REG - Hurricane Energy PLC - Recommended Acquisition of Hurricane Energy plc
16/03/2023 07:45
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RNS Number : 1988T Hurricane Energy PLC 16 March 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE UK VERSION OF THE MARKET ABUSE REGULATION (EU 596/2014) AS IT FORMS PART
OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED
16 March 2023
RECOMMENDED ACQUISITION
of
Hurricane Energy plc ("Hurricane")
by
Prax Exploration & Production PLC ("Prax")
to be effected by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
Summary and Highlights
The boards of Prax and Hurricane are pleased to announce that they have
reached agreement on the terms of a recommended acquisition of the entire
issued and to be issued ordinary share capital of Hurricane by Prax (the
"Acquisition"). The Acquisition is intended to be implemented by Prax by means
of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act
2006 between Hurricane and Hurricane Shareholders (the "Scheme"). The
announcement of the Acquisition concludes the Formal Sale Process.
Under the terms of the Acquisition, which will be subject to the Conditions
and further terms set out in Appendix I to this announcement and to be set out
in the Scheme Document, each Hurricane Shareholder will be entitled to receive
4.15 pence for each Hurricane Share, comprising:
· the Transaction Dividend of 3.32 pence per share in cash (£66.1
million); and
· the Cash Consideration of 0.83 pence per share in cash (£16.5
million); (together, the "Firm Proceeds").
In addition, each Hurricane Shareholder will be entitled to receive:
· the Supplementary Dividend of up to 1.87 pence per share in cash
(£37.2 million) (the "Supplementary Dividend Amount"); and
· a Deferred Consideration Unit, which may deliver up to 6.48 pence per
share in cash (£129.1 million), plus such amount of the Supplementary
Dividend Amount which is not declared as a dividend prior to the Scheme
Effective Date.
The Acquisition, assuming full value is delivered by the Deferred
Consideration Units, will deliver Hurricane Shareholders 12.50 pence per
Hurricane Share and values the entire issued ordinary share capital of
Hurricane at approximately £249.0 million.
· The Acquisition, assuming full value is delivered by the Deferred
Consideration Units, represents a premium of approximately 84 per cent. to the
Closing Price per Hurricane Share of 6.80 pence on 1 November 2022, being the
last Business Day prior to the announcement of the Formal Sale Process (the
"FSP").
· In the event that only the Firm Proceeds are received by Hurricane
Shareholders, the Acquisition values the entire issued ordinary share capital
of Hurricane at approximately £82.7 million, a discount of approximately 39
per cent. to the Closing Price per Hurricane Share of 6.80 pence on 1 November
2022, being the last Business Day prior to the announcement of the FSP.
Summary of the Terms of the Acquisition
· The board of Hurricane has declared a Special Dividend, the
Transaction Dividend, of 3.32 pence per share (£66.1 million), conditional on
(i) shareholder approval by way of ordinary resolution, the passing of such
resolution being conditional on the passing of the Resolutions; and (ii) the
Scheme becoming Effective. The Transaction Dividend will be paid to Hurricane
Shareholders within 14 days of the Scheme becoming Effective.
· The board of Hurricane will declare a further Special Dividend, the
Supplementary Dividend, of up to 1.87 pence per share (£37.2 million), before
the Scheme Effective Date, and conditional on the Scheme becoming Effective.
For the Directors to be able to declare the Supplementary Dividend in full,
Hurricane will need to have sufficient cash resources, in particular it will
need to have received the proceeds, as planned, from the oil lifting from the
Lancaster Field scheduled for late April 2023 (the "April Lifting Payment").
In the event that the April Lifting Payment has not occurred by the Scheme
Effective Date or Hurricane does not otherwise have sufficient cash resources
to declare and pay the Supplementary Dividend in full, the Directors intend to
declare and pay as much of the Supplementary Dividend as is permissible by
law, having regard to their duties as Directors of Hurricane. In such
circumstances, the balance, subject to receipt of cumulative proceeds from the
sale of no less than 450,000 bbls of oil from the Lancaster Field, will be
added to the Deferred Consideration Units, as described below.
· If the Supplementary Dividend is declared and paid in full, Hurricane
Shareholders will receive dividends totalling 5.19 pence per share (£103.4
million), payable within 14 days of the Scheme becoming Effective.
· The Cash Consideration of 0.83 pence per share (£16.5 million) will be
paid, conditional on the Scheme becoming Effective, within 14 days of the
Scheme becoming Effective. Prax will not be entitled to reduce the Cash
Consideration or Deferred Consideration Units payable pursuant to the terms of
the Acquisition or otherwise adjust the terms of the Acquisition as a result
of the declaration or payment of the Transaction Dividend or the Supplementary
Dividend. The Cash Consideration payable under the Acquisition is being wholly
funded from the existing cash resources of Prax.
· Each Hurricane Shareholder will receive one Deferred Consideration Unit
for each Hurricane Share. As noted above, any balance of the Supplementary
Dividend Amount not declared as a Supplementary Dividend shall be paid as a
Deferred Consideration Unit pursuant to the terms of the DCU Deed Poll subject
to cumulative proceeds from the sale of not less than 450,000 bbls of oil from
the Lancaster Field (of which c.200,000 bbls has already been produced). The
Deferred Consideration Units shall also, in aggregate, confer an entitlement
to receive 17.5 per cent. of all future Net Revenues earned by the Hurricane
Group, including from both the Lancaster Field and from any acquisition made
by Hurricane, from 1 March 2023 until 31 December 2026, capped at a total of
6.48 pence per Deferred Consideration Unit (£129.1 million in aggregate). The
Deferred Consideration Unit payments will be paid biannually in arrears other
than the Deferred Consideration Cash Amount which is payable within 5 Business
Days of the Trigger Event. The Deferred Consideration Units are complex
instruments and a number of factors will determine whether any amount will
actually be paid to Scheme Shareholders by way of the Deferred Consideration
Units. The minimum payment under the Deferred Consideration Units could be
zero. Further details in respect of the Deferred Consideration Units will be
contained in the Scheme Document.
Background to and Reasons for the Acquisition
· Following receipt of an unsolicited offer in mid-2022 and after a period
of engagement with the offeror, Hurricane received a follow-up offer from that
offeror which the Hurricane Board concluded should not be recommended to
Hurricane Shareholders. Thereafter, on 2 November 2022, Hurricane announced
the initiation of a Formal Sale Process as referred to in Note 2 on Rule 2.6
of the Code, in order to establish whether there was a bidder prepared to
offer a value that the Hurricane Board considered to be attractive, relative
to the standalone prospects of Hurricane as a publicly traded company and
accordingly one that should be recommended to all Hurricane Shareholders.
· The Acquisition is the conclusion to a comprehensive FSP. The FSP was
marketed to a wide audience of potential acquirors with an interest in
acquiring assets on the UK Continental Shelf. Interest in the FSP was
significantly diminished by the introduction of the Energy Profits Levy, and
subsequent amendments, by the UK government. Twelve companies engaged in the
FSP in a meaningful manner, with five providing actionable offers in
compliance with the requirements of the FSP. After this thorough process, the
Hurricane Board has resolved to recommend the Acquisition to Hurricane
Shareholders.
· Prax is a wholly-owned subsidiary of State Oil Limited, which is the
ultimate operating holding company of the Prax Group ("Prax" or the "Prax
Group"), a leading, British headquartered, international integrated and
diversified midstream and downstream energy group. Prax is committed to
building a sizeable upstream business in the North Sea, complementing its
midstream and downstream activities to create an integrated business, and it
is focused on rapidly developing its oil and gas portfolio via acquisitions.
The acquisition of Hurricane is the first strategic step, providing a platform
from which its upstream division will grow.
Hurricane Recommendation
The Acquisition offers Hurricane Shareholders:
· More Cash: In aggregate, the Special Dividends and Cash
Consideration, together with (a) any balance of the Supplementary Dividend
Amount not declared as a Supplementary Dividend; and (b) the 17.5% share of
future Net Revenues directly from the Lancaster Field (before the inclusion of
any incremental Net Revenue from future acquisitions) being paid as Deferred
Consideration Units pursuant to the terms of the DCU Deed Poll, is expected to
deliver a cash amount to shareholders that is greater than the sums that the
Directors expect to be able to return to shareholders in an orderly wind down
of the business;
· Faster Returns: With the accelerated up-front cash return and
without the requirement to wait for a wind-down of Hurricane following
cessation of production, Hurricane Shareholders will see their cash returns
delivered significantly faster by the Acquisition;
· Mitigated Downside: The Acquisition mitigates against the meaningful
risk of an unplanned cessation of production by delivering accelerated returns
and removing Hurricane Shareholders' direct exposure to the costs of
decommissioning the Lancaster field and winding down Hurricane; and
· Enhanced Upside: There is a significant potential for upside to be
delivered to Hurricane Shareholders, beyond that which could be realised as a
standalone company, should Prax leverage Hurricane's accumulated tax losses to
make production acquisitions in pursuit of its upstream growth strategy in the
near to medium term. In this case, Hurricane Shareholders will receive 12.50
pence per share, assuming payment of the Supplementary Dividend Amount in full
(by way of the Supplementary Dividend and/or Deferred Consideration Unit) and
full value is delivered by the Deferred Consideration Units (including any
balance of the Supplementary Dividend Amount not declared as a Supplementary
Dividend).
· Accordingly, the Board expects the Acquisition to result in
Hurricane Shareholders being better off than in a planned wind down of
Hurricane and significantly better off than they would be in the event of an
unplanned cessation of production, with significant further upside in the
event that the Deferred Consideration Units deliver on their full potential
through acquisitions.
· The Hurricane Directors, who have been so advised by Stifel as to
the financial terms of the Acquisition, consider the terms of the Acquisition
to be fair and reasonable. In providing its financial advice to the Hurricane
Directors, Stifel has taken into account the commercial assessments of the
Hurricane Directors. Stifel is providing independent financial advice to the
Hurricane Directors for the purposes of Rule 3 of the Code.
· Accordingly, the Hurricane Directors intend to unanimously recommend
that Hurricane Shareholders vote in favour of (i) the Scheme at the Court
Meeting; and (ii) the Resolutions at the General Meeting, in each case as the
Hurricane Directors who are interested in Hurricane Shares have irrevocably
undertaken to do in respect of those Hurricane Shares which they are able to
control the exercise of voting rights, amounting in aggregate to 498,092
Hurricane Shares and representing approximately 0.03 per cent. of the ordinary
share capital of Hurricane in issue (excluding treasury shares) on 15 March
2023 (the "Latest Practicable Date").
Irrevocable Undertakings
· In addition to the irrevocable undertakings from the Hurricane
Directors, Prax has also received irrevocable undertakings from Crystal Amber
Fund Limited ("Crystal Amber") and Kerogen Investments No.18 Limited
("Kerogen") to vote, or procure a vote, to approve the Scheme at the Court
Meeting and vote, or procure a vote, in favour of the Resolutions at the
General Meeting in respect of a total of 894,181,210 Hurricane Shares,
representing approximately 44.89 per cent. of the ordinary share capital of
Hurricane in issue (excluding treasury shares) on the Latest Practicable Date.
The obligations of each of Crystal Amber and Kerogen under their respective
undertakings shall remain binding in the event of a higher offer, or any other
bid or offer for Hurricane.
· Therefore, as at the date of this announcement, Prax has received
irrevocable undertakings to vote, or procure a vote, to approve the Scheme at
the Court Meeting and vote, or procure the voting, in favour of the
Resolutions at the General Meeting with respect to a total of 894,679,302
Hurricane Shares, representing approximately 44.92 per cent. of the ordinary
share capital of Hurricane in issue (excluding treasury shares) on the Latest
Practicable Date. Further details of the irrevocable undertakings are set out
in Appendix III to this announcement.
Information on Prax
· Prax is a wholly-owned subsidiary of State Oil Limited, which is
the ultimate operating holding company of the Prax Group.
· The Prax Group is a leading, British headquartered, international
integrated and diversified midstream and downstream energy group with 1,274
employees in 12 offices across seven countries. Prax's activities include
refining, marketing, and distribution of commercial fuels, via its network of
storage terminals and pipeline infrastructure, petrol retail forecourts, road
tankers, and its marine bunkering vessel fleet.
· Prax has a world-class asset base, with 113 kbpd of refining capacity
and 1,917 kcbm of storage capacity. For its financial year ended 28 February
2022, Prax generated revenues of US$10 billion and adjusted EBITDA of US$126.7
million. Prax has a strong balance sheet, providing a solid platform to
execute its strategic growth plans.
· Prax has a strong and experienced management team and Board with an
excellent track record of delivering growth through M&A. Recent activity
includes the acquisition of the Lindsey Oil refinery, a major strategic
refining complex in the UK, from TotalEnergies in 2021; the acquisition of the
Jarrow terminal from Shell in 2016 and the Zeebrugge terminal from
TotalEnergies in 2020; and the acquisition of Harvest Energy in 2015, now one
of the largest bio-fuels blenders in North West Europe.
· Prax has hired a highly experienced and motivated management team to
grow its upstream business, led by Alessandro Agostini, Oliver Dunn and Iain
McKendrick. The upstream management team has decades of North Sea and
international experience in large corporates, listed E&P players and
private equity firms, covering all aspects of oil and gas. In particular the
team has a considerable track record in executing upstream acquisitions.
Information on Hurricane
· Hurricane is an oil & gas exploration and production company,
focussed on fractured basement reservoirs offshore West of Shetlands on the UK
Continental Shelf. Hurricane has a 100 per cent. operated interest in the
Lancaster Field. As at 31 December 2022 the Lancaster Field's proved and
probable reserves were certified by ERCE Equipoise Limited ("ERCE") to be 6.6
mmbbls. Hurricane produced 3.1 mmbbls from the Lancaster field in 2022 and is
currently producing 7,710 bbls/d from a single well, with a water cut of 52
per cent., into the leased Aoka Mizu FPSO. Production of 2P Reserves is
projected by Hurricane to continue until August 2025 at an assumed US$80/bbl
oil price, at which point the Lancaster field will be abandoned. As at 28
February 2023, Hurricane had Net Free Cash of US$140.1 million, as well as
US$60.7 million of cash and liquid investments within restricted funds,
relating to decommissioning security arrangements and amounts set aside to
cover potential early termination fees on the FPSO lease. Hurricane has 28
employees and offices in Surrey and Aberdeen.
Timetable and Conditions
· It is intended that the Acquisition will be effected by way of a
Scheme, however Prax reserves the right to implement the Acquisition by way of
a Takeover Offer, subject to the Panel's consent.
· The Acquisition will be put to Hurricane Shareholders at the Court
Meeting and at the General Meeting. In order to become Effective, the Scheme
must be approved by a majority in number of the Scheme Shareholders voting at
the Court Meeting, either in person or by proxy, representing at least 75 per
cent. in value of the Scheme Shares voted. In addition, a special resolution,
to deal with certain matters ancillary to the Scheme, must be passed by
Hurricane Shareholders representing at least 75 per cent. of the votes cast at
the General Meeting and an ordinary resolution approving the Transaction
Dividend, must be passed by Hurricane Shareholders representing a simple
majority of the votes cast at the General Meeting.
· Subject to, among other things, the satisfaction or, where permitted,
the waiver of the Conditions, including the NSIA Condition and the NSTA
Condition, set out in Appendix I to this announcement, the Scheme is currently
expected to become Effective before the end of Q2 2023.
· The Scheme Document, containing further information about the
Acquisition and notices of the Court Meeting and the General Meeting, will be
published as soon as practicable and, in any event, within 28 days of this
announcement.
Philip Wolfe, Chairman of Hurricane, commented:
"I am pleased by the outcome of what has been a thorough and exhaustive formal
sale process. The Hurricane Board believes that the Acquisition will deliver
more cash than Hurricane Shareholders are likely to have received from
Hurricane's Lancaster oil field, on a much expedited timeframe, as well as
mitigating the risks associated with production from a single well
development. In addition, the Deferred Consideration Units offer the
opportunity to share in future production out-performance or higher oil
prices, as well as revenue from future acquisitions by Hurricane. Accordingly,
the Board of Hurricane is pleased to recommend the Acquisition to
Shareholders."
Commenting on the Acquisition, Sanjeev Kumar Soosaipillai, Chairman and CEO of
the Prax Group, said:
"The Prax Group is a leading British headquartered, international, integrated
and diversified midstream and downstream energy group with revenues of c.
US$10 billion, and 1,274 employees across seven countries. We have a strong
balance sheet, which provides a solid platform to execute our strategic growth
plans, the next leg of which is to build a scaled upstream business. We see
great strategic value in being a fully integrated energy company and have
invested in experienced upstream and M&A management teams to drive this.
The acquisition of Hurricane will provide a strong foundation for further
upstream investments. We look forward to the Hurricane team joining the Prax
family."
Commenting on the Acquisition, Alessandro Agostini, Head Of Exploration &
Production of the Prax Group, said:
"We are committed to building a scaled upstream division and have the
financial, strategic and management capacity to complete further upstream
M&A at pace. Hurricane is the first step and the platform from which our
upstream division will be built, as, together with our M&A colleagues we
review the potential acquisition of further, complementary UK continental
shelf upstream assets. We look forward to welcoming the Hurricane team as we
build a scaled upstream division within the Prax group."
This summary should be read in conjunction with, and is subject to, the full
text of this announcement and its appendices. The Acquisition will be subject
to the Conditions and further terms set out in Appendix I to this announcement
and to the full terms and conditions which will be set out in the Scheme
Document. Appendix II to this announcement contains the sources and bases of
calculation of certain information contained in this announcement. Appendix
III contains a summary of the irrevocable undertakings received in relation to
the Acquisition. Appendix IV contains definitions of certain expressions used
in the summary and in this announcement. Appendix V contains ERCE's valuation
of Hurricane's oil and gas assets in accordance with Rule 29 of the Code.
Analyst and investor presentation
A company presentation will be available on Hurricane's website shortly.
Pinsent Masons LLP is providing legal advice to Prax and the Prax Group.
Dentons UK & Middle East LLP is providing legal advice to Hurricane.
Ashurst LLP is providing legal advice to Stifel and Addleshaw Goddard LLP is
providing legal advice to Gneiss.
