REG - Challenger Energy - New Share & Option Issuance

Challenger EnergyAnnouncement

01/11/2024 07:15

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RNS Number : 4688K  Challenger Energy Group PLC  01 November 2024

1 November 2024

Challenger Energy Group PLC

("Challenger Energy" or the "Company")

 

New Share & Option Issuance

 

 

On 29 October 2024, Challenger Energy (AIM: CEG), the Atlantic margin focused
energy company, announced the closing of the farmout of a 60% interest in the
AREA OFF-1 block to Chevron (the "Farmout"). Consequent on closing of the
Farmout, new shares and options will be issued (the "Share Issuance" and
"Option Issuance", respectively). Details are set out below.

 

Iain McKendrick, Non-Executive Chairman of Challenger Energy, said:

 

"Over the past three years the team has completely transformed the Company,
migrating its exploration focus to Uruguay, securing quality assets of global
interest as validated by the successful farmout of AREA OFF-1 to Chevron, and
it is now looking forward to upcoming value-adding activity across that
portfolio.  The Company has also attracted new investors who understand our
potential and who are committed to Challenger Energy for the long-term. We're
fully funded, with a strong balance sheet and no debts or unfunded
obligations, and therefore no need for any additional capital in the
foreseeable future. Thus, whilst the share and option issuances detailed are
administrative, they're also a milestone, in that they represent the
definitive conclusion of the transition of our Company to where we are today.
The runway ahead is clear, opportunities lie before us, and the Challenger
Energy team is fully committed to exploiting this position of strength for the
benefit of all shareholders".

 

Conversion of Charlestown Loan

 

On 18 April 2024, the Company announced a strategic investment in the Company
by Charlestown Energy Partners LLC ("Charlestown"), under the terms of which
Charlestown invested £1.5m in the Company, initially in the form of a loan,
but which upon closing of the Farmout (and subject to prior completion of a
share consolidation) would convert into shares in the Company, on a pre-agreed
basis. The requisite share consolidation was completed on 7 August 2024, and
the Farmout was completed on 28 October 2024. Accordingly, Charlestown's loan,
along with accrued interest, will now convert into 20,000,000 ordinary shares,
and the loan from Charlestown will be fully extinguished. These ordinary
shares will be issued from the Company's standing share issuance authority,
and will be issued to Charlestown and various associated entities and
investment partners of Charlestown.

 

Service Provider Share Issuance in Lieu of Fees, and issues of Fee Options

 

Parties that have provided services to the Company over the past 12 months,
including in particular various advisory services in respect of the Farmout,
have indicated a desire to receive part of their fees, otherwise payable in
cash, in the form of shares in the Company. The Company considers that this
demonstrates a high degree of confidence in the Company, and also enables the
Company to maximise cash reserves. The Company has thus agreed to issue
12,000,000 new ordinary shares to service providers in lieu of cash fees.
These will be issued from the Company's standing share issuance authority.
Additionally, as part of agreed fees to financial advisers in respect of
services provided, the Company will also issue a total of 3,800,000 options
over ordinary shares, exercise price of 5p per share, valid for 3 years from
date of issue.

 

Share Issuance to the CEO

 

The Chief Executive Officer is entitled to a bonus related to the successful
closing of the Farmout, which the CEO has agreed to receive in the form of
shares in the Company, inclusive of the proviso that none of these shares can
be sold within two years from the date of closing of the Farmout. The Company
considers the willingness of the CEO to forego cash compensation, and instead
increase his shareholding in the Company and to hold those shares for an
extended period of time, to be a sign of confidence in the Company and its
prospects, which not only retains and incentivises him but at the same time
aligns his interests even further with that of all other shareholders.
Accordingly, the CEO will be issued with 3,000,000 new ordinary shares from
the Company's standing share issuance authority. Following this issuance, the
CEO's shareholding in the Company will be a total of 15,122,432 shares, and
will represent approximately 6.2% of the issued share capital.

 

Option Issuance to the CEO and Mr Robert Bose

 

600,000 options in each tranche of the Company's approved option plan (refer
to the Company's announcement of 7 March 2022) will be issued to the CEO as
part of his agreed compensation arrangements consequent on successful
completion of the Farmout, and 360,000 in each tranche will be issued to
non-executive director Mr. Robert Bose, thus providing him with an option
holding equal to other non-executive directors. The terms and conditions
applicable to the new options to be issued to the CEO and Mr Bose will be as
per the Company's announcement of 7 March 2022, but (i) exercise prices
applicable to these options have been increased as described in Table A below,
and (ii) only half will be exercisable immediately (subject to vesting
hurdles), with the balance exercisable only after 1 March 2026. The increased
exercise prices for each tranche of options represent significant premiums to
the current share price, such that the ability to benefit is only possible if
there is a material increase in the Company's market value from current
levels.

