Acquisition/Issue of Equity
Tullow Oil PLC
31 July 2000
TULLOW OIL PLC:
PURCHASE OF MAJOR PACKAGE OF NORTH SEA PRODUCTION INTERESTS FROM BP AMOCO ARCO
FOR A MAXIMUM CONSIDERATION OF Stg £201M
PLACING AND OPEN OFFER TO RAISE APPROXIMATELY Stg £41.8 MILLION (NET OF
EXPENSES)
Tullow Oil plc ('Tullow'), the independent oil and gas exploration,
development and production company, today announced that conditional
agreements had been entered into for the acquisition of interests in a number
of producing gas fields and related infrastructure assets in the southern
sector of the North Sea, for a maximum consideration of Stg £201million cash.
To part fund the acquisition, Tullow also announced a Placing and Open Offer
to raise approximately Stg £41.8 million (net of expenses), and signed a loan
agreement to provide up to Stg £140 million in bridge financing.
The purchase, which is subject to the approval of the UK Government, the
European Commission, licence partners and Tullow shareholders, is of ARCO's
share in several producing gas fields and associated gas pipelines and
processing facilities and is designed to meet an undertaking given by BP Amoco
to secure approval by the European Commission for BP's takeover of Atlantic
Richfield Company (ARCO).
The highlights of the acquisition are:
* Two packages of North Sea production and exploration
assets to be acquired from BP Amoco/ARCO for Stg £201
million, as of 1 January 2000, subject to adjustments
* Assets to be acquired include interests in 16
producing southern North Sea gas fields in the
Thames/Hewett and Murdoch field complexes with proven
and probable reserves estimated at 242.6 bcf as at 1
January 2000 and various associated gas pipeline and
terminal assets
* Purchase also includes 9 undeveloped gas discoveries
and numerous exploration prospects and leads
* BP to support Tullow in its proposal to operate
Thames area fields, subject to UK Government and
licence partners agreements
* Provides Tullow with significant cash flow to support
its anticipated exploration and development
programmes both for these assets and worldwide
* Transforms Tullow in size adding approximately 25,000
barrels of oil equivalent production per day, over
five times Tullow's current production
* Acquisition part funded by Placing and Open Offer of
77 million New Ordinary Shares at Stg 57.5p per share
to raise Stg £41.8 million (net of expenses)
underwritten in full by Investec Bank
* Open Offer to Qualifying Shareholders on basis of 1
New Ordinary Share for every 7 Ordinary Shares held
on the Record Date
* Bridge loan financing of Stg £140 million provided by
CIBC World Markets
* Most of the principal assets being acquired subject
to pre-emption rights
Commenting on the acquisition, Aidan Heavey, Managing Director of Tullow,
said: 'We are delighted with this acquisition, which, in a single
transaction, meets all the targets identified in our recent major strategic
review. It will transform Tullow, provide sufficient production revenue to
fund all our foreseeable international exploration projects and unlock
significant upside potential offshore UK.'
He added: 'We believe the asset packages to be acquired will not only
provide Tullow with cashflow to advance activities in an optimal manner but
also provide the platform for significant economic upside in existing
producing fields in the near term, and good longer term appraisal and
exploration potential. We are also delighted to welcome to Tullow John
Lander and Brian Williams who have been recruited to manage these assets in
a new UK subsidiary. I believe their experience and that of the ARCO staff
we also hope to recruit will be a major benefit in developing our North Sea
business.'
Steve Marshall, BP's Regional President in charge of its UK upstream
(exploration and production) assets said: 'We are pleased to have reached
this agreement with Tullow. It will mark the completion of the required
North Sea assets sale. The deal gives Tullow entry to UK offshore waters
where they will bring a new perspective, as other new entrants have done
successfully before them. This can only benefit the North Sea as it
matures further. We have a transition plan in place and will provide all
necessary assistance to Tullow and the co-venturers to ensure a safe and
smooth handover'.
For Further Information:
Aidan Heavey, Managing Tullow Oil plc 020 7389 0300
Director
Graham Martin, Legal and Tullow Oil plc 020 7389 0300
Commercial Director
Tom Hickey, Finance Tullow Oil plc 020 7389 0300
Director
Peter Binns, Mike Tate Binns & Co 020 7786 9600
Judith Parry, Simon Millham 020 7256 5756
Rothschild Communications
Joe Murray Murray 00353 1 632 6400
Consultants
Nigel Tose Investec 020 7597 5970
Henderson
Crosthwaite
Notes to editors are set out at the end of this announcement.
