Egyptian and Moroccan Acquisition and Fundraise
THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
FURTHER, THIS ANNOUNCEMENT IS MADE FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE COMMON SHARES IN SDX IN THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR ANY OTHER JUSRISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES OF SDX HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED FOR SALE UNDER THE LAW OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY DOES NOT INTEND TO REGISTER ANY SECURITIES UNDER THE SECURITIES ACT, AND NO PUBLIC OFFERING OF SECURITIES IN THE UNITED STATES WILL BE MADE.
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
For Immediate Release 24 January 2017
SDX ENERGY INC.
("SDX" or the "Company")
Proposed acquisition of producing assets in Egypt and Morocco
Accelerated Bookbuild to raise approximately US$40 million
SDX Energy Inc. (TSXV, AIM: SDX), the Egypt focused oil and gas company, is pleased to announce that it has entered into heads of terms, and is finalising a Sale and Purchase Agreement, to acquire a portfolio of oil and gas production and exploration assets in Egypt and Morocco, which are currently held by Circle Oil plc ("Circle") for a total cash consideration of US$30 million, subject to working capital adjustment (the "Acquisition"). On completion of the Acquisition, the Company anticipates that its total net working interest production will increase by over 247 per cent. to approximately 4,705boepd, and its net working interest 2P reserves will grow by 64 per cent. to 12.03 MMboe.
The Acquisition is to be funded through a conditional placing of new Common Shares in SDX at a Placing Price of 30 pence (C$0.50) per Placing Share (the "Placing") and a simultaneous direct subscription of new Common Shares at the Placing Price (the "Subscriptions") to raise gross proceeds of approximately US$40 million (together the "Fundraising"). The Placing is being conducted through an accelerated Bookbuild which will be launched immediately following this Announcement in accordance with the terms and conditions set out in Appendix I to this Announcement. Cantor Fitzgerald, GMP FirstEnergy and Stifel are acting as joint bookrunners in connection with the Placing. GMP FirstEnergy is acting as financial adviser in connection with the Acquisition.
Highlights
The Acquisition
· The Company has entered into an exclusive non-binding heads of terms and is in advanced negotiations for it (or its subsidiaries) to acquire two subsidiaries of Circle, debt free, following a strategic review process by Circle. These subsidiaries together hold a portfolio of producing oil and gas assets in Egypt and Morocco.
o In Egypt, the Company will acquire a 40 per cent. interest in the NW Gemsa concession, in which it currently holds a 10 per cent. interest, which will add net working interest production of approximately 2,600 boepd and net working interest 2P reserves of 3.8 MMboe to the SDX portfolio.
o In Morocco, the Company will acquire a 75 per cent. interest in both the Sebou and Lalla Mimouna concessions (as described in the Table 2 below), which will add net working interest production of approximately 4.5 MMscf/d (750 boepd) and net working interest 2P reserves of approximately 0.9 MMboe to the SDX portfolio.
o A review of Reserves and Resources for Circle Oil Maroc's assets in accordance with Canadian National Instrument NI 51-101 and the COGE Handbook has been prepared by Evolution Resources SA. A copy of this statement is on SDX's website at www.sdxenergy.com.
o In addition, as part of the acquisition, the Company will acquire a positive net working capital position of approximately US$18.3 million, comprising approximately US$16.4 million in receivables less payables and approximately US$1.9 million in cash. This net working capital is allocated c. US$14.5 million in Egypt and c. US$3.8m in Morocco.
· The Company's ability to enter into this acquisition is dependent on it raising sufficient funds to pay the anticipated purchase price of US$30million. Subject to the Fundraising securing sufficient gross proceeds, the Company anticipates entering into the SPA on or prior to Admission with completion taking place on the day of Admission, which is expected to occur at 8 a.m. on 27 January 2017. If this timetable changes and Admission is delayed, an announcement will be made via a RIS. It is a condition of the Fundraising that the SPA is entered into no later than Admission. Following the signing and completion of the Acquisition, the Company anticipates that it will increase its total net working interest production by 247 per cent. to approximately 4,705 boepd, and its net working interest 2P reserves by 64per cent. to 12.03 MMboe.
· The acquisition price of $30 million, before adjustments, represents approximately 39 cents in the dollar on Circle's total group debt of approximately US$77.5 million as at 30 June 2016. The Acquisition is in accordance with the Company's strategy to pursue distressed production and development opportunities in North Africa alongside organic growth, as it seeks to build its portfolio to net production of approximately 25,000 to 30,000 boepd while also diversifying the overall portfolio to a new jurisdiction.
Fundraising
· The Placing and Subscriptions are expected to raise gross proceeds of up to approximately US$40 million, which will be used to fund the Acquisition, the replacement of work programme bonds in Morocco, associated working capital and the costs of the Placing and the Acquisition.
· The Placing and Subscriptions are conditional upon, amongst other things, the entry into the SPA prior to Admission and Admission, which is expected to occur on 27 January 2017 but by no later than 28 February 2017.
· Appendix I to this Announcement sets out further information relating to the Placing including the terms and conditions of the Placing.
Directors' and major Shareholder intentions
· Certain directors and key management of SDX and major Shareholders together comprising approximately 29 per cent. of the Existing Common Shares as at the date of this Announcement have indicated their intention to subscribe for new Common Shares at the Placing Price following publication of this Announcement. The details of these Subscriptions will be announced separately in due course.
About SDX
SDX is an international oil and gas exploration, production and development company, headquartered in London, England, UK, with a principal focus on Egypt. In Egypt, SDX has an interest in two production concessions: NW Gemsa and West Gharib (Meseda) both located in the Eastern Desert. SDX's portfolio also consists of South Ramadan, a development asset in the Gulf of Suez and South Disouq, an exploration asset in the Nile Delta. For further information, please see the website of the Company at www.sdxenergy.com or the Company's filed documents at www.sedar.com.
For further information:
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SDX Energy Inc. Paul Welch President and Chief Executive Officer Tel: +44 203 219 5640
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Mark Reid Chief Financial Officer Tel: +44 203 219 5640
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Cantor Fitzgerald Europe (Nominated Adviser & Joint Bookrunner) Sarah Wharry/Craig Francis Tel: +44 207 7894 7000
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GMP FirstEnergy Capital LLP (Financial Adviser & Joint Bookrunner) Jonathan Wright/David van Erp Tel: +44 207 448 0200
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Stifel Nicolaus Europe Limited (Joint Bookrunner) Ashton Clanfield/Callum Stewart Tel: +44 207 710 7600
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Celicourt (PR) Mark Antelme/Joanna Boon Tel: +44 207 520 9260
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Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
BACKGROUND TO AND REASONS FOR THE ACQUISITION AND FUNDRAISING
Information on the Circle Assets
Under the terms of the Acquisition (as detailed below), the Company proposes to acquire 100 per cent. of the issued share capital of each of Circle Oil Egypt and Circle Oil Maroc, which are 100 per cent. owned subsidiaries of Circle. Further information on these subsidiaries and their assets is set out below.
Circle Oil Egypt
Circle Oil Egypt is a Jersey incorporated company which holds a 40 per cent. interest in the NW Gemsa concession, which is located onshore in the Eastern Desert, Egypt approximately 300 km south east of Cairo and covers a total area of approximately 83 km2. SDX currently holds a 10 per cent. interest in NW Gemsa, with the other partner being North Petroleum International (50 per cent. working interest and operator).
Gross average production from NW Gemsa in Q3 2016 amounted to 6,510 boepd (approximately 2,600 boepd net to Circle Oil Egypt) and as at 31 December 2015, remaining gross 2P reserves were estimated by D&M at 9.4 MMboe (3.8 MMboe net to Circle Oil Egypt and net back is estimated at US$ 17.24/boe (Brent price: US$58.40/bbl).
Following the Acquisition, SDX will have a 50 per cent. working interest in NW Gemsa and SDX's net working interest production from NW Gemsa based on Q3 2016 average production will be approximately 3,250 boepd and net working interest 2P reserves as at 31 December 2015 will be 4.7 MMboe.
In addition to its interest in NW Gemsa, Circle Oil Egypt also has a net working capital position of approximately US$14.5m. This net working capital balance is principally made up of receivables due from EGPC offset by payables due for operations at NW Gemsa, with no outstanding bank debt, all of which will be acquired by SDX under the terms of the Acquisition.
Table 1
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Licence |
Operator |
Circle Working Interest |
Status |
Licence Expiry Date |
Licence Area (km2) |
Comments |
2P reserves (Boe) (gross)2 |
Current production (Boepd) (gross)3 |
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NW Gemsa Concession |
North Petroleum International |
40% |
Production |
16 February 20291 |
250 |
Exploration Period has expired |
7,934 |
6,510 |
1 Three development leases have been issued pursuant to the NW Gemsa Concession, Al Amir (expires 17 Nov 2028) Geyad (expires 11 Aug 2029 and Al Ola (expires 4 Jan 2031).
2 Source: independent reserves and resources evaluation of the Company by DeGolyer and MacNaughton Canada Limited (the "DeGolyer and MacNaughton Report"), dated December 31, 2015, evaluating SDX's crude oil, natural gas liquids and natural gas reserves and resources between January 1, 2015 and December 31, 2015 . A copy of the DeGolyer and MacNaughton Report is available on SDX's website at www.sdxenergy.com.
3average based on Q3 2016 production
The NW Gemsa concession has produced, gross, 1.919 million barrels of oil equivalent in the period 1 January 2016 to 30 September 2016.
Circle Oil Maroc
Circle Oil Maroc is a Jersey incorporated company which holds a 75 per cent. interest and operatorship in certain licences, onshore Morocco, with ONHYM holding a 25 per cent. interest. The reserves in the table below agree to the 2P reserves classified in accordance with NI 51-101 as at 1 July 2016 as estimated by Evolution Resources SA and as is set out in Table 4 below.