 

Total Voting Rights

 

In respect of the new shares to be issued as a result of the foregoing,
application has been made for admission to trading on the AIM of a total of
35,000,000 new ordinary shares of 1p each. Admission is expected on or
around 8 November 2024. On admission the new ordinary shares will rank pari
passu with the Company's existing ordinary shares. Following admission, the
Company's issued share capital will consist of 244,881,322 ordinary shares,
with each ordinary share carrying the right to one vote. The Company does not
hold any ordinary shares in treasury. This figure of 244,881,322 ordinary
shares may therefore 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 their interest in, the
share capital of the Company under the FCA's Disclosure Guidance and
Transparency Rules.

 

Total Options & Warrants on Issue

 

Following the Option Issuances, the total number of options and warrants over
ordinary shares in the Company, and the terms of those options and warrants,
will be as follows:

 

TABLE A: Consolidated Statement of Options and Warrants on Issue

 

 Holder                                    Options and/or Warrants Held

 Iain McKendrick - Non-Executive Chairman  560,000 in each of Tranche A, B, C and D((1))
 Stephen Bizzell - Non-Executive Director  370,000 in each of Tranche A, B, C and D((1))
 Simon Potter - Non-Executive Director     370,000 in each of Tranche A, B, C and D((1))
 Robert Bose - Non-Executive Director      370,000 in each of Tranche A, B, C and D((2, 3))
 Eytan Uliel -Executive Director and CEO   1,700,000 in each of Tranche A, B, C and D((1)) and

                                           600,000 in each tranche on revised terms((2, 3))
 Executives and Staff ((4))                1,800,000 in each of Tranche A, B, C and D((1))
 "In the money" advisor options            21,931,189((5))
 "Out of the money" advisor options        24,000((6))

 

Notes:

All share and option figures are stated on a post share consolidation basis,
reflective of the 50:1 share consolidation that occurred on 8 August 2024.

(1) Terms and conditions of Board & Executive / Staff Options were set out
in the Company's announcement of 7 March 2022, and which are restated here for
shareholder information, as follows:

- Tranche A: exercise price 5p per share; exercise period of 5 years from
grant; vested.

- Tranche B: exercise price 7.5p per share; exercise period of 5 years from
grant; unvested, will vest once a share price of 7.5p per share achieved and
sustained for a period of 10 consecutive trading days.

- Tranche C: exercise price 11.25p per share; exercise period of 5 years from
grant; unvested, will vest once a share price of 11.25p per share achieved
and sustained for a period of 10 consecutive trading days.

- Tranche D: exercise price of 15p per share; exercise period of 5 years
from grant; unvested, will vest once a share price of 15p per share achieved
and sustained for a period of 10 consecutive trading days.

If all Board & Executive / Staff Options that are currently "in the money"
were exercised, a total of 4,800,000 ordinary shares would be issued
(approximately 1.91% of the Company on a fully diluted basis), and in return
for which the Company would receive cash proceeds of approximately £240,000 /
US$320,000.

(2) Exercise prices of these options have been increased as follows:

- Tranche A: exercise price 8p per share (increased 60% from 5p per share)

- Tranche B: exercise price 12p per share (increased 60% from 7.5p per share)

- Tranche C: exercise price 18p per share (increased 60% from 11.25p per
share)

- Tranche D: exercise price is 24p per share (increased 60% from 15p per
share)

(3) 50% of these options are exercisable immediately (but subject to vesting
hurdles being satisfied); 50% only become exercisable on 1 March 2026, unless
accelerated in accordance with their terms.

(4) Executive and staff options have been distributed widely to key members of
the executive and operating staff base, to secure retention and
incentivisation.