Tullow Oil Plc ('Tullow')
Proposed Acquisition by Tullow Oil plc of a portfolio of United Kingdom
Continental Shelf Southern Gas Basin Interests from BP Amoco ARCO for a
maximum consideration of Stg £201 million
Proposed Placing of 77,000,000 New Ordinary Shares at Stg 57.5p (Euro 0.93)
per share and Open Offer of 39,322,026 of those New Ordinary Shares on the
basis of 1 New Ordinary Share for every 7 Existing Ordinary Shares to raise
Stg £41.8 million (net of expenses) to part fund the Acquisition
Introduction
Tullow today announces that the Group has entered into conditional agreements
with ARCO and Britoil to acquire a number of interests in licences covering
areas in the Southern Gas Basin of the UKCS together with a share in the
ownership of their related infrastructure assets. Completion of the
Acquisition Agreements is conditional upon, inter alia, Shareholder approval.
Most of the principal assets are subject to the exercise of pre-emption or
equivalent rights by co-owners. Therefore, the Tullow Group will only be able
to acquire certain of the licence interests and related infrastructure assets
if the co-owners do not exercise those rights. The periods for such exercise
are between thirty and sixty days. Completion may not take place before these
periods elapse unless co-owners expressly waive their rights. However, the
interest in Gawain field is not affected by pre-emption rights of co-owners
and so will be available for purchase by the Tullow Group if the other
conditions of the Acquisition Agreements are waived or satisfied.
The Acquisition is subject to a number of conditions. These include the
requisite approval of Tullow Exploration as purchaser by the UK government in
its capacity as licensing authority for the Assets and the approval by the
European Commission of Tullow Exploration as the purchaser in the context of
the divestment by BP Amoco/ARCO of the Assets as a necessary step to enable
them to merge. The Directors have no reason to believe that the Tullow Group
is not able to satisfy the criteria on which they understand the decisions of
these regulatory authorities will be made. It is envisaged that the
satisfaction of all of the conditions may take several months. Hence,
Completion of the Acquisition is expected to take place in the fourth quarter
of this year.
The consideration for the Acquisition (the 'Consideration') is Stg £201
million of which Stg £21 million is deferred as described below. The
Consideration will be reduced automatically by the exclusion of any assets
from the Acquisition following any exercise of pre-emption or equitable rights
by co-owners.
The Acquisition is being made by reference to an economic date of 1 January,
2000. As at 1 January, 2000, the Assets were estimated to contain proven
reserves (net to Tullow) of 192.1 bcf and proven plus probable reserves (net
to Tullow) of 242.6 bcf.
As Completion is not expected to take place until the fourth quarter of the
year, pending satisfaction or waiver of the conditions to Completion, the
operating cash flows generated by the Assets in the period from 1 January,
2000 until Completion will reduce the cash payable on Completion significantly
below the base Consideration of Stg £201 million. The Directors estimate that
if Completion takes place on 30 September, 2000, this reduction will be in the
order of Stg £38 million. If the base Consideration is not reduced to this
extent the difference will be made up from the working capital credit facility
detailed below. The Directors therefore believe that the net consideration
due at completion will be approximately Stg £142 million (being the
consideration of Stg £201 million less the deferred element of Stg £21 million
less the operating cashflows since 1 January 2000 of approximately Stg £38
million).
The Company has obtained facilities totalling Stg £140 million from CIBC. To
the extent that the Consideration is reduced as a result of the valid exercise
of pre-emption rights, the facilities will be proportionately reduced.
In order to finance the remainder of the base Consideration, the Company is
proposing to raise approximately Stg £41.8 million (net of expenses) through a
Placing and Open Offer of New Ordinary Shares at Stg 57.5p (Euro 0.93) per
share. Of these New Ordinary Shares, 37,677,974 will be conditionally placed
firm with institutional and other investors and 39,322,026 New Ordinary Shares
will be placed, subject to clawback to satisfy valid applications by
Qualifying Shareholders under the Open Offer. The Open Offer is being made to
Qualifying Shareholders on the basis of 1 New Ordinary Share for every 7
Ordinary Shares held on the Record Date. The Placing and Open Offer has been
underwritten in full by Investec Bank.
In view of the size of the Acquisition in relation to Tullow, the Acquisition
is classified as a reverse takeover under the rules of the UK Listing
Authority and the Irish Stock Exchange, and implementation of the Acquisition
requires the approval of Shareholders. The listing of the Existing Ordinary
Shares was suspended at 3pm on Thursday 27 July and will be restored on the
day following the publication of the circular, comprising a prospectus,
prepared in relation to the Proposals, such publication being expected to take
place by 2 August 2000.
The Acquisition is conditional on the approval of Shareholders of the
Proposals. Approval of the Shareholder resolutions required to effect the
Proposals will be sought at the Extraordinary General Meeting of the Company
to be held on 25 August 2000.