Table 2
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Licence |
Operator |
Circle Working Interest |
Status |
Licence Expiry Date |
Licence Area (km2) |
Comments |
2P reserves as at 1 July 2016 (Bcf) (gross)1 |
Q4 2016 Current production (MMscf/d) (gross) |
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Sebou Area |
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Sebou |
Circle |
75% |
Exploration |
18/4/2016 |
134.7 |
Expired but renewal under negotiation |
N/A |
N/A |
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Oulad N'Zala |
Circle |
60% |
Exploitation |
26/9/2014 |
24.4 |
Expired but under negotiation to be re-incorporated in Sebou permit |
0.0 |
N/A |
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Gaddari South |
Circle |
75% |
Exploitation |
08/01/2017 |
1.8 |
Wells CGD-9 & CGD-13 Expired but extension under negotiation |
0.29 |
0.11 |
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Gaddari Central |
Circle |
75% |
Exploitation |
18/01/2014 |
1.6 |
Well CGD-10 depleted |
0.0 |
N/A |
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Gaddari Northwest |
Circle |
75% |
Exploitation |
02/02/2019 |
1.3 |
Well CGD-11 |
0.46 |
Currently shut in |
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Gaddari Southwest |
Circle |
75% |
Exploitation |
Min 10 years duration proposed |
0.65 proposed |
Well CGD-12 on production. Concession applied for but not yet granted |
0.01 |
Currently shut in |
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Ksiri |
Circle |
75% |
Exploitation |
18/01/2025 |
7.2 |
Wells KSR-8, KSR-10, KSR-11, KSR-12 & KSR-A |
5.89 |
3.67 |
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Sidi Al Harati Southwest |
Circle |
75% |
Exploitation |
05/10/2023 |
0.75 |
Well SAH-W1 on production |
0.45 |
1.68 |
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Lalla Mimouna |
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Lalla Mimouna Nord |
Circle |
75% |
Exploration |
22/03/2016 |
1371.2 |
Expired but an extension has been applied for |
N/A |
N/A |
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Lalla Mimouna Sud |
Circle |
75% |
Exploration |
22/03/2016 |
1371.2 |
Expired but an extension has been applied for |
N/A |
N/A |
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1 Source: Prepared in accordance with Canadian National Instrument NI 51-101F2 and the COGE Handbook by Evolution Resources SA see their review of Reserves and Resources for Circle Oil Maroc's assets in accordance with Canadian National Instrument NI 51-101F2 and the COGE Handbook. A copy of this statement is on SDX's website at www.sdxenergy.com.
The Sebou Area permits (see Table 2) are located in the Rharb basin, onshore Morocco, covering an area of approximately 134 km2, and hold existing gas production and reserves. There are 16 hydrocarbon discoveries on the permits each with a single well penetration. At the end of June 2016, eight of the discoveries were capable of production, with an option to bring a further discovery onstream as needed. Gas is exported via a 55 km pipeline to the industrial area of Kenitra. This pipeline is privately owned 75 per cent. by Circle Oil Maroc and 25 per cent. by ONHYM. As at 31 August 2016 approximately US$1.3 million was still outstanding from Circle Oil Maroc under the finance provided for its construction which is being repaid by way of application of a 5% discount to the gas sales price to Super Cerame.
Current gross average annual production from the Sebou area is c6.0 MMscf/d (1,000 boepd) or 4.5 MMscf/d (750 boepd) net to Circle Oil Maroc and as at 1 July 2016, remaining gross 2P reserves were estimated by Lloyds Register at 7.1 Bcf (1.2 MMboe) or 5.3 Bcf (0.9 MMboe) net to Circle Oil Maroc. Net back is estimated to be US$52.25/boe (Brent price of US$58.40/bbl). Gas is currently sold under two contracts to local factories, with annual gas sales averaging 6.0 MMscf/d (gross) at an average selling price of US$9.00/Mcf. This gives the gas a significant price advantage to Gas buyers when compared to competitors who have to buy bottled gas, the main alternative in Morocco, at an equivalent price of US$18.00/Mcf.
SDX has commissioned a CPR on the Sebou permits and published a copy on its website at www.sdxenergy.com. A summary of the resources and reserves of the Sebou permits as at 1 July 2016 as estimated by Lloyds Register is set out below.
Table 3
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Morocco Gross1 Reserves and Contingent Resources on Licence2 |
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Reserves |
Contingent Resources |
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1P |
2P |
3P |
1C |
2C |
3C |
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Sebou (106 Nm3) |
131.824 |
193.382 |
276.762 |
106.085 |
262.406 |
534.141 |
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Oulad N'Zala (106 Nm3) |
0.000 |
0.000 |
0.000 |
1.300 |
6.060 |
24.150 |
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Total (106 Nm3) |
131.824 |
193.382 |
276.762 |
107.385 |
268.466 |
558.291 |
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Total (Bscf) |
4.655 |
6.845 |
9.774 |
3.792 |
9.481 |
19.715 |
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Total (MMboe) |
0.803 |
1.180 |
1.685 |
0.654 |
1.635 |
3.399 |
1 Circle have a 75% net working interest in the Sebou Permit and a 60% net working interest in the Oulad N'Zala Permit
2 Reserves and contingent resources have been evaluated in accordance with the 2007 Petroleum Resources Management System prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE).
An review of Reserves and Resources for Circle Oil Maroc's assets in accordance with Canadian National Instrument NI 51-101 and the COGE Handbook has been prepared by Evolution Resources SA. A copy of this statement is on SDX's website at www.sdxenergy.com. A summary of the resources and reserves of the Sebou permits in accordance with NI 51-101 as at 1 July 2016 as estimated by Evolution Resources SA is set out in Table 4 below.
Table 4: Reserves and Contingent resources summary
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Morocco Gross (100%)1 Reserves and Contingent Resources on Licence |
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Asset |
Reserves |
Contingent Resources |
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1P |
2P |
3P |
1C |
2C |
3C |
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Sebou (MM cm) |
110.0 |
200.4 |
254.9 |
147.7 |
310.2 |
501.9 |
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Oulad N'Zala (MM cm) |
0.0 |
0.0 |
0.0 |
1.4 |
6.1 |
24.1 |
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Total (MM cm) |
110.0 |
200.4 |
254.9 |
149.15 |
316.3 |
526 |
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Total (Bscf) |
3.9 |
7.1 |
9.0 |
5.3 |
11.2 |
18.6 |
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Total (MMboe) |
0.67 |
1.22 |
1.55 |
0.91 |
1.93 |
3.20 |
Table 5
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Circle Oil Maroc's Assets: Net Present Value at 1 July 2016 |
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Net Present Value @10% (USD MM) Net to Circle1 |
Proved |
Proved plus Probable |
Proved plus Probable plus Possible |
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Sebou |
21.4 |
28.7 |
42.9 |
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Oulad N'Zala |
(0.4) |
(0.8) |
(0.9) |
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Total |
21.0 |
27.9 |
42.0 |
1 Circle have a 75% net working interest in the Sebou Permit and a 60% net working interest in the Oulad N'Zala Permit
A review of Reserves and Resources for Circle Oil Maroc's assets in accordance with Canadian National Instrument NI 51-101 and the COGE Handbook has been prepared by Evolution Resources SA. A copy of this statement is on SDX's website at www.sdxenergy.com. A summary of the reserves of the Sebou permits and the net present value in accordance with NI 51-101 as at 1 July 2016 as estimated by Evolution Resources SA is set out in Table 6 below.
Table 6 Summary of the Evaluation of Petroleum Reserves as of July 1st 20161
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Summary of the Evaluation of the Petroleum Reserves |
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Product Classification |
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Ultimate Reserves MM scf |
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Remaining reserves |
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Net Presents Values (millions USD) - Net to Circle |
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Non associated gas |
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100% |
Company |
Before income tax |
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After income tax |
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Gross |
Net |
0% |
5% |
10% |
15% |
20% |
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0% |
5% |
10% |
15% |
20% |
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Proved developed producing |
14581 |
3675 |
2757 |
2740 |
14.3 |
14.2 |
14.1 |
14.0 |
13.9 |
14.3 |
14.2 |
14.1 |
14.0 |
13.9 |
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Proved developed non-producing |
217 |
208 |
156 |
152 |
1.2 |
1.1 |
1.1 |
1.0 |
1.0 |
1.2 |
1.1 |
1.1 |
1.0 |
1.0 |
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Proved Undeveloped |
0 |
0 |
0 |
0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
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Total proved |
14798 |
3884 |
2913 |
2892 |
15.5 |
15.4 |
15.2 |
15.0 |
14.9 |
15.5 |
15.4 |
15.2 |
15.0 |
14.9 |
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Probable |
3199 |
3194 |
2395 |
2312 |
19.2 |
17.1 |
15.3 |
13.7 |
12.4 |
18.0 |
16.0 |
14.4 |
12.9 |
11.7 |
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Total proved + probable |
17997 |
7077 |
5308 |
5204 |
34.7 |
32.5 |
30.5 |
28.8 |
27.3 |
33.6 |
31.4 |
29.6 |
28.0 |
26.6 |
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Possible |
866 |
1925 |
1444 |
1368 |
13.2 |
11.3 |
9.8 |
8.5 |
7.5 |
10.3 |
8.9 |
7.8 |
6.9 |
6.2 |
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Total proved + probable + possible |
18863 |
9002 |
6752 |
6572 |
47.9 |
43.7 |
40.2 |
37.3 |
34.8 |
43.8 |
40.3 |
37.4 |
24.9 |
32.8 |
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[1] The net reserves are defined as Company net - royalties. Note that in this case, the royalties are expected to be paid as a tax, in this case, the net reserves would be equal to the company gross reserves (or Working Interest)
Approximately 0.77 bcf of the 6.845 bcf of 2P Reserves as at 1 July 2016 has been produced in the 6 months to 31 December 2016.
The Lalla Mimouna permits (see table 2) comprises a series of exploration concessions which are prospective for gas, covering a total area of 2,112 km2. Of the total concession area, 154 km2 is covered by 3D seismic. The Lalla Mimouna permits are located adjacent to the Sebou permits, and therefore have access to an existing gas sales line. Any future discoveries will utilise this line to be commercialised. While still in the exploration stage, the Company has identified a number of prospects within the permit which will be subject to further investigation following completion of the Acquisition, subject to the exploration permits being extended.
Circle Oil Maroc has recently entered into a new gas sales contract with an existing customer, Super Cerame, at an increased price. In addition, following completion of the Acquisition, the Company believes that there may be an opportunity to improve gas sales margins under the other existing contracts. In addition, the Board believes there is future opportunity to increase gas price contracts to as much as US$12.00/Mcf. A summary of the immediate gas sales contract priorities and opportunities for the Company is set out in the table below.
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Type |
Customer |
Price (MAD/m3) |
Price (US$/Mcf) |
From |
To |
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Previous contract |
Super Cerame |
2.85 |
8.10 |
Jan-11 |
31-Dec-16 |
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New contract |
Super Cerame |
3.50 |
9.90 |
1-Jan-17 |
31-Dec-21 |
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Existing contract |
CMCP |
2.80 |
7.90 |
1-Jan-16 |
31-Mar-17 |
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Expected new contract |
CMCP |
2.85 |
8.10 |
1-Apr-17 |
31-Mar-18 |
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Potential new contract |
Porcher |
4.25 |
12.00 |
5 years |
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Potential new contract |
Porcher 3rd party |
4.25 |
12.00 |
5 years |
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Potential new contract |
Peugot |
4.50 |
12.70 |
10 years |
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Strategic rationale for the Acquisition
As stated in its AIM Admission Document dated 17 May 2016, the Company's strategy is to create value through low cost production growth and low cost high impact exploration success. The Company's principal focus has been on organically increasing production and cash flow generation through an active work programme consisting of work-over and development wells in its existing portfolio in Egypt, combined with high impact exploration drilling in Egypt.