Enquiries:
Hurricane Energy plc +44 (0)1483 862820
Antony Maris, Chief Executive Officer
communications@Hurricaneenergy.com (mailto:communications@Hurricaneenergy.com)
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Financial Adviser, Nominated Adviser & Joint Corporate Broker to
Hurricane
Callum Stewart / Jason Grossman
Investec Bank plc +44 (0)20 7597 5970
Joint Corporate Broker to Hurricane
Chris Sim / Charles Craven / Jarrett Silver
Vigo Consulting +44 (0)20 7390 0230
Public Relations Adviser to Hurricane
Patrick d'Ancona / Ben Simons
Hurricane@vigoconsulting.com (mailto:hurricane@vigoconsulting.com)
Prax
Alessandro Agostini, Head of Exploration and Production +44 (0) 20 3757 4986
(Care of Camarco)
Gneiss Energy Limited +44 (0) 20 3983 9263
Financial Adviser to Prax
Jon Fitzpatrick / Paul Weidman
Camarco +44 (0) 20 3757 4986
Public Relations Adviser to Prax
Billy Clegg / Georgia Edmonds / Violet Wilson / Hugo Liddy
prax@camarco.co.uk (mailto:prax@camarco.co.uk)
Important Notices
Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Hurricane and no one else in connection with the Acquisition,
the other matters referred to in this announcement and the Scheme Document,
and will not be responsible to anyone other than Hurricane for providing the
protections afforded to clients of Stifel or for providing advice in
connection with the Acquisition or any matter or arrangement referred to
herein.
Investec Bank plc ("Investec"), which is authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct Authority and the
Prudential Regulation Authority in the United Kingdom, is acting exclusively
for Hurricane and no one else in connection with the Acquisition, the other
matters referred to in this announcement and the Scheme Document, and will not
be responsible to anyone other than Hurricane for providing the protections
afforded to clients of Investec or for providing advice in connection with the
Acquisition or any matter or arrangement referred to herein.
Gneiss Energy Limited ("Gneiss"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively for
Prax and no one else in connection with the Acquisition, the other matters
referred to in this announcement and the Scheme Document, and will not be
responsible to anyone other than Prax for providing the protections afforded
to clients of Gneiss or for providing advice in connection with the
Acquisition or any matter or arrangement referred to herein.
Further Information
This announcement is for information purposes only and does not constitute an
offer to sell or an invitation to purchase any securities or the solicitation
of an offer to buy any securities, pursuant to the Acquisition or otherwise.
The Acquisition will be made solely by means of the Scheme Document (or any
document by which the Acquisition is made) which will contain the full terms
and conditions of the Acquisition, including details of how to vote in respect
of the Acquisition. Any decision in respect of, or otherwise in response to,
the Acquisition should be made only on the basis of the information contained
in the Scheme Document (or any other document by which the Acquisition is
made).
This announcement has been prepared for the purpose of complying with the laws
of England and Wales and the Code and the information disclosed may not be the
same as that which would have been disclosed if this announcement had been
prepared in accordance with the laws of jurisdictions outside the United
Kingdom. Nothing in this announcement should be relied on for any other
purpose.
Hurricane and Prax urge Hurricane Shareholders to read the Scheme Document
when it becomes available because it will contain important information
relating to the Acquisition.
This announcement does not constitute a prospectus or prospectus equivalent
document.
Overseas Shareholders
The release, publication or distribution of this announcement in certain
jurisdictions other than the United Kingdom may be restricted by law. Persons
who are not resident in the United Kingdom or who are subject to the laws of
other jurisdictions should inform themselves of, and observe, any applicable
requirements. Any failure to comply with the applicable restrictions may
constitute a violation of the securities laws of any such jurisdiction. To the
fullest extent permitted by applicable law, the companies and persons involved
in the Acquisition disclaim any responsibility or liability for the violation
of such restrictions by any person. Further details in relation to Overseas
Shareholders will be contained in the Scheme Document.
Unless otherwise determined by Prax or required by the Code and permitted by
applicable law and regulation, the Acquisition will not be made available,
directly or indirectly, in, into or from a Restricted Jurisdiction where to do
so would violate the laws in that jurisdiction and no person may vote in
favour of the Acquisition by any such use, means, instrumentality or form
within a Restricted Jurisdiction or any other jurisdiction if to do so would
constitute a violation of the laws of that jurisdiction. Accordingly, copies
of this announcement and all documents relating to the Acquisition are not
being, and must not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in, into or from a Restricted Jurisdiction where to do so
would violate the laws in that jurisdiction, and persons receiving this
announcement and all documents relating to the Acquisition (including
custodians, nominees and trustees) must not mail or otherwise distribute or
send them in, into or from such jurisdictions where to do so would violate the
laws in that jurisdiction.
The availability of the Acquisition to Hurricane Shareholders who are not
resident in the United Kingdom (and, in particular, their ability to vote
their Hurricane Shares with respect to the Scheme at the Court Meeting, or to
appoint another person as proxy to vote at the Court Meeting on their behalf)
may be affected by the laws of the relevant jurisdictions in which they are
resident. Persons who are not resident in the United Kingdom should inform
themselves of, and observe, any applicable requirements, as any failure to
comply with such requirements may constitute a violation of the securities
laws of any such jurisdiction.
To the fullest extent permitted by applicable law, the companies and persons
involved in the Acquisition disclaim any responsibility or liability for the
violation of such restrictions by any person.
Forward Looking Statements
This announcement contains statements about Prax and Hurricane that are or may
be forward-looking statements. All statements other than statements of
historical facts included in this announcement may be forward-looking
statements. Without limitation, any statements preceded or followed by or that
include the words "targets", "plans", "believes", "expects", "aims",
"intends", "will", "may", "anticipates", "estimates", "projects" or words or
terms of similar substance or the negative thereof, are forward-looking
statements. Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, earnings,
synergies, economic performance, indebtedness, financial condition, dividend
policy, losses and future prospects; (ii) business and management strategies
and the expansion and growth of Prax's or Hurricane's operations and potential
synergies resulting from the Acquisition; and (iii) the effects of government
regulation on Prax's or Hurricane's business.
Such forward-looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key
assumptions. Many factors could cause actual results to differ materially from
those projected or implied in any forward-looking statements. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date hereof. All
subsequent oral or written forward-looking statements attributable to the Prax
or any of its members, directors, officers or employees or any persons acting
on their behalf are expressly qualified in their entirety by the cautionary
statement above. Each of Prax and Hurricane disclaims any obligation to update
any forward-looking or other statements contained herein, except as required
by applicable law.
No Profit Forecasts or Estimates
No statement in this announcement is intended as a profit forecast or estimate
for any period and no statement in this announcement should be interpreted to
mean that earnings or earnings per share for Hurricane for the current or
future financial years would necessarily match or exceed the historical
published earnings or earnings per share for Hurricane.
Dealing and Opening Position Disclosure Requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in one per cent.
or more of any class of relevant securities of an offeree company or of any
securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the Offer Period and, if later, following the announcement in
which any securities exchange offeror is first identified.
An Opening Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant securities
of each of: (i) the offeree company; and (ii) any securities exchange
offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) of
the Code applies must be made by no later than 3:30 p.m. (London time) on the
10th business day following the commencement of the Offer Period and, if
appropriate, by no later than 3:30 p.m. (London time) on the 10th business day
following the announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of the
offeree company or of a securities exchange offeror prior to the deadline for
making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in
one per cent. or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of: (i) the
offeree company; and (ii) any securities exchange offeror, save to the extent
that these details have previously been disclosed under Rule 8 of the Code. A
Dealing Disclosure by a person to whom Rule 8.3(b) of the Code applies must be
made by no later than 3:30 p.m. (London time) on the business day following
the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3 of the Code.
Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4 of the Code).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Panel's website at
www.thetakeoverpanel.or (http://www.thetakeoverpanel.org.uk) g
(http://www.thetakeoverpanel.org.uk) .uk (http://www.thetakeoverpanel.org.uk)
, including details of the number of relevant securities in issue, when the
Offer Period commenced and when any offeror was first identified. If you are
in any doubt as to whether you are required to make an Opening Position
Disclosure or a Dealing Disclosure, you should contact the Panel's Market
Surveillance Unit on +44 (0)20 7638 0129.
Publication on Website and Availability of Hard Copies
This announcement and the documents required to be published pursuant to Rule
26.1 of the Code and pursuant to Rule 26 of the AIM Rules for Companies will
be available free of charge, subject to certain restrictions relating to
persons resident in Restricted Jurisdictions, on Hurricane's website at
hurricaneenergy.com and Prax's microsite at prax.com by no later than 12:00
noon (London time) on the Business Day following this announcement.
Neither the content of any website referred to in this announcement nor the
content of any website accessible from hyperlinks is incorporated into, or
forms part of, this announcement.
In accordance with Rule 20 of the AIM Rules for Companies, a copy of this
announcement will shortly be sent to Shareholders who have requested hard copy
communications. In accordance with Rule 30.3 of the Code, you may request a
hard copy of this announcement by contacting Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, Telephone: 0370 707
1733 . You may also request that all future documents, announcements and
information to be sent to you in relation to the Acquisition should be in hard
copy form.
Right to switch to a Takeover Offer
Prax reserves the right to elect, with the consent of the Panel to implement
the Acquisition by way of Takeover Offer for the entire issued and to be
issued ordinary share capital of Hurricane as an alternative to the Scheme. In
such an event, the Takeover Offer will be implemented on the same terms or, on
such other terms being no less favourable (subject to appropriate amendments),
so far as applicable, as those which would apply to the Scheme.
Rounding
Certain figures included in this announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.
Rule 2.9 Disclosure
In accordance with Rule 2.9 of the Code, Hurricane confirms that as at the
date of this announcement, it has in issue and admitted to trading on AIM
1,991,871,556 ordinary shares of 0.1 pence each (excluding ordinary shares
held in treasury). The International Securities Identification Number (ISIN)
of the ordinary shares is GB00B580MF54.
Important Information
If you are in any doubt about the contents of this announcement or the action
you should take, you are recommended to seek your own independent financial
advice immediately from your stockbroker, bank manager, solicitor, accountant
or independent financial advisor duly authorised under the Financial Services
and Markets Act 2000 (as amended) if you are a resident in the United Kingdom
or, if not, from another appropriately authorised independent financial
advisor.
Standard
ERCE's work has been prepared in accordance with the June 2018 Petroleum
SPE/WPC/AAPG/SPEE/SEG/SPWLA/EAGE Resources Management System ("PRMS") as the
standard for classification and reporting.
Competent Person's Review
The technical information in this release has been reviewed by Antony Maris,
Chief Executive Officer, who is a qualified person for the purposes of the AIM
Guidance Note for Mining, Oil and Gas Companies. Mr Maris is a petroleum
engineer with more than 35 years' experience in the oil and gas industry. He
has a B.Sc.(Eng.) Petroleum Engineering (Hons) from the Imperial College of
Science and Technology (University of London) Royal School of Mines A.R.S.M.
and an MBA from Kingston Business School.
ERCE has given its consent to the reference to the Valuation in this
announcement. ERCE confirms it has reviewed this announcement and confirms
that the estimates of Reserves have been correctly extracted from the
Valuation. The Valuation has been signed by Dr Adam Law who has over 30 years
of relevant experience in the oil industry.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE UK VERSION OF THE MARKET ABUSE REGULATION (EU 596/2014) AS IT FORMS PART
OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED
16 March 2023
RECOMMENDED ACQUISITION
of
Hurricane Energy ("Hurricane")
by
Prax Exploration & Production PLC ("Prax")
to be effected by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
1 Introduction
The boards of Prax and Hurricane are pleased to announce that they have
reached agreement on the terms of a recommended acquisition of the entire
issued and to be issued ordinary share capital of Hurricane by Prax (the
"Acquisition"). The Acquisition is intended to be implemented by Prax by means
of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act
2006 between Hurricane and Hurricane Shareholders (the "Scheme"). The
announcement of the Acquisition concludes the Formal Sale Process.
2 The Acquisition
2.1 Summary of the Terms of the Acquisition
Under the terms of the Acquisition, which will be subject to the Conditions
and further terms set out in Appendix I to this announcement and to be set out
in the Scheme Document, each Hurricane Shareholder will be entitled to receive
4.15 pence for each Hurricane Share, comprising:
· the Transaction Dividend of 3.32 pence per share in cash (£66.1
million); and
· the Cash Consideration of 0.83 pence per share in cash (£16.5
million); (together, the "Firm Proceeds").
In addition, each Hurricane Shareholder will be entitled to receive:
· the Supplementary Dividend of up to 1.87 pence per share in cash
(£37.2 million) (the "Supplementary Dividend Amount"); and
· a Deferred Consideration Unit, which may deliver up to 6.48
pence per share in cash (£129.1 million), plus such amount of the
Supplementary Dividend Amount which is not declared as a dividend prior to the
Scheme Effective Date.
The Acquisition, assuming full value is delivered by the Deferred
Consideration Units, will deliver Hurricane Shareholders 12.50 pence per share
and values the entire issued ordinary share capital of Hurricane at
approximately £249.0 million.
The Acquisition, assuming full value is delivered by the Deferred
Consideration Units, represents a premium of approximately 84 per cent. to the
Closing Price per Hurricane Share of 6.80 pence on 1 November 2022, being the
last Business Day prior to the announcement of the Formal Sale Process (the
"FSP").
In the event that only the Firm Proceeds are received by Hurricane
Shareholders, the Acquisition values the entire issued ordinary share capital
of Hurricane at approximately £82.7 million, a discount of approximately 39
per cent. to the Closing Price per Hurricane Share of 6.80 pence on 1 November
2022, being the last Business Day prior to the announcement of the FSP.
The board of Hurricane has declared a Special Dividend, the Transaction
Dividend, of 3.32 pence per share (£66.1 million), conditional on (i)
shareholder approval by way of ordinary resolution, the passing of such
resolution is conditional on the passing of the special resolution necessary
to implement the Scheme at the General Meeting convened immediately after the
Court Meeting; and (ii) the Scheme becoming Effective. The Transaction
Dividend will be paid to Hurricane Shareholders within 14 days of the Scheme
becoming Effective.
The board of Hurricane will declare a further Special Dividend, the
Supplementary Dividend, of up to 1.87 pence per share (£37.2 million), at any
point before the Scheme Effective Date, and conditional on the Scheme becoming
Effective. For the Directors to be able to declare the Supplementary Dividend
in full, Hurricane will need to have sufficient cash resources and profits
available for distribution, in particular it will need to have received the
proceeds, as planned, from the oil lifting from the Lancaster Field scheduled
for late April 2023 (the "April Lifting Payment"). In the event that the April
Lifting Payment has not occurred by the Scheme Effective Date or Hurricane
does not otherwise have sufficient cash resources or profits available for
distribution to declare and pay the Supplementary Dividend in full, the
Directors intend to declare as much of the Supplementary Dividend as is
permissible by law and in accordance with their fiduciary duties, having
regard to their duties as Directors of Hurricane. The balance, subject to
receipt of cumulative proceeds from the sale of no less than 450,000 bbls of
oil from the Lancaster Field (of which c.200,000 bbls has already been
produced), will be added to the Deferred Consideration Units, as described
below.
If the Special Dividends are declared and paid in full, Shareholders will
receive dividends totalling 5.19 pence per share (£103.4 million) pursuant to
the Special Dividends, payable within 14 days of the Scheme becoming
Effective.
The Cash Consideration of 0.83 pence per share (£16.5 million) will be paid,
conditional on the Scheme becoming Effective, within 14 days of the Scheme
becoming Effective. Prax will not be entitled to reduce the Cash Consideration
or Deferred Consideration Units payable pursuant to the terms of the
Acquisition or otherwise adjust its terms as a result of the declaration or
payment of the Transaction Dividend or the Supplementary Dividend. The Cash
Consideration payable under the Acquisition is being wholly funded from the
existing cash resources of Prax.
Each Hurricane Shareholder will receive one Deferred Consideration Unit for
each Hurricane Share. As noted above, any balance of the Supplementary
Dividend Amount not declared as a Supplementary Dividend shall be paid
pursuant to the terms of the DCU Deed Poll subject to cumulative proceeds from
the sale of not less than 450,000 bbls of oil from the Lancaster Field. The
Deferred Consideration Units shall also, in aggregate, confer an entitlement
to receive 17.5 per cent. of all future Net Revenues earned by the Hurricane
Group, including from both the Lancaster Field and any acquisition made by
Hurricane, from 1 March 2023 until 31 December 2026, capped at a total of 6.48
pence per Deferred Consideration Unit (£129.1 million in aggregate). The
Deferred Consideration Unit payments will be paid biannually in arrears, other
than the Deferred Consideration Cash Amount which is payable within 5 Business
Days of the Trigger Event. The Deferred Consideration Units are complex
instruments and a number of factors will determine whether any amount will
actually be paid to Scheme Shareholders by way of the Deferred Consideration
Units. The minimum payment under the Deferred Consideration Units could be
zero. Further details in respect of the Deferred Consideration Units will be
contained in the Scheme Document.
3 Background to and Reasons for the Acquisition
Following receipt of an unsolicited offer and after a period of engagement
with the offeror, Hurricane received an offer from that offeror which the
Hurricane Board concluded should not be recommended to Hurricane Shareholders.
Thereafter, on 2 November 2022, Hurricane announced the initiation of a Formal
Sale Process as referred to in Note 2 on Rule 2.6 of the Code, in order to
establish whether there was a bidder prepared to offer a value that the
Hurricane Board considered to be attractive, relative to the standalone
prospects of Hurricane as a publicly traded company and accordingly one that
should be recommended to all Hurricane Shareholders. After a thorough process,
the Hurricane Board has resolved to recommend the Acquisition to Hurricane
Shareholders.
The Acquisition is the conclusion to a comprehensive FSP. The FSP was marketed
to a wide audience of potential acquirors with an interest in acquiring assets
on the UK Continental Shelf. Interest in the FSP was significantly diminished
by the introduction of the Energy Profits Levy, and subsequent amendments, by
the UK government. Twelve companies engaged in the FSP in a meaningful manner,
with five providing actionable offers in compliance with the requirements of
the FSP. After this thorough process, the Hurricane Board has resolved to
recommend the Acquisition to Hurricane Shareholders.
Prax is a wholly-owned subsidiary of State Oil Limited, which is the ultimate
operating holding company of the Prax Group ("Prax" or the "Prax Group"), a
leading, British headquartered, international integrated and diversified
midstream and downstream energy group. Prax is committed to building a
sizeable upstream business in the North Sea, complementing its midstream and
downstream activities to create an integrated business, and it is focused on
rapidly developing its oil and gas portfolio via acquisitions. The acquisition
of Hurricane is the first strategic step, providing a platform from which its
upstream division will grow.