The Prospectus
It is expected that a Prospectus, accompanied by an Application Form for use
in connection with the Open Offer, setting out details of the Placing and Open
Offer and including a notice of the Extraordinary General Meeting will be
posted to Shareholders on by 2 August 2000.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS 2000
Record Date for the Open Offer close of
business on 24
July
Latest time and date for splitting 3pm on 18
Application Forms (to satisfy bona fide August
market claims only)
Latest time and date for receipt of
completed Application Forms and payment in 3pm on 22
full under the Open Offer August
Latest time and date for receipt of proxy 12 noon on 23
form for the EGM August
Extraordinary General Meeting 12 noon on 25
August
Admission of New Ordinary Shares and re- 8.00 am on 29
admission of existing Ordinary Shares August
Time and date of delivery into CREST of New
Ordinary Shares to be held in uncertificated 8.00 am on 29
form August
Definitive share certificates in respect of by 5 September
New Ordinary Shares to be held in
certificated form to be despatched
Background to the Acquisition
During the first six months of 2000, the Company undertook a major strategic
review which encompassed all elements of its existing asset portfolio. As a
result of this review, the Directors confirmed the strategy of the Group to
become a fully integrated oil and gas exploration and production business with
a continuing focus on active exploration and gas to power opportunities. The
Directors believe that a significant gas production purchase could assist the
realisation of this strategy by enhancing the Group's operational experience,
funding and development options.
The Assets became available for purchase following the decision of the
Competition Directorate of the European Commission, announced on 29 September,
1999, granting approval of the combination of ARCO and BP Amoco. This approval
was granted subject to certain disposal undertakings relating to ARCO and BP
Amoco's gas and pipeline interests in the Southern North Sea. Tullow has been
advised by BP Amoco that these undertakings will be met by the disposal by
ARCO and Britoil of the Assets. Pursuant to the Acquisition, Tullow will
purchase interests in 16 producing southern North Sea gas fields and various
associated gas pipeline and terminal assets. The Acquisition is conditional
upon approval by the European Commission of the purchaser and the transaction.
Production from the Assets is derived mainly from the Hewett and Thames fields
and the Murdoch field. The purchase comprises interests in a total of 18
licences, including one awarded but not yet issued, and encompasses several
undeveloped gas discoveries and a number of exploration prospects and leads.
Information on the Assets
The Assets can best be described in three parts: the Thames area package and
the Hewett area package (which together comprise the Thames/Hewett Package)
and the Murdoch Package. All references to the proven and probable reserves of
the Assets, as detailed below, have been sourced from the Petroleum
Consultant's report which will be contained in the prospectus.
The Thames/Hewett Package
The Thames/Hewett Package comprises ARCO's interests in thirteen licences, and
Britoil's interests in two licences. The package contains 14 producing fields,
six discoveries and a number of exploration prospects and leads, concentrated
in UKCS Quadrants 48, 49, 50, 52, 53 and 54.
Thames Area
Operated interests are held in the Thames field complex (43.33 per cent.), the
Gawain (50.00 per cent.), Orwell (50.00 per cent.) and Welland (33.734 per
cent.) fields, and the Thames pipeline system (43.33 per cent.) that exports
the gas and associated condensate to the onshore Bacton terminal which is
operated by Phillips. ARCO also operates the onshore logistics base at Great
Yarmouth, together with the onshore control room which also performs a number
of functions for other ARCO operated fields not included in the sales package.
The Thames field complex comprises the Thames field itself and the associated
fields of Yare, Bure (including Bure West), Deben and Wensum. Additional gas
is produced from the Welland field, through an unmanned platform (first
production in 1990), and from two fields developed by sub-sea completions,
Orwell (1993) and Gawain (1995). The Thames production complex comprises three
linked platforms which are permanently manned. Tariff income for the Thames
production complex owners is derived from the production received from the
Orwell, Welland and Gawain fields. After some processing on the platform, the
gas and associated condensate is exported through the TAGGS 24 inch pipeline
to the terminal at Bacton.
Net remaining proven and probable reserves in these producing assets at 1
January, 2000 are estimated to be 149.8 bcf. In addition to the above
producing assets, five gas discoveries have been made in this area, but at
present there are no plans for their commercial development.
Tullow will seek to take over from ARCO the operatorship of ARCO's operated
interests within the Thames production complex. This will be subject to
separate government and co-owner approval, but is not a condition for
Completion.
Hewett Area
The Hewett area package consists of the Hewett field and five associated
fields all to the north of the Hewett field together with related interests in
the Hewett-Bacton pipelines and the Bacton terminal. These associated fields
are Little Dotty, Deborah, Della, Dawn and Delilah. None of these interests
are operated by the Sellers.
Interests in the Hewett field and the associated fields have been unitised
with the co-owners of adjacent blocks and the ARCO unitised interest is 19.85
per cent. The unit is not subject to re-determination. The Hewett field itself
has been in production since 1969. Additional production is currently derived
from the satellite fields Della (1988), Dawn (1995), Little Dotty (1979),
Deborah (1978) and Delilah (1998). The production complex totals six platforms
and gas is transported through two 30 inch pipelines to the Bacton terminal.