In pursuing this strategy, SDX has also stated that it intends to leverage its balance sheet, early mover advantage and regional network to grow through the acquisition of undervalued and/or underperforming producing assets principally in onshore Egypt, while maintaining a strict financial discipline to ensure efficient use of funds. In executing its strategy, as stated in its AIM Admission Document, the Company's medium term objective is to achieve net production of 3,000 boepd to 5,000 boepd which on completion of the Acquisition it will have achieved.
The Board of SDX is of the view that the Acquisition represents the next step in implementing this strategy, by adding low cost oil production in Egypt and high margin gas production in Morocco, at the same time acquiring the assets at what it believes is a highly attractive acquisition price.
In particular, the Board is of the view that its entry into Morocco serves to help diversify the overall portfolio in terms of geography and commodity risk. The Company believes that Morocco is a highly compelling jurisdiction for gas sales and production, on the basis of the following attributes:
· Comparatively high natural gas prices (averaging approximately US$9.00/Mcf), underpinned by a scarcity of resources and an alternative supply via compressed natural gas or bottled gas, currently selling for approximately US$18.00/Mcf;
· Ability to contract directly with local industrial users, whereby local demand significantly outstrips supply;
· Significant pressure by industry to find more gas to connect additional users, given the significant cost advantage described above enjoyed by customers employing pipeline gas (no local or national gas grids exist within Morocco); and
· An attractive fiscal regime, comprising a 5 per cent. royalty on revenues after cumulative onshore gas production exceeds 10 Bcf, and a 10 year corporation tax holiday from first production, after which corporation tax rates ranging between 10 per cent. and 31 per cent. apply.
Following completion of the Acquisition, the Company's overall strategy will remain to grow its portfolio to become a mid-tier oil and gas exploration and production company with net production of approximately 25,000 to 30,000 boepd.
Details of the Acquisition
On 28 December 2016, the Company entered into non-binding heads of terms with Circle and Circle Oil Jersey Limited for the acquisition by the Company (or its subsidiaries) of Circle Oil Egypt and Circle Oil Maroc which hold Circle's licence interests in Egypt and Morocco respectively. Since then the Company has negotiated the SPA for these acquisitions, which following a strategic review process by Circle, will be acquired from the subsidiaries' parent, Circle Oil Jersey, immediately after it has been placed into Administration. It is expected that Circle Oil Jersey will make an application to the Court to initiate an Administration process following the release of this Announcement.
Pursuant to the draft SPA, it is expected that the Company will acquire the entire issued share capital of Circle Oil Egypt and Circle Oil Maroc from Circle Oil Jersey Limited and that completion of the Acquisition will take place immediately following signing. The acquisition price is expected to be US$30 million, payable in cash in full on completion of the Acquisition.
The Company's ability to enter into this acquisition is dependent on it raising sufficient funds to pay the anticipated purchase price of US$30 million subject to working capital adjustments which, provided the completion occurs on 27 January 2017, means an expected actual cash payment of approximately US$28.1 million at completion. Subject to the Fundraising securing sufficient gross proceeds the Company anticipates entering into the SPA for the acquisition on Admission , which is expected to occur at 8am (GMT) on 27 January 2017. If this timetable changes and Admission is delayed, an announcement will be made via a RIS. It is a condition of the Fundraising that the SPA is entered into prior to Admission. The Group will be directed to pay $1.6 million of the US$28.1 million total consideration to Futur Oil Services Limited to settle sums owed by Circle to Futur under the net profit interest agreement between Circle Oil Egypt Limited and Futur Oil Services Limited.
As the Acquisition is of a distressed asset which may involve an insolvency process and it is anticipated that an application with be made to the Court for Circle Oil Jersey to be placed into Administration, it is unlikely that any warranties will be given in the SPA. The Company has taken this into account when negotiating the Acquisition price.
As part of the acquisition, the Group is also entering into agreements to terminate the employment of each of the employees of Circle Oil Plc and in consideration for them waiving any claims they might have arising out of their employment, they will receive payment of their contractual notice period.
In addition, following completion, the Group has undertaken to be responsible for and replace certain guarantees totalling approx. $1.3 million provided by Circle Oil Plc to Allied Irish Banks, plc in support of the guarantees to ONYHM given in relation to certain licence commitments in Morocco.
Details of the Fundraising
The Company is pleased to announce that it is proposing a Fundraising to raise up to approximately US$40 million (before expenses) through the issue of new Common Shares at a Placing Price of 30 pence (C$0.50) per new Common Share. The gross proceeds of the Fundraising are expected to be applied as follows:
|
Consideration for the Acquisition |
US$30.0 million |
|
Working capital and replacement of work programme bonds related to the Acquisition |
US$8.0 million |
|
Costs of the Placing and Acquistion |
US$2.0 million |
|
Total |
US$40.0 million |
US$5 million of the Working Capital will be used to fund the planned development drilling programme in Morocco.
The Fundraising will comprise the Placing and Subscriptions for new Common Shares at the Placing Price. The Company has appointed Cantor Fitzgerald, GMP FirstEnergy and Stifel as joint bookrunners to the Company in connection with the Placing to use their reasonable endeavours to procure placees for the Placing Shares at the Placing Price.
The Placing will be undertaken by way of an accelerated bookbuild which will commence immediately following publication of this Announcement. The Bookbuild is expected to close no later than 7.45 a.m. tomorrow, 25 January 2017, although the timing of the closing of the book and allocations is at the discretion of Cantor Fitzgerald, GMP FirstEnergy and Stifel. Details of the number of new Common Shares to be subscribed for in the Placing and Subscriptions will be announced as soon as practicable after the close of the Bookbuild. Neither the Placing nor the Subscriptions are being underwritten by Cantor Fitzgerald, GMP FirstEnergy or Stifel.
Completion of the Placing and the Subscriptions is conditional upon, among other things:
· the Company and relevant parties thereto signing and entering into the SPA to acquire Circle Oil Egypt and Circle Oil Maroc on or prior to Admission;
· the Bookbuild being successfully completed and the Term Sheet being executed by the parties and the Subscriptions becoming unconditional (other than a condition that the Placing Agreement is unconditional);
· none of the warranties in the Placing Agreement being untrue or inaccurate or misleading at the date of the agreement and at the date of Admission and no fact or circumstance having arisen which would render any of the warranties untrue or inaccurate or misleading when repeated at Admission;
· the Shares having been allotted, subject only to Admission; and
· Admission taking place not later than 8.00 a.m. on 27 January 2017 or such later time or date as the Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel may otherwise agree (but not being later than 8.00 a.m. on the Long Stop Date).
The new Common Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the Existing Common Shares, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such new Common Shares after the date of issue of the new Common Shares and may be subject to such hold periods as may be required under Canadian law. Shares traded on AIM will not be subject to any hold periods under English law.
Application will be made for the new Common Shares to be admitted to trading on AIM which is expected to occur at 8 a.m. GMT on 27 January 2017 and to trading on the TSX-V which is expected to occur at 9:30 a.m. EST on 27 January 2017.
On 24 January 2017, the Company entered into a Placing Agreement with Cantor Fitzgerald, GMP FirstEnergy and Stifel. Under the terms of the Placing Agreement the Company: (i) will pay to Cantor Fitzgerald, GMP FirstEnergy and Stifel certain commissions relating to the placing of Placing Shares conditional upon Admission of the Placing Shares becoming effective; and (ii) gives customary warranties, undertakings and indemnities to Cantor Fitzgerald, GMP FirstEnergy and Stifel. The Placing Agreement may be terminated by Cantor Fitzgerald, GMP FirstEnergy and Stifel at their discretion at any time prior to Admission in certain circumstances, including amongst others, in circumstances where any warranties are found to be untrue, inaccurate or misleading in any material respect or any material adverse event occurs in the context of the Placing and Subscriptions or the Acquisition.
MEA Energy Limited and Ingalls & Snyder LLC (which are the Company's largest Shareholders, holding approximately 14.4 and 14.5 per cent. respectively of the Existing Common Shares as at the date of this Announcement), have indicated their intention to participate in the Fundraising. Each of Ingalls & Snyder LLC and MEA Energy Investment Company Limited is a "related party" to the Company under Multilateral Instrument 61-101- Protection of Minority Security Holders in Special Transactions ("MI 61-101") by virtue of such party's existing shareholding being in excess of 10%. Accordingly, any investment by any such entity will be a "related party transaction" under MI 61-101. Each such investment would be exempt from (i) the formal valuation requirements under Section 5.4 of MI 61-101 pursuant to Subsection 5.5(a) of MI 61-101 and (ii) the minority approval requirements under Section 5.6 of MI 61-101 pursuant to Subsection 5.7(1)(a) of MI 61-101 because the fair market value of each of such related party's investment is not expected to exceed 25% of SDX's market capitalization (as defined in MI 61-101).
Furthermore, certain Directors and key management of the Company have indicated an intention to participate in the Fundraising. The Company has received indications of interest in respect of Subscriptions of c. US$11.6 million in aggregate from MEA Energy Limited, Ingalls & Snyder LLC and certain Directors and key management of the Company. The details of the Subscriptions are expected to be announced with the closing of the Bookbuild, in due course.
In respect of Placees procured by Cantor Fitzgerald, GMP FirstEnergy and Stifel, the Placing is subject to the terms and conditions set out in Appendix I to this Announcement. It is expected that subscribers under the Subscriptions will enter into conditional subscription agreements following this announcement and prior to the close of the Bookbuild.
Current trading and prospects of the Company
Following completion of its US$11 million fundraising and admission to AIM in May 2016, the Company sought to use the gross proceeds of the fundraising principally to implement a workover programme at its Meseda concession in Egypt to increase production from the field. Meseda's gross average production in Q3 2016 was 3,657 boepd and the Company announced on 25 November 2016 that, following the successful completion of an 8 well workover programme and strategic initiative focussed on development optimization and increasing production, the partners in Meseda completed a fluid handling review during Q3 2016 and had subsequently launched a tendering process to secure the equipment necessary to increase facility treating capacity.
Since this time, the Company and its partner in Meseda have completed the tendering process and appointed a contractor to carry out the works to upgrade the treating capacity at Meseda to 20,000 bfpd. The Company expects that this will be completed during Q1 2017, following which it intends to resume its workover and waterflood programme with a further 5 workovers and 2 infill production wells planned during 2017 to take advantage of the improved and increased treating capacity. In addition, the Company is planning to drill 2 exploration wells on the Meseda permit during 2017, each with dry hole well costs of c. US$750,000 which can be brought into production in a relatively short period after well completion. It is expected that Meseda has the potential to double current production from its Q3 2016 levels with its workover programme, in part through the replacement of certain pumps, which should yield an incremental oil gain of nearly 7,000 bbl/day over current production. Further, it has the potential to improve recoverable volumes by three times over the economic life of the field as a result of the waterflood and infill well programme.