4 Recommendation
The Hurricane Directors, who have been so advised by Stifel as to the
financial terms of the Acquisition, consider the terms of the Acquisition to
be fair and reasonable. In providing its financial advice to the Hurricane
Directors, Stifel has taken into account the commercial assessments of the
Hurricane Directors. Stifel is providing independent financial advice to the
Hurricane Directors for the purposes of Rule 3 of the Code.
Accordingly, the Hurricane Directors unanimously intend to recommend that
Hurricane Shareholders vote in favour of (i) the Scheme at the Court Meeting;
and (ii) the Resolutions at the General Meeting, in each case as the Hurricane
Directors who are interested in Hurricane Shares have irrevocably undertaken
to do in respect of those Hurricane Shares in respect of which they are able
to control the exercise of voting rights, amounting in aggregate to 498,092
Hurricane Shares and representing approximately 0.03 per cent. of the ordinary
share capital of Hurricane in issue (excluding treasury shares) on 15 March
2023 (the "Latest Practicable Date").
5 Background to and Reasons for the Recommendation
5.1 Introduction
The Acquisition offers Hurricane Shareholders:
· More Cash: In aggregate, the Special Dividends and Cash
Consideration, together with (a) any balance of the Supplementary Dividend
Amount not declared as a Supplementary Dividend; and (b) the 17.5% share of
future Net Revenues directly from the Lancaster Field (before the inclusion of
any incremental Net Revenues from future acquisitions by the Hurricane Group)
being paid as Deferred Consideration Units pursuant to the terms of the DCU
Deed Poll, is expected to deliver a cash amount to shareholders that is
greater than the sums that the Directors expect to be able to return to
shareholders in an orderly wind down of the business;
· Faster Returns: With the accelerated up-front cash return and
without the requirement to wait for a wind-down of Hurricane following
cessation of production, Hurricane Shareholders will see their cash returns
delivered significantly faster by the Acquisition;
· Mitigated Downside: The Acquisition mitigates against the
meaningful risk of an unplanned cessation of production by delivering
accelerated returns and removing Hurricane Shareholders' direct exposure to
the costs of decommissioning the Lancaster field and winding down Hurricane;
and
· Enhanced Upside: There is a significant potential for upside to be
delivered to Hurricane Shareholders, beyond that which could be realised as a
standalone company, should Prax leverage Hurricane's accumulated tax losses to
make production acquisitions in pursuit of its upstream growth strategy in the
near to medium term. In this case, Hurricane Shareholders will receive 12.50
pence per Hurricane Share, assuming payment of the Supplementary Dividend
Amount in full (by way of the Supplementary Dividend and/or Deferred
Consideration Unit) and full value is delivered by the Deferred Consideration
Units (including any balance of the Supplementary Dividend Amount not declared
as a Supplementary Dividend).
5.2 Background
During 2022, Hurricane was focused on delivering growth from its existing
Lancaster Field.
On 30 September 2022, Hurricane announced that it had not been able to obtain
the necessary support of the North Sea Transition Authority to give it
sufficient confidence to sanction further economic development of its
Lancaster asset. Consequently, the strategic options available to the
Hurricane Board were;
a. to grow the business through acquisition, using the Group's cash
reserves and accrued tax losses to support the acquisition of tax-advantaged
oil & gas production; or
b. to wind the business down and distribute cash to shareholders; or
c. to sell the business.
5.3 Formal Sale Process
Crystal Amber, which holds 28.9 per cent. of Hurricane's shares and is
Hurricane's largest shareholder, indicated to the Board its desire to monetise
the value of its shareholding and its unwillingness to support growth through
acquisition. On 21 October 2022, Hurricane received an unsolicited offer to
acquire the entire issued share capital of Hurricane at 7.70 pence per share
which the Board concluded, following consultation with its largest
shareholders, should not be recommended to Hurricane Shareholders.
Accordingly, Hurricane launched an FSP as referred to in Note 2 on Rule 2.6 of
the Code, in order to establish whether there was a bidder prepared to offer a
value that the Board considered attractive, relative to the standalone
prospects of Hurricane as a publicly traded company.
The FSP was marketed to a wide audience of potential acquirors with an
interest in acquiring assets on the UK Continental Shelf. Interest in the FSP
was significantly diminished by the introduction of the Energy Profits Levy,
and subsequent amendments, by the UK government. Twelve companies engaged in
the FSP in a meaningful manner, with five providing actionable offers in
compliance with the requirements of the FSP.
5.4 Key Risks to the Existing Business
A key area of bidders' due diligence was the perceived fragility of
Hurricane's continued oil production. Whilst Hurricane's uptime has been
excellent, all of Hurricane's production is through a single well and riser,
and is accordingly subject to the risks associated with multiple single points
of failure, most notably the upper electronic submersible pump ("ESP"), which
has been in operation for two years, following an unidentified fault with the
lower ESP. In the event of a significant failure to the upper ESP, it is
possible that there may not be an economic repair solution and consequently
production from Lancaster might cease permanently. In the event that an
unplanned cessation of production was to occur, in addition to decommissioning
costs held as restricted cash, Hurricane would be required to pay six months
of the FPSO bareboat charter costs as well as ongoing operational and
corporate costs, which Hurricane estimates could be as much as US$60 million.
ERCE sets out a number of sensitivities to illustrate the impact of an
unplanned cessation of operations in the Valuation. Accordingly, most
potential offerors for Hurricane have considered a contingent structure to
mitigate the potential risk resulting from an unplanned cessation of
production at the Lancaster Field, or have proposed an acquisition value that
is below the prevailing market price of Hurricane's shares. In addition,
Hurricane has received a number of proposals for reverse takeovers or other
M&A transactions that in the opinion of the Hurricane Board were either
not deliverable, or were less attractive than the Acquisition.
5.5 Key Benefits of the Acquisition
Prax has proposed an offer structure which allows Hurricane to dividend
substantially all of its Net Free Cash (up to £103.4 million) to Hurricane
Shareholders, significantly in excess of the £66.1 million it would be able
to dividend if it had to retain sufficient liquidity to manage an unplanned
cessation of operations on a standalone basis. The offer structure also
includes Cash Consideration of £16.5 million.
In addition, the Deferred Consideration Units offer Hurricane Shareholders the
opportunity to participate meaningfully in the utilisation of Hurricane's tax
losses, which represent Hurricane's only asset other than its cash and the
Lancaster field. Under the proposed structure, Prax is providing Hurricane
Shareholders with access to the potential value of the tax losses without
risking Hurricane's cash position. This allows Hurricane Shareholders to both
receive cash today, as well as benefit from future upside through additional
acquisitions up to a total value of 12.50 pence per share. In the absence of
the Acquisition, if Hurricane were to return cash to Hurricane Shareholders,
it would likely not have sufficient cash to make meaningful acquisitions of
producing assets.
Prax has consulted with its two largest shareholders throughout the FSP and
the Acquisition has the support of both largest shareholders, who have given
irrevocable undertakings to vote in favour of the Acquisition, as set out in
paragraph 7 below.
5.6 Comparison of Potential Returns to Hurricane Shareholders
As part of the FSP, Hurricane commissioned a new competent person's report
with an effective date of 31 December 2022, in which ERCE certified a reserve
upgrade and extended the economic limit of the field. ERCE has produced an
updated letter for the purposes of Rule 29 of the Takeover Code updating the
Valuation with an effective date of 1 March 2023. A summary of the upgraded
Reserves and a valuation of the asset is set out in paragraph 6 below and the
updated letter is attached as Appendix V. The comparison of potential returns
below is based on the updated ERCE CPR 2P production profiles, after adding
the effect of corporate costs.
The Board estimates that Hurricane will be able to deliver the following
returns to Hurricane Shareholders from Lancaster production alone, at an
assumed US$80/bbl oil price and incorporating an August 2025 cessation of
production ("COP") using the updated ERCE CPR 2P production profiles and after
adding the effect of corporate costs. The expected distributions are laid out
below on an annual basis in pence per share and do not include returns that
may be generated from asset outperformance or future acquisitions.
Illustrative Lancaster returns to Hurricane Shareholders as a standalone
independent business compared to the outcome pursuant to the Acquisition under
the same production assumptions are presented below:
Returns to Shareholders 2023 2024 2025 2026 2027 Total
Hurricane Standalone 3.32p 0.83p 2.07p 1.94p 0.00p 8.17p
6.29p 1.21p 1.13p 0.35p 8.98p
Acquisition (through Special Dividends and DCUs)
0.00p
+90% +81% +39% +10% +10% +10%
Cumulative Variance (Acquisition vs Standalone)
Holders of Deferred Consideration Units will benefit from 17.5% of all other
Net Revenues, including from any acquisitions made by the Hurricane Group,
from 1 March 2023 until 31 December 2026 meaning the Acquisition, assuming
full value is delivered by the Deferred Consideration Units and the
declaration and payment of the Supplementary Dividend in full will deliver
Hurricane Shareholders 12.50 pence per share.
In an orderly wind down of the business, Hurricane expects to pay for the
ongoing costs of the business and the decommissioning of the wells and
facilities, and return all of Hurricane's remaining cash and cash from
operations to Hurricane Shareholders, with the last payment expected to be in
2026. In aggregate, the Special Dividends and Cash Consideration under the
Acquisition total 6.02 pence per share, which, together with the 17.5% share
of future Net Revenues directly from the Lancaster field, is greater than the
sums that the Directors expect to be able to return to shareholders in an
orderly wind down of the business, assuming that the oil price is US$80/bbl
from now until COP.
The expected cash return to Hurricane Shareholders is expected to be thus
significantly quicker and, based on current oil prices, materially higher,
before taking into account the potential risk from an unplanned cessation of
production or a reduction in the oil price.
5.7 Hurricane's Tax Assets
In an orderly wind down of the business, assuming a flat oil price of
US$80/bbl, the Directors expect that accrued tax losses with an approximate
value of up to US$370 million will remain unutilised and thus will not provide
any benefit to Hurricane Shareholders.
The Deferred Consideration Units provide a way for Hurricane Shareholders to
share in the future success of Hurricane, with 17.5 per cent. of future Net
Revenues being paid to Deferred Consideration Unitholders biannually. This
allows Hurricane Shareholders to benefit from ongoing production, gaining
exposure to production outperformance, higher oil prices and most importantly,
future acquisitions.
Prax has a stated intention to grow the Hurricane Group through acquisition,
leveraging its own group balance sheet to fund acquisitions, taking advantage
of Hurricane's tax losses. The Deferred Consideration Units will receive a
proportion of revenues from any future acquisitions made by the Hurricane
Group. Prax is currently in a number of processes to acquire producing oil and
gas assets and has employed an experienced and credible management team to
identify and execute M&A opportunities. The current UK oil and gas M&A
market is characterised by a limited credible buyer universe and numerous
large companies looking to exit their UK positions. Prax has a strong
strategic imperative to increase its upstream business, given the synergies
that may bring to its downstream business. Prax's commitment to the
Acquisition is in itself significant evidence of its intention to grow its UK
upstream business.
5.8 Conclusion
The Acquisition is the conclusion to a comprehensive FSP. With Hurricane's
largest shareholder having made it clear that it did not support a strategy of
growth by acquisition or the all-share mergers which were proposed, the FSP
has concluded with an outcome which both succeeds in delivering greater
near-term cash returns, thus meeting its largest shareholder's requirements,
as well as retaining exposure to future revenues including from Prax's growth
strategy.
Accordingly, using Hurricane's planning case, the Board expects the
Acquisition to result in Hurricane Shareholders being materially better off
than in a planned wind down of Hurricane, significantly better off than they
would be in the event of an unplanned cessation of production, with
significant further upside in the event that the Deferred Consideration Units
deliver on their full potential through acquisitions.
6 Reserves and Resources Update and Rule 29 Asset Valuation
On 16 March 2023, Hurricane published a competent person's report ("CPR") with
an effective date of 31 December 2022, which included an asset valuation by
ERCE. In connection with the Acquisition, Hurricane is required by Rule 29 of
the Code to publish an updated, independent asset valuation (referred to in
this document as the "Valuation"). ERCE is independent of both Hurricane and
Prax.
a) Reserves Update
In the ERCE CPR, ERCE has evaluated the Reserves for the field, assuming the
effective date of 31 December 2022. The estimates of Reserves and the economic
limit in each case are summarised in the table below.
Hurricane Gross Reserves Net Attributable Reserves
100% and operator 1P 2P 3P 1P 2P 3P
Reserves (MMstb) 4.1 6.6 10.3 4.1 6.6 10.3
Economic Limit Dec-2024 Feb-2026 Nov-2027 Dec-2024 Feb-2026 Nov-2027
A summary of the movements in net attributable 2P Reserves as compared to the
previous CPR (effective date of 31 December 2021) is as follows:
Net attributable 2P Reserves (MMbbl)
At 31 December 2021 5.8
Produced volumes in 2022 (3.1)
Change in assumptions and economic life 3.9
At 31 December 2022 6.6
ERCE has also updated its estimates of 2C Resources (Development Unclarified),
which require further drilling to convert to Reserves. These are set out in
the table below:
Hurricane Gross Contingent Resources Net Attributable Contingent Resource
100% 1C 2C 3C 1C 2C 3C
Lancaster (MMstb) (MMstb) (MMstb) (MMstb) (MMstb) (MMstb)
8.3 31.6 82.7 8.3 31.6 82.7
b) Valuation
The Valuation has an effective date for cash flow modelling of 28 February
2023. The estimates of the Net Present Value (Best Case) at a 10% discount
factor (NPV10) are summarised below.
Hurricane Gross Net Attributable
100% 2P 2P
NPV10 ($m) 65.1 65.1
Economic Limit 01/02/2026 01/02/2026
A copy of the Valuation is available at Appendix V to this announcement. A
copy of the Valuation and CPR is available at
https://www.hurricaneenergy.com/investors. The Directors of Hurricane note
that the effective date of the Valuation is different to the date of this
announcement and state that ERCE has confirmed that an updated valuation to
the date of this announcement would not be materially different.
Rule 29.6 of the Code requires that this announcement contain an estimate by
the Hurricane directors of the amount of any potential tax liability which
would arise if the assets were to be sold at the amount of the Valuation and a
comment as to the likelihood of any such liability crystallising. The
Hurricane Directors, having taken appropriate taxation advice, believe that
there are realistic transaction structures for such a sale in which it is
likely that no tax would be payable.
7 Irrevocable Undertakings
Prax has received irrevocable undertakings from each of the Hurricane
Directors who are interested in Hurricane Shares to vote in favour of the
Scheme at the Court Meeting and the Resolutions at the General Meeting, in
respect of those shares in respect of which they are able to control the
exercise of voting rights, being a total of 498,092 Hurricane Shares,
representing approximately 0.03 per cent. of the ordinary share capital of
Hurricane in issue (excluding treasury shares) on the Latest Practicable Date.
These irrevocable undertakings remain binding in the event of a higher, or any
other, bid or offer for Hurricane. Further details of these irrevocable
undertakings are set out in Appendix III to this announcement.
In addition to the irrevocable undertakings from the Hurricane Directors, Prax
has also received irrevocable undertakings from Crystal Amber Fund Limited
("Crystal Amber") and Kerogen Investments No.18 Limited ("Kerogen") to vote,
or procure the voting, to approve the Scheme at the Court Meeting and vote, or
procure the voting, in favour of the Resolutions at the General Meeting in
respect of a total of 894,181,210 Hurricane Shares, representing approximately
44.89 per cent. of the ordinary share capital of Hurricane in issue on the
Latest Practicable Date.
Therefore, as at the date of this announcement, Prax has received irrevocable
undertakings to vote, or procure the voting, to approve the Scheme at the
Court Meeting and vote, or procure the voting, in favour of the Resolutions at
the General Meeting with respect to a total of 894,679,302 Hurricane Shares,
representing approximately 44.92 per cent. of the ordinary share capital of
Hurricane in issue on the Latest Practicable Date (excluding treasury shares).
Further details of the above-mentioned irrevocable undertakings are set out in
Appendix III to this announcement.
The obligations of each of Crystal Amber and Kerogen under their respective
undertakings shall remain binding in the event of a higher, or any other, bid
or offer for Hurricane.
8 Information on Prax
Prax is a wholly-owned subsidiary of State Oil Limited, which is the ultimate
operating holding company of the Prax Group.
The Prax Group is a leading, British headquartered, international, integrated
and diversified midstream and downstream energy group with 1,274 employees in
12 offices across seven countries. Prax's activities include refining,
marketing, and distribution of commercial fuels, via its network of storage
terminals and pipeline infrastructure, petrol retail forecourts, road tankers,
and its marine bunkering vessel fleet.
Prax has a world-class asset base, with 113 kbpd of refining capacity and
1,917 kcbm of storage capacity. For its financial year ended 28 February 2022,
Prax generated revenues of US$10 billion and adjusted EBITDA of US$126.7
million. Prax has a strong balance sheet, providing a solid platform to
execute its strategic growth plans.
Prax is indirectly and wholly owned by (i) Sanjeev Kumar Soosaipillai and
Arani Soosaipillai in equal shares, both of whom are British citizens,
resident and domiciled in the United Kingdom; and (ii) their family trusts.
Prax has a strong and experienced management team and Board with an excellent
track record of delivering growth through M&A. Recent activity includes
the acquisition of the Lindsey Oil refinery, a major strategic refining
complex in the UK, from TotalEnergies in 2021; the acquisition of the Jarrow
terminal from Shell in 2016 and the Zeebrugge terminal from TotalEnergies in
2020; and the acquisition of Harvest Energy in 2015, now one of the largest
bio-fuels blenders in North West Europe.
Prax has hired a highly experienced and motivated management team to grow its
upstream business, led by Alessandro Agostini, Oliver Dunn and Iain
McKendrick. The upstream management team has decades of North Sea and
international experience in large corporates, listed E&P players and
private equity firms, covering all aspects of oil and gas. In particular the
team has a considerable track record in executing upstream deals.
9 Information on Hurricane
Hurricane is an oil & gas exploration and production company, focussed on
fractured basement reservoirs offshore West of Shetlands on the UK Continental
Shelf. Hurricane has a 100 per cent. operated interest in the Lancaster Field.
As at 31 December 2022 the Lancaster Field's proved and probable reserves were
certified by ERCE to be 6.6 mmbbls. Hurricane produced 3.1 mmbbls from the
Lancaster field in 2022 and is currently producing 7,710 bbls/d from a single
well, with a water cut of 52 per cent., into the leased Aoka Mizu FPSO.