Net remaining proven and probable reserves as at 1 January, 2000 are estimated
to be 32.1 bcf. In addition to the above producing assets, two other gas
discoveries have been made in this area, but at present there are no plans for
their commercial development.
Thames and Hewett
The gas produced from the Thames and Hewett areas is sold under a number of
separate sales arrangements. The sales agreements for the Thames fields (with
the exception of Deben) and Gawain fields are on a life of field basis to
British Gas Trading and PowerGen respectively. Gas pricing under these
contracts is escalated in relation to certain contractual indices. Other
production is currently sold through ARCO's own gas marketing arm at prices
which are more reflective of open market prices.
Production from the Thames/Hewett Package comes predominantly from good
quality Rotliegendes sandstones, the main producing reservoir in the southern
North Sea Gas Basin. Additional quantities of gas are produced locally from
Zechstein Carbonates and the Triassic Bunter Sandstones.
ARCO has an extensive database over the area and information on numerous
wells. An ARCO internal review of the exploration and appraisal potential,
notably in the Thames area, has identified a number of mainly Rotliegendes
prospects and leads, with the potential to add significantly to the current
gas reserves already in production within the Thames and Hewett areas.
Murdoch Area
The Murdoch Package comprises interests in three licences held by ARCO. They
are situated in UKCS Quadrants 43 and 44 and contain two producing fields, two
discoveries and a number of exploration prospects and leads. None of these
interests are operated by ARCO.
The Murdoch field (34.00 per cent.) is the main producing asset. The Boulton
field (9.50 per cent.) produces back to the Murdoch platform from a single
well. The fields are produced through the Caister Murdoch System (CMS) which
is jointly owned by the original founder fields, Caister and Murdoch. The
Murdoch Package includes ARCO's 17 per cent. ownership interest in the CMS.
Gas from the Murdoch field is produced via the Murdoch platform. This platform
is controlled from the Conoco (U.K.) Limited ('Conoco')/BP Amoco gas terminal
at Theddlethorpe and is not normally manned. The gas and associated condensate
are transported to Theddlethorpe through a 26 inch pipeline. The Murdoch field
came on production in 1993 and the remaining net proven and probable reserves
as at 1 January, 2000 are estimated to be 50.4 bcf.
The Boulton field lies to the west of Murdoch and commenced production in
1997. The field is currently producing from one well through a minimum
facilities platform, and then by 10 inch pipeline to the Murdoch well head
platform. The reserves from this field have recently been upgraded and net
proven and probable reserves as at 1 January, 2000 are estimated to be 10.3
bcf.
The gas from both the Murdoch and Boulton fields is sold under long term
contracts to the Conoco Group and the TXU Group respectively. Gas pricing
under these contracts is escalated in relation to certain contractual indices.
In addition, as a joint owner of the CMS, ARCO receives tariff income from the
Boulton field and two other fields, Schooner and Ketch, which are both
operated by Shell U.K. Limited..
The gas from this area is produced from Carboniferous sandstone reservoirs of
different ages, and these reservoirs are generally more variable in quality
than those in the Rotliegendes province to the south. There are two additional
Carboniferous discoveries and several exploration prospects on the blocks. In
addition, surrounding blocks also contain a number of undeveloped discoveries
and exploration prospects, and Conoco, the operator for CMS, is looking at
ways to develop satellite fields in the CMS area under a single unitised
scheme. The Directors believe that this scheme could represent a significant
source of upside potential for the Murdoch area.
Summary
The Acquisition will comprise a number of sizeable production interests with
established production histories, and will be capable of generating
significant cash flow in the short to medium term. A production forecast will
be contained in the Petroleum Consultant's report in the prospectus. There are
also a number of undeveloped discoveries and exploration targets with the
potential to enhance or maintain production in the areas for a number of years
to come. Although certain of the Assets are affected by pre-emption and
similar rights, one of the principal Assets, the interest in Gawain, is
certain to be available for purchase by Tullow if the other terms and
conditions of the Acquisition Agreements are satisfied or waived by 15
December, 2000. The Directors believe that this field, which as at 1 January,
2000 was estimated to contain proven and probable reserves of 66.6 bcf is a
very important asset with stable cash flows and has significant exploration
upside.
Financial information on the Assets
As at 31 March 2000, the net book value of the Assets to be acquired were Stg
£89.3 million. The profit before taxation attributable to the Assets to be
acquired for the year ended 31 December 1999 was Stg £37.3 million. Further
financial information on the Assets will be included in the prospectus.
Integration and Management of the Assets
Tullow is an established upstream operator, currently onshore in the UK and
both onshore and offshore in other countries. In undertaking the proposed
Acquisition, Tullow will become, for the first time, a holder of acreage in
the UKCS. This will provide the Company with the opportunity to establish and
build a North Sea operation.