As announced on 14 November 2016, SDX, and its partner at the South Disouq permit have agreed on the target and location for drilling the exploration well, where SDX's costs are carried up to a cap of US$3 million gross, identified during the interpretation of data. The Company is pleased to report that the planning work for this exploration well remains on track, and it expects spudding of the well during Q1 2017. If successful, the Company intends to initiate a fast track development programme using existing locally sourced infrastructure
At NW Gemsa, SDX and the operator have planned a programme of 12 workovers in order to maintain production at an annual average of c. 6,000 boepd. SDX also believes that following completion of the Acquisition, it can improve upon Circle Oil Egypt's payment record and can take over its interest in NW Gemsa with no additional increase in staffing or corporate overhead.
A summary of the Company's future work programme following completion of the Acquisition across its enlarged portfolio is set out below.
|
Field/Activity |
Activity |
Time |
|
|
|
|
|
NW Gemsa 8 Well Workover (Producers) |
Workover |
Q1/Q2 2017 |
|
4 Well Workover (Injectors) |
Contingent |
Q3/Q4 2017 |
|
Meseda Facilities Upgrade |
|
|
|
5 Well Workover Program (Producers) |
Workover |
Q1/Q2 2017 |
|
Infill Producer - 1 |
Producer |
Q2 2017 |
|
Infill Producer - 2 |
Producer |
Q2 2017 |
|
Exploration Well - 1 |
Exploration |
Q2 2017 |
|
Exploration Well - 2 |
Exploration |
Q2 2017 |
|
S. Disouq Interpretation |
|
|
|
Studies |
Q1 2017 |
|
|
Exploration Well (SD-1X) |
Exploration |
Q1 2017 |
|
S. Ramadan Development Option Review |
|
|
|
Studies |
Q1/Q2 2017 |
|
|
FarmOut/Relinquish |
Studies |
Q2/Q3 2017 |
|
Development Well 1 |
Producer (Contingent) |
Q3/Q4 2017 |
|
Lalla Mimouna |
|
|
|
Exploration Well - 1 |
Exploration |
Q3 2017 |
|
Exploration Well - 2 |
Exploration |
Q3 2017 |
The work programme for Lalla Mimouna is subject to the exploration licence being extended by that time.
Following completion of the Acquisition and Fundraising, the Company's estimated pro forma balance sheet is set out below.
Pro-forma balance sheet
|
|
SDX |
Circle |
Consolidated |
Consolidated Balance Sheet |
|
Cash |
4,961 |
1,925 |
8,0001 |
14,886 |
|
Receivables |
7,896 |
28,128 |
|
36,024 |
|
Other working capital assets |
1,190 |
7,114 |
|
8,304 |
|
Current assets |
14,047 |
37,167 |
8,000 |
59,214 |
|
|
|
|
|
|
|
Oil and Gas Assets |
29,854 |
49,4602 |
|
79,314 |
|
Total Assets |
43,901 |
86,627 |
8,000 |
138,528 |
|
|
|
|
|
|
|
Other working capital liabilities |
4,454 |
18,913 |
|
23,367 |
|
Other non-current liabilities |
286 |
1,380 |
|
1,666 |
|
Non-current liabilities |
286 |
1,380 |
|
1,666 |
|
Total liabilities |
4,740 |
20,293 |
|
25,033 |
|
Equity |
39,161 |
66,334 |
8,0001 |
113,495 |
|
|
|
|
|
|
|
Equity and liabilities |
43,901 |
86,627 |
8,000 |
138,528 |
(1) Additional US$10m raised over consideration used: US$5m accelerate Morocco drilling to 2017, US$3m for Working Capital, Bonds etc and US$2m for Transaction costs netted against equity.
(2) US$30m Consideration split US$16.874m W Cap and US$13.126m Oil and Gas assets (oil and gas assets shown above at an FV of US$49.46m).
Following completion of the Acquisition and Fundraising, a summary of the Company's illustrative cash flow and capital expenditure for full year 2017 and 2018 is set out below.
|
|
2017 |
2018 |
|
Circle |
|
|
|
Operating cashflow |
32.2 |
36.5 |
|
Capex |
9.8 |
8.6 |
|
Free cashflow |
22.4 |
27.9 |
|
|
|
|
|
SDX |
|
|
|
Operating cashflow |
14.4 |
14.6 |
|
Capex |
6.5 |
0.8 |
|
SDX free cashflow |
7.9 |
13.8 |
|
|
|
|
|
Consolidated |
|
|
|
Operating cashflow |
46.6 |
51.1 |
|
Capex |
16.3 |
9.4 |
|
Free cashflow |
30.3 |
41.7 |
|
|
|
|
RISK FACTORS
An investment in the Company involves a variety of risks. Accordingly, prospective investors should consider carefully the specific risk factors set out or referred to below, in addition to the other information contained in this document before investing in the Company. The Directors consider the following risks to be the material risks for potential investors. In particular, the Company's performance may be materially and adversely affected by changes in the market and/or economic conditions and/or by changes in the laws and regulations (including any tax laws and regulation) relating to, or affecting, the Company or the interpretation of such laws and regulations.
If any of the following risks materialise, the business, financial condition, results or future operations of the Company could be materially and adversely affected. In such circumstances, the trading price of the Common Shares could decline and investors could lose part or all of their investment in the Common Shares. In addition, the risks below are not the only risks to which the Company may be subject. The Company may be unaware of certain risks or believe certain risks to be immaterial which later prove to be material.
The following risk factors should be read together with the Risk Factors set out in Part II of the Company's AIM Admission Document a copy of which can be found on the Company's website: www.sdxenergy.com.
Risks relating to the Acquisition
The Acquisition will take the form of a purchase of the Circle Assets at a time when Circle is in a state of financial distress and such sale may involve an insolvency process such as Administration. As is customary in such circumstances, the Company may not receive any representations or warranties regarding the Acquisition which means that there is no effective recourse in the event the Circle Assets or underlying concessions do not otherwise align with the Company's expectations.
The Company has sought to mitigate these acquisition risks by undertaking a targeted due diligence process, which has focused on confirming title to the Circle Assets, the key terms of the material contracts relating to the Circle Assets and the material liabilities relating to the Circle Assets. Issues identified in due diligence have been taken into account in agreeing the purchase price. Even so, it remains possible that the due diligence may not have identified all material issues associated with the concessions or the Circle Assets and that unidentified issues may have a material adverse effect on the value of the Circle Assets, their concessions and the Company.
Risks relating to Egypt
Circle Oil Egypt presently owes an amount of approximately US$7.5 million to North Petroleum International, the operator of the NW Gemsa concession, in relation to past cash calls. This has been taken into account in calculating the purchase price for the Acquisition. To date, North Petroleum International has granted Circle Oil Egypt time to pay this amount pending the receipt of amounts due to Circle Oil Egypt from EGPC relating to petroleum sales, which have been delayed. The Directors expect North Petroleum International to allow this arrangement to continue. However, if it did not, the Company may need to meet this liability in a short period of time which it would seek to do through a number of sources which may include a short term working capital facility or an acceleration of receivables from EGPC. In the event this did occur this may have an impact on the future operations, performance and investments of the Company and may ultimately risk forfeiture of Circle Oil Egypt's 40% interest in NW Gemsa.
The NW Gemsa field extends beyond the boundaries of the NW Gemsa concession. There is an ongoing process to unitise the NW Gemsa concession with the neighbouring concession, which could result in an adjustment in the reserves attributable to the NW Gemsa concession and/or a payment being due to or by the Company to the holder of the neighbouring concession in respect of past production. Whilst the process is being finalised, this may result in an increase in reserves.
Whilst the Directors do not consider that any government consents, approvals or waivers are required for the Acquisition, it is possible (particularly in emerging markets) that governments may assert consent, approval or pre-emption rights, or rights to payments in relation to natural resources transactions. On the basis of advice received as to current practice in Egypt and Morocco, the Directors do not believe this to be a material risk for the Acquisition.
Please also refer to the Risk Factors in Part II of the Company's AIM Admission Document, including Section 2 titled "Risks Relating to the Industry or Countries in Which the Company Operates". This Section highlights risks related to ownership of oil and gas assets in Egypt, and is provided in the context of the Company's existing ownership interest in the NW Gemsa Asset. The Company is increasing its interest in this asset and accordingly the same risk factors have direct application here.
Risks relating to Morocco
Risks relating to licences
Certain of the licences held by Circle Oil Morocco as detailed in the licence table, which are the subject of the Acquisition, have expired with renewals yet to be granted by ONHYM (who are Circle's partner in these licences), or are at application stage and are awaiting grant by ONHYM. While the Company remains confident that such renewals and applications will be granted by ONHYM, there can be no guarantee that this will occur in a timely manner following completion of the Acquisition, if at all. In the event that such renewals and applications are not granted by ONHYM, SDX may not acquire title to those assets and therefore may not be entitled to produce hydrocarbons from the respective fields contained within these licences, nor to receive cash flows associated with such hydrocarbon production. Such circumstances may result in an adverse impact on the Company's revenues and profits, cash flows and financial position.
As at 25 January 2017 wells with approximately 0.30bcf of reserves, out of a total gross 2P volume of 7.1 bcf, as at 1 July2016, as set out in Table 4 above are located in licences awaiting renewal.
Other risks relating to Morocco
As noted earlier in the announcement, the gas produced from the Moroccan licences is sold to two local factories in Morocco, delivered through separate local pipelines. Any disruption to the pipelines or the production licences (whether due to operational constraints, sabotage, claims from local land owners or occupiers, or otherwise) may undermine the Company's ability to produce, transport or sell its gas, and could lead to claims from the offtakers. The Company is reliant on the continued custom of these offtakers to enable it to dispose of its gas production in Morocco. The contracts with the offtakers presently expire on 31 March 2018 , in respect of approx. 1/3 of current production, and in December 2021, in respect of approx. 2/3 of current production respectively. The risk of these contracts not being renewed is mitigated by the lack of available alternative suppliers of gas in the region at comparable prices (see above as to the current alternative supply and price differential).
There are a number of disputes ongoing in relation to Circle Oil Maroc, which the Directors do not consider material and which have been taken into account in agreeing the purchase price for the Acquisition. Whilst there is no current material litigation ongoing in relation to Circle Oil Maroc, the final time periods for appeal by claimants in relation to previous cases may not have passed in all instances and it is possible that claims could be revived, which may have a material adverse effect on the value of the Circle Assets, their concessions and the Company.
There are presently two bank guarantees in place in relation to the Moroccan licences, for which the Company will be responsible following completion of the Acquisition. They are for US$1.0 million and US$0.3 million, and have been taken into account in agreeing the purchase price for the Acquisition. The Company expects both guarantees to apply to the Moroccan licences once extended (as anticipated by the Company). In the event the relevant Moroccan licences are not extended, the guarantees could be called and the Company required to fund such amounts.