Production of 2P Reserves is projected by Hurricane to continue until August
2025, at which point Hurricane expects the Lancaster field to be abandoned. As
at 28 February 2023, Hurricane had Net Free Cash of US$140.1 million, as well
as US$60.7 million of cash and liquid investments within restricted funds,
relating to decommissioning security arrangements and amounts set aside to
cover potential early termination fees on the FPSO lease. Hurricane has 28
employees and offices in Surrey and Aberdeen.
10 Intentions for the future business of Hurricane and the
Hurricane Group
10.1 Future business of Hurricane and the Hurricane Group
Prax is committed to building a sizeable upstream business in the North Sea,
complementing its midstream and downstream activities to create an integrated
business, and it is focused on rapidly developing its oil and gas portfolio
via acquisitions. The acquisition of Hurricane is the first strategic step,
providing a platform from which its upstream division will grow. Prax is
currently in a number of other acquisition processes for upstream assets.
Prax believes the Acquisition represents an attractive opportunity to leverage
its midstream and downstream presence, complement its existing trading
strategies through the production of oil, and aligns strongly with Prax's
broader long-term vision for its upstream business.
Prax believes that the enlarged group will provide opportunities for the
management and employees of both companies. Prax envisages moving towards full
integration of Hurricane as soon as possible following completion of the
Acquisition. Prax is impressed by the high quality of the Hurricane management
team and wishes and expects them to participate in the future leadership of
the company.
Following the completion of the Acquisition, it is the strategic intent of
Prax to continue production at the P6 Lancaster well until its economic
cut-off. Concurrently, Prax will continue with Hurricane's assessment of
commercial options surrounding extension of life and expanding operations at
P1368 in accordance with the UK's Maximising Economic Recovery strategy, at
the same time being respectful of the UK government's commitment to reach net
zero emissions by 2050.
10.2 Directors, management and employees
Prax holds the skills, knowledge and expertise of Hurricane's management and
employees in high regard and believes it will provide long-term stability and
reassurance to Hurricane's most important asset, its staff.
Prax confirms that, following completion of the Acquisition, the existing
contractual and statutory employment rights of Hurricane employees will be
fully safeguarded in accordance with applicable law.
Prax does not expect that there will be any reduction in Hurricane's
headcount, with the exception of the non-executive directors of Hurricane.
Prax does not intend to make any material changes to the balance of skills and
functions of employees and management of Hurricane.
Prax intends to retain the executive Directors and members of the management
team of Hurricane. The executive directors have agreed to stand down from the
Hurricane Board following payment of the Supplemental Dividend, or, if
earlier, 14 days from the Effective Date and will continue in operational
roles in the organisation. Prax intends to fully integrate, when practically
possible, Hurricane's business functions into the Prax Group. Combining the
functions of Hurricane and Prax is intended to assist the transition of
Hurricane into the Prax Group and will not result in any reduction in
headcount.
Prax expects that there may be a reduction in certain corporate functions or
activities which are related to Hurricane's status as a public company, which
will not be needed following completion of the Acquisition, without any
expected reduction in headcount.
In accordance with the requirements of Rule 24.2 (c) of the Code, Prax and its
group confirm that they do not intend to seek or implement, as a result of the
Acquisition, any material changes regarding the continued employment of the
employees and management of Prax and its group, including any material change
in the conditions of employment or in the balance of the skills and functions
of the employees and management.
10.3 Existing rights and pension schemes
Hurricane operates a defined contribution pension scheme. Prax does not intend
to make any changes to the ongoing employer contributions to the Hurricane
pension scheme, benefit accrual for existing Hurricane pension scheme members
or admission of new members.
10.4 Intentions for locations of business, headquarters and fixed
assets
Hurricane has its head office in Surrey (Godalming), UK and an office in
Aberdeen, UK. Prax has its head office in Weybridge, UK, just a few miles from
Godalming. Prax will undergo a review of the organisational and commercial
feasibility in retaining Hurricane's physical office locations in Godalming
and Aberdeen with a view to optimising its real estate portfolio but being
mindful of operational requirements.
Prax does not intend to redeploy fixed assets of Hurricane following the
Scheme becoming Effective.
Following completion of the Acquisition and other than the growth strategy
outlined earlier in this announcement, Prax does not expect there to be any
impact on the strategic plans, management, employees and locations of Prax
group's existing business including its group's headquarters and headquarters
function. Prax does not expect that there will be any reduction in Hurricane's
headcount, with the exception of the non-executive directors of Hurricane who
have agreed to stand down from the Hurricane board from the Effective Date.
10.5 Research and development
Hurricane does not currently have a research and development function and Prax
does not have any plans in this regard.
10.6 Trading facilities
Hurricane Shares are currently admitted to trading on AIM. As explained in
paragraph 17 below, prior to the Scheme becoming Effective, an application
will be made to the London Stock Exchange to cancel the admission of the
Hurricane Shares to trading on AIM with effect from the closing date of the
Acquisition. It is expected that the last day of dealings in Hurricane Shares
on AIM will be the Business Day immediately prior to the Effective Date.
Prax intends to put in place a matched bargain facility upon the Scheme
becoming Effective and upon which the Deferred Consideration Units could be
traded.
None of the statements in this paragraph 10 are "post-offer undertakings" for
the purposes of Rule 19.5 of the Code.
11 Financing
The Cash Consideration payable under the Acquisition is being wholly funded
from the existing cash resources of Prax.
In accordance with Rule 2.7(d) of the Code, Gneiss Energy Limited ("Gneiss
Energy"), as financial adviser to Prax, is satisfied that sufficient resources
are available to Prax to satisfy in full the Cash Consideration payable to
Hurricane Shareholders under the terms of the Acquisition.
Gneiss Energy has not been required to confirm, and has not confirmed, that
resources are available to (1) Hurricane to satisfy payments under the Special
Dividends or (2) Prax to satisfy payments under the Deferred Consideration
Units. Hurricane Shareholders will be at risk if, for any reason, these
payment obligations were unable to be satisfied by Prax and/or Hurricane.
12 Details of the Deferred Consideration Units
12.1 Pursuant to the terms of the Acquisition, Scheme Shareholders (other
than Restricted Overseas Shareholders) will receive one Deferred Consideration
Unit for each Scheme Share that they hold on the Scheme Record Date.
In the event that there are delays to Hurricane's scheduled April lifting of
crude oil such that the sale proceeds have not been received by the date the
Scheme becomes Effective, the Hurricane Directors intend to declare and pay as
much of the Supplementary Dividend as is permissible by law and their
fiduciary duties. The balance of the Supplementary Dividend, subject to
receipt by the Hurricane Group (following the date of this announcement) of
proceeds from the sale of no less than 450,000 bbls of oil from the Lancaster
Field (being the "Trigger Event") (being the "Deferred Consideration Cash
Amount"), will be added to the Deferred Consideration Units and shall be
payable to each holder of a Deferred Consideration Unit within five Business
Days of such Trigger Event occurring provided that the Trigger Event occurs
after the Scheme becomes Effective and before 00:00 on 1 January 2024.
The Deferred Consideration Units shall also enable Scheme Shareholders (other
than Restricted Overseas Shareholders) to receive 17.5 per cent. of all future
Net Revenues earned by the Hurricane Group, including from any acquisition
made by the Hurricane Group, from 1 March 2023 until 31 December 2026, capped
at a total of 6.48 pence per Deferred Consideration Unit (the "DCU Cash
Amount") (subject to any applicable deductions or withholdings). The total
amount of the DCU Cash Amount, including any amounts Restricted Overseas
Shareholders would have been entitled to receive in the form of a Deferred
Consideration Unit had it been legal for them to do so but which they shall
instead receive under the terms of the Scheme, shall be capped at £129.1
million. The Deferred Consideration Unit payments of the DCU Cash Amount will
be biannually in arrears.
Scheme Shareholders (other than Restricted Overseas Shareholders) will be
entitled to make an election to receive Class I DCUs. Each Class I DCU will
entitle the Class I DCU Holder to receive Loan Note(s) (subject to applicable
securities laws), in an amount equal to the DCU Cash Amount, the principal of
which will be redeemable in cash on the redemption date. The Class I DCU
Holders shall not be entitled to elect to receive Loan Note(s) in respect of
the amount of the Deferred Consideration Cash Amount, if payable, and shall
receive further cash for such amount on the relevant date.
Alternatively, Scheme Shareholders (other than Restricted Overseas
Shareholders) will receive Class II DCUs. Each Class II DCU will entitle the
Class II DCU Holder to receive further cash, in an amount equal to the DCU
Cash Amount and the Deferred Consideration Cash Amount, if payable.
The Deferred Consideration Units have been constituted by the DCU Deed Poll on
the date of this announcement. The Deferred Consideration Units will not
represent any equity or ownership interest in Hurricane, and accordingly will
not confer on the Deferred Consideration Unit Holder any right to attend,
speak at or vote at any meeting of the shareholders of Hurricane or right to
any dividends or right to any return of capital by Hurricane.
The Deferred Consideration Units will be transferable by way of a matched
bargain facility, if put in place by Prax, and in certain other prescribed
circumstances. Prax intends to put in place a matched bargain facility upon
the Scheme becoming Effective and upon which the Deferred Consideration Units
could be traded. No application will be made for the Deferred Consideration
Units to be listed or dealt in on any stock exchange. The Deferred
Consideration Units will be governed by English law and will be issued in
certificated form. No interest is payable in respect of the Deferred
Consideration Units.
The Loan Notes will not be issued to US Persons or persons located in the
United States. Accordingly, such US investors will only have the option to
take Class II DCUs.
If the laws of any jurisdiction make it illegal for Scheme Shareholders to
hold or be issued Deferred Consideration Units or would require any
qualification of the Deferred Consideration Units under any applicable laws or
regulations, they may not be entitled to the Deferred Consideration Units or
the amounts which may be payable thereon. In such circumstances, Prax
intends under the terms of the Scheme to pay such Restricted Overseas
Shareholders an amount equal to the amount that such Scheme Shareholder would
have received (if any) under the Deferred Consideration Units (subject to the
terms and conditions of the Deferred Consideration Units as if they applied
for determining such amount).
Full details of the DCU Deed Poll will be contained in the Scheme Document.
The Deferred Consideration Units are complex instruments and a number of
factors will determine whether any amount will actually be paid to Scheme
Shareholders by way of the Deferred Consideration Units. The minimum payment
under the Deferred Consideration Units could be zero. Further details in
respect of the Deferred Consideration Units will be contained in the Scheme
Document.
The Panel has determined that an estimate of the value of the Deferred
Consideration Units in accordance with Rule 24.11 of the Code is not required
to be included in the Scheme Document.
12.2 Loan Notes
The Loan Notes will be governed by English law and will be issued, credited as
fully paid, in integral multiples of 0.1 pence nominal value. The Loan Notes
will be not be transferable other than in certain prescribed circumstances but
no application will be made for them to be listed or dealt in on any stock
exchange.
The Loan Notes will not bear interest.
The Loan Notes will be issued in accordance with the terms of the Class I
DCUs. The term of the Loan Notes will be six months and one day from the date
of issue of the Loan Notes. On the expiry of the term, Prax will redeem the
outstanding Loan Notes for cash at par (less any tax required by law to be
withheld or deducted therefrom). A holder of the Loan Notes may not opt to
redeem any of his notes prior to the expiry of the term.
Full details of the Loan Notes will be contained in the Scheme Document.
Hurricane Shareholders should consider carefully, in light of their own
investment objectives and tax position, whether they wish to elect for Class I
DCUs which will entitle the Class I DCU Holder to receive Loan Notes and are
strongly advised to seek their own independent financial advice before making
any such election.
13 Hurricane Share Incentive Plan
Participants in the Hurricane Share Incentive Plan (the "SIP") will be
contacted (via the trustee of the associated SIP trust, as the registered
holder of the Hurricane Shares they own pursuant to the SIP (their "SIP
Shares"),) regarding the effect of the Acquisition on their SIP Shares.
Appropriate proposals will be made to such participants in relation to their
SIP Shares in due course. Further details of the terms of such proposals will
be included in the Scheme Document.
14 Management Transaction Bonus
In accordance with the terms of the management transaction bonus scheme
approved in July 2022, the Hurricane Board (excluding members with an
interest) has resolved to make a payment of £0.9 million in aggregate to the
executive directors and staff, conditional on the Scheme becoming Effective.
In order to align rewards under the management transaction bonus scheme with
the deferred element of the Acquisition, a contingent payment of up to £3.5
million in aggregate, will be payable in full only if the full consideration
envisaged by the Deferred Consideration Units is ultimately paid. Prax has
consented to these arrangements pursuant to Rule 21.1 of the Code.
15 Offer-related arrangements
15.1 Confidentiality Agreement
State Oil Limited and Hurricane entered into a confidentiality agreement on or
about 18 November 2022 and amended that agreement on or about 25 November 2022
(the agreement as amended being the "Confidentiality Agreement"). Pursuant to
the Confidentiality Agreement, Prax and Hurricane has each undertaken to keep
confidential any information relating to Prax, Hurricane and the Acquisition,
and not disclose such to third parties. Unless terminated earlier by mutual
agreement, the Confidentiality Agreement will terminate on the Scheme
Effective date. Prax's and Hurricane's confidentiality undertakings under the
Confidentiality Agreement will remain in force until 18 May 2024. The
Confidentiality Agreement further includes customary standstill obligations on
Prax from the period commencing on 18 November 2022 and ending on 18 May 2024.
15.2 Parent Company Guarantee
On 16 March 2023, State Oil Limited, as the immediate parent company of Prax,
entered into a parent company guarantee with Hurricane (the "State Oil PCG").
Pursuant to the terms of the State Oil PCG, subject to and conditional upon
the Scheme becoming Effective, State Oil Limited guarantees all monies, debts
and liabilities of any nature from time to time due, owing or incurred by
Hurricane excluding any such monies, debts and liabilities in relation to the
Special Dividends.
If the Takeover Panel determines that any provision of the State Oil PCG that
requires the offeree company to take or not to take action, whether as a
direct obligation or as a condition to any other person's obligation (however
expressed), is not permitted by Rule 21.2 of the Takeover Code, that provision
shall have no effect and shall be disregarded.
16 Structure of and Conditions to the Acquisition
It is intended that the Acquisition shall be effected by means of a
Court-sanctioned scheme of arrangement between Hurricane and the Scheme
Shareholders under Part 26 of the Companies Act although Prax reserves the
right to implement the Acquisition by means of a Takeover Offer (subject to
receiving Panel consent).
The purpose of the Scheme is to provide for Prax to become the holder of the
entire issued and to be issued ordinary share capital of Hurricane. This is to
be achieved by the transfer of the Hurricane Shares to Prax, in consideration
for which the Hurricane Shareholders shall receive consideration on the basis
set out in paragraph 2 of this announcement.
The Acquisition shall be subject to the Conditions including the NSIA
Condition and the NSTA Condition and certain further terms set out below and
in Appendix I to this announcement and to be set out in the Scheme Document
and shall only become effective, if, among other things, the following events
occur on or before 11.59 p.m. on the Long-stop Date:
(a) the approval of the Scheme by a majority in number of the
Scheme Shareholders who are present and vote (and are entitled to vote),
whether in person or by proxy, at the Court Meeting and who represent 75 per
cent. in value of the Scheme Shares voted by those Hurricane Shareholders;
(b) the Resolutions required to approve and implement the Scheme
being duly passed by Hurricane Shareholders representing the requisite
majority or majorities of votes cast at the General Meeting;
(c) following the Court Meeting and the General Meeting, the
sanction of the Scheme by the Court (with or without modification but subject
to any modification being on terms acceptable to Hurricane and Prax); and
(d) following such sanction, the delivery of a copy of the Court
Order to the Registrar of Companies.
The Scheme shall lapse if:
(a) the Court Meeting and the General Meeting are not held on or
before the 22(nd) day following the expected date of those meetings to be set
out in the Scheme Document in due course, (or such later date as Prax and
Hurricane may agree and (if required) the Court may allow);
(b) the Court hearing to sanction the Scheme is not held on or
before the 22(nd) day after the expected date of such hearing to be set out in
the Scheme Document in due course (or such later date as may be agreed between
Prax and Hurricane and that the Court may approve (if required));
(c) the Scheme is not approved by a majority in number of the
Scheme Shareholders who are present and vote, whether in person or by proxy,
at the Court Meeting and who represent 75 per cent. in value of the Scheme
Shares voted by those Hurricane Shareholders;
(d) the resolutions required to approve and implement the Scheme
are not duly passed by Hurricane Shareholders representing the requisite
majority or majorities of votes cast at the General Meeting; or
(e) the Scheme does not become effective on or before 11.59 p.m. on
the Long-stop Date,
provided, however, that the deadlines for the timing of the Court Meeting, the
General Meeting and the Court hearing to sanction the Scheme as set out above
may be waived by Prax and the Long Stop Date may be extended by agreement
between Hurricane and Prax, with the consent of the Panel and if required, the
Court.
Once the necessary approvals from Hurricane Shareholders have been obtained
and the other Conditions have been satisfied or (where applicable) waived and
the Scheme has been approved by the Court, the Scheme will become effective
upon delivery of the Court Order to the Registrar of Companies.
Subject to satisfaction (or waiver, where applicable) of the Conditions, the
Scheme is expected to become effective before the end of Q2 2023.
Upon the Scheme becoming effective, it shall be binding on all Scheme
Shareholders, irrespective of whether or not they attended or voted at the
Court Meeting or the General Meeting (and if they attended and voted, whether
or not they voted in favour). Entitlements to Hurricane Shares held within the
CREST system will be cancelled and such entitlements rematerialized and share
certificates in respect of Hurricane Shares will cease to be valid. In
accordance with the applicable provisions of the Code, the Cash Consideration
payable under the Acquisition for the transfer of the Hurricane Shares to Prax
will be despatched no later than 14 days after the Effective Date. Upon the
Scheme becoming effective, the DCUs will be issued to Hurricane shareholders
(other than Restricted Overseas Shareholders) within 14 days of the Effective
Date.
Further details of the Scheme, including an indicative timetable for its
implementation, shall be set out in the Scheme Document which is expected to
be despatched to Scheme Shareholders as soon as reasonably practicable, and in
any event within 28 days of the date of this announcement (unless Hurricane
and Prax both agree, and the Panel consents, to a later date).
The Scheme will be governed by the Companies Act and is subject to the
jurisdiction of the Court.
17 De-listing and Re-registration
Prior to the Scheme becoming Effective, Hurricane will make an application to
the London Stock Exchange for the cancellation of the listing of Hurricane
Shares on AIM, in each case to take effect from or shortly after the Effective
Date. The last day of dealings in Hurricane Shares on AIM is expected to be
the Business Day immediately prior to the Effective Date and no transfers will
be registered after 6:00 p.m. (London time) on that date.
