REG - ADM Energy PLC - Subscription, Investment and Financing Update

Adm EnergyAnnouncement

08/04/2024 12:00

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RNS Number : 7013J  ADM Energy PLC  08 April 2024

8 April 2024

 

 

ADM Energy PLC

("ADM" or the "Company")

 

 

Equity Subscription, Cash Generative Investment and Financing Update

 

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC), an AIM-listed natural resources
investing company, announces that the Company has executed subscription
agreements with two investors resulting in gross proceeds of £220,500 at 1p
per share (the "Subscription") that will result in the issuance of 22,050,000
ordinary shares of the Company (the "Subscription Shares"). The Company
intends to use the proceeds to fund the cash requirements of a new investment
discussed further herein and for general working capital purposes, including
reducing outstanding creditors.

In conjunction with the Subscription, the Company has acquired an interest in
SW Oklahoma Reclamation, LLC ("SWOK") ("the Investment"), a company
established as a joint venture with Bargo Capital, LLC to reinitiate
operations at the JKT Reclamation facility in Wilson, Oklahoma. As a result of
the Investment, the Company will have a 30.6% interest in JKT Reclamation LLC
("JKT Reclamation"), a revenue generative Oklahoma Limited Liability Company,
engaged in the purchase, processing and sale of residual oil from oil tanks
(tank bottoms) and other oilfield waste streams containing significant
concentrations of crude oil.  The consideration for the investment is
US$827,500 to be paid via the issue of 43,200,000 ordinary shares at a nominal
share price of 1p per share for a value of US$540,000, a cash investment of
US$287,500 for working capital into JKT Reclamation and the grant of
14,640,000 3-year, 1.0p warrants.

The Company has acquired its interest in SWOK from Bargo Capital, LLC and OFX
Holdings, LLC, a substantial shareholder of the Company. The effective date of
the investment is 1 January 2024 and it is expected to be immediately cash
flow generative to the Company.

In addition, the Company announces the termination of the remaining contingent
payment obligations associated with the acquisitions of the Blade Oil V, LLC
assets.

 

Investment Highlights

·    Located outside Wilson, Oklahoma, the facility is situated on a
20-acre property and includes a workshop/office structure, ten 410-barrel
storage tanks, separation and heating tanks, two proprietary chemical formulae
and various other processing and material handling equipment;

·    Having commenced operations in February 2024, JKT Reclamation sold
944 barrels of crude oil in February 2024 and received US$68,759 in gross
revenue. JKT Reclamation sold an additional 1,475 barrels of crude oil in
March 2024 for which payment is expected on or around 20 April 2024. JKT
Reclamation typically receives pricing consistent with the West Texas
Intermediate ("WTI") crude oil benchmark less US$3.00 per barrel;

·    Investment consideration represents approximately twice JKT
Reclamation's forecast annualised cash flow based on the directors' estimates
of JKT Reclamation achieving its sales target of 3,000 barrels of crude oil
per month;

·    The Company has entered into a non-binding letter of intent with JKT
Reclamation pursuant to which the Company will have the opportunity to
participate in the development of two additional locations, one each in the
U.S. states of Kansas and Texas; and

·    ADM has executed a non-binding letter of intent with EER Services
Limited to explore the potential to develop a reclamation / remediation
facility in Nigeria using the processes and proprietary chemical formulae used
by JKT Reclamation.

 

Investment Summary

The Company has acquired 100.0% of the Class A membership of SW Oklahoma
Reclamation, LLC ("SWOK"), a company established as a joint venture with Bargo
Capital, LLC to reinitiate operations at the JKT Reclamation facility in
Wilson, Oklahoma.

SWOK is a limited liability company formed under the laws of the State of
Oklahoma.  An LLC is a form of business organisation that combines the
limitations on liability to its owners of a corporation with "pass through"
tax treatment of a partnership (the LLC itself is not subject to state or
federal income tax) and the structuring flexibility of a partnership.  The
equity interest of a limited liability company is referred to as "membership
interest" and in place of shares, ownership is represented by "units".  An
LLC can have more than one class of units.  In the case of the Class A Units
of SWOK, the Class A Units are intended to provide a preferential return to
holders (typically the investors providing capital) prior to significant
distributions to other parties.  The Class B Units typically represent an
incentive interest.  The Class A and Class B Units split future distributable
cash based on the Class A Units achieving certain payout thresholds.