Please also refer to the Risk Factors in Part II of the Company's AIM Admission Document, including Section 2 titled "Risks Relating to the Industry or Countries in Which the Company Operates". While this Section highlights risks related to ownership of oil and gas assets in countries other than Morocco, the majority of the risk factors apply equally to Morocco.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
|
24 January 2017 |
Announcement of the proposed Acquisition and Fundraising
|
|
25 January 2017 |
Closing of accelerated Bookbuild, Subscription Agreements entered into and announcement of results
|
|
On or prior to 8 a.m. 27 January 2017 |
SDX to enter into the SPA
|
|
8 a.m. 27 January 2017 |
Admission and dealings expected to commence in new Common Shares
|
NOTE: Subject to change. If there are any changes and Admission is delayed, an announcement of the updated timetable will be made via a RIS.
DEFINITIONS
In addition to the terms defined above in this Announcement, the following additional definitions apply throughout this Announcement including its Appendix (unless the context requires otherwise):
|
"Acquisition"
|
the proposed acquisition of the Circle Assets, which is a distressed sale from a seller that is expected to be placed into Administration;
|
|
"Administration" |
the administration process in respect of Circle Oil Jersey under which it is intended that a court application will be made following the release of this Announcement to appoint Circle Oil Jersey's administrators. |
|
"Admission" |
the effective admission of the new Common Shares to trading on AIM pursuant to the AIM Rules;
|
|
"AIM" |
AIM, a market operated by London Stock Exchange;
|
|
"AIM Admission Document" |
Company's AIM Admission Document dated 17 May 2016;
|
|
"AIM Rules" |
the 'AIM Rules for Companies' published by London Stock Exchange for companies whose shares are traded on AIM, governing the admission to and operation of AIM, as amended from time to time;
|
|
"Announcement" |
this announcement, including the appendix released by the Company on 24 January 2017;
|
|
"Board" or "Directors" |
the directors of the Company at the date of this Announcement;
|
|
"Bookbuild" |
the accelerated bookbuild process to be undertaken by Cantor Fitzgerald, GMP FirstEnergy and Stifel in connection with the Placing;
|
|
"Cantor Fitzgerald" |
Cantor Fitzgerald Europe, the Company's nominated adviser and broker and joint bookrunner to the Placing;
|
|
"Circle"
|
Circle Oil plc, a company incorporated in the Republic of Ireland; |
|
"Circle Assets"
|
a 100 per cent. shareholding in Circle Oil Egypt and a 100 per cent. shareholding in Circle Oil Maroc;
|
|
"Circle Oil Egypt" |
Circle Oil Egypt Limited, an indirect 100 per cent. subsidiary of Circle and one of the Circle Assets;
|
|
"Circle Oil Jersey" |
Circle Oil Jersey Limited, a 100 per cent. subsidiary of Circle;
|
|
"Circle Oil Maroc" |
Circle Oil Maroc Limited, an indirect 100 per cent. subsidiary of Circle and one of the Circle Assets;
|
|
"Common Share" |
common shares of no par value in the capital of the Company, or depository interests representing such common shares;
|
|
"Company" or "SDX" |
SDX Energy Inc., a company incorporated in Alberta, Canada;
|
|
"CPR"
|
the competent persons report prepared by Lloyd's Register and dated 24 January 2017, which has been published on the Company's website at www.sdxenergy.com from the date of this Announcement;
|
|
"CREST" |
a relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations);
|
|
"CREST Regulations" |
the Uncertificated Securities Regulations 2001 (SI 2001/3755) as amended from time to time;
|
|
"D&M"
|
Degolyer and MacNaughton Canada Limited; |
|
"EGPC"
|
Egyptian General Petroleum Corporation; |
|
"Euroclear" |
Euroclear UK & Ireland Limited;
|
|
"Existing Common Shares" |
the 79,843,902 Common Shares in issue as at the date of this Announcement;
|
|
"FCA" |
the Financial Conduct Authority;
|
|
"Fundraising"
|
the Placing and Subscriptions of the new Common Shares at the Placing Price to raise gross proceeds of US$40 million;
|
|
"GMP FirstEnergy" |
FirstEnergy Capital LLP, and an affiliate of GMP Securities L.P. and the Company's joint broker, financial adviser to the Acquisition and joint bookrunner to the Placing;
|
|
"Group" |
the Company and its subsidiaries;
|
|
"ISIN" |
international securities identification number;
|
|
"Lalla Mimouna"
|
the Lalla Mimouna oil and gas concession in Morocco; |
|
"Lloyds Register"
|
Lloyds Register (Lloyd's Register (GB) Limited); |
|
"London Stock Exchange" |
London Stock Exchange plc;
|
|
"Long Stop Date" |
28 February 2017;
|
|
"ONHYM"
|
L'Office National des Hydrocarbures et des mines; |
|
the "Order" |
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended;
|
|
"Meseda"
|
the Meseda field located in Block H, Egypt; |
|
"NW Gemsa"
|
the North West Gemsa hydrocarbon concession in Egypt;
|
|
"Placee" |
any person who offers to subscribe for new Common Shares in the Placing;
|
|
"Placing" |
the placing of new Common Shares at the Placing Price in accordance with the Terms and Conditions;
|
|
"Placing Agreement" |
the agreement dated 24 January 2017 between the Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel in relation to the Placing;
|
|
"Placing Price" |
a price of 30 pence (C$0.50) per new Common Share;
|
|
"Placing Shares" |
the new Common Shares to be issued to placees in the Placing;
|
|
"Sebou"
|
the Sebou oil and gas concession in Morocco; |
|
"Securities Act" |
the United States Securities Act of 1933, as amended;
|
|
"Shareholders" |
persons who are registered holders of Common Shares from time to time;
|
|
"SPA" |
the share purchase agreement to be entered into in respect of the Acquisition;
|
|
"Stifel"
|
Stifel Nicolaus Europe Limited, joint bookrunner to the Placing; |
|
"Subscriptions"
|
the subscriptions for new Common Shares at the Placing Price by subscribers directly introduced by the Company;
|
|
"Terms and Conditions" |
the terms and conditions of the Placing, set out in Appendix I to this Announcement;
|
|
"Term Sheet" |
the pricing supplement in relation to the Placing and the Subscriptions following the Bookbuild.
|
|
"TSX-V"
|
the TSX Venture Exchange, on which the Existing Common Shares are currently listed for trading;
|
|
"uncertificated" or "uncertificated form" |
recorded on the register of members of the Company as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST;
|
|
"UK" or "United Kingdom" |
the United Kingdom of Great Britain and Northern Ireland;
|
|
"US Person"
|
a US person as defined in the Securities Act; |
|
"US$ or USD" |
United states dollar, the lawful currency of the United States of America;
|
|
"£" and "C$" |
Sterling, the lawful currency of the United Kingdom; and Canadian dollar, the lawful currency of Canada.
|
GLOSSARY
|
1P |
Proved reserves
|
|
2P |
Proved + Probable reserves
|
|
3P |
Proved + Probable + Possible reserves
|
|
1C |
Contingent resources - Low case
|
|
2C |
Contingent resources - Mid case
|
|
3C |
Contingent resources - High case
|
|
|
|
|
bbl
|
barrel of crude oil |
|
Bcf
|
billion cubic feet of natural gas |
|
bfpd
|
barrels of fluid per day |
|
boe
|
barrel of crude oil equivalent |
|
boepd
|
barrels of crude oil equivalent per day |
|
bopd
|
barrels of crude oil per day |
|
COGEH |
Canadian Oil and Gas Evaluation Handbook
|
|
km
|
kilometres |
|
km2
|
square kilometres |
|
Mcf
|
thousand cubic feet of natural gas |
|
MM |
Millions
|
|
MMbbls
|
million barrels of crude oil |
|
MMboe
|
million barrels of crude oil equivalent
|
|
MMscf/d
|
million standard cubic feet of natural gas per day |
|
NI 51-101 |
Canadian National Instrument 51-101
|
|
PRMS |
the Petroleum Resource Management System of the Society of Petroleum Engineers
|
Cantor Fitzgerald Europe which is authorised and regulated in the United Kingdom by the FCA, is acting for the Company and for no one else in connection with the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to Cantor Fitzgerald's clients, or for providing advice in relation to the Placing, or any other matters referred to herein.
First Energy Capital LLP which is authorised and regulated in the United Kingdom by the FCA, is acting for the Company and for no one else in connection with the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to GMP First Energy's clients, or for providing advice in relation to the Placing, or any other matters referred to herein.
Stifel Nicolaus Europe Limited which is authorised and regulated in the United Kingdom by the FCA, is acting for the Company and for no one else in connection with the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to Stifel's clients, or for providing advice in relation to the Placing, or any other matters referred to herein.
Inside Information
The information contained in this announcement is inside information. If you have any queries on this, then please contact Mark Reid, the Chief Financial Officer and Director of the Company (responsible for arranging release of this announcement) at 38 Welbeck Street, London, W1G 8DP on +44 (0) 203 219 5640.
Forward Looking Statements
Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the assets of Circle Oil Egypt and Circle Oil Maroc, the Acquisition, the Fundraising and the future prospects and strategy of the Company, and the results referenced or implied herein should be viewed as forward-looking statements.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements". All reserves and resources information contained herein should be considered as forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and other factors include, among others, costs and timing of exploration and production development, availability of capital to fund exploration and development and political, social and other risks inherent in carrying on business in Egypt and Morocco. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.
Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law. Although SDX has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Actual results may differ materially from those currently anticipated. SDX's Annual Information Form for the year ended December 31, 2015, filed on the Company's SEDAR profile on April 29, 2016, has a full description of the risks and uncertainties associated with the Company's business, including its exploration activities and these risk factors and uncertainties should be referred to and read in their entirety. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
Reserves and Resources Data- Egypt and Evolution Resources SA statement regarding Morocco
The determination of oil and natural gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of proved, probable and possible reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of recovery.
The estimation and classification of reserves requires the application of professional judgment combined with geological and engineering knowledge to assess whether or not specific reserves classification criteria have been satisfied. Knowledge of concepts including uncertainty and risk, probability and statistics, and deterministic and probabilistic estimation methods is required to properly use and apply reserves definitions.
The recovery and reserve estimates of oil reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein.
Terms related to reserves classifications referred to herein are based on definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and are in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
"Proved reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
"Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
"Possible Reserves" are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
The qualitative certainty levels referred to in the definitions above are applicable to "individual reserves entities", which refers to the lowest level at which reserves calculations are performed, and to "reported reserves", which refers to the highest level sum of individual entity estimates for which reserves estimates are presented. Reported reserves should target the following levels of certainty under a specific set of economic conditions:
- at least a 90 per cent. probability that the quantities actually recovered will equal or exceed the estimated proved reserves. This category of reserves can also be denoted as 1P;
- at least a 50 per cent. probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves. This category of reserves can also be denoted as 2P; and
- at least a 10 per cent. probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable plus possible reserves. This category of reserves can also be denoted as 3P.
Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGE Handbook. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.
