Publication of Independent Asset Valuation

RNS Number : 3957M

Wentworth Resources PLC

11 January 2023

 

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.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO 596/2014 (AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018). UPON PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION WILL BE CONSIDERED TO BE IN THE PUBLIC DOMAIN.

11 January 2023

WENTWORTH RESOURCES PLC
("Wentworth" or the "Company")

Publication of Independent Asset Valuation and Update

Wentworth Resources plc ("Wentworth") and Etablissements Maurel & Prom S.A. ("M&P") announced on 5 December 2022 that they had reached agreement on the terms of a recommended acquisition of the entire issued and to be issued share capital of Wentworth by M&P at 32.5 pence per share (the "Acquisition"), in accordance with the UK Takeover Code (the "Code"). The Acquisition values the entire issued and to be issued ordinary share capital of Wentworth at approximately £61.7 million (approximately $75.0 million).

On 14 February 2022 Wentworth published a competent person's report which included an asset valuation by RPS Energy Canada Limited ("RPS"). In connection with the Acquisition, Wentworth is required by Rule 29 of the Code to publish an updated, independent asset valuation (the "Valuation"). As RPS is also reserves auditor to M&P, Wentworth has commissioned ERC Equipoise Ltd ("ERCE") to provide the Valuation. ERCE is independent of both Wentworth and M&P.

ERCE values Wentworth's oil & gas assets at a range, based on the scenarios set out below, of:

$59 million to $75 million

Wentworth estimates the value of the Company as an ongoing business, based on the Valuation, adjusting for existing cash, taxes and costs, on a fully diluted basis, to be between:

24.8 pence per share and 27.9 pence per share

The illustrative figures below set out the indicative pence per share valuation of Wentworth as a business, taking into account the Valuation.

· The Valuation represents the Net Present Value¹ of the cash flows from Wentworth's assets in each of three stated scenarios, selected by ERCE, as at 1 October 2022 (the "Effective Date")

· Withholding tax of 10 per cent. is applied on those cash flows when repatriated from Tanzania

· Costs comprise the Net Present Value¹ of the expenditure required to maintain the business, both in Tanzania and as a quoted company. The illustrative figures below extrapolate the Company's reported 2021 General & Administrative expenses for the length of the licence in each scenario, risked where appropriate.

· In all cases, the discount rate used by ERCE is 15%, which the Board believes to be appropriate, taking into account Wentworth's cost of capital.

	Scenario 12		Scenario 23		Scenario 34
	$ million	GBp/share8,9	$ million	GBp/share8,9	$ million	GBp/share8,9
ERCE Asset Valuation1,10	59.0	25.6	71.0	30.8	75.0	32.5
Withholding Tax5	(5.9)	(2.6)	(7.1)	(3.1)	(7.5)	(3.3)
Costs1,5	(30.7)	(13.3)	(38.0)	(16.5)	(38.0)	(16.5)
Cash5,6	28.0	12.2	28.0	12.2	28.0	12.2
Working Capital5,7	6.7	2.9	6.7	2.9	6.7	2.9
Total	57.2	24.8	60.7	26.3	64.3	27.9

Notes:

1.  Net Present Value is the value of all future cashflows (positive and negative) over the length of the licence, discounted to the present

2.  Scenario 1 assumes that the current licence expires at the end of the current term in October 2031 and is not extended. In addition it assumes that $45 million (gross) of costs which the Operator believes to be cost recoverable are not ultimately recovered at all.

3.  Scenario 2 assumes that the current licence is extended at the end of the current term, being 2031, until October 2041. In addition it assumes that $16.9 million (gross) of the $45 million (gross) of costs which the Operator believes to be cost recoverable are not ultimately recovered at all. The licence extension (and the taxes and costs thereafter) are risked at 80%.

4.  Scenario 3 assumes that the current licence is extended at the end of the current term, being 2031, until October 2041. In addition it assumes that $45 million (gross) of costs which the Operator believes to be cost recoverable are fully recovered. The licence extension (and the taxes and costs thereafter) are risked at 80%.