Adjusted for the terms of the investment, SWOK has 100,000 Class A Units
authorised; 100,000 Class A Units approved for issuance and 100,000 Class A
Units issued. SWOK has 50,000 Class B Units authorised and 50,000 Class B
Units issued.

As a result of the Transactions, ADME will be interested in 100,000 Class A
Units (representing 100% of the Class A Units). The Company will not have an
interest in the 50,000 Class B Units.

 

 Ownership of SW Oklahoma Reclamation, LLC
 Class A Units: ADM Energy (USA), Inc.          100%
 Class B Units:
     Bargo Capital, LLC                         80%
     Ventura Energy Advisors, LLC               20%

 Ownership of JKT Reclamation, LLC
 SW Oklahoma Reclamation, LLC                   60%
 Certain Employees                              40%
   Total                                        100%
                                                      % of Distributable Cash
 ADM "Economic Interest"                              Tier 1        Tier 2
 % of Distributable Cash Paid to Class A Units        70.0%         51.0%
 SWOK Interest in JKT Reclamation                     60.0%         60.0%
     Economic Interest in JKT Reclamation             42.0%         30.6%

 

The Class A Units will receive 70% of the distributable cash of JKT
Reclamation until US$356,250 has been distributed ("Tier 1 Distribution"),
thereafter the Class A Units will receive 51% of distributable cash ("Tier 2
Distribution"). The Class B Units will receive all distributions not paid to
the Class A Units. The Class A Units and the Class B Units each have 50% of
the voting rights of SWOK.

Pursuant to the terms of the joint venture, the Company will have an effective
Tier 1 Distribution economic interest of 42.0% in the distributable cash flow
of JKT Reclamation and a 30.6% Tier 2 Distribution interest thereafter.
Bargo Capital, LLC and Ventura Energy Advisors, LLC will retain 80% and 20%,
respectively, of the Class B Units of SWOK.

Consideration for the investment comprises (i) the issue of 43,200,000 new
ordinary shares at a nominal price of 1.0p per share (the "Consideration
Shares"), (ii) 14,640,000 3-year, 1.0p warrants; and (iii) a cash investment
of US$287,500.  The cash investment will be funded from proceeds of the
Subscription. The Company will issue 20,000,000 Consideration Shares to Bargo
Capital, LLC and 9,000,000 Consideration Shares to certain members of the
management team of JKT Reclamation. OFX Holdings LLC ("OFXH"), a substantial
shareholder of the Company, will receive 14,200,000 Consideration Shares and
14,640,000 3-year, 1.0p warrants of the Company.

Adjusted for the issuance of these new shares, on Admission (as defined
below), OFXH will hold a total of 96,669,367 ordinary shares representing
17.1% of the enlarged share capital of the Company.

 

JKT Reclamation LLC Business Plan

JKT Reclamation was formed by SW Oklahoma Reclamation and certain owners of
JKT Wilson, LLC to restructure the ownership of, and reinitiate operations at,
an oil reclamation facility located in Wilson, Oklahoma. The facility has
fixed assets including a 20-acre property, a workshop/office structure, ten
410 barrel storage tanks, and other related separation and material handling
equipment.  In addition to the property, plant and equipment, other assets
include approximately 4,000 barrels of raw material for processing (of which
approximately 2,000 barrels have been used alongside additional raw materials
purchased in the processing of oil sold in February and March 2024) and
near-term sale and two proprietary chemical formulae with additional potential
commercial applications.