Use of the term "boe" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Certain volumes provided in this news release represent a pro forma arithmetic sum of multiple estimates of proved plus probable reserves, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of reserves and appreciate the differing probabilities of recovery associated with each class as explained in the annual oil and gas disclosure filings of SDX (available on www.sedar.com) and the effects of arithmetic aggregation. Factors that could affect the accuracy of the reported pro forma aggregated reserves estimates include company level differences in evaluation effective dates, reservoir characteristics and pricing assumptions.
Resources are petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including discovered and undiscovered (recoverable and unrecoverable) plus quantities already produced. Total resources is equivalent to total petroleum initially-in-place.
"Contingent Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies.
"Prospective Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development.
Resources information in this press release relating to Egypt is based on the DeGolyer and MacNaughton Report. Reserves information in this press release relating to NW Gemsa are based on the independent reserves and resources evaluation of the Company by DeGolyer and MacNaughton Canada Limited (the "DeGolyer and MacNaughton Report"), dated December 31, 2015, evaluating SDX's crude oil, natural gas liquids and natural gas reserves and resources between January 1, 2015 and December 31, 2015 . A copy of the DeGolyer and MacNaughton Report is available on SDX's website at www.sdxenergy.com.
A review of Reserves and Resources for Circle Oil Maroc's assets in accordance with Canadian National Instrument NI 51-101 and the COGE Handbook has been prepared by Evolution Resources SA. A copy of this statement is on SDX's website at www.sdxenergy.com.
The Net Present Values presented in this announcement which have extracted from the report been prepared by Evolution Resources SA have been calculated based on the information provided by SDX Energy and the NI51-101 requirements. The NPV provided might not necessarily be representative of the fair market value of the reserves or the assets.
Reserves and Resources Data Morocco - Lloyd's Register CPR
SDX has commissioned a CPR on the Sebou permits in Morocco from Lloyd's Register. Reserves and contingent resources which have been evaluated by Lloyd's Register have been evaluated in accordance with the 2007 Petroleum Resources Management System prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE). A copy of this CPR is available on SDX's website www.sdxenergy.com.
APPENDIX I - TERMS AND CONDITIONS OF THE PLACING
FOR INVITED PLACEES ONLY - IMPORTANT INFORMATION
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING, NO PUBLIC OFFERING OF PLACING SHARES IS BEING OR WILL BE MADE AND EACH PLACEE AGREES AND WARRANTS THAT IT IS NOT ACQUIRING PLACING SHARES ON BEHALF OF MEMBERS OF THE PUBLIC OR ITS RETAIL CLIENTS (AS THAT TERM IS DEFINED IN THE RULES OF THE FCA), SAVE WHERE THE PLACEE DOES SO ON A FULLY DISCRETIONARY BASIS AND WITHOUT REFERENCE TO ANY SUCH RETAIL CLIENTS. THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT AND REFERRED TO IN IT ARE DIRECTED ONLY AT PERSONS SELECTED BY THE JOINT BOOKRUNNERS WHO ARE (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE "QUALIFIED INVESTORS", AS DEFINED IN ARTICLE 2.1(E) OF DIRECTIVE 2003/71/EC (AS AMENDED AND INCLUDING APPLICABLE IMPLEMENTING DIRECTIVE MEASURES) ("THE PROSPECTUS DIRECTIVE"), (B) IF IN THE UNITED KINGDOM, PERSONS WHOSE (I) ORDINARY ACTIVITIES INVOLVE THEM ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES AND HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS WHO FALL WITHIN THE DEFINITION OF "INVESTMENT PROFESSIONALS" IN ARTICLE 19(5) OF THE ORDER OR FALL WITHIN THE DEFINITION OF "HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS ETC" IN ARTICLE 49(2)(A) TO (D) OF THE ORDER AND (II) ARE "QUALIFIED INVESTORS" AS DEFINED IN SECTION 86 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 OR (C) PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. DISTRIBUTION OF THIS ANNOUNCEMENT IN CERTAIN JURISDICTIONS MAY BE RESTRICTED OR PROHIBITED BY LAW. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO.
THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN OR INTO THE UNITED STATES, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION (EACH, A "RESTRICTED TERRITORY").
Each Placee should consult with its own advisers as to legal, tax, business and related aspects of any subscription for Placing Shares.
These Terms and Conditions do not constitute an offer or invitation to acquire, underwrite or dispose of, or any solicitation of any offer or invitation to acquire, underwrite or dispose of, any Common Shares or other securities of the Company to any person in any jurisdiction to whom it is unlawful to make such offer, invitation or solicitation in such jurisdiction. Persons who seek to participate in the Placing must inform themselves about and observe any such restrictions and must be persons who are able to lawfully receive this Announcement in their jurisdiction. In particular, these Terms and Conditions do not constitute an offer or invitation (or a solicitation of any offer or invitation) to acquire, underwrite or dispose of or otherwise deal in any Common Shares or other securities of the Company in the United States, Canada, Australia, Japan or the Republic of South Africa.
The Placing Shares have not been, and will not be, registered under the Securities Act or the securities laws or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, or transferred, directly or indirectly, in the United States absent registration under the Securities Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. Any offering of the Placing Shares to be made in the United States will be made only to a limited number of "qualified institutional buyers" as defined in Rule 144A under the Securities Act pursuant to an exemption from the registration requirements of the Securities Act in a transaction not involving any public offering and outside the United States in offshore transactions in accordance with Regulation S under the Securities Act ("Regulation S"). No public offering of the Placing Shares is being made in the United Kingdom, any Restricted Territory or elsewhere.
These Terms and Conditions apply to Placees, each of whom confirms its agreement, whether by telephone or otherwise, with Cantor Fitzgerald, GMP FirstEnergy or Stifel (the "Bookrunners") to subscribe for Placing Shares in the Placing, and hereby agrees with each of the Bookrunners to be legally and irrevocably bound by these Terms and Conditions which will be the Terms and Conditions on which the Placing Shares will be acquired in the Placing and is deemed to have read and understood this Announcement in its entirety (including this Appendix) and to be providing the representations, warranties, undertakings, agreements and acknowledgements contained in this Appendix.
Capitalised terms not otherwise defined in this appendix are as defined in the Announcement relating to the Placing of which this appendix forms a part.
The Terms and Conditions must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which the Terms and Conditions set out herein relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. A Placee may not assign, transfer, or in any manner, deal with its rights or obligations under the agreement arising from the acceptance of the Placing, without the prior written agreement of the Bookrunners or in accordance with all relevant requirements.
All times and dates in this appendix are references to times and dates in London (United Kingdom).
Terms of the Placing
The Bookrunners have entered into the Placing Agreement with the Company under which the Bookrunners have severally (and not jointly or jointly and severally), on the terms and subject to the conditions set out therein, undertaken to use their reasonable endeavours as agents of the Company to procure Placees for the Placing Shares. The Bookrunners will today commence the Bookbuild to determine demand for participation in the Placing. This appendix gives details of the terms and conditions of, and the mechanics for participation in, the Placing.
Each Placee's commitment to subscribe for a fixed number of Placing Shares under the Placing will be agreed orally with Cantor Fitzgerald, GMP FirstEnergy or Stifel and such agreement will constitute a binding irrevocable commitment by a Placee, subject to the Terms and Conditions set out in this appendix, to subscribe and pay for the relevant number of Placing Shares (the "Placing Participation") at the Placing Price. Such commitment is not capable of termination or rescission by the Placee in any circumstances except fraud. All such obligations are entered into by the Placee with Cantor Fitzgerald, GMP FirstEnergy or Stifel acting in their capacity as agents of the Company and are therefore directly enforceable by the Company.
After such agreement is entered into, each Placee allocated Placing Shares in the Placing will be sent a confirmatory email stating the number of Placing Shares allocated to it at the Placing Price, the total subscription amount payable to the Bookrunners and including settlement instructions (the "Confirmation Note"). Except with the Bookrunners' consent, such commitment will not be capable of variation or revocation after the time at which it is submitted.
Each Placee will be deemed to have read this appendix in its entirety. Cantor Fitzgerald, GMP FirstEnergy and Stifel are each acting for the Company and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of these Terms and Conditions) as a client in relation to the Placing and to the fullest extent permitted by law and applicable FCA rules, neither Cantor Fitzgerald, GMP FirstEnergy nor Stifel nor any of their respective affiliates will have any liability, obligation or duty to Placees or to any person other than the Company in respect of the Placing.
The Company confirms that the Placing Shares will when issued, subject to the constitution of the Company, rank pari passu in all respects and form one class with the Existing Common Shares of the Company in issue on Admission, including the right to receive dividends or other distributions after the date of issue of the Placing Shares, if any. The Placing Shares will be issued free of any encumbrance, lien or other security interest.
The completion of the Bookbuild will be determined by the Bookrunners in their absolute discretion and shall then be announced on a Regulatory Information Service as soon as is practicable following completion of the Bookbuild. The Bookbuild is expected to close no later than 8.00 a.m. on 25 January 2017 but may be closed earlier or later at the discretion of the Bookrunners. The Bookrunners may, in agreement with the Company, accept bids that are received after the Bookbuild has closed. The Bookrunners reserve the right to reduce or seek to increase the amount to be raised pursuant to the Placing, in their absolute discretion.
The Placing Price per Placing Share is 30 pence (C$0.50).
Application for Admission
Application will be made to the London Stock Exchange for Admission of the Placing Shares to trading on AIM. It is anticipated that Admission of the Placing Shares to trading on AIM will become effective at 8.00 a.m. on 27 January 2017 and that dealings in the Placing Shares will commence at that time and date for normal account settlement.
Application will also be made to TSX-V for the Placing Shares and Subscription Shares to be listed on the TSX-V. The Placing Shares and Subscription Shares are expected to be listed on the TSX-V within one business day following Admission.
Placing Participations conditional
Placing Participations are in all respects conditional upon:-
(i) the Placing Agreement entered into between Cantor Fitzgerald, GMP FirstEnergy, Stifel and the Company relating to the placing of the Placing Shares becoming unconditional in all respects and not having been terminated in accordance with its terms; and
(ii) Admission having become effective;
in each case by 8.00 a.m. on 27 January 2017 (or such later time and/or date as the Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel agree, but in any event being no later than 8.00 a.m. on 28 February 2017 (the "Long Stop Date")).
Scaling back
Each of Cantor Fitzgerald, GMP FirstEnergy and Stifel (after consulting with the Company) reserve the right to scale back the number of Placing Shares to be subscribed by any Placee or the number of Placing Shares to be subscribed for by all Placees in aggregate. The Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel also each reserve the right not to offer allocations of Placing Shares to any person and not to accept offers to subscribe for Placing Shares or to accept such offers in part rather than in whole. Cantor Fitzgerald, GMP FirstEnergy and Stifel shall be entitled to effect the Placing by such method as they shall in their sole discretion lawfully determine in the exercise of their appointment and the powers, authority and discretion conferred on them as Bookrunners.