5.  Corporate adjustments, including withholding tax, costs, cash and working capital have been made by Wentworth to the ERCE valuation to provide an illustrative corporate valuation.

6.  Cash figure represents the unaudited 30 September 2022 balance, in order to align with the Effective Date.

7.  Working capital is defined as receivables minus payables. Figure represents the unaudited 30 September 2022 balance, in order to align with the Effective Date.

8.  Assumes a GBP: USD exchange rate of 1:1.2163, sourced from Factset as at 10 January 2023.

9.  Assumes a fully diluted share count of 189,717,616.

10.  ERCE has only provided asset valuations for Scenarios 1, 2 and 3 in USD. In the table above, Wentworth has converted these to GBp/share.

Rule 29.6 of the Code requires that this announcement contain an estimate by the Wentworth directors of the amount of any potential tax liability which would arise if the assets were to be sold at the amount of the Valuation and a comment as to the likelihood of any such liability crystallizing. The Wentworth Directors, having taken appropriate taxation advice, are aware that in comparable transactions in Tanzania, taxation, in varying amounts, has been levied by the Government of Tanzania. The Wentworth Directors are unable to calculate the amount of tax that may be levied by the Tanzanian Government for any such sale for the purposes of Rule 29.6 of the Code.

The Valuation is available on Wentworth's website: https://www.wentplc.com/investors/offer-for-wentworth/

The publication of the Valuation permits the Board of Wentworth to set out the above views on value as well the observations below:

· Wentworth has historically been able to deliver strong shareholder returns since its maiden dividend in 2019, however:

o  Wentworth has benefitted from the Mnazi Bay production sharing contract's cost recovery mechanism and historic cost pool, having recovered approximately $300 million of historic costs to date;

o  on 23 December 2022, the Mnazi Bay JV Partners ("JV Partners") received formal notice from TPDC that it proposes to discuss re-examining the historic cost pool audit for the years 2013 - 2015 relating to seismic, field infrastructure and drilling of MB-4 well expenditure. Joint Venture costs of $45 million (approximately $15 million net to Wentworth) are subject to the re-examination. The Company anticipates, given the absence of recent investment in the Mnazi Bay field, that 2023 production will include significant periods where costs have been fully recovered, leading to substantially lower revenues. Any reduction in the current expected cost pool balance as a result of the audit re-examination is likely to further impact revenue next year;

o  Mnazi Bay is at, or close to, peak production and material capex is required to maintain, let alone increase, production. As such, historic revenue, profit and dividend growth cannot be used as proxy for future expectations; and

o  M&P is the operator of the asset. All future capital expenditure is dependent on M&P choosing to allocate capital to this asset, in the context of its wider portfolio.

· The directors consider that inorganic growth in Tanzania is clearly going to be challenging. Wentworth has pursued various acquisition opportunities, the most advanced of which did not proceed after the vendor's partner exercised its pre-emption rights.

· The value of Wentworth is substantially impacted by the present value of its G&A costs. Historic G&A costs do include the costs of acquisitions which did not complete. However the significant majority of the costs relate to maintaining a substantial presence in Tanzania, which, in the opinion of the Board, is required to maintain Wentworth's good standing in Tanzania, as well as the costs of maintaining Wentworth as a well governed quoted entity. The Board has regularly considered stripping back the costs of the business, either to the bare minimum to function as a quoted company or as a private company. However, when considered in depth, the Board has not been able to satisfy itself that the outcome would result in greater cash returns than that offered by the Acquisition and could lead to reduced investor appeal resulting in an erosion of value for shareholders. The Board believes that the most appropriate way to realise the value of the asset is for the asset to form part of a larger business. The Acquisition is expected to deliver substantial synergies for M&P, but those potential synergies exist only because M&P is Wentworth's partner in the Mnazi Bay asset. Wentworth cannot access those synergies itself, nor can Wentworth offer all of those synergies to a third party acquiror, particularly when M&P has extensive direct and indirect pre-emption rights over the asset.

