REG - Caspian Sunrise plc - Proposed disposal of MJF & South Yelemes

Caspian SunriseAnnouncement

03/09/2024 07:00

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RNS Number : 6248C  Caspian Sunrise plc  03 September 2024

Caspian Sunrise PLC

("Caspian Sunrise" or the "Company" and together with its subsidiaries, the
"Group")

 

Proposed disposal of the Shallow MJF & South Yelemes structures

 

On 14 May 2024 the board of the Company (the "Board") announced the
conditional disposal of the MJF and South Yelemes Structures currently held by
the Group, for a headline cash consideration of approximately US$83 million.
At that time the proposed purchaser Absolute Resources LLP ("Absolute
Resources"), was granted a 90 day exclusivity period to conclude its due
diligence. On 18 July 2024 the Board announced that the proposed purchase
price had by negotiation increased to approximately US$88 million and that the
exclusivity period had been extended until 31 August 2024.

 

The board is now pleased to announce it has entered into a conditional and
binding  term sheet (the "Heads of Terms") with Absolute Resources regarding
the proposed disposal of the shallow MJF and South Yelemes Structures on the
BNG contract area, which is located in the west of Kazakhstan, 40 kilometres
southeast of Tengiz on the edge of the Mangistau Oblast, covering an area of
1,561 square kilometres, and the oil and gas assets and operations carried out
therein (the "BNG Contract Area") (the "Disposal"). The Disposal will be
effected by way of the sale to Absolute Resources of the entire issued share
capital of a Group entity to be established in the Astana International
Finance Centre (the "NewCo").

 

The MJF structure is the principal shallow structure on the BNG Contract Area
and has accounted for the vast majority of the Group's oil production since it
first produced oil in 2016. The South Yelemes structure was awarded its own
export licence in 2021 but to date has only produced from wells drilled in the
Soviet era, as improved by recent horizontal drilling.

 

The Group would continue to own the remainder of the BNG Contract Area
including the licences for the two key deep structures Airshagyl and Yelemes
Deep.

 

The Board believes that the Group has a competitive advantage in the
identification and acquisition of new projects in Kazakhstan, which it does
not necessarily have to the same degree in the day to day operation of
maturing assets. Accordingly, in the opinion of the Board, the funds released
from the Disposal can be better used elsewhere to enhance longer term
shareholder value.

 

In the year ended 31 December 2023 revenue attributable from the production of
oil at the MJF and South Yelemes Structures was approximately US$21.6 million,
down from approximately US$39.2 million in 2022, with gross profit in 2023 of
approximately US$16.6 million, down from approximately US$32.7 million in
2022. In 2023 the profit before tax from the BNG shallow structures was
approximately US$12.5 million, down from approximately US$15.0 million in
2022.

 

The carrying value of the MJF and South Yelemes Structures at 31 December 2023
as set out in the 2023 audited financial statements was approximately US$60.6
million.

 

Under the AIM Rules, the proposed disposal is of a sufficient size relative to
the Group to require shareholder approval. A shareholder circular (the
"Circular"), including further details relating to the Disposal and including
a notice convening a general meeting of the Company's shareholders
("Shareholders") will be posted to Shareholders in due course and at that time
will also be uploaded to the Company's website at
https://caspiansunrise.com/investors/circulars-documents
(https://caspiansunrise.com/investors/circulars-documents) . The Company will
make a separate announcement relating to the publication of the Circular in
due course.

 

Material terms of the Heads of Terms

 

The aggregate consideration payable by Absolute Resources shall be the
Kazakhstan Tenge equivalent of USD$88 million (the "Price"), which shall be
payable by Absolute Resources as follows:

 

·    the outstanding amount of historical costs under certain subsoil use
contracts (the "Subsoil Use Contracts") shall be deemed paid by Absolute
Resources by the transfer to NewCo of the outstanding amount of such
historical costs as at the date of completion of the Disposal ("Completion").
As of 26 August 2024, these costs were approximately US$16.3 million and to
the extent that the actual transfer of costs is less than this amount then the
first tranche below shall be increased by the difference;

·    US$2 million that was paid by Absolute Resources to the Group earlier
this year under the terms of a related exclusivity agreement, in two separate
tranches of US$1 million each;

·    US$12 million within 5 business days following the signing of the
Heads of Terms;

·    approximately US$54.1 million that will be payable upon Completion;
and

·    US$4 million (the "Second Tranche Payment") shall be paid in equal
monthly instalments in the 120-day period post-Completion.

 

The Group will contribute subsurface use rights under the Subsoil Use
Contracts and assets related to the production of hydrocarbons under those
contracts to NewCo prior to Completion. No other obligations or debts other
than those specified in the Heads of Terms shall be transferred to NewCo.

 

Absolute Resources has made certain assumptions regarding the Disposal which,
if any are incorrect, entitle Absolute Resources to withdraw from the
transaction or otherwise renegotiate the Heads of Terms and/or the Sale and
Purchase Agreement ("SPA").

 

Completion will be conditional on, inter alia, the following conditions (the
"Conditions"):

 

·    the Group having complied with certain pre-Completion obligations
relating to the ongoing operation of the Company as set out in the Heads of
Terms;

·    Absolute Resources having obtained relevant antimonopoly and
governmental consents in Kazakhstan;

·    the Company obtaining the consent of the requisite majority of
Shareholders;

·    Absolute Resources having completed satisfactory technical, financial
and tax investigations, and an inventory of assets related to the operations
under the Subsoil Use Contracts;

·    Absolute Resources having received debt-financing to pay the Price
under the SPA;

·    there being no material adverse change in the business, operations,
assets, financial or trading position, profits or prospects of the Group
related to the Subsoil Use Contracts prior to Completion;

·    the successful negotiation and signing of suitable contractual
documents between the parties, including the SPA; and

·    Absolute Resources having paid the portions of the Price due prior to
Completion.

 

The Conditions must be satisfied by 31 October 2024. If any of the Conditions
have not been satisfied by this date, the parties have agreed to negotiate and
agree in good faith a new long-stop date.

 

The Group shall retain full operational control over NewCo until the Price
(other than the Second Tranche Payment) has been paid by Absolute Resources.

 

The parties intend to enter into the SPA on or before 30 September 2024. If
this date is not met, the defaulting Party may become liable to pay the sum of
US$2 million in liquidated damages to the other Party, and in the case of the
Group's default, amounts equal to up to approximately US$14 million then
received by the Group may become repayable by the Group to Absolute Resources,
subject to certain deductions.

 

Contacts:

Caspian Sunrise PLC

 

 Clive Carver, Chairman and CFO  +7 727 375 0202

 Zeus Capital Limited            +44 (0) 203 829 5000

  James Joyce

   James Bavister

   Andrew de Andrade

 

Qualified person

 

Mr. Assylbek Umbetov, a member of the Association of Petroleum Engineers, has
reviewed and approved the technical disclosures in this announcement.

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Clive Carver, Chairman and CFO of the Company.

 

This announcement has been posted to:

www.caspiansunrise.com/investors (http://www.caspiansunrise.com/investors)

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information
is disclosed in accordance with the Company's obligations under Article 17 of
the UK MAR. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

 

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