To the fullest extent permissible by law, neither Cantor Fitzgerald, GMP FirstEnergy nor Stifel nor any holding company thereof, nor any subsidiary, branch or affiliate of Cantor Fitzgerald or GMP FirstEnergy or Stifel (each an "Affiliate") nor any person acting on behalf of any of the foregoing shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, none of Cantor Fitzgerald, GMP FirstEnergy, Stifel, nor any of their Affiliates nor any person acting on behalf of any such person shall have any liability to Placees in respect of its conduct of the Placing.
Placing Agreement
Pursuant to the Placing Agreement, Cantor Fitzgerald, GMP FirstEnergy and Stifel have each agreed on behalf of and as agent of the Company, to use its reasonable endeavours to procure persons who will subscribe for the Placing Shares at the Placing Price, subject to these Terms and Conditions. The Placing is not underwritten.
Conditions of the Placing
The obligations of each of Cantor Fitzgerald, GMP FirstEnergy and Stifel under the Placing Agreement in respect of the Placing Shares are conditional, inter alia, on:-
(i) the SPA having been signed and entered into by the parties thereto prior to Admission;
(ii) the Bookbuild being successfully completed and the Subscriptions becoming unconditional (other than a condition that the Placing Agreement is unconditional);
(iii) none of the warranties in the Placing Agreement being untrue or inaccurate or misleading at the date of the agreement and at the date of Admission and no fact or circumstance having arisen which would render any of the warranties untrue or inaccurate or misleading when repeated at Admission;
(iv) the Placing Shares having been allotted, subject only to Admission; and
(v) Admission taking place not later than 8.00 a.m. on 27 January 2017 or such later time or date as the Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel may otherwise agree (but not being later than 8.00 a.m. on the Long Stop Date).
The Placing Agreement contains, inter alia, certain warranties and indemnities from the Company for the benefit of Cantor Fitzgerald, GMP FirstEnergy and Stifel.
Right to terminate the Placing Agreement
Cantor Fitzgerald, GMP FirstEnergy and Stifel may, each in their absolute discretion, terminate the Placing Agreement (inter alia) if: (i) they become aware of any circumstance resulting in a material breach of the warranties given to them in the Placing Agreement at the date of the agreement or when repeated on Admission; (ii) the Company is in material breach of any provision of the Placing Agreement; (iii) an event or other matter (including, without limitation, any change or development in economic, financial, political, diplomatic or other market conditions or any change in the laws or regulation of Egypt or Morocco or other applicable jurisdiction) has occurred or is reasonably likely to occur which materially and adversely affects the assets, financial position or the business or prospects of the Company and, in Cantor Fitzgerald, GMP FirstEnergy or Stifel's opinion (acting in good faith) will have a materially prejudicial effect on the Placing or otherwise makes it impractical or inadvisable for Cantor Fitzgerald, GMP FirstEnergy or Stifel to perform their obligations under the Placing Agreement.
The exercise by Cantor Fitzgerald, GMP FirstEnergy or Stifel of a right of termination (or any right of waiver exercisable by Cantor Fitzgerald, GMP FirstEnergy and Stifel) contained in the Placing Agreement or the exercise of any discretion under the Terms and Conditions set out herein is within the absolute discretion of Cantor Fitzgerald, GMP First Energy and/or Stifel (acting in good faith) and none of them will have any liability to Placees whatsoever in connection with any decision to exercise or not exercise any such rights.
By accepting the Placing Shares referred to in the Announcement to which this appendix is annexed, each Placee agrees that, without having any liability to such Placee, Cantor Fitzgerald, GMP FirstEnergy and Stifel may, in their absolute discretion, exercise the right: (i) to extend the time for fulfilment of any of the conditions in the Placing Agreement (provided that Placees' commitments are not extended beyond the Long Stop Date); (ii) to waive, in whole or in part, fulfilment of certain of the conditions (but not including Admission); or (iii) to terminate the Placing Agreement, in each case without consulting Placees (or any of them).
If any of the conditions in the Placing Agreement are not satisfied (or, where relevant, waived), the Placing Agreement is terminated or the Placing Agreement does not otherwise become unconditional in all respects, the Placing will not proceed and all funds delivered by Placees to Cantor Fitzgerald, GMP FirstEnergy, Stifel or the Company pursuant to the Placing and this appendix will be returned to Placees at their risk without interest, and Placees' rights and obligations under the Placing shall cease and determine at such time and no claim shall be made by Placees in respect thereof.
Registration and settlement
Irrespective of the time at which the Placee's allocation(s) pursuant to the Placing is/are confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made on the basis explained below.
Settlement of transactions in the Placing Shares (ISIN: CA78410A1075) following Admission will take place within CREST (subject to certain exceptions). Cantor Fitzgerald, GMP FirstEnergy and Stifel reserve the right to require settlement for, and delivery of, the Placing Shares (or a portion thereof) to Placees by such other means that they may deem necessary if delivery or settlement is not possible or practicable within CREST within the timetable set out in this Announcement or would not be consistent with the regulatory requirements in the jurisdiction of any Placee.
It is expected that settlement will be on 27 January 2017 in accordance with the instructions set out in the Confirmation Note.
Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of 3 percentage points above The Royal Bank of Scotland plc's base rate, with interest compounded on a daily basis.
Each Placee is deemed to agree that, if it does not comply with these obligations, Cantor Fitzgerald, GMP FirstEnergy and Stifel may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for Cantor Fitzgerald, GMP FirstEnergy or Stifel's account and benefit (as agents for the Company), an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax or securities transfer tax (together with any interest or penalties) which may arise in any jurisdiction upon the sale of such Placing Shares on such Placee's behalf. By communicating a bid for Placing Shares, each Placee confers on Cantor Fitzgerald, GMP FirstEnergy and Stifel all such authorities and powers necessary or desirable to carry out any such sale and agrees to ratify and confirm all actions which Cantor Fitzgerald, GMP FirstEnergy and Stifel lawfully takes in pursuance of such sale.
If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the Confirmation Note is copied and delivered immediately to the relevant person within that organisation.
The Company confirms that insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax or securities transfer tax.
Placees will not be entitled to receive any fee or commission in connection with the Placing.
Further Terms, Confirmations and Warranties
By accepting the Placing Participation referred to in the Confirmation Note, each Placee outside the United States makes the following confirmations, acknowledgements, representations, warranties and/or undertakings to Cantor Fitzgerald, GMP FirstEnergy and Stifel and the Company and their respective directors, agents and advisers:
1. each Placee confirms, represents and warrants that it has read and understood this Announcement (including this appendix) in its entirety and acknowledges that its Placing Participation will be governed by the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings in this appendix;
2. each Placee acknowledges and agrees that its Placing Participation on the Terms and Conditions set out in this appendix is legally binding, irrevocable and is not capable of termination or rescission by such Placee in any circumstances;
3. each Placee confirms, represents and warrants that it has not relied on, received or requested nor does it have any need to receive, any prospectus, offering memorandum, listing particulars or any other document (other than the Announcement), any information given or any representations, warranties, agreements or undertakings (express or implied), written or oral, or statements made at any time by the Company, Cantor Fitzgerald, GMP FirstEnergy or Stifel or by any subsidiary, holding company, branch or associate of the Company, Cantor Fitzgerald, GMP FirstEnergy or Stifel or any of their respective officers, directors, agents, employees or advisers, or any other person in connection with the Placing, the Company and its subsidiaries or the Placing Shares and that in making its application under the Placing it is relying solely on the information contained in the Announcement and this appendix and it will not be relying on any agreements by the Company and its subsidiaries or Cantor Fitzgerald, GMP FirstEnergy or Stifel, or any director, employee or agent of the Company, Cantor Fitzgerald, GMP FirstEnergy or Stifel other than as expressly set out in this appendix, for which none of Cantor Fitzgerald, GMP FirstEnergy nor Stifel nor any of their directors and/or employees and/or person(s) acting on behalf of any of them shall to the maximum extent permitted under law have any liability except in the case of fraud;
4. each Placee confirms, represents and warrants that it is sufficiently knowledgeable to understand and be aware of the risks associated with, and other characteristics of, the Placing Shares and, among others, of the fact that it may not be able to resell the Placing Shares except in accordance with certain limited exemptions under applicable securities legislation and regulatory instruments;
5. each Placee confirms, represents and warrants, if a company, that it is a valid and subsisting company and has all the necessary corporate capacity and authority to execute its obligations in connection with the Placing Participation and confirms, represents and warrants that any person who confirms to Cantor Fitzgerald, GMP FirstEnergy or Stifel on behalf of a Placee an agreement to subscribe for Placing Shares is duly authorised to provide such confirmation to Cantor Fitzgerald, GMP FirstEnergy or Stifel (as the case may be);
6. each Placee agrees that the exercise by Cantor Fitzgerald, GMP FirstEnergy or Stifel of any right of termination or any right of waiver exercisable by Cantor Fitzgerald, GMP FirstEnergy and Stifel contained in the Placing Agreement or the exercise of any discretion including (without limitation) the right not to enter into the Placing Agreement is within the absolute discretion of Cantor Fitzgerald, GMP FirstEnergy and Stifel, and none of them will have any liability to any Placee whatsoever in connection with any decision to exercise or not exercise any such rights. Each Placee acknowledges that if: (i) any of the conditions in the Placing Agreement are not satisfied (or, where relevant, waived); (ii) the Placing Agreement is terminated; or (iii) the Placing Agreement does not otherwise become unconditional in all respects; the Placing will lapse and such Placee's rights and obligations in relation to the Placing shall cease and determine at such time and no claim shall be made by any Placee in respect thereof;
7. each Placee acknowledges and agrees that none of Cantor Fitzgerald, GMP FirstEnergy or Stifel are acting for, and that it does not expect Cantor Fitzgerald, GMP FirstEnergy or Stifel to have any duties or responsibilities towards, such Placee, including, without limitation, for providing protections afforded to customers or clients of Cantor Fitzgerald, GMP FirstEnergy or Stifel under the FCA's Conduct of Business Sourcebook or advising such Placee with regard to its Placing Participation and that such Placee is not, and will not be, a customer or client of Cantor Fitzgerald, GMP FirstEnergy or Stifel as defined by the FCA's Conduct of Business Sourcebook in connection with the Placing. Likewise, neither Cantor Fitzgerald, GMP FirstEnergy nor Stifel will treat any payment by such Placee pursuant to its Placing Participation as client money and governed by the FCA's Client Assets Sourcebook;
8. each Placee undertakes and agrees that it will be responsible for any stamp duty or stamp duty reserve tax or securities transfer tax in relation to the Placing Shares comprised in its Placing Participation and that neither Cantor Fitzgerald, GMP FirstEnergy, Stifel nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax or securities transfer tax in relation to the Placing Shares comprised in such Placee's Placing Participation;
9. each Placee confirms, represents and warrants that it is a Relevant Person and that it may lawfully subscribe for or acquire the Placing Shares comprised in such Placee's Placing Participation and that it has complied with and will comply with all applicable law and regulation with respect to anything done by such Placee in relation to the Placing Shares in, from or otherwise involving, the United Kingdom or elsewhere;
10. each Placee acknowledges and agrees that the agreement confirmed by the Confirmation Note is a legally binding contract between it and the Company and the Terms and Conditions of such Placee's Placing Participation will be governed by, and construed in accordance with, the laws of England and Wales to the exclusive jurisdiction of whose courts such Placee irrevocably agrees to submit;
11. each Placee agrees that it will ensure delivery and payment is completed in accordance with the settlement instructions set out in the Confirmation Note and acknowledges and agrees that time shall be of the essence as regards such Placee's obligations pursuant to its Placing Participation;