On the Effective Date, Hurricane will become a wholly-owned subsidiary of Prax
and the share certificates in respect of Hurricane Shares will cease to be
valid and of value and should be destroyed. In addition, entitlements to
Hurricane Shares held within the CREST system will be cancelled.
It is also proposed that, following the Effective Date and after its shares
are delisted, Hurricane will be re-registered as a private limited company.
18 Disclosure of Interests in Hurricane Shares
Save in respect of the irrevocable undertakings referred to in paragraph 7
above, as at the Latest Practicable Date neither Prax, nor any of its
directors, nor, so far as Prax is aware, any person acting in concert (within
the meaning of the Code) with it:
(a) has any interest in or right to subscribe for any relevant
securities of Hurricane;
(b) has any short positions in respect of relevant Hurricane Shares
(whether conditional or absolute and whether in the money or otherwise),
including any short position under a derivative, any agreement to sell or any
delivery obligation or right to require another person to purchase or take
delivery;
(c) has borrowed or lent any relevant Hurricane Shares (including,
for these purposes, any financial collateral arrangements of the kind referred
to in Note 4 on Rule 4.6 of the Code) save for any borrowed shares which have
been either on-lent or resold; or
(d) is a party to any dealing arrangement of the kind referred to
in Note 11 on the definition of acting in concert in the Code.
19 Dividends
If any dividend, other than the Transaction Dividend or the Supplementary
Dividend is paid or becomes payable in respect of Hurricane Shares on or after
the date of this announcement and prior to closing of the Acquisition, Prax
has the right to reduce the amount of consideration payable in respect of such
Hurricane Shares by the amount of all or part of such dividend or other
distribution. Prax will not be entitled to reduce the Cash Consideration or
Deferred Consideration Units payable pursuant to the terms of the Acquisition
or otherwise adjust the terms of the Acquisition as a result of the
declaration or payment of the Transaction Dividend or the Supplementary
Dividend.
20 Overseas Shareholders
The availability of the Acquisition and the distribution of this announcement
to persons who are not resident in the United Kingdom may be affected by the
laws and regulations of the relevant jurisdictions. Such persons should inform
themselves about and observe any applicable requirements. Hurricane
Shareholders who are in any doubt regarding such matters should consult an
appropriate independent professional adviser in the relevant jurisdiction
without delay.
This announcement does not constitute an offer for sale of any securities or
an offer or an invitation to purchase any securities. Hurricane Shareholders
are advised to read carefully the Scheme Document and the Forms of Proxy once
these have been dispatched.
21 General
Prax reserves the right to elect (with the consent of the Panel) to implement
the Acquisition by way of a Takeover Offer for the Hurricane Shares as an
alternative to the Scheme. In such event, the Takeover Offer shall be
implemented on the same terms, so far as applicable as those which would apply
to the Scheme, subject to appropriate amendments, including (without
limitation) an acceptance condition set at 75 per cent. or such other
percentage as Prax may, subject to the rules of the Code and with the consent
of the Panel, decide, of the shares to which such Takeover Offer relates.
The Acquisition shall be made subject to the Conditions and further terms set
out in Appendix I to this announcement and to be set out in the Scheme
Document. The bases and sources of certain financial information contained in
this announcement are set out in Appendix II to this announcement. A summary
of the irrevocable undertakings given in relation to the Acquisition is
contained in Appendix III to this announcement. Certain terms used in this
announcement are defined in Appendix IV to this announcement.
In deciding whether or not to vote or procure votes in favour of the Scheme at
the Court Meeting and the Resolutions at the General Meeting, Hurricane
Shareholders should rely on the information contained in, and follow the
procedures described in, the Scheme Document.
Stifel and Gneiss Energy have given and not withdrawn their consent to the
publication of this announcement with the inclusion herein of the references
to their respective names in the form and context in which they appear.
22 Documents available on website
Copies of the following documents will be made available on Prax's microsite
www.prax.com, and Hurricane's website
https://www.hurricaneenergy.com/investors by no later than 12:00 noon (London
time) on the Business Day following the date of this announcement and will
remain available until the end of the Offer Period:
(a) the irrevocable undertakings referred to in paragraph 7 above;
(b) the Confidentiality Agreement;
(c) the DCU Deed Poll;
(d) Loan Note Instrument;
(e) the State Oil PCG; and
(f) a copy of this announcement.
Enquiries:
Hurricane Energy plc +44 (0)1483 862820
Antony Maris, Chief Executive Officer
communications@Hurricaneenergy.com (mailto:communications@Hurricaneenergy.com)
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Financial Adviser, Nominated Adviser & Joint Corporate Broker to
Hurricane
Callum Stewart / Jason Grossman
Investec Bank plc +44 (0)20 7597 5970
Joint Corporate Broker to Hurricane
Chris Sim / Charles Craven / Jarrett Silver
Vigo Consulting +44 (0)20 7390 0230
Public Relations Adviser to Hurricane
Patrick d'Ancona / Ben Simons
Hurricane@vigoconsulting.com (mailto:hurricane@vigoconsulting.com)
Prax
Alessandro Agostini, Head of Exploration and Production +44 (0) 20 3757 4986
(Care of Camarco)
Gneiss Energy Limited +44 (0) 203983 9263
Financial Adviser to Prax
Jon Fitzpatrick / Paul Weidman
Camarco +44 (0) 20 3757 4986
Public Relations Adviser to Prax
Billy Clegg / Georgia Edmonds / Violet Wilson / Hugo Liddy
prax@camarco.co.uk (mailto:prax@camarco.co.uk)
Important Notices
Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Hurricane and no one else in connection with the Acquisition,
the other matters referred to in this announcement and the Scheme Document,
and will not be responsible to anyone other than Hurricane for providing the
protections afforded to clients of Stifel or for providing advice in
connection with the Acquisition or any matter or arrangement referred to
herein.
Investec Bank plc ("Investec"), which is authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct Authority and the
Prudential Regulation Authority in the United Kingdom, is acting exclusively
for Hurricane and no one else in connection with the Acquisition, the other
matters referred to in this announcement and the Scheme Document, and will not
be responsible to anyone other than Hurricane for providing the protections
afforded to clients of Investec or for providing advice in connection with the
Acquisition or any matter or arrangement referred to herein.
Gneiss Energy Limited ("Gneiss"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively for
Prax and no one else in connection with the Acquisition, the other matters
referred to in this announcement and the Scheme Document, and will not be
responsible to anyone other than Prax for providing the protections afforded
to clients of Gneiss or for providing advice in connection with the
Acquisition or any matter or arrangement referred to herein.
Further Information
This announcement is for information purposes only and does not constitute an
offer to sell or an invitation to purchase any securities or the solicitation
of an offer to buy any securities, pursuant to the Acquisition or otherwise.
The Acquisition will be made solely by means of the Scheme Document (or any
document by which the Acquisition is made) which will contain the full terms
and conditions of the Acquisition, including details of how to vote in respect
of the Acquisition. Any decision in respect of, or otherwise in response to,
the Acquisition should be made only on the basis of the information contained
in the Scheme Document (or any other document by which the Acquisition is
made).
This announcement has been prepared for the purpose of complying with the laws
of England and Wales and the Code and the information disclosed may not be the
same as that which would have been disclosed if this announcement had been
prepared in accordance with the laws of jurisdictions outside the United
Kingdom. Nothing in this announcement should be relied on for any other
purpose.
Hurricane and Prax urge Hurricane Shareholders to read the Scheme Document
when it becomes available because it will contain important information
relating to the Acquisition.
This announcement does not constitute a prospectus or prospectus equivalent
document.
Overseas Shareholders
The release, publication or distribution of this announcement in certain
jurisdictions other than the United Kingdom may be restricted by law. Persons
who are not resident in the United Kingdom or who are subject to the laws of
other jurisdictions should inform themselves of, and observe, any applicable
requirements. Any failure to comply with the applicable restrictions may
constitute a violation of the securities laws of any such jurisdiction. To the
fullest extent permitted by applicable law, the companies and persons involved
in the Acquisition disclaim any responsibility or liability for the violation
of such restrictions by any person. Further details in relation to Overseas
Shareholders will be contained in the Scheme Document.
Unless otherwise determined by Prax or required by the Code and permitted by
applicable law and regulation, the Acquisition will not be made available,
directly or indirectly, in, into or from a Restricted Jurisdiction where to do
so would violate the laws in that jurisdiction and no person may vote in
favour of the Acquisition by any such use, means, instrumentality or form
within a Restricted Jurisdiction or any other jurisdiction if to do so would
constitute a violation of the laws of that jurisdiction. Accordingly, copies
of this announcement and all documents relating to the Acquisition are not
being, and must not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in, into or from a Restricted Jurisdiction where to do so
would violate the laws in that jurisdiction, and persons receiving this
announcement and all documents relating to the Acquisition (including
custodians, nominees and trustees) must not mail or otherwise distribute or
send them in, into or from such jurisdictions where to do so would violate the
laws in that jurisdiction.
The availability of the Acquisition to Hurricane Shareholders who are not
resident in the United Kingdom (and, in particular, their ability to vote
their Hurricane Shares with respect to the Scheme at the Court Meeting, or to
appoint another person as proxy to vote at the Court Meeting on their behalf)
may be affected by the laws of the relevant jurisdictions in which they are
resident. Persons who are not resident in the United Kingdom should inform
themselves of, and observe, any applicable requirements, as any failure to
comply with such requirements may constitute a violation of the securities
laws of any such jurisdiction.
To the fullest extent permitted by applicable law, the companies and persons
involved in the Acquisition disclaim any responsibility or liability for the
violation of such restrictions by any person.
Forward Looking Statements
This announcement contains statements about Prax and Hurricane that are or may
be forward-looking statements. All statements other than statements of
historical facts included in this announcement may be forward-looking
statements. Without limitation, any statements preceded or followed by or that
include the words "targets", "plans", "believes", "expects", "aims",
"intends", "will", "may", "anticipates", "estimates", "projects" or words or
terms of similar substance or the negative thereof, are forward-looking
statements. Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, earnings,
synergies, economic performance, indebtedness, financial condition, dividend
policy, losses and future prospects; (ii) business and management strategies
and the expansion and growth of Prax's or Hurricane's operations and potential
synergies resulting from the Acquisition; and (iii) the effects of government
regulation on Prax's or Hurricane's business.
Such forward-looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key
assumptions. Many factors could cause actual results to differ materially from
those projected or implied in any forward-looking statements. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date hereof. All
subsequent oral or written forward-looking statements attributable to Prax or
any of its members, directors, officers or employees or any persons acting on
their behalf are expressly qualified in their entirety by the cautionary
statement above. Each of Prax and Hurricane disclaims any obligation to update
any forward-looking or other statements contained herein, except as required
by applicable law.
No Profit Forecasts or Estimates
No statement in this announcement is intended as a profit forecast or estimate
for any period and no statement in this announcement should be interpreted to
mean that earnings or earnings per share for Hurricane for the current or
future financial years would necessarily match or exceed the historical
published earnings or earnings per share for Hurricane.
Dealing and Opening Position Disclosure Requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in one per cent.
or more of any class of relevant securities of an offeree company or of any
securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the Offer Period and, if later, following the announcement in
which any securities exchange offeror is first identified.
An Opening Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant securities
of each of: (i) the offeree company; and (ii) any securities exchange
offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) of
the Code applies must be made by no later than 3:30 p.m. (London time) on the
10th business day following the commencement of the Offer Period and, if
appropriate, by no later than 3:30 p.m. (London time) on the 10th business day
following the announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of the
offeree company or of a securities exchange offeror prior to the deadline for
making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in
one per cent. or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of: (i) the
offeree company; and (ii) any securities exchange offeror, save to the extent
that these details have previously been disclosed under Rule 8 of the Code. A
Dealing Disclosure by a person to whom Rule 8.3(b) of the Code applies must be
made by no later than 3:30 p.m. (London time) on the business day following
the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3 of the Code.
Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4 of the Code).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Panel's website at
www.thetakeoverpanel.org.uk (http://www.thetakeoverpanel.org.uk) , including
details of the number of relevant securities in issue, when the Offer Period
commenced and when any offeror was first identified. If you are in any doubt
as to whether you are required to make an Opening Position Disclosure or a
Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on
+44 (0)20 7638 0129.
Publication on Website and Availability of Hard Copies
This announcement and the documents required to be published pursuant to Rule
26.1 of the Code and pursuant to Rule 26 of the AIM Rules for Companies will
be available free of charge, subject to certain restrictions relating to
persons resident in Restricted Jurisdictions, on Hurricane's website at
www.hurricaneenergy.com and Prax's microsite at prax.com by no later than
12:00 noon (London time) on the Business Day following this announcement.
Neither the content of any website referred to in this announcement nor the
content of any website accessible from hyperlinks is incorporated into, or
forms part of, this announcement.
In accordance with Rule 30.3 of the Code, you may request a hard copy of this
announcement by contacting Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZY, Telephone: 0370 707 1733 . You may also
request that all future documents, announcements and information to be sent to
you in relation to the Acquisition should be in hard copy form.
Right to switch to a Takeover Offer
Prax reserves the right to elect, with the consent of the Panel to implement
the Acquisition by way of Takeover Offer for the entire issued and to be
issued ordinary share capital of Hurricane as an alternative to the Scheme. In
such an event, the Takeover Offer will be implemented on the same terms or, on
such other terms being no less favourable (subject to appropriate amendments),
so far as applicable, as those which would apply to the Scheme.
Rounding
Certain figures included in this announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.
Rule 2.9 Disclosure
In accordance with Rule 2.9 of the Code, Hurricane confirms that as at the
date of this announcement, it has in issue and admitted to trading on AIM
1,991,871,556 ordinary shares of 0.1 pence each (excluding ordinary shares
held in treasury). The International Securities Identification Number (ISIN)
of the ordinary shares is GB00B580MF54.
Important Information
If you are in any doubt about the contents of this announcement or the action
you should take, you are recommended to seek your own independent financial
advice immediately from your stockbroker, bank manager, solicitor, accountant
or independent financial advisor duly authorised under the Financial Services
and Markets Act 2000 (as amended) if you are a resident in the United Kingdom
or, if not, from another appropriately authorised independent financial
advisor.
Standard
ERCE's work has been prepared in accordance with the June 2018 SPE/WPC/AAPG/
SPEE/SEG/SPWLA/EAGE Petroleum Resources Management System (PRMS) as the
standard for classification and reporting.
Competent Person's Review
The technical information in this release has been reviewed by Antony Maris,
Chief Executive Officer, who is a qualified person for the purposes of the AIM
Guidance Note for Mining, Oil and Gas Companies. Mr Maris is a petroleum
engineer with more than 35 years' experience in the oil and gas industry. He
has a B.Sc.(Eng.) Petroleum Engineering (Hons) from the Imperial College of
Science and Technology (University of London) Royal School of Mines A.R.S.M.
and an MBA from Kingston Business School.
ERCE has given its consent to the reference to the Valuation in this
announcement. ERCE confirms it has reviewed this announcement and confirms
that the estimates of Reserves have been correctly extracted from the
Valuation. The Valuation has been signed by Dr Adam Law who has over 30 years
of relevant experience in the oil industry.
APPENDIX I
Part 1: Conditions to the Scheme and the Acquisition
1 The Acquisition is conditional upon the Scheme becoming
unconditional and Effective, subject to the provisions of the Code, by no
later than 11.59 p.m. on the Long-stop Date.
Scheme approval
2 The Scheme will be subject to the following conditions:
(a)
a) its approval at the Court Meeting and at any separate class
meeting which may be required (or any adjournment thereof) by a majority in
number of the Scheme Shareholders on the register of members of Hurricane at
the Voting Record Time, present and voting, whether in person or by proxy,
representing not less than 75 per cent. in value of the Scheme Shares voted by
those Scheme Shareholders; and
b) such Court Meeting being held on or before the 22nd day after
the expected date of the Court Meeting to be set out in the Scheme Document in
due course, or such later date (if any) as Prax and Hurricane may agree and
(if required) the Court may allow; and
(b)
a) the Resolutions set out in the notice of the General Meeting
being duly passed by the requisite majority (or majorities, if applicable) at
the General Meeting; and
b) the General Meeting being held on or before the 22(nd) day
after the expected date of the General Meeting to be set out in the Scheme
Document in due course or such later date (if any) as Prax and Hurricane may
agree and (if required) the Court may allow; and
(c)
a) the sanction of the Scheme by the Court (without modification
or with modification on terms acceptable to Prax and Hurricane);
b) the Court Hearing being held on or before the 22(nd) day after
the expected date of the Court Hearing to be set out in the Scheme Document in
due course or such later date (if any) as Prax and Hurricane may agree and (if
required) the Court may allow; and
c) the delivery of a copy of the Court Order to the Registrar of
Companies.
3 In addition, Prax and Hurricane have agreed that, subject as
stated in Part 2 of this Appendix I and to the requirements of the Panel, the
Acquisition will be conditional upon the following Conditions and,
accordingly, the Court Order shall not be delivered to the Registrar of
Companies unless such Conditions (as amended if appropriate) have been
satisfied or, where relevant, waived:
(A) National Security and Investment Act Approval
A notification having been made and accepted under the United Kingdom National
Security and Investment Act 2021 ("NSIA") and one of the following having
occurred:
(a) the Chancellor of the Duchy of Lancaster confirming before the
end of the review period that no further action will be taken in relation to
the Acquisition; or
(b) if the Chancellor of the Duchy of Lancaster issues a call-in
notice in relation to the Acquisition, the parties receiving a final
notification pursuant to section 26(1) (b) of the NSIA containing confirmation
that the Chancellor of the Duchy of Lancaster will take no further action in
relation to the call-in notice and the Acquisition under the NSIA; or
(c) the Chancellor of the Duchy of Lancaster making a final order
pursuant to section 26(1) (a) of the NSIA in relation to the Acquisition, save
to the extent that such an order prohibits the Acquisition; or
(d) Prax having received written notice by or on behalf of the
Chancellor of the Duchy of Lancaster that the NSIA does not apply to the
Acquisition;
(the "NSIA Condition").
(B) North Sea Transition Authority Approval
The receipt of written confirmation from the North Sea Transition Authority
(the "NSTA"), informing Prax that it does not intend, as a consequence of the
Acquisition, to revoke any of the relevant licences or to require a further
change of control of Hurricane under any of the relevant licences (the "NSTA
Condition").