Tullow recognises the quality of the existing staff and management, and has
reviewed the control equipment, training and safety systems employed at the
operating locations. If appointed operator, Tullow, as a new entrant to the
UKCS, will seek to maintain the existing operating structure in Great
Yarmouth, and will seek to retain the majority of the personnel who work on
the Thames area complex and in the Great Yarmouth base.
To achieve a seamless and safe transfer of the operating role that satisfies
all parties involved, Tullow recognises the need for close co-operation with
BP Amoco, co-venturers and government organisations. The Directors anticipate
that the process of building a new North Sea operating entity will take at
least six months from Completion. On the purchase of the Assets and approval
of its operatorship role, Tullow proposes to apply to join UKOOA and, on
change of domicile (as noted below), Brindex. Tullow has recruited a UK
Managing Director and a UK Finance Director to oversee the integration into
the Tullow group and the continuing management of the Assets. Information on
these individuals is set out below.
John Lander (proposed managing director or Tullow Exploration)
John Lander (aged 56) has been involved in international oil and gas
exploration for over 30 years. During this time he has served with Shell
International Petroleum, Ranger Oil, RTZ Oil and Gas and Elf UK, principally
in the area of Exploration and New Ventures. From 1989 to 1995 John was
Managing Director of Pict Petroleum Plc, which in 1996 merged with Premier Oil
Plc. Most recently John was Executive Director UK for British-Borneo Petroleum
Syndicate Plc and, from 1998 to 1999 was Managing Director of Tuskar Resources
Plc. John will be responsible for managing all Tullow North Sea assets and
operations. John is a qualified Geophysicist and in 1996 was President of the
Petroleum Exploration Society of Great Britain.
Brian Williams (proposed Finance Director of Tullow Exploration)
Brian Williams (aged 45) MA, CA, qualified as a Chartered Accountant with
Thomson McLintock in 1980. Since then he has worked for British National Oil
Corporation, Hamilton Brothers Oil and Gas Ltd, Pict Petroleum plc and
Alliance Resources plc, in the latter two cases as Finance Director. Brian has
extensive experience of economic analysis, project finance, corporate finance
and investor relations. Within Tullow, Brian will be responsible for all
accounting, financial, taxation and reporting aspects of the Group's UK
operations.
The Board will not be changed as a result of the Acquisition and the Assets
will be managed as a discrete entity within the Enlarged Group.
Acquisition Agreements
Under the Acquisition Agreements, Tullow will acquire a number of interests in
licences covering areas in the Southern Gas Basin of the UKCS together with
their related infrastructure assets. Details of the two packages of interests
proposed to be acquired is set out above and further details will be set out
in the prospectus.
With the exception of the Gawain field interest, most of the principal assets
are subject to pre-emption or similar rights held by co-owners so that Tullow
Exploration will only be able to acquire these interests if the co-owners
decline to exercise those rights. The period for such exercise varies between
thirty and sixty days and Completion may not take place before these periods
elapse unless co-owners expressly waive their rights. The Assets are in the
main held by co-owners who have held them for a significant period but there
have recently been some new entrants to the groups. Accordingly, co-owners
will have a variety of strategic objectives and the Directors are not in a
position to predict whether pre-emption rights will be exercised.
The Acquisition is also subject to a number of other conditions. These include
the requisite consent of the UK government as the licensing authority of the
Assets and the approval of both Tullow as purchaser and the transaction by the
EC in the context of the divestment by BP Amoco/ARCO for the purposes of their
merger. The Directors have no reason to believe that the Tullow Group is not
able to satisfy the criteria on which they understand the decisions of these
regulatory authorities will be made.
As noted above, the transaction is subject to the approval of Shareholders and
to the commencement of dealings in the New Ordinary Shares, which is expected
to take place on 29 August, 2000. It is envisaged that the satisfaction of all
of the conditions may take several months. As a result, Completion is expected
to take place in the fourth quarter of this year.
The Consideration is Stg £201 million. Of this sum Stg£66.6 million is
attributable to the Murdoch Package, of which Stg£63.0 million is payable on
Completion and the balance is payable on the later of 29 March, 2002 and the
date which is twelve months after Completion. The remaining Consideration of
Stg £134.4 million is attributable to the Thames/Hewett Package, of which Stg
£117.0 million is payable on Completion, Stg £10 million is payable on the
date which is six months after Completion and the balance is payable on the
later of 29 March, 2002 and the date which is twelve months after Completion.
A deposit of Stg £1 million was paid on the signing of the Acquisition
Agreements and a further deposit of Stg £4 million will be paid following the
commencement of dealings in the New Ordinary Shares. The Consideration will be
automatically reduced by the exclusion of assets from the Acquisition in
consequence of the exercise of pre-emption or equivalent rights by the amounts
payable by the pre-emptors, which will equate to the portions of the
Consideration ascribed to the assets for the purpose of the Acquisition.
The Acquisition is being made by reference to an economic date of 1 January,
2000. The Consideration will be subject to a number of adjustments to reflect
the fact that actual ownership of the assets will not pass until Completion.
