SOGP Sovereign Oil

 

TIDMSOGP 
 
RNS Number : 1889X 
Sovereign Oilfield Group plc 
10 August 2009 
 

 
 
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| FOR IMMEDIATE RELEASE                 |                       10 August 2009  | 
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SOVEREIGN OILFIELD GROUP Plc 
 
 
("Sovereign" or "the Company" or "the Group") 
 
 
Disposals of Prodrill Engineering Limited and Sovereign House 
(the Disposals") 
and 
Notice of General Meeting 
 
 
Sovereign Oilfield Group plc is pleased to announce that it has entered into a 
Share Purchase Agreement subject to Shareholder approval to dispose of the 
entire issued share capital of Prodrill Engineering Limited ("Prodrill"), a 
subsidiary that provides oilfield recruitment services, for a total 
consideration of GBP2.25 million and a further agreement for the sale of 
Sovereign House for a total consideration of GBP1.575 million. 
 
 
Background and reasons for the Disposal of Prodrill and Sovereign House 
 
 
Sovereign floated on AIM in 28 September 2005 and had pursued an aggressive 
acquisition policy having completed six acquisitions within its two divisions, 
Fabrication and Drilling, since admission to AIM. 
 
 
Sovereign's shares were suspended from trading on AIM on 26 September 2008 
pending publication of the Company's annual report and accounts for the year 
ended 31 March 2008 ("the 2008 Annual Accounts") as it was in negotiations with 
a number of lenders, including its existing lenders, regarding a restructuring 
of the Group's debt facilities. 
 
 
Since the disposal of Vertec Engineering Limited and the Cabin Rental Fleet of 
Labtech Services Limited announced on 11 May 2009 the Existing Lending 
Consortium agreed to continue to support the Group's existing banking 
facilities, removing both short and medium term financing concerns. Sovereign 
published its 2008 Annual Accounts and its interim statement for the six months 
ended 30 September 2008 on 18 May 2009 and trading in Sovereign's ordinary 
shares on AIM was restored on 19 May 2009. 
 
 
Sovereign currently has debt facilities of GBP28.4 million comprising GBP11.6 
million senior debt and GBP16.8 million of mezzanine debt. The Existing Lending 
Consortium has confirmed continued support of the Group's existing banking 
facilities subject to certain conditions, which includes the disposal of the 
certain non-core subsidiaries. The disposal of Prodrill is not a condition of 
the new banking facilities but is being sold to reduce the overall level of debt 
in the Group as it is not considered core to the Group's future activities. 
 
 
As a result of the Disposals, debt facilities will reduce to approximately 
GBP27.15 million at completion, and GBP26.15 million on full repayment of the 
loan notes. 
 
 
  Principle Terms 
 
 
Sovereign has entered into the conditional Share Purchase Agreement for the 
disposal of Prodrill to Claymore Investments Limited ("Claymore"). The proposed 
disposal of Prodrill is a transaction with a related party for both the purposes 
of the AIM Rules as the proposed purchaser, Claymore, is a company beneficially 
owned by certain Directors and Shareholders of Sovereign. Under the terms of 
this agreement the consideration has been agreed at GBP2.25 million with GBP1.25 
million being payable in cash at completion and GBP1.0 million being paid in 
four half yearly installments of GBP250,000. The deferred consideration is to be 
secured by a pledge on all the issued ordinary shares of Prodrill Engineering 
Limited. 
 
 
The gross assets of Prodrill were GBP2.42 million as at 31 March 2008 and the 
operating profit was GBP0.5 million, excluding internal management charges. The 
figures above are extracted from the audited financial statements for the year 
to 31 March 2008. 
 
 
The Company has also entered into the conditional agreement for the sale and 
leaseback of Sovereign House with Tilestamp Limited. Sovereign House, a non 
trading asset, will remain the Head Office of the Group. Under the terms of this 
agreement the consideration has been agreed at GBP1.575 million payable in cash 
at completion. The terms of the sale and leaseback include a rental of 
GBP120,000 per annum for a period of 5 years, increasing to the greater of 
GBP132,500 or the open market rental value of the property at that time. 
 
 
The proposed Disposals are both deemed to be disposals resulting in a 
fundamental change of the business for the purpose of AIM Rule 15 as the 
disposal proceeds for each are in excess of the market capitalisation of the 
Company at close of business on 7 August 2009. By virtue of being deemed to be a 
fundamental change of business, the disposal of Prodrill and the sale of 
Sovereign House are both conditional on approval of the Shareholders. 
 
 
The proceeds of the Disposals will be used to reduce the Groups existing banking 
facilities and augment the Group's working capital facilities. As a result of 
the Disposals, debt facilities will reduce to approximately GBP27.15 million at 
completion, and GBP26.15 million on full repayment of the loan notes. 
 
 
Remaining businesses of the Company 
 
 
Subject to shareholder approval, the Drilling and Fabrication Division 
businesses (excluding Prodrill) will be the remaining trading businesses of the 
Group. As such Directors do not consider that the Company will be classed as an 
investing company under rule 15 of the AIM Rules. For the year to 31 March 2008 
the unaudited turnover attributable to the remaining Drilling and Fabrication 
Division businesses of the Group was GBP75.5 million with a gross profit of 
GBP20.4 million before the allocation of central running costs. 
 
 
General Meeting 
 
 
A circular will be sent to shareholders shortly giving notice of a General 
Meeting to be held at Sovereign's offices, 4 Queens Terrace, Aberdeen, AB10 1XL 
at 10.00 a.m. on 26 August 2009 to consider, and if thought fit, to approve the 
Resolutions in order to implement the Disposals. 
 
 
  Commenting on the Disposals, Graham Burgess, Chairman of Sovereign Oilfield 
Group plc said: 
 
 
"Sovereign has been working tirelessly over the last year to reshape the Group 
and to reduce debt. The disposals of Prodrill and Sovereign House announced 
today represent a significant step forward for the Group and in the last 12 
months the Group has realized GBP12.79 million which it has used to pay down 
debt and increase working capital.  This will allow the Group to focus on the 
core strengths in its remaining Drilling and Fabrication Division businesses." 
 
 
 
 
Further information: 
 
 
Sovereign Oilfield Group Plc Tel: 01224 261900 
Graham Burgess, Executive Chairman 
Julie Cowie, Finance Director 
 
 
Buchanan Communications Tel: 0207 466 5000 
Tim Thompson/Catherine Breen 
 
 
Charles Stanley Securities - Nominated AdvisorTel: 0207 149 6000 
Mark Taylor/Freddy Crossley 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 DISKGGMRDGGGLZM 
 

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