Wentworth now expects to publish the scheme document in connection with the Acquisition on 25 January 2023 which will contain the full terms and conditions of the Acquisition together with notices of the Court Meeting and the General Meeting (expected to be held on 23 February 2023), the expected timetable of the Scheme, and will specify the action to be taken by Wentworth Shareholders.

Wentworth management intends to hold investor meetings in the UK and Norway with shareholders ahead of the Court Meeting and the General Meeting. Wentworth invites shareholders to submit questions to [e-mail] to permit these to be addressed. If you would like to participate in physical meetings please also submit your name, shareholding and preferred location and the Company will attempt to facilitate meetings, where practicable. Further detail will be provided in due course.

Tim Bushell, Chairman of Wentworth, said:

"The Board believes that the Valuation underlines its view that the terms of the Acquisition are fair and reasonable, not least given the substantially lower revenues expected in 2023 due to the depletion of the historic cost pool. Furthermore, material capex is required to maintain, let alone increase, production at the Company's only non-cash asset.

"The Acquisition represents a substantial 62% premium to the share price at the time of the offer when adjusted for cash and is a material increase to M&P's initial indicative offer prices. This is reflected by the support from longstanding shareholders representing over 22% of the register.

"Wentworth recommends that Shareholders vote in favour of the Acquisition to enable them to realise the future value potential in the near-term for cash without further capital expenditure, operational risk and time."

Enquiries:

Wentworth Resources plc Katherine Roe, Chief Executive Officer	via FTI Consulting
Stifel (Financial Adviser, Nominated Adviser and Joint Broker to Wentworth) Callum Stewart Jason Grossman Simon Mensley	Tel: [phone]
Peel Hunt (Joint Broker to Wentworth) Richard Crichton	Tel: [phone]
FTI Consulting (PR Adviser to Wentworth) Sara Powell Ben Brewerton Ollie Mills	Tel: [phone] E: [e-mail]

Further information

This Announcement is for information purposes only and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer of invitation to purchase or otherwise acquire, subscribe for, sell, or otherwise dispose of, any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise, nor shall there be any sale, issuance or transfer of securities of Wentworth in any jurisdiction in contravention of applicable laws.

The Acquisition will be implemented solely pursuant to the terms of the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the Offer Document), which, together with the Forms of Proxy, will contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition. Any decision by Wentworth Shareholders in respect of, or other response to, the Acquisition (including any vote in respect of the Resolutions to approve the Acquisition, the Scheme or related matters), should be made only on the basis of the information contained in the Scheme Document (or, if the Acquisition is implemented by way of a Takeover Offer, the Offer Document).

Please be aware that addresses, electronic addresses and certain other information provided by Wentworth Shareholders, persons with information rights and other relevant persons in connection with the receipt of communications from Wentworth may be provided to M&P during the offer period as required under Section 4 of Appendix 4 of the Code.

Publication of this Announcement

A copy of this Announcement will be available subject to certain restrictions relating to persons resident in Restricted Jurisdictions at https://www.wentplc.com/investors/offer-for-wentworth   promptly and in any event by no later than 12 noon on the Business Day following the publication of this announcement.

The contents of the websites referred to in this Announcement are not incorporated into and do not form part of this Announcement.

Important Notices relating to the Financial Advisers

Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated by the FCA in the UK, is acting as financial adviser, nominated adviser and corporate broker exclusively for Wentworth and no one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than Wentworth for providing the protections afforded to its clients or for providing advice in relation to matters referred to in this announcement. Neither Stifel, nor any of its affiliates, owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Stifel in connection with this announcement, any statement contained herein or otherwise.

Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated by the FCA in the UK, is acting as corporate broker exclusively for Wentworth and no one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than Wentworth for providing the protections afforded to its clients or for providing advice in relation to matters referred to in this announcement. Neither Peel Hunt, nor any of its affiliates, owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Peel Hunt in connection with this announcement, any statement contained herein or otherwise.