Official authorisations, regulatory clearances and third-party clearances
General antitrust and regulatory
(a) other than in respect of condition (A) and (B), all
notifications, filings, applications or submissions which are necessary having
been made in connection with the Acquisition and all necessary waiting periods
(including any extensions thereof) under any applicable legislation or
regulation of any jurisdiction having expired, lapsed or been terminated (as
appropriate) and all statutory and regulatory obligations in any jurisdiction
having been complied with in each case in respect of the Acquisition and all
necessary Authorisations in any jurisdiction for or in respect of the
Acquisition and, except pursuant to Chapter 3 of Part 28 of the Companies Act,
the acquisition or the proposed acquisition of any shares or other securities
in, or control or management of, Hurricane or any other member of the Wider
Hurricane Group by any member of the Wider Prax Group, in each case which is
material in the context of Prax Group or the Hurricane Group as a whole,
having been obtained in terms and in a form reasonably satisfactory to Prax
from all appropriate Third Parties or (without prejudice to the generality of
the foregoing) from any person or bodies with whom any member of the Wider
Hurricane Group or the Wider Prax Group has entered into contractual
arrangements and all such Authorisations necessary to carry on the business of
any member of the Wider Hurricane Group in any jurisdiction, in each case
which is material in the context of Prax Group or the Hurricane Group as a
whole, having been obtained and all such Authorisations remaining in full
force and effect at the time at which the Acquisition becomes otherwise
unconditional and there being no notice or intimation of an intention to
revoke, suspend, restrict, modify or not to renew such Authorisations;
(b) other than in respect of Conditions (A) and (B), no Third Party
having given notice of a decision to take, institute, implement or threaten
any action, proceeding, suit, investigation, enquiry or reference (and in each
case, not having withdrawn the same), or having required any action to be
taken or otherwise having done anything, or having enacted, made or proposed
any statute, regulation, decision, order or change to published practice (and
in each case, not having withdrawn the same) and there not continuing to be
outstanding any statute, regulation, decision or order which would or might
reasonably be expected to (in each case so as to be material in the context of
Prax Group or the Hurricane Group as a whole):
a) require, prevent or materially delay the divestiture or
materially alter the terms envisaged for such divestiture by any member of the
Wider Prax Group or by any member of the Wider Hurricane Group of all or any
material part of its businesses, assets or property or impose any limitation
on the ability of all or any of them to conduct their businesses (or any part
thereof) or to own, control or manage any of their assets or properties (or
any part thereof);
b) except pursuant to Chapter 3 of Part 28 of the Companies Act,
require any member of the Wider Prax Group or the Wider Hurricane Group to
acquire or offer to acquire any shares, other securities (or the equivalent)
or interest in any member of the Wider Hurricane Group or any asset owned by
any Third Party (other than in the implementation of the Acquisition);
c) impose any material limitation on, or result in a material
delay in, the ability of any member of the Wider Prax Group directly or
indirectly to acquire, hold or to exercise effectively all or any rights of
ownership in respect of shares or other securities in Hurricane or on the
ability of any member of the Wider Hurricane Group or any member of the Wider
Prax Group directly or indirectly to hold or exercise effectively all or any
rights of ownership in respect of shares or other securities (or the
equivalent) in, or to exercise voting or management control over, any member
of the Wider Hurricane Group;
d) otherwise adversely affect any or all of the business, assets,
profits or prospects of any member of the Wider Hurricane Group or any member
of the Wider Prax Group;
e) result in any member of the Wider Hurricane Group or any member
of the Wider Prax Group ceasing to be able to carry on business under any name
under which it presently carries on business;
f) make the Acquisition, its implementation or the acquisition
or proposed acquisition of any shares or other securities in, or control or
management of, Hurricane by any member of the Wider Prax Group void,
unenforceable and/or illegal under the laws of any relevant jurisdiction, or
otherwise, directly or indirectly materially prevent or prohibit, restrict,
restrain, or delay or otherwise to a material extent or otherwise materially
interfere with the implementation of, or impose material additional conditions
or obligations with respect to, or otherwise materially challenge, impede,
interfere or require material amendment of the Acquisition or the acquisition
or proposed acquisition of any shares or other securities in, or control or
management of, Hurricane by any member of the Wider Prax Group;
g) require, prevent or materially delay a divestiture by any
member of the Wider Prax Group of any shares or other securities (or the
equivalent) in any member of the Wider Hurricane Group or any member of the
Wider Prax Group; or
h) impose any material limitation on the ability of any member of
the Wider Prax Group or any member of the Wider Hurricane Group to conduct,
integrate or co-ordinate all or any part of its business with all or any part
of the business of any other member of the Wider Prax Group and/or the Wider
Hurricane Group,
and all applicable waiting and other time periods (including any extensions
thereof) during which any such Third Party could decide to take, institute,
implement or threaten any such action, proceeding, suit, investigation,
enquiry or reference or take any other step under the laws of any jurisdiction
in respect of the Acquisition or the acquisition or proposed acquisition of
any Hurricane Shares or otherwise intervene having expired, lapsed or been
terminated;
Certain matters arising as a result of any arrangement, agreement, etc.
(a) except as Disclosed, there being no provision of any arrangement,
agreement, lease, licence, franchise, permit or other instrument to which any
member of the Wider Hurricane Group is a party or by or to which any such
member or any of its assets is or may be bound, entitled or be subject or any
event or circumstance which, as a consequence of the Acquisition or the
acquisition or the proposed acquisition by any member of the Wider Prax Group
of any shares or other securities (or the equivalent) in Hurricane or because
of a change in the control or management of any member of the Wider Hurricane
Group or otherwise, could or might reasonably be expect to result in any of
the following to an extent which is material and adverse in the context of the
Wider Hurricane Group, or the Wider Prax Group, in either case, taken as a
whole:
a) any monies borrowed by, or any other indebtedness, actual or
contingent, of, or any grant available to, any member of the Wider Hurricane
Group being or becoming repayable, or capable of being declared repayable,
immediately or prior to its or their stated maturity date or repayment date,
or the ability of any such member to borrow monies or incur any indebtedness
being withdrawn or inhibited or being capable of becoming or being withdrawn
or inhibited;
b) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business, property or
assets of any member of the Wider Hurricane Group or any such mortgage, charge
or other security interest (whenever created, arising or having arisen)
becoming enforceable;
c) any such arrangement, agreement, lease, licence, franchise,
permit or other instrument being terminated or the rights, liabilities,
obligations or interests of any member of the Wider Hurricane Group being
materially and adversely modified or materially and adversely affected or any
obligation or liability arising or any materially adverse action being taken
or arising thereunder;
d) any liability of any member of the Wider Hurricane Group to make any
severance, termination, bonus or other payment to any of its directors, or
other officers;
e) the rights, liabilities, obligations, interests or business of any
member of the Wider Hurricane Group or any member of the Wider Prax Group
under any such arrangement, agreement, licence, permit, lease or instrument or
the interests or business of any member of the Wider Hurricane Group or any
member of the Wider Prax Group in or with any other person or body or firm or
company (or any arrangement or arrangement relating to any such interests or
business) being or becoming capable of being terminated, or adversely modified
or affected or any onerous obligation or liability arising or any adverse
action being taken thereunder;
f) any member of the Wider Hurricane Group ceasing to be able to
carry on business under any name under which it presently carries on business
to an extent which is or would be material in the context of the Wider
Hurricane Group taken as a whole;
g) the value of, or the financial or trading position or prospects
of, any member of the Wider Hurricane Group being materially prejudiced or
materially and adversely affected; or
h) the creation or acceleration of any liability (actual or
contingent) by any member of the Wider Hurricane Group other than trade
creditors or other liabilities incurred in the ordinary course of business,
and no event having occurred which, under any provision of any arrangement,
agreement, licence, permit, franchise, lease or other instrument to which any
member of the Wider Hurricane Group is a party or by or to which any such
member or any of its assets are bound, entitled or subject, would or might
result in any of the events or circumstances as are referred to in Conditions
3(c)(i) to (viii), in each case to the extent material in the context of the
Wider Hurricane Group taken as a whole;
Certain events occurring since 30 June 2022
(a) except as Disclosed, no member of the Wider Hurricane Group
having since 30 June 2022:
a) issued or agreed to issue or authorised or proposed or
announced its intention to authorise or propose the issue, of additional
shares of any class, or securities or securities convertible into, or
exchangeable for, or rights, warrants or options to subscribe for or acquire,
any such shares, securities or convertible securities or transferred or sold
or agreed to transfer or sell or authorised or proposed the transfer or sale
of Hurricane Shares out of treasury (except, where relevant, as between
Hurricane and wholly-owned subsidiaries of Hurricane or between the
wholly-owned subsidiaries of Hurricane;
b) recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend or other distribution (whether
payable in cash or otherwise) other than dividends (or other distributions
whether payable in cash or otherwise) lawfully paid or made by any
wholly-owned subsidiary of Hurricane to Hurricane or any of its wholly-owned
subsidiaries;
c) other than pursuant to the Acquisition (and except for
transactions between Hurricane and its wholly-owned subsidiaries or between
the wholly-owned subsidiaries of Hurricane and transactions in the ordinary
course of business) implemented, effected, authorised or proposed or announced
its intention to implement, effect, authorise or propose any merger, demerger,
reconstruction, amalgamation, scheme, commitment or acquisition or disposal of
assets or shares or loan capital (or the equivalent thereof) in any
undertaking or undertakings in any such case to an extent which is material in
the context of the Wider Hurricane Group taken as a whole;
d) except for transactions between Hurricane and its wholly-owned
subsidiaries or between the wholly-owned subsidiaries of Hurricane and except
for transactions in the ordinary course of business disposed of, or
transferred, mortgaged or created any security interest over any material
asset or any right, title or interest in any material asset (including shares)
or authorised, proposed or announced any intention to do so;
e) (except for transactions between Hurricane and its wholly-owned
subsidiaries or between the wholly-owned subsidiaries of Hurricane) issued,
authorised or proposed or announced an intention to authorise or propose, the
issue of or made any change in or to the terms of any debentures or become
subject to any contingent liability or incurred or increased any indebtedness
which is material in the context of the Wider Hurricane Group as a whole;
f) entered into or varied or authorised, proposed or announced
its intention to enter into or vary any material contract, arrangement,
agreement, transaction or commitment (whether in respect of capital
expenditure or otherwise) except in the ordinary course of business which is
of a long term, unusual or onerous nature or magnitude or which is or which
involves or could involve an obligation of a nature or magnitude which is
reasonably likely to be materially restrictive on the business of any member
of the Wider Hurricane Group which is material in the context of the Wider
Hurricane Group as a whole;
g) entered into or varied the terms of, or made any offer (which
remains open for acceptance) to enter into or vary to a material extent the
terms of any contract, service agreement, commitment or arrangement with any
director or senior executive of any member of the Wider Hurricane Group,
except for salary increases, bonuses or variations of terms in the ordinary
course;
h) proposed, agreed to provide or modified the terms of any share
option scheme, incentive scheme or other benefit relating to the employment or
termination of employment of any employee of the Wider Hurricane Group which
are material in the context of the Wider Hurricane Group taken as a whole,
save as agreed by the Panel (if required);
i) purchased, redeemed or repaid or announced any proposal to
purchase, redeem or repay any of its own shares or other securities or reduced
or, except in respect of the matters mentioned in sub-paragraph (i) above,
made any other change to any part of its share capital;
j) except in the ordinary course of business, waived,
compromised or settled any claim which is material in the context of the Wider
Hurricane Group as a whole;
k) terminated or varied the terms of any agreement or arrangement
between any member of the Wider Hurricane Group and any other person in a
manner which would or might reasonably be expected to have a material adverse
effect on the financial position of the Wider Hurricane Group taken as a
whole;
l) (except as disclosed on publicly available registers) made
any material alteration to its memorandum or articles of association or other
incorporation documents;
m) except in relation to changes made or agreed as a result of, or
arising from, changes to legislation, made or agreed or consented to any
significant change to:
(A) the terms of the trust deeds and rules constituting the pension
scheme(s) established by any member of the Wider Hurricane Group for its
directors, employees or their dependants;
(B) the contributions payable to any such scheme(s) or to the
benefits which accrue, or to the pensions which are payable, thereunder;
(C) the basis on which qualification for, or accrual or entitlement
to, such benefits or pensions are calculated or determined; or
(D) the basis upon which the liabilities (including pensions) of
such pension schemes are funded, valued, made, agreed or consented to,
to an extent which is in any such case material in the context of the Wider
Hurricane Group;
n) been unable, or admitted in writing that it is unable, to pay
its debts or commenced negotiations with one or more of its creditors with a
view to rescheduling or restructuring any of its indebtedness, or having
stopped or suspended (or threatened to stop or suspend) payment of its debts
generally or ceased or threatened to cease carrying on all or a substantial
part of its business which is material in the context of the Wider Hurricane
Group taken as a whole;
o) (other than in respect of a member of the Wider Hurricane Group
which is dormant and was solvent at the relevant time) taken or proposed any
steps, corporate action or had any legal proceedings instituted or threatened
against it in relation to the suspension of payments, a moratorium of any
indebtedness, its winding-up (voluntary or otherwise), dissolution,
reorganisation or for the appointment of a receiver, administrator, manager,
administrative receiver, trustee or similar officer of all or any material
part of its assets or revenues or any analogous or equivalent steps or
proceedings in any jurisdiction or appointed any analogous person in any
jurisdiction or had any such person appointed;
p) (except for transactions between Hurricane and its wholly-owned
subsidiaries or between the wholly-owned subsidiaries), made, authorised,
proposed or announced an intention to propose any change in its loan capital;
q) other than in the ordinary course of trading, entered into,
implemented or authorised the entry into, any joint venture, asset or profit
sharing arrangement, partnership or merger of business or corporate entities;
r) having taken (or agreed or proposed to take) any action which
requires or would require, the consent of the Panel or the approval of
Hurricane Shareholders in general meeting in accordance with, or as
contemplated by, Rule 21.1 of the Code; or
s) entered into any agreement, arrangement, commitment or contract
or passed any resolution or made any offer (which remains open for acceptance)
with respect to or announced an intention to, or to propose to, effect any of
the transactions, matters or events referred to in this Condition 3(d);
No adverse change, litigation, regulatory enquiry or similar
(a) except as Disclosed, since 30 June 2022 there having been:
a) no adverse change and no circumstance having arisen which would
or might be expected to result in any adverse change or deterioration in, the
business, assets, financial or trading position or profits or prospects or
operational performance of any member of the Wider Hurricane Group which is
material in the context of the Wider Hurricane Group taken as a whole;
b) no litigation, arbitration proceedings, prosecution or other
legal proceedings having been threatened, announced or instituted by or
against or remaining outstanding against or in respect of, any member of the
Wider Hurricane Group or to which any member of the Wider Hurricane Group is
or may become a party (whether as claimant, defendant or otherwise) having
been threatened, announced, instituted or remaining outstanding by, against or
in respect of, any member of the Wider Hurricane Group, in each case which
might reasonably be expected to have a material adverse effect on the Wider
Hurricane Group taken as a whole;
c) no enquiry, review or investigation by, or complaint or
reference to, any Third Party against or in respect of any member of the Wider
Hurricane Group having been threatened, announced or instituted or remaining
outstanding by, against or in respect of any member of the Wider Hurricane
Group, in each case which might reasonably be expected to have a material
adverse effect on the Wider Hurricane Group taken as a whole;
d) no contingent or other liability having arisen or become
apparent to Prax or increased other than in the ordinary course of business
which is reasonably likely to affect adversely the business, assets, financial
or trading position or profits or prospects of any member of the Wider
Hurricane Group to an extent which is material in the context of the Wider
Hurricane Group taken as a whole; and
e) no steps having been taken and no omissions having been made
which are reasonably likely to result in the withdrawal, cancellation,
termination or modification of any licence held by any member of the Wider
Hurricane Group which is necessary for the proper carrying on of its business
and the withdrawal, cancellation, termination or modification of which might
reasonably be expected to have a material adverse effect on the Wider
Hurricane Group taken as a whole;
No discovery of certain matters regarding information, liabilities and
environmental issues
(a) except as Disclosed, Prax not having discovered that:
a) any financial, business or other information concerning the
Wider Hurricane Group publicly announced prior to the date of this
announcement or disclosed at any time to any member of the Wider Prax Group by
or on behalf of any member of the Wider Hurricane Group prior to the date of
this announcement is misleading, contains a material misrepresentation of any
fact, or omits to state a fact necessary to make that information not
misleading, in any such case to a material extent, in the context of the Wider
Hurricane Group taken as a whole;
b) any member of the Wider Hurricane Group is, subject to any
liability, contingent or otherwise and which is material in the context of the
Wider Hurricane Group taken as a whole;
c) any past or present member of the Wider Hurricane Group has not
complied in the context of the Wider Hurricane Group taken as a whole with all
applicable legislation, regulations or other requirements of any jurisdiction
or any Authorisations relating to the use, treatment, storage, carriage,
disposal, discharge, spillage, release, leak or emission of any waste or
hazardous substance or any substance likely to impair the environment
(including property) or harm human health or otherwise relating to
environmental matters or the health and safety of humans, which non-compliance
would be likely to give rise to any liability including any penalty for
non-compliance (whether actual or contingent) on the part of any member of the
Wider Hurricane Group which in any case is material in the context of the
Wider Hurricane Group taken as a whole or in the context of the Acquisition;
d) there has been a disposal, discharge, spillage, accumulation,
release, leak, emission or the migration, production, supply, treatment,
storage, transport or use of any waste or hazardous substance or any substance
likely to impair the environment (including any property) or harm human health
which (whether or not giving rise to non-compliance with any law or
regulation), would be likely to give rise to any liability (whether actual or
contingent) on the part of any member of the Wider Hurricane Group which in
any case is material in the context of the Wider Hurricane Group taken as a
whole or in the context of the Acquisition;
Anti-corruption, economic sanctions, criminal property and money laundering
(a) except as disclosed, Prax not having discovered that:
a) (A) any past or present member, director, officer or employee
of the Wider Hurricane Group is or has at any time engaged in any activity,
practice or conduct which would constitute an offence under the Bribery Act
2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable
anti-corruption or anti-bribery law, rule or regulation or any other
applicable law, rule, or regulation concerning improper payments or kickbacks
or (B) any person that performs or has performed services for or on behalf of
the Wider Hurricane Group is or has at any time engaged in any activity,
practice or conduct in connection with the performance of such services which
would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt
Practices Act of 1977 or any other applicable anti-corruption or anti-bribery
law, rule or regulation or any other applicable law, rule, or regulation
concerning improper payments or kickbacks;
b) any asset of any member of the Wider Hurricane Group
constitutes criminal property as defined by section 340(3) of the Proceeds of
Crime Act 2002 (but disregarding paragraph (b) of that definition) or proceeds
of crime under any other applicable law, rule, or regulation concerning money
laundering or proceeds of crime or any member of the Wider Hurricane Group is
found to have engaged in activities constituting money laundering under any
applicable law, rule, or regulation concerning money laundering;
c) any past or present member, director, officer or employee of
the Wider Hurricane Group, or any other person for whom any such person may be
liable or responsible, is or has engaged in any conduct which would violate
applicable economic sanctions or dealt with, made any investments in, made any
funds or assets available to or received any funds or assets from:
(A) any government, entity or individual in respect of which US, UK
or European Union persons, or persons operating in those territories, are
prohibited from engaging in activities or doing business, or from receiving or
making available funds or economic resources, by US, UK or European Union laws
or regulations, including the economic sanctions administered by the United
States Office of Foreign Assets Control, or HMRC; or
(B) any government, entity or individual targeted by any of the
economic sanctions of the United Nations, the United States, the United
Kingdom, the European Union or any of its member states, save that this shall
not apply if and to the extent that it is or would be unenforceable by reason
of breach of any applicable Blocking Law;
d) any past or present member, director, officer or employee of
the Wider Hurricane Group, or any other person for whom any such person may be
liable or responsible:
(A) has engaged in conduct which would violate any relevant
anti-terrorism laws, rules, or regulations, including but not limited to the
U.S. Anti-Terrorism Act;
(B) has engaged in conduct which would violate any relevant
anti-boycott law, rule, or regulation or any applicable export controls,
including but not limited to the Export Administration Regulations
administered and enforced by the U.S. Department of Commerce or the
International Traffic in Arms Regulations administered and enforced by the
U.S. Department of State;
(C) has engaged in conduct which would violate any relevant laws,
rules, or regulations concerning human rights, including but not limited to
any law, rule, or regulation concerning false imprisonment, torture or other
cruel and unusual punishment, or child labour; or
(D) is debarred or otherwise rendered ineligible to bid for or to
perform contracts for or with any government, governmental instrumentality, or
international organization or found to have violated any applicable law, rule,
or regulation concerning government contracting or public procurement; or
e) any member of the Wider Hurricane Group is or has been engaged
in any transaction which would cause Prax to be in breach of any law or
regulation upon its Acquisition of Hurricane, including but not limited to the
economic sanctions of the United States Office of Foreign Assets Control, or
HMRC, or any other relevant government authority.
