets of the Group the facilities will be cancelled and all
Loans and all other amounts owed will become immediate due and
payable;
II. Change of control: any Lender may elect to cancel its
facilities in which case all Loans and other amounts owed to the
Lender will become due and repayable within 15 days;
III. Equity fundraising: upon any equity fundraising, any
amounts raised (net of costs and expenses) shall be applied in
repayment of the Loans pro rata. The Company is to procure that any
equity fundraising is conducted in a manner and in a form such that
the Lenders may elect to set off any amounts due and payable by the
Company under the Loans against any amounts due by the Lender in
connection with the equity fundraising;
IV. Oil Sale revenues: all revenues from oil sales (minus
transportation costs) - are to be applied to repaying amounts
outstanding under the Finance Documents (as defined in the New
Facility Agreement); and
V. Strategic Transaction: as a separate general undertaking, the
Company agrees that all amounts raised from any Strategic
Transaction are to be applied to the repayment of the Loans.
i) Representations and warranties - The New Facility Agreement
contains usual representations and warranties which relate to the
Company's business, financial position, solvency and other
customary representations and warranties that are typical in a
commercial loan agreement of this nature. The representations and
warranties have been made as at the date of the New Facility
Agreement. Certain of the representations and warranties are also
deemed to be made by the Borrower on the date of each request for
drawdown under the New Facility Agreement, on each Drawdown Date
and on each Interest Calculation Date under the New Facility
Agreement.
j) Information undertakings - The Company has also given certain
information undertakings which are in force for so long as any
amount is outstanding under the Finance Documents or any Commitment
is in force. These information undertakings include the provision
by the Company to each Lender (subject to applicable law) of all
documents sent to the Company shareholders and creditors, the
notification of any current, threatened or pending litigation or
analogous proceedings which might have a material adverse effect
(as such term is defined in the New Facility Agreement) and the
provision of such further information regarding the financial
condition, assets and operations of the Group (and/or any member of
it) (including any requested amplification or explanation of any
item in the financial statements, budgets or other material
provided by the Company under the New Facility Agreement, any
changes to management of the Group and an up to date copy of its
shareholders' register) as the Majority Lenders (representing 66%
or more of the Loans) may reasonably request.
The Company is also required to provide the Lenders with a
progress report, as reasonably determined by the Company, in
relation to the proposed strategic transaction within 3 Business
Days after 31 December 2015.
The Company is also required to notify each Lender of any
default.
k) General undertakings - The Company has also committed to
certain undertakings typical of a borrower under a commercial loan
agreement.
(MORE TO FOLLOW) Dow Jones Newswires
September 29, 2015 10:28 ET (14:28 GMT)
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