These adjustments will take into account the working capital position of the
assets at 1 January, 2000 and the revenues, expenditures and related taxation
arising from that date until Completion. As Completion is not expected to
occur before the final quarter, the revenues are expected to exceed the
expenditures by some margin and hence the actual cash amount of the
consideration payable for the assets will be significantly less than the base
Consideration.
Further details of the Acquisition Agreements and related documents will be
set out in the prospectus.
In approving the proposed Acquisition, Shareholders will be authorising the
Company to proceed to acquire all of the Assets, notwithstanding the fact
that, due to the valid exercise of pre-emption or similar rights beyond the
control of Tullow, the ultimate packages acquired may be substantially less
than the total. Tullow is, however, satisfied that in the context of the
transaction, no pre-emptive right exists in respect of the interests in the
Gawain field and certain other assets.
In the event that the Murdoch package becomes subject to pre-emption, the
Murdoch Agreement allows Tullow to recover certain of its costs in evaluating
and pursuing the acquisition of interests in the Murdoch field.
Reasons for the Acquisition
The addition of the Assets to Tullow's existing UK and international
portfolios will mark a transformation of the Group and should provide it with
significant cash flow to support Tullow's anticipated exploration and
development programme, both in the UK and overseas. The Directors believe that
the inclusion of the Assets within Tullow's portfolio will provide Tullow with
enhanced capabilities in its dealings in its target emerging markets.
The Directors believe that the projected returns from the Assets are
attractive based on existing producing fields alone. The Directors also
believe that the undeveloped reserves associated with the Assets could present
significant upside potential.
The Acquisition will assist Tullow in its aim of becoming a more broadly based
oil and gas exploration and production business with a continuing focus on
active exploration and gas to power projects.
Principal Terms of the CIBC facility
In order to finance the Consideration, Tullow has entered into a Stg £140
million twelve month secured bridge facility with CIBC. This facility is
available to fund the acquisition by Tullow of the Assets, to fund various
fees and expenses associated with the Acquisition and for agreed working
capital requirements. Following Completion, it is intended that the bridge
facility will be replaced by a 5 year borrowing base facility and CIBC of up
to Stg £125 million has committed to underwrite such a facility on terms
acceptable to Tullow. The availability under this facility will be determined
semi-annually by reference to the expected future cash flows of the assets
acquired.
The bridge facility is secured by a fixed charge over all the assets of Tullow
Exploration including the Assets being acquired, and a guarantee from Tullow.
Principal Terms of the Issue
The Placing
The Company proposes to issue 77,000,000 New Ordinary Shares by way of a
Placing of which 39,322,026 New Ordinary Shares are the subject of an Open
Offer. Investec Bank has conditionally agreed to procure placees for
37,677,974 New Ordinary Shares, which will be placed firm. Investec Bank has
also conditionally agreed to procure placees for the remaining 39,322,026 New
Ordinary Shares subject to recall to satisfy valid applications by Qualifying
Shareholders under the Open Offer.
The Open Offer
In order to provide Qualifying Shareholders with the opportunity to acquire
New Ordinary Shares at the Issue Price, your Directors have arranged an Open
Offer, pursuant to which Investec Henderson Crosthwaite invites applications
for New Ordinary Shares at Stg 57.5p (Euro 0.93) per share on the basis of:
1 New Ordinary Shares for every 7 existing Ordinary Shares
and so in proportion for any other number of Ordinary Shares held on the
Record Date. Entitlements to New Ordinary Shares will be rounded down to the
nearest whole number and fractions of New Ordinary Shares will be aggregated
and sold for the benefit of the Company under the Placing.
Application Forms are personal to shareholders and may not be transferred
except to satisfy bona fide market claims.
The New Ordinary Shares will, when issued and fully paid, rank pari passu in
all respects with the existing Ordinary Shares, including the right to receive
all dividends and other distributions hereafter declared.
The Placing and Open Offer is conditional, inter alia, upon Shareholder
approval at the EGM, and Admission. It is expected that Admission will take
place and dealings in the New Ordinary Shares will commence on 29 August ,
2000.
Use of the proceeds of the Placing and Open Offer and the CIBC facility
The net proceeds of the Issue of approximately Stg £41.8 million (which will
initially be placed on deposit) will be applied to pay the Consideration.
To the extent that co-owners exercise or fail to waive their pre-emption
rights and Tullow is unable to acquire certain assets and the Consideration is
therefore reduced, the facility from CIBC will be reduced in a similar fashion
such that the use of the proceeds of the Issue will not be materially altered.
In the event (which the Directors consider unlikely) that the Consideration
for the Assets falls below Stg £41.8 million, the surplus net proceeds of the
Issue will be used to fund the Company in continuing its exploration and
development activities and in particular, completing the development of the
Cote d'Ivoire project without recourse to project finance.