12. each Placee acknowledges and agrees that it is the responsibility of such Placee (if it is outside of the United Kingdom) to satisfy itself that, in doing so, such Placee complies with the laws and regulations of any relevant territory in connection with its Placing Participation and that it obtains any requisite governmental or other consents and observes any other applicable formalities;
13. each Placee acknowledges and agrees that the Announcement does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, Placing Shares in any jurisdiction in which such an offer or solicitation is unlawful. Accordingly, such Placee acknowledges and agrees that the Placing Shares may not, subject to certain limited exceptions, be offered or sold, directly or indirectly, in or into the United States, any province of Canada or Australia, Japan or the Republic of South Africa or offered or sold to, or for the account or benefit of, a national, citizen or resident of the United States, any province of Canada or Australia, Japan or the Republic of South Africa, in each case subject to limited exemptions, or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction;
14. each Placee acknowledges and agrees that the Placing Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or jurisdiction of the United States, or the relevant Canadian, Japanese, Australian or South African securities legislation and therefore the Placing Shares may not be offered, sold, transferred or delivered directly or indirectly into the United States, Canada, Japan, Australia or the Republic of South Africa or their respective territories and possessions, subject to limited exemptions, and in the case of the United States, pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and in compliance with United States securities laws;
15. each Placee confirms, represents and warrants that it has complied with all relevant laws of all relevant territories, obtained all requisite governmental or other consents which may be required in connection with its Placing Participation and complied with all requisite formalities, and that it has not taken any action or omitted to take any action which will or may result in Cantor Fitzgerald, GMP FirstEnergy, Stifel, the Company or any of their respective directors, officers, agents, employees or advisers acting in breach of the legal or regulatory requirements of any territory in connection with the Placing or such Placee's Placing Participation;
16. each Placee confirms, represents and warrants that its subscription for Placing Shares does not trigger, in the jurisdiction in which such Placee is resident or located: (i) any obligation to prepare or file a prospectus or similar document or any other report with respect to such subscription; (ii) any disclosure or reporting obligation of the Company; or (iii) any registration or other obligation on the part of Cantor Fitzgerald, GMP FirstEnergy, Stifel or the Company;
17. each Placee confirms, represents and warrants it is acting as principal and for no other person and that its Placing Participation will not give any other person a contractual right to require the issue by the Company of any Placing Shares;
18. each Placee confirms, represents and warrants that in accepting its Placing Participation it is not applying for registration as, or as a nominee or agent for, a person who is or may be a person mentioned in sections 67 to 72 inclusive and sections 93 to 97 inclusive of the UK Finance Act 1986;
19. each Placee confirms, represents and warrants that, to the extent applicable to it, it is aware of its obligations in connection with the UK Criminal Justice Act 1993, Terrorism Act 2006, Anti-Terrorism Crime and Security Act 2001, Money Laundering Regulations, the Proceeds of Crime Act 2002 and the Financial Services and Markets Act 2000 (each as amended), it has identified its clients in accordance with the Money Laundering Regulations 2007 and it has complied fully with its obligations pursuant to those Regulations;
20. each Placee acknowledges and agrees that all times and dates in this Announcement and the Terms and Conditions set out in this appendix, may be subject to amendment and that Cantor Fitzgerald, GMP FirstEnergy or Stifel will notify it of any such amendments;
21. each Placee acknowledges and agrees that no term of the agreement confirmed by the Confirmation Note shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by any person other than the Company, Cantor Fitzgerald, GMP FirstEnergy or Stifel or any affiliate of Cantor Fitzgerald, GMP FirstEnergy or Stifel or any Indemnified Persons (as hereinafter defined);
22. each Placee acknowledges that any of its monies held or received by Cantor Fitzgerald, GMP FirstEnergy or Stifel will not be subject to the protections conferred by the FCA's Client Money Rules;
23. each Placee confirms, represents and warrants that it understands that the Placing Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and, accordingly, may not be offered or sold or otherwise transferred in the United States or to, or for the account or benefit of, US Persons except pursuant to a registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, and, in connection with any such transfer, the Company or the Bookrunners will have the right to obtain, as a condition to transfer, a legal opinion of counsel, in form and by counsel reasonably satisfactory to the Company or the Bookrunners, that no such Securities Act registration is or will be required along with appropriate certifications by the transferee as to the 'Accredited Investor' status and/or other appropriate matters;
24. each Placee confirms, represents and warrants that it has not distributed, forwarded, transferred or otherwise transmitted this Announcement or any other presentation or offering materials concerning the Placing Shares within the United States, nor will it do any of the foregoing. Such Placee further confirms that it understands that the information in this Announcement, including financial information, may be materially different from any disclosure that would be provided in a United States offering;
25. each Placee agrees, confirms, represents, warrants and undertakes as follows:-
25.1. it is, at the time of the offer and acceptance of the Placing Shares, outside the United States for the purposes of Regulation S;
25.2. it will not offer or sell the Placing Shares in the United States absent registration or an exemption from registration under the Securities Act;
25.3. it is aware that the Placing Shares are being offered outside the United States in reliance on Regulation S; and
25.4. it did not purchase or otherwise acquire the Placing Shares based on or due to directed selling efforts (as defined in Rule 902 under the Securities Act), including based on an advertisement in a publication with a general circulation in the United States, nor has it seen or been aware of any activity that, to its knowledge, constitutes directed selling efforts in the United States;
26. if it is subscribing for the Placing Shares in the United Kingdom, each Placee is a Relevant Person;
27. if it has received any confidential price sensitive information about the Company in advance of the Placing, it warrants that it has received such information within the market soundings regime provided for in article 11 of MAR and associated delegated regulations and has not: (a) dealt in the securities of the Company; (b) encouraged or required another person to deal in the securities of the Company; or (c) disclosed such information to any person, prior to the information being made publicly available;
28. each Placee confirms, represents and warrants that, in making its investment decision with respect to the Placing Shares:-
28.1. it has not relied on the Company or any of its respective affiliates or on any document published by any of them (other than the Announcement);
28.2. it has the ability to bear the economic risk of its investment in the Placing Shares and has no need for liquidity with respect to its investment in the Placing Shares;
28.3. it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits, risks and suitability of investing in the Placing Shares, and is able to sustain a complete loss of any investment in the Placing Shares;
28.4. it has investigated independently and made its own assessment and satisfied itself concerning the relevant tax, legal, currency and other economic considerations relevant to its investment in the Placing Shares, including any federal, state and local tax consequences, affecting it in connection with its subscription for and any subsequent disposal of the Placing Shares;
28.5. if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, the Placing Shares purchased by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the European Economic Area which has implemented the Prospectus Directive other than "qualified investors" as defined in Article 2.1(e) of the Prospectus Directive, or in circumstances in which the prior consent of the Bookrunners has been given to the offer or resale; and
28.6. it has not offered or sold and will not offer or sell any Placing Shares to the public in any member state of the European Economic Area except in circumstances falling within Article 3(2) of the Prospectus Directive which do not result in any requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive;
29. each Placee acknowledges and agrees that it is not entitled to the protections afforded to clients of Cantor Fitzgerald, GMP FirstEnergy or Stifel in connection with the Placing and that neither Cantor Fitzgerald, GMP FirstEnergy, Stifel nor any of their affiliates nor any of their respective officers, directors, employees or advisers shall be liable for any losses (including, without limitation, loss of profit, loss of business or opportunity and special interest or consequential losses), damages or costs of the Placee save as a result of fraud or for death or personal injury;
30. each Placee acknowledges that the Company, Cantor Fitzgerald, GMP FirstEnergy, Stifel, CREST, the registrar, any transfer agent, any distributors or dealers and their respective affiliates and others will rely on the truth and accuracy of the foregoing warranties, acknowledgements, representations, undertakings and agreements, and agrees to notify the Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel promptly in writing if any of its warranties, acknowledgements, representations, undertakings or agreements set out above cease to be accurate and complete and to indemnify and hold harmless on an after-tax basis the Company, Cantor Fitzgerald, GMP FirstEnergy, Stifel and any of their respective officers, directors, agents, employees or advisers ("Indemnified Persons") from and against any and all loss, damage, liability or expense, including reasonable costs and attorneys' fees and disbursements, which an Indemnified Person may incur by reason of, or in connection with, any representation or warranty made by such Placee as set out above not having been true when made, any misrepresentation made or any failure by such Placee to fulfil any of its undertakings or agreements set out above or any other document such Placee provides to the Company, Cantor Fitzgerald GMP FirstEnergy or Stifel. Such Placee irrevocably authorises each of the Company, Cantor Fitzgerald, GMP FirstEnergy and Stifel to produce a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby;
31. acknowledges that it irrevocably appoints any member or officer of a Bookrunner as its agent for the purposes of executing and delivering to the Company and/or its registrars any documents on its behalf necessary to enable it to be registered as the holder of any of the Placing Shares agreed to be taken up by it under the Placing; each Placee acknowledges that the rights and remedies of Cantor Fitzgerald, GMP FirstEnergy, Stifel and the Company under these Terms and Conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one right or remedy will not prevent the exercise of the other rights and/or remedies;
32. authorises and instructs each Bookrunner, the Company and their respective agents to receive and hold any personal data and information of or belonging to the Placee which is received in relation to the Bookbuild or the Placing, and it consents to the lawful use by each Bookrunner, the Company and their respective agents of such data and information for the purposes of the Bookbuild and the Placing;
33. each Placee undertakes that it (and any person acting on its behalf) will make payment for the Placing Shares allocated to it in accordance with this Announcement on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other subscribers or sold as Cantor Fitzgerald, GMP FirstEnergy or Stifel may in their sole discretion determine and without liability to such Placee and such Placee will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear the liability for any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to or referred to in these Terms and Conditions) which may arise upon the placing or sale of such Placee's Placing Shares on its behalf.
Each Placee (if any) located in the United States shall on request make specific representations, warranties and acknowledgements pursuant to a separate US investor representation letter.
CREST depositary interests representing Placing Shares, once issued, will be admitted to CREST with effect from Admission. Placees will receive such depositary interests comprised in their Placing Participation in uncertificated form registered in their CREST member account.
Responsibility
The Terms and Conditions set out in this appendix and the Announcement of which it forms part have been issued by the Company and are the sole responsibility of the Company.
This information is provided by RNS
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