UK: Trapoil Announces Acquisition of Reach Oil & Gas Limited

Trapoil  announces the acquisition of Reach Oil & Gas Limited (“Reach”) for a total consideration of approximately £30 million (£20 million in cash and approximately £10 million in new ordinary shares to be issued at a deemed price of 43 pence per share). Reach’s two wholly-owned subsidiaries, Reach Exploration (UK) Limited (“Reach UK”) and Reach Petroleum Limited (“Reach Petroleum”) (together, the “Reach Group”), currently hold mostly carried interests in a total of 14 exploration licences governing 24 Blocks and part Blocks in the UK Continental Shelf (“UKCS”).

Acquisition highlights:

The Reach Group’s asset portfolio (the “Reach Portfolio”) comprises largely of appraisal assets and exploration prospects (with a range of risk profiles) with a small amount of near term production in the UKC· More than doubles the size of Trapoil’s existing exploration portfolio and near term drilling activity, including increasing the Company’s interest to 15% in the promising Orchid prospect to be drilled later in 2011.

· Expected to increase the number of near term wells to be drilled by three additional wells in 2012 and four additional wells in 2013, providing the Company with potential net risked resources of approximately 15mmboe (unaudited estimate by Trapoil’s management).

· The Reach portfolio comprises predominantly carried interests in a total of 14 exploration licences governing 24 Blocks and part Blocks in the UKNS covering, in aggregate, an area of approximately 2,000km2.

· Trapoil will benefit from Reach’s existing carried interests with estimated carried drilling costs of approximately £17 million in respect of the eight initial wells currently expected to be drilled within the next two years.

· Provides opportunities for further asset management to broaden the portfolio and manage risks, with potential to farm-out working interests in some of the assets acquired and increase equity positions in others.

Detailed information on the Reach Portfolio is set out below.

As part of the arrangements, Miles Newman, Exploration Director and co-vendor of Reach, will be appointed to the board of directors of Trapoil (the “Board”) as a Non-Executive Director.

Mark Groves Gidney, Chief Executive Officer of Trapoil, commented:

“I am delighted to announce our first corporate acquisition, which greatly strengthens our existing portfolio, delivers the drilling opportunities envisaged at the time of our IPO and positions Trapoil as one of the more active exploration and appraisal companies in the UK North Sea, with the possibility of drilling up to 8 wells a year in 2012 and beyond.

The acquisition offers multiple benefits for Trapoil, including an increased interest in the promising Orchid well, due to spud this autumn. In addition, the acquisition brings significant existing carried drilling costs, while we anticipate valuable cash flow generation from near term production and effective portfolio management.

Having successfully secured this attractive portfolio to augment our existing assets, the Company’s focus will turn to identifying and acquiring producing assets in order to provide sufficient cash flows to support the group’s planned drilling programme with suitable tax synergies.

I welcome the appointment of Miles to the Board and I am delighted that he has agreed to accept a significant part of the purchase consideration in the form of new Trapoil shares, underlining his long-term commitment to the Company’s future success.”

Summary of the Acquisition

Trapoil , the independent oil and gas exploration and appraisal company focused on the UKCS region of the North Sea, announces that it has today entered into a conditional sale and purchase agreement to acquire the entire issued share capital of Reach, an established private UK oil and gas company which owns an extensive portfolio of promising licence interests in the UKCS, for a total consideration of approximately £30 million (the “Acquisition”).

The total consideration of approximately £30 million, payable on completion of the Acquisition, comprises a cash payment of £20 million and the allotment of 23,203,402 new ordinary shares of one pence each in the Company (“Ordinary Shares”) (the “Consideration Shares”) (together, the “Consideration”). The Acquisition is conditional on, inter alia, admission of the Consideration Shares to trading on AIM becoming effective (“Admission”).

The Consideration will be funded from the Company’s existing cash resources together with the issue of the Consideration Shares to the vendors at a deemed price of 43 pence per Consideration Share, being the Company’s March flotation price. The Consideration Shares represent approximately 11.30 per cent. of Trapoil’s issued ordinary share capital as enlarged by the Acquisition and will be fully paid and rank pari passu with the Company’s existing Ordinary Shares. Application has been made to the London Stock Exchange for Admission and it is expected that Admission will become effective and that dealings in the Consideration Shares will commence at 8.00 a.m. on Tuesday 5 July 2011. The Company’s issued ordinary share capital following completion of the Acquisition will consist of 205,373,117 Ordinary Shares, each with voting rights attached. Trapoil does not hold any Ordinary Shares in treasury and accordingly there are no voting rights in respect of any treasury shares.

The aforementioned figure of 205,373,117 Ordinary Shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest, or any change to their interest, in Trapoil under the Financial Service Authority’s Disclosure and Transparency Rules.

(read more)

[mappress]
Source: hemscottir , July 4, 2011; Image: trapoil