JKT Reclamation conducts its business through two primary subsidiary
companies, JKT Wilson, LLC and JKT Leasing, LLC. JKT Wilson, LLC is 100% owned
by JKT Reclamation, LLC, it is a registered and bonded operator in the State
of Oklahoma and conducts the operations of JKT Reclamation including the
purchase, processing and sale of reclaimed oil.  JKT Leasing, LLC is 33.4%
owned by JKT Reclamation and owns the property, facilities and equipment which
is used in the operations of the Company. The interest in JKT Leasing, LLC not
owned by JKT Reclamation is owned by third-parties unrelated to OFX Holdings,
LLC, Bargo Capital, LLC or any of the employees or other owners of JKT
Reclamation.

The business plan for the reclamation business is to increase volume of oil
processed at the Wilson, Oklahoma facility with a sustainable monthly
production target of 3,000 barrels per month. JKT typically receives pricing
for its oil sales based on the WTI benchmark price. Oil sold by JKT typically
receives a US$3.00 discount to WTI. On an ongoing basis, the Company expects
operating costs (including purchase of raw material) to approximately be
US$32.00 per barrel, however as the 4,000 barrels of raw material on hand,
which, at recent oil prices, has an estimated value post processing cost of
approximately US$185,000) did not require purchase, sales commissions or
trucking, the operating costs for the first couple of months (as JKT
Reclamation works through raw material on hand) is expected to be in the range
of US$15.00 per barrel.  General and administrative costs are expected to be
circa US$35,000 to US$40,000 per month.

 

Rationale for Undertaking the JKT Reclamation Investment

In undertaking the investment the Company has paid special attention to the
following considerations:

1.    The facility is ideally located in proximity to an area referred to
as the South-Central Oklahoma Oil Province (the "SCOOP") which is an area
within the Anadarko basin in the state of Oklahoma that according to
Shaleexperts.com has produced in excess of 3.2 billion barrels of oil from
more than 60 reservoirs and is expected by the Board to continue to generate
attractive opportunities for the reclamation business for the foreseeable
future;

2.    From 12 February 2024 to the end of February 2024, JKT Reclamation
processed and sold 944 barrels of oil for which the business received
US$68,759 in revenue and 1,475 barrels of oil in March 2024 which, based on
the terms of the transaction, will result in immediate revenue and cash flow
for the Company;

3.    JKT Reclamation had 4,000 barrels of inventory on hand for processing
at start-up of the facility;

4.    At current oil prices, no material changes in the way the facility is
run and based on achieving a rate of sales of 3,000 barrels per month, the
directors believe that the investment could net between US$30,000 and
US$40,000 per month in cash distributions to the Company;

5.    The two proprietary chemical formulae used successfully at the
facility provide a competitive advantage to the business and may independently
have the potential to be marketed to other industry participants and for use
in environmental remediation projects;

6.    The Investment Consideration is attractive representing approximately
twice forecast annual net cash flow to the Company expected by the directors
based upon sales of 3,000 barrels per month and the in-place assets to support
significantly higher sales volumes.

 

Equity Subscription and Debt Restructuring

The Company announces that it has raised approximately £220,500 via the
Subscription, for a total of 22,050,000 ordinary shares at 1p per share.

Concepta Consulting AG ("Concepta"), a Lichtenstein-based consulting company
owned and controlled by Dr. Peter Riedi, has entered into an investment
agreement (the "Investment Agreement") with the Company pursuant to which it
will invest US$380,000 by way of a loan conversion and subscription for
30,400,000 new ordinary shares of the Company at 1p per share. The investment
comprises loan conversions of US$180,000 and a further cash subscription for
US$200,000.  Additionally, a private European investor has also invested
€90,000 by way of a subscription for 6,050,000 new ordinary shares at 1p per
share. In aggregate, the subscriptions and loan conversion total approximately
£365,000, which will be satisfied by the issue of 36,450,000 new ordinary
shares ("Settlement Shares") £220,500 being new funding for the Company from
which it is able to meet the cash component of the Investment. The exchange
rates used in determining the number of Subscription Shares are US$1.25/£1.00
and £0.85/€1.00, respectively.