(5) Since 2018, options and warrants have been issued to various advisors and
financiers as part of agreed compensation arrangements for services provided /
fundraisings. Many of these have since expired, and of those that remain the
number of warrants and exercise prices have been readjusted as a result of
share consolidations. Therefore, for shareholder's reference, the number of
options and warrants referred to as 'advisor warrants' in Table A constitutes
an up-to-date, definitive statement of all such options presently on issue. Of
these, 19,831,189 have an exercise price of 5p each, are vested, and expire in
respect of 11,031,189 options on 11/03/2026, in respect of 5,000,000 options
on 2/11/2026, and in respect of 3,800,000 options on 1/11/2027. Given that
these are currently vested and 'in the money' it is expected that they will in
due course be exercised in accordance with their terms, and if all exercised,
would result in the issue of 19,831,189 ordinary shares (representing
approximately 6.9% of the Company on a fully diluted basis), and in return for
which the Company would receive cash proceeds of approximately £991,000 /
US$1.3 million. A further 2,100,000 warrants were issued consequent on the
Charlestown investment, valid to 28 May 2026, exercise price 10p per share
(refer to the Company's RNS of 18 April 2024) and, if ultimately these were to
become 'in the money' and exercised, would result in the issue of 2,100,000
ordinary shares (representing approximately 0.8% of the Company on a fully
diluted basis), and in return for which the Company would receive cash
proceeds of approximately £201,000 / US$280,000.

(6) These small number of "legacy" options that remain valid relate to
remuneration provided in settlement of fees pertaining to financing of the
well drilled in The Bahamas in late 2020. They have an exercise price of 175p
each, are vested, and expire on 01/09/2025. Given the extent to which these
options are 'out of the money', they are expected to lapse without being
exercised.

 

 

For further information, please contact:

 

 Challenger Energy Group PLC                         Tel: +44 (0) 1624 647 882

 Eytan Uliel, Chief Executive Officer
 Zeus - Nomad and Joint Broker                       Tel: +44 (0) 20 3829 5000

 Simon Johnson / Antonio Bossi / Darshan Patel
 Stifel - Joint Broker                               Tel: +44 (0) 20 7710 7600

 Ashton Clanfield / Callum Stewart / Simon Mensley
 Gneiss Energy Limited - Financial Adviser           Tel: +44 (0) 20 3983 9263

 Jon Fitzpatrick / Paul Weidman / Doug Rycroft
 CAMARCO - Financial PR                                Tel: +44 (0) 20 3757 4980

 Billy Clegg / Georgia Edmonds / Tomisin Ibikunle
 Jonathan Paterson - Investor Relations                Tel: +1 475 477 9401

 Jonathan.paterson@harbor-access.com

 

Notes to Editors

 

Challenger Energy is an Atlantic-margin focused energy company, with
production, development, appraisal, and exploration assets in the region.
Challenger's primary assets are located in Uruguay, where the Company holds
two high impact offshore exploration licences, totalling 19,000km(2) (gross)
and is partnered with Chevron on the AREA-OFF 1 block. Challenger Energy is
quoted on the AIM market of the London Stock Exchange.

 

https://www.cegplc.com (https://www.cegplc.com/)

 

 1   Details of the person discharging managerial responsibilities/person closely
     associated
 a)  Name:                                     Eytan Uliel
 2   Reason for the notification
 a)  Position/Status:                          Chief Executive Officer

 b)  Initial Notification/Amendment:           Initial Notification

 3   Details of the issuer, emission allowance market participation, auction
     platform, auctioneer or auction monitor
 a)  Name:                                     Challenger Energy Group plc
 b)  LEI:                                      2138007V1WVFQ52DLS75
 4.  Details of transaction(s); section to be repeated for (i) each type of
     instrument; (ii) each type of transaction; (iii) each date; and (iv) each
     place where transactions have been conducted.
 a)  Description of the financial instrument:  Ordinary shares of £0.01

     Identification code:                      ISIN: IM00BPLZ1D89
 b)  Nature of the transaction:                Issue of ordinary shares as bonus on completion of farmout

 c)  Price(s) and volume(s):                   Price(s)                        Volume(s)
     n/a                                                                       3,000,000
 d)  Aggregated volume:                        As above

     Price:
 e)  Date of the Transaction:                  8 November 2024
 f)  Place of the Transaction:                 London Stock Exchange

4.

Details of transaction(s); section to be repeated for (i) each type of
instrument; (ii) each type of transaction; (iii) each date; and (iv) each
place where transactions have been conducted.

a)

Description of the financial instrument:

Identification code:

Ordinary shares of £0.01

ISIN: IM00BPLZ1D89

b)

Nature of the transaction:

 

Issue of ordinary shares as bonus on completion of farmout

c)

Price(s) and volume(s):

Price(s)

Volume(s)

n/a

3,000,000

d)

Aggregated volume:

Price:

As above

e)

Date of the Transaction:

8 November 2024

f)

Place of the Transaction:

London Stock Exchange

 

 

ENDS

 

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