Current trading and prospects
On 6 April, 2000 Tullow released its preliminary statement of results for the
year ended 31 December, 1999. This statement indicated an increase in turnover
of approximately 32 per cent., principally due to the Company's increased
stake in the Ryedale Gas Field, and a return to operating profitability. In
addition, Tullow announced that gas sales from the Sara and Suri fields were
continuing at approximately 38 mmscfd, that all sales targets had been met and
all payments received on time.
At the Company's Annual General Meeting on 22 June 2000, the Chairman
confirmed that favourable production and resource pricing conditions continued
to prevail and that, as a result of this, a significant advance in turnover
and operating profitability could be expected for 2000. Since the date of the
Annual General Meeting the Group has continued to trade and operate in line
with the expectations of the Board.
Since 31 December, 1999, the Assets have continued to produce in line with
budget. Cash flow in relation to the production of uncontracted gas is
benefiting from increasing spot prices.
The Directors believe that the prospects for the Enlarged Group are good,
particularly in the light of current favourable oil and gas prices.
Definitions
The following definitions apply throughout this announcement unless the
context otherwise requires:
'Admission' the admission of the New Ordinary Shares to
be issued pursuant to the Placing and Open
Offer to the Official Lists and to the Main
Market which is expected to become
effective on 29 August 2000
'Acquisition' the proposed acquisition of the Assets by
Tullow from the Sellers
'Acquisition the agreements dated 28 July 2000 between
Agreements' the Sellers and Tullow Exploration relating
to the Acquisition
'Act' the Companies Act 1990 of Ireland (as
amended)
'Application Form' the Application Form relating to the Open
Offer sent to Qualifying Shareholders with
the prospectus
'ARCO' ARCO British Limited
'Assets' the interests in licences currently held by
the Sellers covering areas in the Southern
Basin of the UKCS, in particular the
Thames, Hewett and Murdoch areas, and
including part ownership of related
infrastructure assets
'Board' or the directors of Tullow
'Directors'
'BP Amoco' BP Amoco plc
'Brindex' British Independent Exploration, an
industry group comprising independent UK
domiciled exploration companies
'Britoil' Britoil Public Limited Company
'CIBC' CIBC World Markets plc
'Completion' completion of the Acquisition
'Consideration' the consideration for the Acquisition
'CREST' the computerised settlement system to
facilitate the transfer of title to shares
in uncertificated form operated by CRESTCo
'CRESTCo' CRESTCo Limited
'EC' or 'European Commission of the European Communities
Commission'
'Enlarged Group' the Tullow Group following completion of
the Acquisition
'Existing Ordinary the 275,254,187 ordinary shares of Euro
Shares' 0.13 each in the capital of the Company
currently in issue
'Extraordinary the Extraordinary General Meeting of the
General Meeting' Company to be held at 12 noon on 25 August
or 'EGM' 2000, notice of which will be set out at
the end of the prospectus
'Investec Bank' Investec Bank (UK) Limited
'Investec Investec Henderson Crosthwaite, a division
Henderson of Investec Bank
Crosthwaite'
'Ireland' the Republic of Ireland
'Irish Stock the Irish Stock Exchange Limited
Exchange'
'Issue' the Placing and Open Offer
'Issue Price' Stg 57.5p (Euro 0.93, IR 73.24p,) per New
Ordinary Share
'Listing Rules' the listing rules of the Irish Stock
Exchange and the UK Listing Authority
'London Stock the London Stock Exchange plc
Exchange'
'Main Market' the London Stock Exchange's market for
listed securities
'New Ordinary the 77,000,000 New Ordinary Shares proposed
Shares' to be issued pursuant to the Issue
'Official Lists' the Official List of the Irish Stock
Exchange and Official List of the UK
Listing Authority
'Open Offer' the offer to Qualifying Shareholders of the
Open Offer Shares at the Issue Price upon
the terms and conditions to be set out in
the Prospectus
'Open Offer the 39,322,026 New Ordinary Shares which
Shares' are to be offered to Qualifying
Shareholders under the Open Offer
'Operator' the entity appointed to operate a licence
interest or an infrastructure asset on
behalf of the co-owners of such interest or
asset
'Ordinary Shares' the ordinary shares of Euro 0.13 each in
the capital of the Company
'Overseas Shareholders not resident in the UK or
Shareholders' Ireland
'Phillips' Phillips Petroleum Company United Kingdom
Limited
'Placing' the conditional placing by Investec
Henderson Crosthwaite of the New Ordinary
Shares subject, in the case of 39,322,026
of the New Ordinary Shares, to recall to
satisfy valid applications under the Open
Offer
'Placing and Open the conditional agreement dated 28 July
Offer Agreement' 2000 between the Company (1) and Investec
Bank (2) relating to the Placing and Open
Offer details of which will be set out in
the Prospectus
'Proposals' the Acquisition and the Placing and Open