Overseas jurisdictions

The release, publication or distribution of this Announcement in or into, and the availability of the Acquisition to persons who are residents, citizens of nationals of, jurisdictions other than the United Kingdom or Jersey may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom or Jersey should inform themselves about, and observe any applicable legal or regulatory requirements. In particular, the ability of persons who are not resident in the United Kingdom or Jersey to accept or procure the acceptance of the Acquisition (when made) may be affected by the laws of the relevant jurisdictions in which they are located. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person. This Announcement has been prepared for the purpose of complying with English and Jersey law, the Code, the Market Abuse Regulation and the Disclosure Guidance and Transparency Rules and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom or Jersey.

The receipt of cash pursuant to the Acquisition by Wentworth Shareholders may be a taxable transaction under applicable national, state and local, as well as foreign and other tax laws. Each Wentworth Shareholder is urged to consult their independent professional adviser regarding the tax consequences of the Acquisition applicable to them.

Further details in relation to Wentworth Shareholders in overseas jurisdictions will be contained in the Scheme Document.

The Acquisition will be subject to the applicable requirements of the Code, the Panel, the Jersey Companies Law, the London Stock Exchange and the FCA.

Notes to US investors in Wentworth

Shareholders in the United States should note that the Acquisition relates to the shares of a Jersey company and is proposed to be made by means of a scheme of arrangement provided for under, and governed by, Jersey law.  Neither the proxy solicitation nor the tender offer rules under the US Securities Exchange Act of 1934, as amended, will apply to the Scheme.  Moreover the Scheme will be subject to the disclosure requirements and practices applicable in the UK and Jersey to schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules and tender offer rules.  Financial information included in this Announcement and the Scheme Document has been or will be prepared in accordance with accounting standards applicable in the UK and Jersey and may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States. If M&P exercises its right to implement the Acquisition by way of a Takeover Offer and determines to extend the offer into the United States, such offer will be made in compliance with applicable United States securities laws and regulations.

Wentworth and M&P are organised under the laws of Jersey and France respectively.  Some or all of the officers and directors of Wentworth and M&P are residents of countries other than the United States.  It may not be possible to sue Wentworth and M&P in a non-US court for violations of US securities laws.  It may be difficult to compel Wentworth, M&P and their respective affiliates to subject themselves to the jurisdiction and judgment of a US court.

In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US Exchange Act, M&P or its nominees, or its brokers (acting as agents), may from time to time make certain purchases of, or arrangements to purchase Wentworth Shares outside of the United States, other than pursuant to the Acquisition, until the date on which the Acquisition becomes Effective, lapses or is otherwise withdrawn.  These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices.  Any information about such purchases will be disclosed as required in the UK, will be reported to the Regulatory Information Service of the London Stock Exchange and will be available on the London Stock Exchange website at http://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.

This Announcement does not constitute or form a part of any offer to sell or issue, or any solicitation of any offer to purchase, subscribe for or otherwise acquire, any securities in the United States.

Neither the US Securities and Exchange Commission nor any securities commission of any state or other jurisdiction of the United States has approved the Acquisition, passed upon the fairness of the Acquisition, or passed upon the adequacy or accuracy of this Announcement. Any representation to the contrary is a criminal offence in the United States.

Disclosure requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the Announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the Announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at  www.thetakeoverpanel.org.uk   , including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Forward  -  looking statements

This Announcement contains certain forward-looking statements, including statements regarding M&P's and Wentworth's plans, objectives and expected performance.  Such statements relate to events and depend on circumstances that will occur in the future and are subject to risks, uncertainties and assumptions.  There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements, including, among others the enactment of legislation or regulation that may impose costs or restrict activities; the re-negotiation of contracts or licences; fluctuations in demand and pricing in the oil and gas industry; fluctuations in exchange controls; changes in government policy and taxations; industrial disputes; war and terrorism. These forward-looking statements speak only as at the date of this Announcement.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of figures that precede them.

 

END

 

 

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