Part 2: Certain further terms of the Acquisition
1. Subject to the requirements of the Panel, Prax reserves the
right, in its sole discretion, to waive, in whole or in part, all or any of
the Conditions set out in Part 1 of this Appendix I above, except Conditions
2(a)a), 2(b)a), 2(c)a) and 2(c)c), which cannot be waived. If any of
Conditions 1, 2(a)b), 2(b)b), or 2(c)b) are not satisfied by the relevant
deadline specified in the relevant Condition, Prax shall make an announcement
by 8.00 a.m. on the Business Day following such deadline confirming whether it
has invoked the relevant Condition, waived the relevant deadlines, or agreed
with Hurricane to extend the relevant deadline.
2. If Prax is required by the Panel to make an offer for Hurricane
Shares under the provisions of Rule 9 of the Code, Prax may make such
alterations to any of the above Conditions and terms of the Acquisition as are
necessary to comply with the provisions of that Rule.
3. Prax shall be under no obligation to waive (if capable of
waiver), to determine to be or remain satisfied or to treat as fulfilled any
of the Conditions in Part A of this Appendix I above that are capable of
waiver by a date earlier than the latest date for the fulfilment of that
Condition notwithstanding that the other Conditions of the Acquisition may at
such earlier date have been waived or fulfilled and that there are at such
earlier date no circumstances indicating that any of such Conditions may not
be capable of fulfilment.
4. Under Rule 13.5(a) of the City Code, Prax may not invoke a
Condition so as to cause the Acquisition not to proceed, to lapse or to be
withdrawn unless the circumstances which give rise to the right to invoke the
Condition are of material significance to Prax in the context of the
Acquisition. Prax may only invoke a condition that is subject to Rule 13.5(a)
with the consent of the Panel.
5. Conditions 1 and 2 in Part A of this Appendix I above, and, if
applicable, any acceptance condition if the Acquisition is implemented by
means of a Takeover Offer, are not subject to Rule 13.5(a) of the Code.
6. Any Condition that is subject to Rule 13.5(a) of the Code may
be waived by Prax.
7. The Hurricane Shares acquired under the Acquisition shall be
acquired fully paid and free from all liens, equities, charges, encumbrances,
options, rights of pre-emption and any other third party rights and interests
of any nature and together with all rights now or hereafter attaching or
accruing to them, including, without limitation, voting rights and the right
to receive and retain in full all dividends and other distributions (if any)
declared, made or paid, or any other return of value (whether by reduction of
share capital or share premium account or otherwise) made on or after the
Effective Date (other than the Special Dividends).
8. If, on or after the date of this announcement and prior to or
on the Effective Date, any dividend, distribution or other return of value,
other than the Special Dividends, is declared, paid or made, or becomes
payable by Hurricane, Prax reserves the right (without prejudice to any right
of Prax, with the consent of the Panel, to invoke Condition 3(d)(ii) of
Appendix I above) to reduce the consideration payable under the Acquisition to
reflect the aggregate amount of such dividend, distribution, or other return
of value or excess. In such circumstances, Hurricane Shareholders shall be
entitled to retain any such dividend, distribution, or other return of value
declared, made, or paid.
If on or after the date of this announcement, and to the extent that any such
dividend, distribution or other return of value (other than the Special
Dividends) has been declared, paid, or made, or becomes payable by Hurricane
on or prior to the Effective Date and Prax exercises its rights under this
paragraph 8 to reduce the consideration payable under the terms of the
Acquisition, any reference in this announcement to the consideration payable
under the terms of the Acquisition shall be deemed to be a reference to the
consideration as so reduced.
If and to the extent that such a dividend, distribution, or other return of
value (other than the Special Dividends) has been declared or announced, but
not paid or made, or is not payable by reference to a record date on or prior
to the Effective Date and is or shall be (i) transferred pursuant to the
Acquisition on a basis which entitles Prax to receive the dividend,
distribution, or other return of value and to retain it; or (ii) cancelled,
the consideration payable under the terms of the Acquisition shall not be
subject to change in accordance with this paragraph 8. Prax also reserves the
right to reduce the consideration payable under the Acquisition in such
circumstances as are, and by such amount as is, permitted by the Panel.
Any exercise by Prax of its rights referred to in this paragraph 8 shall be
the subject of an announcement and, for the avoidance of doubt, shall not be
regarded as constituting any revision or variation of the Acquisition.
9. Prax reserves the right to elect (with the consent of the
Panel), to implement the Acquisition by way of a Takeover Offer for the
Hurricane Shares as an alternative to the Scheme. In such event, the Takeover
Offer shall be implemented on the same terms, so far as applicable, as those
which would apply to the Scheme, subject to appropriate amendments, including
(without limitation) an acceptance condition set at 75 per cent. or such other
percentage as Prax and Hurricane may, subject to the rules of the Code and
with the consent of the Panel, decide, of the shares to which such Takeover
Offer relates.
10. The availability of the Acquisition to persons not resident in
the United Kingdom may be affected by the laws of the relevant jurisdictions.
Persons who are not resident in the United Kingdom should inform themselves
about and observe any applicable requirements.
11. The Acquisition is not being made, directly or indirectly, in,
into or from, or by use of the mails of, or by any means of instrumentality
(including, but not limited to, facsimile, e-mail or other electronic
transmission, telex or telephone) of interstate or foreign commerce of, or of
any facility of a national, state or other securities exchange of, any
jurisdiction where to do so would violate the laws of that jurisdiction.
12. The Acquisition is governed by the law of England and Wales and
is subject to the jurisdiction of the courts of England and Wales and to the
Conditions and further terms set out in this Appendix I and to be set out in
the Scheme Document. The Acquisition shall be subject to the applicable
requirements of the Code, the Panel, the AIM Rules for Companies, the London
Stock Exchange and the Financial Conduct Authority.
13. Each of the Conditions shall be regarded as a separate
Condition and shall not be limited by reference to any other Condition.
APPENDIX II
SOURCES OF INFORMATION AND BASES OF CALCULATION
In this Announcement, unless otherwise stated or the context otherwise
requires, the following bases and sources have been used:
i. As at the Latest Practicable Date, there were 1,991,871,556 Hurricane
Shares in issue. The International Securities Identification Number for
Hurricane Shares is GB00B580MF54;
ii. Any references to the issued share capital of Hurricane are based on
the 1,991,871,556 Hurricane Shares in issue;
iii. Hurricane has no options, warrants or other dilutive instruments
outstanding;
iv. The value of the Acquisition based on the Acquisition price of up to
12.50 pence per Hurricane Share is calculated on the basis of the issued share
capital of Hurricane as set out in paragraph (ii) above.
v. Unless otherwise stated, the Closing Prices and volume weighted average
prices referred to in this announcement are taken from the Daily Official List
of the London Stock Exchange.
vi. Unless otherwise stated, the financial information relating to
Hurricane is extracted from the audited consolidated financial statements of
Hurricane for the financial year to 31 December 2021, prepared in accordance
with IFRS, the unaudited interim statements for the six months ended 31 June
2022 and the unaudited trading statement in relation to the twelve months
ended 31 December 2022.
APPENDIX III
Details of Irrevocable Undertakings
HURRICANE DIRECTORS
Name of Hurricane Directors Number of Hurricane Shares over which undertaking is given Percentage of Hurricane issued ordinary share capital as at 15 March 2023
Richard Paul Chaffe 140,558 0.007%
David Ian Craik 188,450 0.009%
Antony Wayne Maris 169,084 0.008%
As at the date of this Announcement, Robert Andrew Allan, Linda Janice Beal,
Joan Morera Calveras, Philip Edward Charles Wolfe and Alan John Wright do not
hold any Hurricane Shares.
The irrevocable undertakings will continue to remain binding in the event of a
higher, or any other, bid or offer for Hurricane.
These irrevocable undertakings cease to be binding, inter alia:
· immediately if Prax announces, with the consent of the Panel, that
it does not intend to proceed with the proposed Acquisition;
· on and form the earlier of (i) 31 December 2023 and (ii) the time
and date the proposed Acquisition is withdrawn, lapses or otherwise terminates
in accordance with its terms.
OTHER HURRICANE SHAREHOLDERS
Name of Hurricane Shareholder giving undertaking Number of Hurricane Shares over which undertaking is given Percentage of Hurricane issued ordinary share capital as at 15 March 2023
Crystal Amber Fund Limited 575,649,999 28.90%
Kerogen Investments No.18 Limited 318,531,211 15.99%
The irrevocable undertakings will continue to remain binding in the event of a
higher, or any other, bid or offer for Hurricane.
These irrevocable undertakings cease to be binding, inter alia:
· immediately if the Scheme Document or the formal document
containing a Takeover Offer (as the case may be) is not published within 28
days of the date of this announcement (or within such longer period as
Hurricane and Prax may agree, with the consent of the Panel);
· immediately if Prax announces, with the consent of the Panel, that
it does not intend to proceed with the proposed Acquisition;
· immediately if the Scheme or Takeover Offer does not become wholly
unconditional before 11.59 p.m. on 31 December 2023 (unless agreed otherwise);
· on and from the time and date on which the proposed Acquisition is
withdrawn, lapses or otherwise terminates in accordance with its terms.
APPENDIX IV
DEFINITIONS AND GLOSSARY
"Acquisition" the recommended acquisition by Prax of the entire issued and to be issued
share capital of Hurricane to be implemented by means of the Scheme (or by way
of Takeover Offer under certain circumstances described in this announcement)
and, where the context admits, any subsequent revision, variation, extension
or renewal thereof
"AIM" the AIM Market of the London Stock Exchange
"AIM Rules for Companies" the rules, published by the London Stock Exchange, which set out the rules and
responsibilities in relation to AIM companies
"Authorisations" regulatory authorisations, orders, recognitions, grants, consents, clearances,
confirmations, certificates, licences, permissions or approvals, in each case,
of a Third Party
"Blocking Law" (i) any provision of Council Regulation (EC) No 2271/1996 of 22 November 1996
(or any law or regulation implementing such Regulation in any member state of
the European Union); or (ii) any provision of Council Regulation (EC) No
2271/1996 of 22 November 1996, as it forms part of domestic law in the United
Kingdom by virtue of the European Union (Withdrawal) Act 2018
"Bloomberg" the information service available on http://www.bloomberg.com
"Board" the board of directors of Hurricane
"Class I DCU Holder" a holder of a Class I DCU
"Class I DCUs" the Class I deferred consideration unts to be issued by Prax
"Class II DCUs" the Class II deferred consideration units to be issued by Prax
"Class II DCU Holder" a holder of a Class II DCU
"Closing Price" the closing middle-market quotation of a Hurricane Share as derived from the
Daily Official List
"Code" the City Code on Takeovers and Mergers issued from time to time by or on
behalf of the Panel
"Companies Act" the Companies Act 2006, as amended
"Conditions" the conditions of the Acquisition set out in Appendix I of this announcement
and to be set out in the Scheme Document and "Condition" means any one of them
"Confidentiality Agreement" the confidentiality agreement between Prax and Hurricane dated 25 November
2022, as amended
"Court" the High Court of Justice in England and Wales
"Court Hearing" the hearing by the Court of the application to sanction the Scheme under Part
26 of the Companies Act
"Court Meeting" the meeting of Scheme Shareholders to be convened pursuant to an order of the
Court under the Companies Act for the purpose of considering and, if thought
fit, approving the Scheme (with or without amendment), including any
adjournment thereof, notice of which is to be contained in the Scheme Document
"Court Order" the order of the Court sanctioning the Scheme
"CPR" Competent person's report
"CREST" the relevant system (as defined in the Uncertificated Securities Regulations
2001 (SI 2001/3755)) in respect of which Euroclear UK & Ireland Ltd is the
Operator (as defined in such regulations) in accordance with which securities
may be held and transferred in uncertificated form
"Daily Official List" the Daily Official List of the London Stock Exchange
"DCU Cash Amount" has the meaning given to that term in paragraph 12.1 of this announcement
"DCU Consideration Amount" means the aggregate of the DCU Cash Amount and the Deferred Consideration Cash
Amount
"DCU Deed Poll" the deed poll constituting the Deferred Consideration Units
"DCU Holder" a holder of a Deferred Consideration Unit
"Dealing Disclosure" has the same meaning as in Rule 8 of the Code.
"Deferred Consideration Cash Amount" has the meaning given to that term in paragraph 12.1 of this announcement.
"Deferred Consideration Units" the Class I DCUs and the Class II DCUs
"Disclosed" the information disclosed by, or on behalf of Hurricane, (i) in the annual
report and accounts of the Hurricane Group for the financial years ended 31
December 2021; (ii) in the unaudited interim statements for the Hurricane
Group for the six months ended 30 June 2022; (iii) in the unaudited trading
statement for the Hurricane Group in relation to the twelve months ended 31
December 2022; (iv) in this announcement; (v) in any other announcement to a
Regulatory Information Service by, or on behalf of Hurricane prior to the
publication of this announcement; or (vi) as otherwise fairly disclosed to
Prax (or its respective officers, employees, agents or advisers) prior to the
date of this announcement, including (but not limited to): (i) in connection
with any management presentation in connection with the Acquisition which was
attended by Prax (or any of their respective officers, employees, agents or
advisers in their capacity as such), or (ii) via the virtual or physical data
room operated on behalf of Hurricane in respect of the Acquisition
"Disclosure Table" the disclosure table on the Panel's website at
http://www.thetakeoverpanel.org.uk
"Effective" either:
(a) if the Acquisition is implemented by means of the Scheme, the Scheme
having become effective in accordance with its terms; or
(b) if the Acquisition is implemented by means of the Takeover Offer, the
Takeover Offer has been declared or become unconditional in all respects in
accordance with its terms and the requirements of the Code
"Effective Date" or "Scheme Effective Date" the date on which:
(a) if the Acquisition is implemented by means of the Scheme, the Scheme
becomes effective in accordance with its terms; or
(b) if the Acquisition is implemented by means of the Takeover Offer, the
Takeover Offer is declared or becomes unconditional in all respects in
accordance with its terms and the requirements of the Code
"Excluded Shares" (i) any Hurricane Shares beneficially owned by Prax or any other member of
Prax Group; and (ii) any Hurricane Shares held in treasury by Hurricane
"Financial Conduct Authority" the Financial Conduct Authority acting in its capacity as the competent
authority for the purposes of Part VI of the UK Financial Services and Markets
Act 2000;
"Formal Sale Process" the formal sale process announced by Hurricane on 2 November 2022
"Forms of Proxy" the forms of proxy for use at the Court Meeting and the General Meeting
respectively, which will accompany the Scheme Document
"General Meeting" the general meeting of the Hurricane Shareholders to be convened in connection
with the Scheme, and any adjournment thereof
"Hurricane" Hurricane Energy plc
"Hurricane Directors" or " "Hurricane Board" the directors of Hurricane at the time of this announcement or, where the
context so requires, the directors of Hurricane from time to time
"Hurricane Group" Hurricane and its subsidiary undertakings and, where the context permits, each
of them
"Hurricane Share" the ordinary shares of 0.1 pence each in the capital of Hurricane
"Hurricane Shareholder" the holders of Hurricane Shares
"IFRS" International Financial Report Standards
"Latest Practicable Date" 15 March 2023, being the latest practicable date prior to the publication of
this announcement
"Loan Notes" the loan notes to be issued by Prax at the election of Scheme Shareholders
pursuant to the terms of the Class I DCUs
"London Stock Exchange" London Stock Exchange plc
"Long Stop Date" 31 December 2023, or such later date as may be agreed by Prax and Hurricane
(with the Panel's consent and as the Court may approve (if such consent or
such approval is required))
"Meetings" together, the Court Meeting and the General Meeting
"Net Free Cash" unrestricted cash and cash equivalents, plus current financial trade and other
receivables, current oil price derivatives, less current financial trade and
other payables
"Net Revenues" has the meaning given to it in the DCU Deed Poll
"NSIA Condition" has the meaning given to it in para 3(A) of Appendix I hereof
"NSTA Condition" has the meaning given to it in 3(B) of Appendix I hereof
"Offer Period" the offer period (as defined by the Code) relating to Hurricane, commencing on
2 November 2022 (being the date of the announcement of the Formal Sale
Process) and ending on the day this Acquisition becomes Effective, lapses or
is withdrawn (or such other date as the Panel may decide)
"Opening Position has the same meaning as in Rule 8 of the Code
"Overseas Shareholders" Hurricane Shareholders whose registered addresses are outside the UK or who
are citizens or residents of countries other than the UK
"Panel" the UK Panel on Takeovers and Mergers
"Prax Directors" or " Prax Board" the board of directors of Prax and " Prax Director" means any of them
"Prax Group" Prax and its subsidiary undertakings and, where the context permits, each of
them
"Registrar of Companies" the Registrar of Companies in England and Wales
"Regulatory Information Service" a service approved by the London Stock Exchange for the distribution to the
public of announcements and included within the list maintained on the London
Stock Exchange's website
"Resolutions" the resolution to be proposed by Hurricane at the General Meeting in
connection with, amongst other things, the approval of the Scheme, the
amendment of Hurricane's articles of association, the Transaction Dividend and
such other matters as may be necessary to implement the Scheme
"Restricted Jurisdiction" any jurisdiction where local laws or regulations may result in a significant
risk of civil, regulatory, or criminal exposure if information concerning the
Acquisition is sent or made available to Hurricane Shareholders in that
jurisdiction
"Restricted Overseas Shareholders" Scheme Shareholders whose registered address is in a jurisdiction in which it
is illegal to issue Deferred Consideration Units to Scheme Shareholders or for
Scheme Shareholders to hold Deferred Consideration Units
"Rule 29 Valuation" or "Valuation" ERCE's Valuation of Hurricane's oil and gas assets in accordance with Rule 29
of the Code as set out in Appendix V of this announcement
"Scheme" the proposed scheme of arrangement under Part 26 of the Companies Act between
Hurricane and the Scheme Shareholders in connection with the Acquisition, with
or subject to any modification, addition or condition approved or imposed by
the Court and agreed to by Hurricane and Prax
"Scheme Document" the document to be sent to Hurricane Shareholders (and persons with
information rights) containing, amongst other things, the Scheme and the
notices convening the Court Meeting and the General Meeting
"Scheme Record Time" the time and date specified as such in the Scheme Document, expected to be
6.00 p.m. on the Business Day immediately prior to the Effective Date
"Scheme Shareholders" a holder of Scheme Shares at any relevant date or time
"Scheme Shares" a definition to be specified in the Scheme Document, expected to be:
(a) Hurricane Shares in issue as at the date of the Scheme Document;
(b) (if any) Hurricane Shares issued after the date of the Scheme Document
but prior to the Voting Record Time; and
(c) (if any) Hurricane Shares issued at or after the Voting Record Time and
before the Scheme Record Time, either on terms that the original or any
subsequent holders thereof shall be bound by the Scheme, or in respect of
which the holders thereof shall have agreed in writing to be, bound by the
Scheme,
and, in each case (where the context requires), remaining in issue at the
Scheme Record Time, but excluding Excluded Shares;
"Securities Act" means the US Securities Act of 1933, as amended
"Significant Interest" in relation to an undertaking, a direct or indirect interest of 20 per cent.