Following its subscription and conversion, on admission of the Settlement
Shares and Consideration Shares to trading on AIM ("Admission"), Concepta will
have an interest in 30,400,000 ordinary shares representing 5.4 per cent. of
the enlarged issued share capital

The Company also announces that, further to the announcement of the Financing
Update and Debt and Asset Restructuring on 14 November 2023, the Company and
OFX Holdings, LLC have terminated the remaining contingent payment of up to
US$700,000 associated with the Blade Oil V, LLC assets ("Debt Reduction").
The termination results in a further reduction of Total Maximum Consideration
associated with the Blade Oil V LLC transaction from US$1,207,160 (as amended
pursuant to the announcement of 14 November 2023) to US$507,160.

 

Admission to AIM and Total Voting Rights

Application has been made for Admission of the Settlement Shares, the
Subscription Shares and the Consideration Shares which total 79,650,000 new
ordinary shares and which will rank pari passu with the Company's existing
ordinary shares. It is expected that Admission will become effective and that
dealings will commence at 08.00 am on or around 15 April 2024.

Following Admission, the Company's enlarged issued share capital ("Enlarged
Issued Share Capital") will comprise 564,588,611 ordinary shares of £0.01
each with voting rights in the Company. This figure 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 in, or a
change in the interest in, the share capital of the Company under the FCA's
Disclosure and Transparency Rules.

 

Transaction Advisory Fee

Ventura Energy Advisors, LLC ("VEA") will be paid a structuring and advisory
fee ("Transaction Advisory Fee") of US$100,000 in connection with its services
associated with the origination, structuring and initiation of operations
associated with the investment. The fee will be paid by issuance to VEA of
US$100,000 of the Company's 15% Secured Convertible Loan Notes.

 

Related Party Transactions

The Debt Reduction and the issuance of the Consideration Shares to OFX
Holdings, LLC, and the payment of the Transaction Advisory Fee are related
party transactions pursuant to the AIM rules. With the exception of Claudio
Coltellini and Stefan Olivier, the directors of the Company consider, having
consulted with its nominated adviser, Cairn Financial Advisers LLP, that the
terms of the Debt Reduction, the acquisition of the holding from OFX Holdings
LLC and payment of the Transaction Advisory Fee are fair and reasonable
insofar as its shareholders are concerned.

 

Commenting on the Equity Subscription and Reclamation Investment Stefan
Olivier, CEO, stated: "The equity subscription and cash generative investment
announced today are material for the Company. Completing the subscription at
more than 100% premium to the current share price demonstrated confidence in
the underlying value in ADM, quality of our new investment and the board's
strategy that we are executing."

 

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.

 

Enquiries:

 

 ADM Energy plc                                       +44 7495 779520
 Stefan Olivier, Chief Executive Officer
 www.admenergyplc.com (http://www.admenergyplc.com/)

 Cairn Financial Advisers LLP                         +44 20 7213 0880
 (Nominated Adviser and Broker)
 Jo Turner, James Caithie

 ODDO BHF Corporates & Markets AG                      +49 69 920540
 (Designated Sponsor)
 Michael B. Thiriot

 Gracechurch Group                                    +44 20 4582 3500
 (Financial PR)
 Harry Chathli, Alexis Gore, Henry Gamble

 

About ADM Energy PLC

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC) is a natural resources investing
company with an existing investment representing approximately 46.8% economic
interest in OFX Technologies, LLC (www.ofxtechnologies.com
(http://www.ofxtechnologies.com) ) and a 9.2% profit interest in Aje Field,
part of OML 113, which covers an area of 835km² offshore Nigeria. Aje has
multiple oil, gas, and gas condensate reservoirs in the Turonian, Cenomanian
and Albian sandstones with five wells drilled to date.

 

Forward Looking Statements

Certain statements in this announcement are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as "believe", "could", "should", "envisage'',
"estimate", "intend", "may", "plan", "potentially", "expect", "will" or the
negative of those, variations or comparable expressions, including references
to assumptions. These forward looking statements are not based on historical
facts but rather on the Directors' current expectations and assumptions
regarding the Company's future growth, results of operations, performance,
future capital and other expenditures (including the amount, nature and
sources of funding thereof), competitive advantages, business prospects and
opportunities. Such forward looking statements reflect the Directors' current
beliefs and assumptions and are based on information currently available to
the Directors.

 

 

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