Offer
'Qualifying a holder of Ordinary Shares on the register
Shareholder' at the close of business on the Record Date
other than certain Overseas Shareholders
'Record Date' the close of business of 24 July 2000
'Registrar' Computershare Services (Ireland) Limited
'Regulations' the Companies Act 1990 (Uncertificated
Securities) Regulations 1996 of Ireland
'Resolutions' the resolutions to be set out in the notice
of EGM
'Securities Act' the United States Securities Act of 1933,
as amended, and the rules and regulations
promulgated thereunder
'Sellers' ARCO and Britoil, both of which are wholly
owned subsidiaries of BP Amoco
'Shareholders' holders of Ordinary Shares
'Stock Exchanges' together the Irish Stock Exchange and the
London Stock Exchange
'Subsidiaries' Tullow's subsidiary undertakings for the
time being
'Tullow' or Tullow Oil plc
'Company'
'Tullow Tullow Exploration Limited, a subsidiary of
Exploration' Tullow
'Tullow Group' or the Company and its subsidiaries
'Group'
'UK Listing the Financial Services Authority acting in
Authority' or its capacity as the competent authority for
'UKLA' the purposes of Part IV of the Financial
Services Act 1986
'United Kingdom' the United Kingdom of Great Britain and
or 'UK' Northern Ireland
'UKOOA' the United Kingdom Offshore Operating
Authority
In this announcement, all references to 'IR£', 'Irish Pounds' and 'IRp' are to
the lawful currency of Ireland; all references to 'Stg', 'Stg£', 'Stgp' and
'Sterling' are to the lawful currency of the United Kingdom; all references to
'US$' and '$' are to the lawful currency of the United States of America and
all references to 'US' and 'USA' are to the United States of America; all
references to 'Euro' are to the lawful currency of the participating member
states of the European Union.
Unless otherwise stated, in this announcement the exchange rate of Euro 1 :
Stg £0.617 prevailing on 28 July 2000 have been used. The Irish pound was
irrevocably fixed from 1 January 1999 at Euro 1 :IR £0.787564
GLOSSARY
'bcf' billion cubic feet
'CMS' the Caister-Murdoch System, comprising
offshore gas gathering and compression
facilities and the pipeline to
Theddlethorpe
'Probable those reserves of petroleum which are not
reserves' yet proven but which on the available
evidence and taking into account technical
and economic factors have a better than 50
per cent. chance of being produced
'Proven reserves' those reserves of petroleum which on the
available evidence taking into account
technical and economic factors have a
better than 90 per cent. chance of being
produced
'UKCS' United Kingdom continental shelf
Notes to Editors:
1. Tullow Oil plc is an Irish registered public quoted company engaged in
oil and gas exploration, development and production. Tullow's assets
cover more than 30 licences in its countries of operation which are
Pakistan, India, Bangladesh, Cote d'Ivoire, Egypt, the United Kingdom and
Romania.
The Company's shares are listed on the Official Lists of the London and
Irish Stock Exchanges. Tullow plans to re-register as a UK company in
October 2000 but will retain its Irish Stock Exchange listing.
In the UK, Tullow operates in three areas: North Yorkshire, operating and
supplying gas to a power station; Lincolnshire, where oil is produced and
sold to a local refinery; and South Yorkshire, operating the facilities
for a gas storage project.
At the end of 1999, Tullow's reserves were 33.4 million barrels of
liquids and 270 billion cubic feet of gas.
2. The purchase from BP is of:
* ARCO's equity in the Murdoch and Boulton gas fields and the Caister-
Murdoch System pipeline: and
* ARCO's equity in the Thames gas field with surrounding satellites, the
Hewett gas field with surrounding satellites, the associated pipeline
and terminal interests.
ARCO's equity in the following gas fields will transfer to
Tullow: Thames, Hewett, Gawain, Yare, Bure including Bure West,
Deben, Orwell, Welland, Boulton, Wensum, Della, Delilah, Murdoch,
Little Dotty, Deborah and Dawn, as well as nine undeveloped
satellite fields and some exploration acreage. Also included in
the sale is the interest in the Thames field pipeline, the Hewett
field pipeline and the Caister-Murdoch System pipeline, as well as
the interest in the Phillips-operated gas processing terminal at
Bacton.
3. Tullow has also indicated a wish to take over from ARCO the
operatorship of the Thames field and its associated satellites, subject
to the agreements of Government and licence partners. The Thames area
assets operated by ARCO currently employ 22 staff based in Great
Yarmouth and offshore, with a further 65 contractors' employees. It
will take some months to obtain all of the necessary approvals for the
changes in ownership and operatorship. No job losses are anticipated
as a result of the sale.
4. Net ARCO production from the fields in the purchase by Tullow amounts
to a current average of some 150 million cubic feet of gas a day, with
net proven and probable reserves at the end of 1999 of 242.6 billion
cubic feet.
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