or more of the total voting rights conferred by the equity share capital (as
defined in section 548 of the Companies Act) of such undertaking;
"Special Dividend" or "Special Dividends" means the Transaction Dividend and the Supplementary Dividend
"Stifel" Stifel Nicolaus Europe Limited
"State" or "State Oil" State Oil Limited, the immediate parent company of Prax
"Supplementary Dividend" the interim dividend that may declared by Hurricane on or prior to the
Effective Date of 1.87 pence per share, conditional on the Scheme becoming
Effective
"Takeover Offer" should the Acquisition be implemented by way of a takeover offer as defined in
Chapter 3 of Part 28 of the Companies Act, the offer to be made by or on
behalf of Prax to acquire the entire issued and to be issued ordinary share
capital of Hurricane and, where the context admits, any subsequent revision,
variation, extension or renewal of such takeover offer
"Third Party" any relevant government or governmental, quasi-governmental, supranational,
statutory, regulatory, environmental or investigative body, court, trade
agency, association, institution, any entity owned or controlled by any
relevant government or state, or any other body or person whatsoever in any
jurisdiction
"Transaction Dividend" the interim dividend declared by Hurricane on or about the date of this
announcement of 3.32 pence per share, conditional on (i) shareholder approval
by way of ordinary resolution, the passing of such resolution being
conditional on the passing of the Resolutions; and (ii) the Scheme becoming
Effective
"Treasury Shares" shares held as treasury shares as defined in section 724(5) of the Companies
Act
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland
"United States of America", or "US" or "United States" the United States of America, its possessions and territories, all areas
subject to its jurisdiction or any subdivision thereof, any State of the
United States and the District of Columbia
"US Exchange Act" the US Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder
"US Persons" means a US person as defined in Regulation S of the Securities Act.
"Valuation" the independent asset valuation prepared by ERCE pursuant to Rule 29 of the
Code.
"Voting Record Time" the time and date to be specified in the Scheme Document by reference to which
entitlement to vote on the Scheme will be determined
"Wider Prax Group" Prax and its associated undertakings and any other body corporate,
partnership, joint venture or person in which Prax and all such undertakings
(aggregating their interests) have a Significant Interest
"Wider Hurricane Group" Hurricane and its associated undertakings and any other body corporate,
partnership, joint venture or person in which Hurricane and all such
undertakings (aggregating their interests) have a Significant Interest
For the purposes of this announcement, "subsidiary", "subsidiary undertaking",
"undertaking" and "associated undertaking" have the respective meanings given
thereto by the Companies Act.
All references to "pounds", "pounds Sterling", "Sterling", "£", "pence",
"penny" and "p" are to the lawful currency of the United Kingdom.
All references to "US$", "$" and "US Dollars" are to the lawful currency of
the United States.
All the times referred to in this announcement are London times unless
otherwise stated.
References to the singular include the plural and vice versa.
Glossary
bbl Barrel of oil
bbls/d Barrels of oil per day
bopd Barrels of oil per day
ESP Electric submersible pump
FPSO Floating production storage offloading vessel
kbpd Thousand barrels per day
kcbm Thousand cubic metres
MMbbls Millions of barrels of oil
MMstb Million stock tank barrels
PRMS Definitions
1C Denotes low estimate of Contingent Resources.
2C Denotes best estimate of Contingent Resources.
3C Denotes high estimate of Contingent Resources.
1P Denotes low estimate of Reserves (i.e., Proved Reserves). Equal to P1.
2P Denotes the best estimate of Reserves. The sum of Proved plus Probable
Reserves.
3P Denotes high estimate of reserves. The sum of Proved plus Probable plus
Possible Reserves.
Contingent Resources Those quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations by application of development projects,
but which are not currently considered to be commercially recoverable owing to
one or more contingencies.
Contingent Resources, Development Pending A discovered accumulation where project activities are ongoing to justify
commercial development in the foreseeable future.
Contingent Resources, Development Unclarified A discovered accumulation where project activities are under evaluation and
where justification as a commercial development is unknown based on available
information.
Developed Reserves Reserves that are expected to be recovered from existing wells and facilities.
Developed Reserves may be further sub-classified as Producing or Non-
Producing.
Economic Limit Defined as the time when the maximum cumulative net cash flow (see Net
Entitlement) occurs for a project.
Net Entitlement That portion of future production (and thus resources) legally accruing to an
entity under the terms of the development and production contract or license.
Under the terms of PSCs, the producers have an entitlement to a portion of the
production. This entitlement, often referred to as "net entitlement" or "net
economic interest" is estimated using a formula based on the contract terms
incorporating costs and profits.
Possible An incremental category of estimated recoverable quantities associated with a
defined degree of uncertainty. Possible Reserves are those additional reserves
Reserves that analysis of geoscience and engineering data suggest are less likely to be
recoverable than Probable Reserves. The total quantities ultimately recovered
from the project have a low probability to exceed the sum of Proved plus
Probable plus Possible (3P), which is equivalent to the high estimate
scenario. When probabilistic methods are used, there should be at least a 10%
probability that the actual quantities recovered will equal or exceed the 3P
estimate.
Probable An incremental category of estimated recoverable quantities associated with a
defined degree of uncertainty. Probable Reserves are those additional Reserves
Reserves that are less likely to be recovered than Proved
Reserves but more certain to be recovered than Possible Reserves. It is
equally likely that actual remaining quantities recovered will be greater than
or less than the sum of the estimated Proved plus Probable Reserves (2P). In
this context, when probabilistic methods are used, there should be at least a
50% probability that the actual quantities recovered will equal or exceed the
2P estimate.
Proved An incremental category of estimated recoverable quantities associated with a
defined degree of uncertainty. Proved Reserves are those quantities of
Reserves petroleum that, by analysis of geoscience and engineering data, can be
estimated with reasonable certainty to be commercially recoverable, from a
given date forward, from known reservoirs and under defined economic
conditions, operating methods, and government regulations. If deterministic
methods are used, the term "reasonable certainty" is intended to express a
high degree of confidence that the quantities will be recovered. If
probabilistic methods are used, there should be at least a 90% probability
that the quantities actually recovered will equal or exceed the estimate.
Reserves Those quantities of petroleum anticipated to be commercially recoverable by
application of development projects to known accumulations from a given date
forward under defined conditions. Reserves must satisfy four
criteria: they must be discovered, recoverable, commercial, and remaining (as
of a given date) based on the development project(s) applied.
APPENDIX V
RULE 29 LETTER
15 March 2023
Hurricane Energy plc
The Wharf, Abbey Mill Business Park
Lower Eashing
Godalming
Surrey GU7 2QN
Dear Directors,
This letter (the Rule 29 Valuation) has been prepared by ERCE for inclusion in
any document to be published by Hurricane pursuant to Rule 29 of the UK
Takeover Code in response to an offer to purchase Hurricane and must only be
used for that purpose. ERCE has granted and not withdrawn its consent for
inclusion of this Rule 29 Valuation in any such document. On 15 March 2023,
Hurricane Energy plc (Hurricane) published a Reserves report for the Lancaster
field prepared by ERCE (the ERCE CPR). In accordance with your instructions,
ERC Equipoise Ltd (ERCE) has undertaken a series of sensitivities to the Net
Present Value (NPV) calculation of the 2P production profile from the ERCE
CPR.
The ERCE CPR was prepared with an effective date (Effective Date) of 31
December 2022. This Rule 29 Valuation has mechanically adjusted the 2P
production profile from the ERCE CPR for the production between the Effective
Date and 28 February 2023 and updated the NPV calculation using an updated 1
March 2023 ERCE price forecast. ERCE's estimate of NPV10 for the revised 2P
production profile calculated on this basis is shown below:
Table 1: 2P NPV10 for the Lancaster field, as at 1 March 2023
NPV(10) $MM 65.1 65.1
Economic Limit 01/02/2026 01/02/2026
This Rule 29 Valuation should be read in conjunction with the ERCE CPR.
Hurricane has confirmed that, other than as publicly announced by Hurricane,
no new data or information has been acquired between the Effective Date and
the publication date of this Rule 29 Valuation that would materially affect
the economic evaluation presented in this Rule 29 Valuation. ERCE confirms
that if the Rule 29 Valuation were updated to today's date, the updated
valuation would not be materially different.
ERCE has carried out this work in accordance with the June 2018 SPE/WPC/AAPG/
SPEE/SEG/SPWLA/EAGE Petroleum Resources Management System (PRMS) as the
standard for classification and reporting.
Nomenclature that may be used in this Rule 29 Valuation is summarised in
APPENDIX 2 of the ERCE CPR.
ERCE, Stephenson House, 2 Cherry Orchard Road, Croydon, CR0 6BA, T +44 (0) 20
8256 1150 www.erce.energy (http://www.erce.energy) , Registered Company ERC
Equipoise Ltd, No 3587074, Registered Address Eastbourne, House, 2 Saxbys
Lane, Lingfield, Surrey, RH7 6DN
Disclaimer and Use of the Rule 29 Valuation
This Rule 29 Valuation has been made available to Hurricane to use for
publication in accordance with Rule 29 of the UK Takeover Code. This Rule 29
Valuation is produced solely for the benefit of and on the instructions of
Hurricane, and not for the benefit of any third party. Any third party to whom
Hurricane discloses or makes available this Rule 29 Valuation shall not be
entitled to rely on it or any part of it.
Hurricane agrees to ensure that any publication or use of this Rule 29
Valuation which makes reference to ERCE shall be published or quoted in its
entirety and that Hurricane shall not publish or use extracts of this Rule 29
Valuation or any edited or amended version of this Rule 29 Valuation, without
the prior written consent of ERCE.
In the case that any part of this Rule 29 Valuation is delivered in digital
format, ERCE does not accept any responsibility for edits carried out by
Hurricane or any third party or otherwise after such material has been sent by
ERCE to Hurricane.
Any valuations or projections included in this Rule 29 Valuation are produced
for the purposes of economic analysis and should not be taken either as a
recommendation to engage in any kind of investment activity or as advice about
the merits or demerits of engaging in any kind of investment activity.
ERCE is not authorised or regulated by the Financial Conduct Authority or any
other regulatory or supervisory body to provide investment advice. Hurricane
acknowledges that ERCE is not an investment advisor and does not, and will
not, provide advice about the merits or otherwise of any particular investment
or transaction.
In the course of the work undertaken to present this Rule 29 Valuation, ERCE
may produce forecasts, projections or valuations that could be used towards
the assessment of the prospects of a particular company, security or other
transaction. Hurricane understands that this information is presented for the
purposes of economic analysis and should not be taken as advice relating to
any kind of investment activity and Hurricane is solely responsible for
deciding what weight (if any) to give to any such information in making any
investment decision.
In the course of the work undertaken to present this Rule 29 Valuation, ERCE
may produce bespoke economic indicators to generate intrinsic and/or technical
valuations of companies. These are tools that are meant only for economic
analysis and Hurricane agrees that it will not seek to use any of them as a
"benchmark" underlying an investment product, for example to determine the
amount payable under a security, or the value of a security or to measure the
performance of a company for the purpose of tracking the return of an
investment product.
Economic Evaluation Sensitivities, Lancaster field 2P Production Profiles
On Hurricane's instruction and as described above, ERCE has taken its 2P
forecasts of costs and production for the Lancaster field as presented in the
ERCE CPR and mechanically adjusted the production forecasts using production
data from the Lancaster field provided by Hurricane for the period between the
effective date of the ERCE CPR and the date of this Rule 29 Valuation. There
has been no update to ERCE's forecast of costs as presented in the ERCE CPR.
ERCE has then recalculated the net present value (NPV10) of the Lancaster
field using the oil price forecast presented below which is effective 1 March
2023 (Table 2). For clarity, the cost of abandonment has been included as a
future cash flow in the calculation of NPV10 and does not take into account
any existing financing arrangements that may be drawn down (such as cash held
in trust). A table comparing the 2P NPV10 from the ERCE CPR and the 2P NPV10
calculated for the purposes of this Rule 29 Valuation is also presented below
(Table 3).
Table 2: Oil Price forecast, best case
Real (Constant $, 2023) 84.50 80.50 76.84 75.96 75.70
Nominal ($ of the day) 84.50 82.11 79.95 80.60 81.94
Table 3: Lancaster field 2P NPV10, as at the effective date of the ERCE CPR
and the effective date of this Rule 29 Valuation
NPV(10) as at 01/01/2023 ($MM) 78.7 78.7
NPV(10) as at 01/03/2023 ($MM) 65.1 65.1
Economic Limit 01/02/2026 01/02/2026
The key risk described in the ERCE CPR is the failure of the ESP within Well
P6 before the economic limit of the field is reached. On Hurricane's
instruction ERCE has undertaken the calculation of 2P NPV10 on a quarterly
basis, beginning 31 March 2023, using the best case oil price forecast (Table
2), to estimate the NPV10 that would result should the ESP fail at the end of
each quarter. In addition, ERCE has undertaken quarterly sensitivities for the
2P NPV10 using the following low and high case oil price forecasts (Table 4
and Table 5). The results of this sensitivity analysis are presented as Table
6.
Table 4: Oil Price forecast, low case
Real (Constant $, 2023) 67.60 64.40 61.47 60.76 60.56
Nominal ($ of the day) 67.60 65.69 63.96 64.48 65.55
Table 5: Oil Price forecast, high case
Real (Constant $, 2023) 101.40 96.60 92.21 91.15 90.84
Nominal ($ of the day) 101.40 98.53 95.94 96.73 98.32
Table 6: Lancaster field 2P NPV10 at the effective date of this Rule 29
Valuation, under low, best and high case oil price forecasts, assuming ESP
failures occurring at the end of each quarter. This table is for illustrative
purposes only.
None (Economic CoP) -9.22 65.13 133.48
01/08/2024 01/02/2026 01/06/2026
31/03/2023 -48.73 -45.32 -41.92
30/06/2023 -39.22 -26.08 -12.94
30/09/2023 -42.03 -22.27 -2.51
31/12/2023 -31.00 -2.02 17.03
31/03/2024 -22.50 10.30 37.00
30/06/2024 -13.01 21.15 55.22
30/09/2024 -9.22 25.42 65.59
31/12/2024 -9.22 37.11 78.60
31/03/2025 -9.22 42.11 89.30
30/06/2025 -9.22 46.14 98.89
30/09/2025 -9.22 52.80 107.86
31/12/2025 -9.22 62.95 119.45
31/03/2026 -9.22 65.13 128.98
Professional Qualifications
ERCE is an independent consultancy specialising in geoscience evaluation,
engineering and economic assessment. ERCE will receive a fee for the
preparation of this Rule 29 Valuation in accordance with normal professional
consulting practices. This fee is not dependent on the findings of the Rule 29
Valuation and ERCE will receive no other benefit for the preparation of this
Rule 29 Valuation.
Neither ERCE, nor any Directors of ERCE have, at the date of this report, any
shareholding in Hurricane or Prax Exploration & Production plc (Prax).
Consequently, ERCE and the directors of ERCE consider themselves to be
independent of Hurricane, Prax, their directors and senior management.
ERCE has the relevant and appropriate qualifications, experience and technical
knowledge to appraise professionally and independently the assets. The work
has been supervised by Dr Adam Law, a Director of ERCE, a post-graduate in
Geology, a Fellow of the Geological Society of London and a member of the
Society of Petroleum Evaluation Engineers.
Yours faithfully
Adam Law
Director, ERCE
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