REG - Crystal Amber Fund - Crystal Amber requisitions Hurricane GM

Crystal Amber FundAnnouncement

23/12/2022 07:00

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RNS Number : 6913K  Crystal Amber Fund Limited  23 December 2022

 

23 December 2022

 

CRYSTAL AMBER FUND LIMITED

("Crystal Amber", the "Company", or the "Fund")

 

Crystal Amber requisitions general meeting of Hurricane Energy plc
("Hurricane")

Proposal to remove six directors and appoint two new directors

Crystal Amber Fund, the activist investment fund, announces that it has sent
to the board of Hurricane a requisition notice requiring Hurricane to convene
a general meeting at which resolutions will be proposed to remove executives
Antony Maris and Richard Chaffe, Non-Executive Chairman, Philip Wolfe and,
conditional on the appointment of Tony Buckingham and Franco Castelli, Crystal
Amber nominees, David Craik, John Wright and Juan Morera, in order for
Hurricane to maintain its independence. As regards the removal of Messrs.
Craik, Wright and Morera, this is required to ensure that the board of
Hurricane maintains its independence and is no reflection on the performance
of these Crystal Amber nominees: Crystal Amber thanks them for their
contributions. The requisition notice proposes to appoint Tony Buckingham and
Franco Castelli to the board as directors. Details relating to Tony Buckingham
and Franco Castelli are set out below.

The Fund has been a shareholder in Hurricane since March 2013. In May 2021,
the Fund requisitioned a general meeting to remove five directors and appoint
two directors. In June 2021, immediately prior to the general meeting, the
five directors resigned and Crystal Amber's nominees, David Craik and John
Wright were appointed.

In February 2022, the Fund requested and was offered a position on the
Hurricane board to assist Hurricane to fully realise its potential. In March
2022, Juan Morera was appointed to the board. Subsequently, the arrival of two
additional independent non-executive directors means that the Hurricane board
now meets the necessary governance standards.

On 2 November 2022, Hurricane announced that it had received an unsolicited
offer for the company and that following a period of engagement with the
bidder, Hurricane had received an offer for the entire issued share capital of
the Company at an indicative offer of 7.7p per Hurricane share in cash (the
"Indicative Offer") (the "Hurricane Announcement"). In the Hurricane
Announcement, the Hurricane Board stated that it had concluded that the
Indicative Offer should not be recommended to Hurricane shareholders.  The
Hurricane Board also stated that it had decided to launch a formal sale
process for Hurricane to establish whether there is a bidder prepared to offer
a value the Hurricane Board considers attractive, relative to the standalone
prospects of Hurricane as a publicly listed company and one that should be
recommended to all Hurricane shareholders.

 

In the Hurricane Announcement, Hurricane stated that whilst the outcome of the
formal sale process is uncertain, it is in a very strong financial and
operational position.

 

In the Hurricane Announcement, the Hurricane Board stated that in the event
that the formal sale process does not result in a transaction, it intends to
commence a significant capital return programme with up to $70 million
(equivalent to 3.1p per Hurricane share at the then current exchange rates) to
be returned to shareholders in Q1 2023, upon completion of a capital reduction
by Hurricane which would require the approval of Hurricane shareholders and
confirmation by the High Court of Justice in England and Wales. Furthermore,
Hurricane announced that in the absence of alternatives that would generate
better returns for Hurricane shareholders, further distributions totalling up
to $110 million could be made during 2023 and 2024 in aggregate, with a final
distribution of up to $30 million in 2025, following the cessation of
production from the Lancaster operations. Hurricane further advised that the
amount of cash available to distribute to Hurricane shareholders following
cessation of operations and decommissioning is dependent on many factors,
including oil price, ultimate oil recovery from Lancaster, whether the
decision to cease operations is planned or forced and the cost and timing of
decommissioning.

 

In the Hurricane Announcement, the Hurricane Board reserved the right to alter
any aspect of the process as outlined above or to terminate the process at any
time and in such cases will make an announcement as appropriate.  The
Hurricane Board also reserved the right to reject any approach or terminate
discussions with any interested party at any time.

 

The Fund notes that on 18 November 2022, Hurricane announced that it had
received multiple expressions of interest from several counterparties.

The Fund also notes that Hurricane has forecast net cash at the end of 2022 to
be approximately $118 million, equivalent to 4.9p a share. The Fund believes
that as long as well performance is able to continue as forecast, production
could continue into Q2 2025, based upon current oil prices, additional value
in excess of the indicative offer of 7.7p per share could be returned to
shareholders. However, thereafter, given management's failure in September
2022 to achieve regulatory approval for its "P8" well after trumpeting its
potential and fast payback to investors, under its present management,
Hurricane has become a cash rich and cash generative "orphan asset," with no
further growth potential.

The Fund has concluded that in the continuing absence of a firm offer that
reflects the value of Hurricane, it would be better served under new
management that has a track record of delivering for shareholders. Crystal
Amber has been in discussions with Tony Buckingham, the founder and Chief
Executive of Albion Energy Limited and Franco Castelli, Managing Director of
Albion Energy Limited. Tony Buckingham is the founder of Heritage Oil, which
in 2014 was acquired for $1.6 billion. [Albion Energy Limited discovered more
than two billion barrels gross of oil.] Tony Buckingham and Franco Castelli
have agreed to act as directors.

 

The Fund has also been informed by Albion Energy Limited that it is of the
view that there remains substantial potential within Hurricane's acreage and
that under the right leadership, Hurricane could attract significant new
investment to fund growth opportunities. In the event that Tony Buckingham and
Franco Castelli are appointed directors of Hurricane, Crystal Amber
understands that the remuneration packages for Tony Buckingham and Franco
Castelli will be set by the ongoing Remuneration Committee of Hurricane but it
would be supportive of the grant of options to Albion Energy Limited over 100
million Hurricane shares, equivalent to approximately 5% of the issued share
capital of Hurricane at an exercise price of £0.001, being the par value of a
Hurricane ordinary share, with such options vesting quarterly over the
following 12 months. In addition, Crystal Amber would be supportive of
Hurricane granting options over a further 200 million shares, equivalent to
approximately 10% of the current issued share capital of Hurricane to Albion
Energy Limited, at an exercise price of 10p a share. A vesting condition of
such options would be that, by 31 July 2023, Hurricane raises a minimum of
£250 million of capital to spend on a drilling programme within Hurricane's
acreage. These options should vest quarterly in arrears over two years.

 

In the event that Crystal Amber accepts a cash offer from a third party that
is declared wholly unconditional on or before 30 April 2023, Crystal Amber
would give Albion Energy Limited the economic value of effectively having an
option over 20 million Hurricane shares held by Crystal Amber at an exercise
price of 7.7p a share.

 

Hurricane has announced its intention to return $70 million in Q1 2023.
Crystal Amber is supportive of this capital return and would expect any new
board of Hurricane to honour this commitment, in the absence of an offer that
is declared wholly unconditional.

 

 

For further enquiries please contact:

 

Crystal Amber Fund Limited

Chris Waldron (Chairman)

Tel: 01481 742 742

www.crystalamber.com (http://www.crystalamber.com)

 

Allenby Capital Limited - Nominated Adviser

David Worlidge/Jeremy Porter/Freddie Wooding

Tel: 020 3328 5656

 

Winterflood Investment Trusts - Broker

Joe Winkley/Neil Langford

Tel: 020 3100 0160

 

Crystal Amber Advisers (UK) LLP - Investment Adviser

Richard Bernstein

Tel: 020 7478 9080

 

 

 

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